Document:

EXHIBIT 10.15

 

 

LEASE

 

 

 

between

 

 

 

ROCKBER PARTNERS, LLC

a Delaware limited liability company

 

(“Lessor”)

 

 

and

 

 

MCGHAN MEDICAL CORPORATION

a California corporation

 

 

(“Lessee”)

 

 

CONFIDENTIAL

[SEAL OF McGHAN MEDICAL
CORPORATION

PROPRIETARY INFORMATION]

 

 

TABLE OF CONTENTS

 

	
  SECTION

  
	
   

  	
   

  
	
  1.  LEASE
  OF PREMISES

  
	
   

  	
   

  
	
  2.  
  TERM

  
	
   

  	
  2.1  Commencement of Term

  
	
   

  	
  2.2  Delay in Commencement

  
	
   

  	
  2.3  Option to Renew

  
	
   

  	
   

  
	
  3.  RENT

  
	
   

  	
  3.1  Initial Annual Rent

  
	
   

  	
  (a) Rental Deposit

  
	
   

  	
  3.2  Additional Rent

  
	
   

  	
  3.3  No Reduction or Offset

  
	
   

  	
  3.4  Definitions

  
	
   

  	
  3.5 
  Rent Adjustment for Consumer Price Index

  
	
   

  	
  3.6  Calculation and Payment

  
	
   

  	
  3.7  End of Term

  
	
   

  	
   

  
	
  4.  SECURITY
  DEPOSIT

  
	
   

  	
   

  
	
  5.  USE

  
	
   

  	
  5.1 
  Use

  
	
   

  	
  5.2  Compliance with Law;
  Nuisance

  
	
   

  	
  5.3  Insurance Cancellation

  
	
   

  	
  5.4  Hazardous Substances

  
	
   

  	
  (a) Hazardous Materials Handling Report
  describing the safe handling of hazardous materials to prevent accidents

  
	
   

  	
  5.5  Environmental Laws

  
	
   

  	
  (a) Compliance with Environmental Laws

  
	
   

  	
  (b) Hazardous Materials Handling

  
	
   

  	
  (c) Notices

  
	
   

  	
  (d) Indemnification

  
	
   

  	
   

  
	
  6.  MAINTENANCE,
  REPAIRS AND ALTERATIONS

  
	
   

  	
  6.1  Lessor’s Obligations

  
	
   

  	
  6.2  Lessee’s Obligations

  
	
   

  	
  6.3  Alterations and Additions

  
	
   

  	
  6.4  Surrender

  
	
   

  	
  6.5
   Lessor’s Rights

  
	
   

  	
   

  
	
  7.  INSURANCE

  
	
   

  	
  7.1  Lessee’s Liability
  Insurance

  
	
   

  	
  7.2 
  Lessee’s Worker’s Compensation Insurance

  
	
   

  	
  7.3 
  Lessee’s Fire and Extended Coverage Insurance

  
	
   

  	
  7.4  Policy Requirements

  
	
   

  	
  7.5  Lessor’s Rights

  
	
   

  	
  7.6  Lessor’s Insurance

  

 

i

 

	
   

  	
  7.7  Indemnification

  
	
   

  	
  7.8 
  Exemption of Lessor from Liability

  
	
   

  	
   

  
	
  8.  DAMAGE
  OR DESTRUCTION

  
	
   

  	
   

  
	
   

  	
  8.1  Partial Damage

  
	
   

  	
  8.2  Damage Near End of Term

  
	
   

  	
  8.3 
  Abatement of Rent; Lessee’s Remedies

  
	
   

  	
  8.4 
  Insurance Proceeds Upon Termination

  
	
   

  	
  8.5  Restoration

  
	
   

  	
   

  
	
  9.  PERSONAL
  PROPERTY TAXES

  
	
   

  	
   

  
	
  10. 
  UTILITIES

  
	
   

  	
   

  
	
  11.  ASSIGNMENT
  AND SUBLETTING

  
	
   

  	
   

  
	
  12.  DEFAULTS;
  REMEDIES

  
	
   

  	
  12.1  Default
  by Lessee

  
	
   

  	
  12.2 
  Remedies
  for Default by Lessee

  
	
   

  	
  12.3  Default
  by Lessor

  
	
   

  	
  12.4  Late
  Charges

  
	
   

  	
   

  	
   

  
	
  13. 
  CONDEMNATION
  OR RESTRICTION ON USE

  
	
   

  	
  13.1  Eminent
  Domain

  
	
   

  	
  13.2  Abatement
  of Rent

  
	
   

  	
  13.3  Temporary
  Taking

  
	
   

  	
  13.4  Voluntary
  Sale as Taking

  
	
   

  	
   

  	
   

  
	
  14. 
  BROKERS

  
	
   

  	
   

  
	
  15. 
  LESSOR’S LIABILITY

  
	
   

  	
   

  
	
  16. 
  PARKING

  
	
   

  	
   

  
	
  17.  GENERAL PROVISIONS

  
	
   

  	
  17.1  Estoppel Certificate

  
	
   

  	
  17.2  Severability

  
	
   

  	
  17.3  Time of Essence

  
	
   

  	
  17.4 
  Captions

  
	
   

  	
  17.5 
  Notices

  
	
   

  	
  17.6 
  Waivers

  
	
   

  	
  17.7  Holding Over

  
	
   

  	
  17.8  Cumulative Remedies

  
	
   

  	
  17.9  Inurement

  
	
   

  	
  17.10  Choice of Law

  
	
   

  	
  17.11  Subordination

  
	
   

  	
  17.12  Attorneys’ Fees

  
	
   

  	
  17.13  Lessor’s Access

  

 

ii

 

	
   

  	
  17.14 
  Corporate Authority

  
	
   

  	
  17.15  Surrender or
  Cancellation

  
	
   

  	
  17.16  Entire Agreement

  
	
   

  	
  17.17 
  Signs

  
	
   

  	
  17.18 
  Interest on Past Due Obligations

  
	
   

  	
  17.19  Gender; Number

  
	
   

  	
  17.20  Recording of Lease

  
	
   

  	
  17.21  Waiver of Subrogation

  
	
   

  	
  17.22  Confidentiality of
  Lease

  
	
   

  	
  17.23  Quiet Enjoyment

  
	
   

  	
  17.24  Window Coverage

  
	
   

  	
  17.25 
  Materials Storage Restrictions

  
	
   

  	
  17.26  No Agency

  
	
   

  	
  17.27  Force Majeure

  
	
   

  	
  17.28  Accord and Satisfaction

  
	
   

  	
  17.29  Financial Statements

  
	
   

  	
  17.30  Supersedes Proposal to
  Lease

  
	
   

  	
  17.31  Construction

  
	
   

  	
  17.32  Non-Disturbance
  Agreement

  
	
   

  	
  17.33 
  Consent

  
	
   

  	
   

  	
   

  
	
  18. 
  CONSTRUCTION OF TENANT IMPROVEMENTS

  
	
   

  	
  18.1  Tenant Improvements

  
	
   

  	
  18.2 
  Tenant Improvement Allowance

  

 

iii

 

Net, Net, Net

LEASE

 

THIS LEASE dated
November    , 1999, for reference
purposes only is made between the Lessor and the Lessee named below, effective
on the later of the dates set forth under their respective signatures.

 

BASIC LEASE PROVISIONS

 

	
  1.

  	
  Premises:

  	
  The entire
  single story building referred to as CP3 (the “Building”) located at 7 South
  Los Carneros Road, Goleta, California and depicted on the Site Plan attached
  hereto as Exhibits A and A-1

  
	
   

  	
   

  	
   

  
	
   

  	
  Project:

  	
  Campus
  Pointe

  
	
   

  	
   

  	
   

  
	
   

  	
  Use of Premises:

  	
  General
  office, manufacturing, warehousing, research and development, shipping and
  receiving in compliance with Santa Barbara County zoning regulations of MR-P.

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Leased Area:

  	
  As generally
  depicted on Exhibit A

  
	
   

  	
   

  	
   

  
	
   

  	
  Square Feet:

  	
  105,257
  square feet for the Entire Premises (consisting of 8,850 square feet for the
  “Initial Premises” and 96,407 square feet for the “Remaining Premises”, as
  generally depicted on Exhibit A attached hereto and made a part hereof).

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Lessee’s Percentages:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Building:  

  	
  100%

  
	
   

  	
   

  	
   

  
	
   

  	
  Common Area:  

  	
  50.56%

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Initial Annual Rent:

  	
  $130,626.00
  ($1.23 psf per month) — Initial Premises

  $1,422,967.32 ($1.23 psf per month) — Remaining Premises

  $1,553,593.32 ($1.23 psf per month) — Entire Premises

  
	
   

  	
   

  	
   

  
	
   

  	
  Rental Deposit:

  	
  $129,466.11
  (which shall be applied to the Rent payable for the month of July 2000).

  
	
   

  	
   

  	
   

  
	
   

  	
  Rent Adjustment:

  	
  Rent to be
  increased annually in accordance with the CPI (with a minimum of 2.5% and a
  maximum of 6.5%).

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Initial Monthly Rental Installments:

  	
  $129,466.11

  

 

i

 

	
  6.

  	
  Term:

  	
  Approximately Fifteen (15) years and three (3) months commencing on
  the Commencement Date set forth in item 7 below and ending on the Termination
  Date set forth in item 7 below, plus two (2) five (5) year option periods.

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Commencement Date:

  	
  Upon mutual execution of the Lease.

  
	
   

  	
   

  	
   

  
	
   

  	
  Rent Commencement Dates:

  	
  March 1, 2000 for the Initial Premises and July 1, 2000 for the Remaining
  Premises

  
	
   

  	
   

  	
   

  
	
   

  	
  Termination Date:

  	
  December 31, 2014 for the Entire Premises

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Security Deposit:

  	
  $129,466.11

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Broker(s):

  	
  CB Richard Ellis and Blair Hayes Commercial

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Parking Spaces Provided:

  	
  255 unreserved parking spaces.

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Submission of this instrument for examination or signature by the
  Lessee does not constitute a reservation of or option for space and it is not
  effective as a lease or otherwise until execution by both the Lessee and the
  Lessor.  This document will be deemed
  withdrawn by the Lessor if not executed by the Lessee and delivered to the
  Lessor by November    , 1999.

  

 

ii

 

IN WITNESS
WHEREOF, the parties hereto have executed this Lease, consisting of the
foregoing Basic Lease Provisions, Articles 1 through 19 which follow, and any
attached Exhibits or Addenda, as of the date first above written.

 

	
   

  	
   

  	
  LESSOR:

  
	
   

  	
   

  	
   

  
	
  Date: Nov. 16, 1999

  	
   

  	
   

  
	
   

  	
   

  	
  ROCKBER PARTNERS, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Los Carneros Investors, LLC,

  a California limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Bermant Development Company,

  a California corporation, Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Jeffrey C. Bermant

  	
   

  
	
   

  	
   

  	
   

  	
  Jeffrey C. Bermant, President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5383 Hollister Avenue. Suite 150

  Santa Barbara, California 93111

  
	
   

  	
   

  	
   

  
	
   

  	
  LESSEE:

  
	
   

  	
   

  
	
  Date: Nov. 15, 1999

  	
   

  
	
   

  	
  MCGHAN MEDICAL CORPORATION,

  a California corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C.S.
  Eschbach

  	
   

  
	
   

  	
   

  
	
   

  	
  Name and Title:

  	
   C.S.ESCHBACH, PRESDENT & CEO

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  700 Ward Drive

  Santa Barbara, CA 93111

  Attention: David Heinz, Director of Facilities

  
											

 

iii

 

1.             LEASE OF
PREMISES

 

The Lessor hereby leases to the Lessee and the Lessee leases from the
Lessor for the term, at the rental, and upon all of the conditions set forth in
this Lease, the Premises identified in item 1 of the Basic Lease Provisions,
together with the non-exclusive use, in common, with the Lessor and other
tenants of the Project and their respective invitees, of common areas of the
Project including, without limitation, the parking areas adjoining the
Building.  The Lessee and the Lessor
have agreed on the square footage set forth in item 2 of the Basic Lease
Provisions and each party will be bound by item 2 through the term of this
Lease or any extension thereof.  The
approximate anticipated configuration of the Project and the location of the
Building, Premises and associated common and parking areas is indicated on
Exhibit B. The size, location and function of the buildings and related
structures depicted here are approximate. 
The configuration of the development, the design, size, function and
location of all other improvements, and the identity and location of other
tenants to the extent depicted are subject to change without notice for any
reason deemed sufficient by the Lessor. 
The Lessor reserves the right to alter the configuration of the Project
to construct additional improvements thereon to withdraw areas therefrom from
time to time and alter the configuration of the associated common and parking
areas, provided that the number of parking spaces intended for the Lessee’s use
shall not thereby be materially diminished. 
The Lessee shall be allocated the number of parking spaces set forth in
item 10 of the Basic Lease Provisions as depicted on Exhibit B-1, and the
Lessee acknowledges that the Lessor shall have no responsibility to supervise
or police the usage of the parking lot by the tenants of the Project.  Nothing in this Lease shall cause the Lessor
in any way to be construed as an employer, employee, fiduciary, a partner, a
joint venturer or otherwise associated in any way with the Lessee in the
operation of the Premises, or to subject the Lessor to any obligation, loss,
charge or expense connection with or arising from the Lessee’s operation or use
of the Premises.

 

Pursuant to Section 1652 of the California Civil Code, it is understood
and agreed that the general intent and purpose of this Lease is that this Lease
shall be an absolute triple net lease with respect to the Lessor.  The Lessee shall pay its pro rata share of
all insurance, utilities, all operating costs for the Premises, the common
areas of the Project, and the land on which it is situated (excluding any unimproved
property).  It is intended that the
rental return to the Lessor shall not be reduced, offset or diminished directly
or indirectly by any cost, charge, or expense due from the Lessee and others in
connection with the Premises, Project or land upon which it is situated, nor
subject to suspension or termination for any reason, except as provided
herein.  It is acknowledged and agreed
that all provisions of this Lease shall be interpreted in a manner consistent
with and subordinate to such general intent and purpose.

 

2.             TERM

 

2.1          Commencement
of Term

 

(a)           The term of the Lease shall commence on the Commencement
Date (which shall be the date of full execution of this Lease) as shown in item
7 of the Basic Lease Provisions, and ending on the Termination Date, unless
sooner terminated pursuant to any

 

1

 

provision
hereof, or extended if Lessee exercises its option(s) to renew the term of the
Lease in accordance with Section 2.3 below. 
Upon mutual execution of this Lease and Lessee’s compliance with the
requirements of Section 7.4 below, Lessor shall deliver possession of the
Premises to Lessee, and Lessee shall have the right to use and occupy the
Initial Premises and the Remaining Premises upon the terms and conditions of
this Lease.

 

(b)           The payment of rent and additional rent for the Initial
Premises and Remaining Premises shall commence on the respective Rent
Commencement Date(s) as shown item 7 of the Basic Lease Provisions.

 

(c)           Lessee’s right to occupy the Initial Premises or Remaining Premises
shall be rent-free until the respective Rent Commencement Dates for the Initial
Premises and the Remaining Premises; provided, however, Lessee shall pay
utilities pursuant to Sections 10 and 18.1 for period from and after the
Lessee’s date of occupancy of the Premises.

 

2.2          Delay
in Commencement.  Notwithstanding the Commencement Date set
forth in item 7 of the Basic Lease Provisions, if for any reason the Lessor
cannot deliver possession of the Premises to the Lessee upon mutual execution
of this Lease, the Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease or the obligations of the
Lessee hereunder or extend the term hereof provided, however, that if the
Lessor shall not have delivered possession of the Premises within twelve (12)
months after date of full execution of this Lease, subject to delays caused by
Lessee or events of force majeure, the Lessee may, at the Lessee’s option by
notice in writing to the Lessor, within ten (10) days thereafter, cancel this
Lease, in which event the parties shall be discharged from all obligations
hereunder.  The Lessee shall not be
obligated to pay rent until delivery of possession of the Premises has
occurred.

 

2.3          Option to Renew.  The Lessor hereby grants to the Lessee the
right to renew this Lease, solely as to the space then occupied, for two (2)
additional five (5)-year periods, upon the same terms, covenants and conditions
as are provided in this Lease (including the rental adjustment provisions contained
in Section 3.5), except as provided in this paragraph.

 

(a)           Notice.  The Lessee shall give notice to the Lessor in
writing of the Lessee’s election to exercise such option no less than six (6)
months nor earlier than twelve (12) months prior to the expiration of the
Term.  The Lessee shall not be entitled
to exercise the option if, at the time of such exercise: (i) the Lessee is in
default of any provision of this Lease and Lessee has not to commenced to cure
such default, either before or after exercise of the option, within thirty (30)
days after written notice of such default from the Lessor to the Lessee and
diligently prosecute such cure to completion; or (ii) if the Lessor has
delivered to the Lessee more than two (2) notices of default under this Lease
within the previous twelve (12) months.

 

(b)           Non-Transferable Option.  The rights contained in this Section 2.3 may be exercised by the
originally named Lessee, an “affiliate” (as defined in Section 11.8) or by any
assignee of the Lessee’s interest in the Lease if the assignment has been
approved by the Lessor under Article 11 of this Lease.  Such rights may not be exercised by any
sublessee of all or any portion of the Premises.

 

2

 

(c)           Rent During Option Term.

 

(1)           Effective on the first day of each
option period, rent shall be increased (but not decreased) to an amount equal
to the greater of (A) ninety percent (90%) of the fair market rent of the
Premises as of the commencement of the option period, as determined by Lessor,
the amount of which Lessor shall notify Lessee of prior to the commencement of
the option period, or (B) the then-current rent, increased in accordance with
the terms of Section 3.5. Thereafter, rent shall be adjusted in accordance with
the terms of Section 3.5.

 

(2)           If Lessee objects to Lessor’s
determination of the fair market rent of the Premises for the option period,
Lessee shall notify Lessor in writing, within thirty (30) days after receipt of
Lessor’s notice of the fair market rent determination, that Lessee disagrees
with Lessor’s determination of fair market rent.  In the event that Lessor and Lessee are unable to agree upon the
fair market rent of the Premises, then the fair market rent shall be determined
by appraisal in the manner provided below. 
Until the appraisal procedures are finalized, Lessee shall continue to
pay to Lessor the amount of rent due pursuant to Section 2.3(c)(1)(B)
above.  After the determination of the
appraisers is final, Lessee shall promptly make payment to Lessor for any
underpayment of rent owing for prior months.

 

(3)           The fair market rent of the Premises
shall be determined as follows:  The
Premises shall be appraised by an MAI appraiser chosen by Lessor (“First
Appraisal”) and the appraisal report forwarded to Lessee.  If the First Appraisal is deemed
unacceptable by Lessee, then Lessee shall so advise Lessor in writing within
ten (10) working days after receipt of the First Appraisal and Lessee shall have
the right to engage an MAI appraiser to appraise the Premises (“Second
Appraisal”) and the appraisal report forwarded to Lessor.  In the event Lessor shall deem the Second
Appraisal to the unacceptable, then Lessor shall advise Lessee within ten (10)
working days after receipt of the Second Appraisal, and the first appraiser and
second appraiser shall together choose a third MAI appraiser who shall appraise
the Premises (“Third Appraisal”) and forward the appraisal report to Lessor and
Lessee.  The fair market rent for the
Premises shall be the average of the two (2) closest appraisals.  The “fair market rent” shall mean the rent
then being charged for comparable space in similar buildings in the vicinity of
the Building (i.e., buildings of similar age, grade and quality taking into
consideration any recent remodeling or renovations), with similar amenities,
taking into consideration the size, location, improvements (excluding any
tenant improvement allowances as Lessee shall not receive any tenant
improvement allowance during any option period), the proposed term of the
Lease, the extent of services to be provided within the rental, and other
relevant terms or conditions.  The cost
of each appraisal shall be borne by the party requesting such appraisal with
the cost of the Third Appraisal being shared equally by Lessor and Lessee.

 

3.             RENT

 

3.1          Initial Annual Rent.  The Lessee shall pay to the Lessor as rent for the Premises an
Initial Annual Rent in the amount specified in item 4 of the Basic Lease
Provisions in equal monthly installments in the amount specified in item 5 of
the Basic Lease Provisions in advance on the first day of each month, which
amounts shall be subject to adjustments as set forth in Section 3.5 below.

 

3

 

(a)           Rental Deposit.  Upon
Lease execution, the Lessee shall deposit with the Lessor the amount provided
in item 4 of the Basic Lease Provisions.

 

3.2          Additional Rent.     The Lessee shall
reimburse the Lessor, as additional rent, in the manner and at the times
provided, for the Lessee’s proportionate share of all Building Operating
Expenses and Common Area Operating Expenses (as hereinafter defined) incurred
by the Lessor.  The Lessee’s
proportionate share of such Building Operating Expenses and Common Area
Operating Expenses shall be based upon the Lessee’s Building Percentage in the
case of Building Operating Expenses, and upon the Lessee’s Common Area
Percentage in the case of Common Area Operating Expenses, all as defined
herein.

 

3.3          No Reduction or Offset.  All Rent due under
this Lease shall be payable without deduction, abatement or offset, except as
provided in Sections 8.3, 12.3 and 13.2 below

 

3.4          Definitions: 
For purposes of this Article 3:

 

(a)           The Lessee’s Building Percentage is a
percentage calculated by dividing the Leased Area of the Premises by the
leasable area of the Building, and is stipulated to be as shown in item 3 of
the Basic Lease Provisions.

 

(b)           Building Operating Expenses shall
mean the sum of all expenses incurred by the Lessor in connection with the operation,
repair, replacement and maintenance of the Building, including, but not limited
to, heating and air conditioning; all real property taxes (as hereinafter
defined) imposed upon or with respect to the Building and related improvements
(exclusive of the land underlying all such improvements); all fire and extended
coverage, earthquake, loss of rents, vandalism, malicious mischief and other
insurance covering the Building and losses suffered which fall below the
insurance deductible; utilities; materials and supplies; fire protection;
amortization of capital investments for improvements which are designed to
reduce operating costs, improve operations or comply with governmental
conservation or safety programs over such reasonable period as the Lessor shall
determine (together with interest at five (5) percentage points above the
discount rate of the Federal Reserve Bank of San Francisco on the unamortized
amount); and an amount equal to three percent (3%) of the Annual Rent and all
additional rent (as defined in Section 3.2 below) to cover the Lessor’s
administrative and overhead expenses (“Administration Fee”).  Building Operating Expenses attributable to
the utilities and services furnished pursuant to Article 10 shall be
apportioned among the tenants of the Building receiving such services
(excluding those tenants furnishing or paying for their own utilities and
janitorial services) based on the respective leased areas occupied by such
tenants.

 

(c)           Lessee’s Common Area Percentage is a
percentage figure calculated by the project architect by dividing the Leased
Area of the Premises by the average leasable area in all improvements,
including the Building and other buildings, shown on Exhibit B, during such
year as is initially stipulated to be as shown in item 3 of the Basic Lease
Provisions.  Lessee’s Common Area
Percentage shall be equitably adjusted to reflect (i) the elimination of
certain buildings or landscape areas within the Project which become separately
owned or maintained or (ii) the addition of improvements to the Project.

 

4

 

(d)           Common Area Operating Expenses shall
mean the sum of all expenses incurred by the Lessor in connection with the
operation, repair, replacement and maintenance of driveways, landscaping,
walkways, plazas,  parking facilities,
perimeter property including, but not limited to:  all items described in Section 6.1 hereof, and any and all other
common area of the Project; all real property taxes (as hereinafter defined)
imposed upon or with respect to the land included within Exhibit B; all public
liability insurance covering Exhibit B, and losses suffered which fall below
the insurance deductible; security and fire protection; maintenance of the
common areas, gardening, landscaping, repaving, repainting and trash removal;
amortization of capital investments for improvements which comply with
governmental conservation  or safety
programs over such reasonable period as the Lessor shall determine (together
with interest at five (5) percentage points above the discount rate of the
Federal Reserve Bank of San Francisco on the unamortized amount).  General overhead and depreciation of
improvements shall not be included in the expenses except as specifically set
forth in the foregoing.  Any
governmental surcharge, fee or assessment imposed with respect to the parking
facilities within Exhibit B shall, to the extent paid by the Lessor and not
passed on to the users of said parking facilities, be included in Common Area
Operating Expenses.  Common Area
Operating Expenses shall exclude maintenance of unimproved portions of the
Project.

 

(e)           Real Property Taxes shall mean any
and all real and personal property taxes and assessments incurred during any
calendar year, including, but not limited to: 
special and extraordinary assessments, meter and sewer rates and
charges, occupancy taxes or similar taxes imposed on or with respect to the
real or personal property, whether or not imposed on or measured by the rent
payable by the Lessee, and other governmental levies and charges, general and
special, ordinary and extraordinary, unforeseen as well as foreseen, of any
kind and nature whatsoever relating to the real or personal property, and any
gross rental, license or business tax measured by or levied on rent payable or
space occupied.  If, by law, any
property taxes are payable, or may at the option of the taxpayer be paid, in
installments (whether or not interest shall accrue on the unpaid balance of
such property taxes), the Lessor may, at the Lessor’s option, pay the same and,
in such event, any accrued interest on the unpaid balance of such property
taxes shall be deemed to be Real Property Taxes as defined herein.  Real Property Taxes shall also include all
expenses reasonably incurred by the Lessor in seeking a reduction by the taxing
authorities of Real Property Taxes applicable to the Project, but only the to
extent a reduction is received.  Lessee
shall also have the right to seek a reduction by the taxing authority for Real
Property Taxes applicable to the Project, provided Lessee first delivers
written notice to Lessor of Lessee’s desire to contest such Real Property Taxes
and Lessor, in its sole discretion, refuses to contest such Real Property
Taxes.  Lessee shall indemnify, defend,
and hold Lessor harmless from and against any and all claims, liabilities,
costs and expenses arising from Lessee’s contest of any Real Property Taxes.
Real Property Taxes shall not include any capital levy, franchise, estate,
inheritance, succession, gift or transfer tax of the Lessor, or any income,
profits or excess profits tax, assessment, charge or levy upon the income of
the Lessor; provided, however, that if at any time during the term of this
Lease under the laws of the United States or the State of California, or any
political subdivision of either, a tax or excise on rents, space or other
aspects of real property, is levied or assessed against the Lessor, the same
shall be deemed to be Real Property Taxes. 
If any such property taxes upon the income of the Lessor shall be
imposed on a graduated scale, based upon the Lessor’s aggregate rental income,
Real Property Taxes shall include only such portion of such property taxes as
would be payable if the rent

 

5

 

payable with respect to the
Building and Common Areas were the only rental income of the Lessor subject
thereto.

 

3.5          Rent Adjustment for Consumer Price
Index.

 

(a)           On the first day of
the first full calendar year following the Commencement Date and on the first
day of each calendar year thereafter, the Initial Annual Rent shall be adjusted
by the change, if any, from the Base Month specified below, in the United
States Department of Labor, Bureau of Labor Statistics, Consumer Price Index,
“Urban Wage Earners and Clerical Workers (Revised) Series) All Items - Los
Angeles - Anaheim Riverside Average (1982-1984 = 100)”, herein referred to as
the “CPI”.

 

(b)           The monthly rent
payable in accordance with Section 3.1 of this Lease shall be calculated as
follows:  the Inital Annual Rent set
forth in item 4 of the Basic Lease Provisions shall be multiplied by a fraction
the numerator of which shall be the CPI of the calendar month two months prior
to the month(s) specified in Section 3.5(a) above during which the adjustment
is to take effect, and the denominator of which shall be the CPI of the
calendar month which is two months prior to the Rent Commencement Date for the
Initial Premises (“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 rent adjustment.  In no event shall the increase in Initial Annual Rent pursuant to
this paragraph be less than 2.5% per annum or greater than 6.5% per annum.  Notwithstanding the foregoing, the first
rental adjustment for the portion of the Annual Rent payable for the Premises
shall be prorated to reflect the fact that the Rent Commencement Dates for the
Initial Premises and the Remaining Premises occur on March 1, 2000, and July 1,
2000, respectively (e.g., the first rental adjustment as of January 1, 2001,
for the Initial Annual Rent payable for the Remaining Premises shall be
one-half of the annual amount determined in accordance with this paragraph).

 

(c)           In the event the
compilation and/or publication of the CPI 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 CPI shall be used to make such
calculation.  In the event that the
parties cannot agree on such alternative index, than 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 Arbitration shall be paid equally by the parties.

 

3.6          Calculation
and Payment

 

(a)           Annual rent shall be
payable to the Lessor without deduction or offset (except as provided in Sections
8.3, 12.3 and 13.2 below), in lawful money of the United States at the Lessor’s
address herein or to such other persons or at such other places as the Lessor
designates in writing.  Rent payable for
any period for less than one (1) month shall be prorated based upon a thirty
(30) day month.

 

6

 

Prior to the commencement of the lease term
and of each December thereafter, the Lessor shall give the Lessee a written
estimate of the Lessee’s share of Building and Common Area Operating Expenses
for the ensuing year or portion thereof. 
The Lessee shall pay such estimated amount to the Lessor in equal
monthly installments, in advance. 
Within ninety (90) days after the end of each calendar year and the end
of the Lease Term, the Lessor shall furnish to the Lessee a statement showing
in reasonable detail the actual Building and Common Area Operating Expenses
incurred by the Lessor during such period, and the parties shall within thirty
(30) days make any payment or allowance necessary to adjust the Lessee’s
estimated payment to the Lessee’s actual proportionate share as shown by such
annual statement.  Any amount due the
Lessee shall be credited against installments next coming due under this
paragraph.

 

(b)           Within ninety (90)
days after each Adjustment Date, the Lessor shall furnish the Lessee with a
written statement showing the percentage change in the index for the period
ending on the Adjustment Date and specifying the increase, if any, in the
annual rent subsequent to the Adjustment Date, talking into account all prior
adjustments to annual rent for the period preceding the Adjustment Date
pursuant to this paragraph above and applying any percentage increase in the
index to the annual rent as previously adjusted.  At the rental payment date next following the Lessee’s receipt of
such statement, the Lessee shall pay to the Lessor an amount equal to
one-twelfth (1/12th) of the adjustment pursuant to this paragraph (b) multiplied
by the number of rent payment dates (including the current one) since the
relevant Adjustment Date.  Subsequent
rental payments shall be increased by one-twelfth (1/12th) of the adjustment
pursuant to this paragraph (b).

 

(c)           Lessee may audit
Lessor’s Building and Common Area Operating Expenses in order to verify the
accuracy of amount thereof provided that: (i) Lessee specifically designates
the fiscal year(s) that Lessee intends to audit, which shall be a year within
two (2) years of the date of the audit but must be within one (1) year following
the Lease Term; (ii) such audits shall be limited to one (1) time per calendar
year; and (iii) Lessee gives Lessor fourteen (14) days’ prior written notice of
any such audit.  Lessee shall deliver to
Lessor a copy of the results of such audit within fifteen (15) days of its
receipt by Lessee.  No audit shall be
conducted at any time that Lessee is in default of any of the terms of the
Lease beyond the applicable cure period. 
No subtenant shall have any right to conduct an audit and no assignee
shall conduct an audit for any period during which such assignee was not in
possession of the Premises.  Lessee
shall use commercially reasonable efforts to minimize interference with
Lessor’s business during such audits. 
If Lessor’s statement of Common Area Operating Expenses for the
pertinent calendar year shall be found to have overstated Common Area Operating
Expenses by more than five percent (5%), Lessor shall pay to Lessee all
reasonable costs and expenses incurred by Lessee for such audit (not to exceed $2,500,
which amount shall be increased annually in proportion to the increase in the
CPI).

 

3.7          End of Term.  Upon
the expiration or earlier termination of this Lease, the Lessee shall pay the
Lessor, as additional rent, the aggregate rental increase which would have been
payable by the Lessee pursuant to this Article 3, except for such expiration or
termination, for the portion of the year in which termination or expiration
occurs through the Termination Date. 
The amount of such payment shall be calculated by the Lessor based upon
Sections 3.2, 3.3 and 3.5 (using the expiration or Termination Date as the
Adjustment Date for

 

7

 

Section
3.5) and the best information then available to the Lessor, and shall give
effect to all prior adjustments and payments on account by Lessee pursuant to
this Article 3.

 

4.             SECURITY
DEPOSIT

 

Concurrently with the Lessee’s execution of this Lease, the Lessee
shall deposit with the Lessor the sum specified in item 8 of the Basic Lease
Provisions as security for the faithful performance by the Lessee of all
covenants and conditions of this Lease. 
If the Lessee shall breach or default in the performance of any
covenants or conditions of this Lease, including the payment of rent, the
Lessor may use, apply or retain the whole or any part of such security deposit
for the payment of any rent in default or for any other sum which the Lessor
may spend or be required to spend by reason of the Lessee’s default, after
written notice to Lessee and an opportunity to cure such default.  If the Lessor so uses or applies all or any
portion of said deposit, the Lessee shall, within ten (10) days after written
demand therefor, deposit cash with the Lessor in an amount sufficient to
restore said deposit to the full amount hereinabove stated and the Lessee’s
failure to do so shall be a material breach of this Lease.  Should the Lessee comply with all covenants
and conditions of this Lease, the security deposit or any balance thereof shall
be returned to the Lessee (or at the option of the Lessor, to the last assignee
of the Lessee’s interest in this Lease) at the expiration of the term.  Should the Lessor sell its interest in the
Premises, the Lessor may transfer to the purchaser thereof the then unexpended
or unappropriated deposit and thereupon the Lessor shall be discharged from any
liability for such funds.  Lessor shall
deposit the security deposit in a segregated savings account at a federally
insured bank selected by Lessor.  Lessor
shall endeavor to invest the security deposit in an account which earns the
maximum interest rate payable by such bank for federally insured accounts in
which the funds are immediately available for withdrawal without penalty or
loss of interest and are not subject to time-restrictions.  Provided Lessee is not in default under the
Lease, Lessor shall pay Lessee on an annual basis interest earned on the
Security Deposit at the rate earned by Lessor as set forth above.

 

5.             USE

 

5.1          Use.  The Premises shall be used and occupied for
the purposes described in item 1 of the Basic Lease Provisions, permitted under
applicable ordinances and other Governmental requirements, the covenants,
conditions and restrictions affecting the Project, as the same may be amended
from time to time, and the Rules and Regulations as the Lessor may from time to
time reasonably adopt for the safety, care and cleanliness of the Building and
the Project or the preservation of good order. 
The Rules and Regulations presently in effect are attached hereto as
Exhibit C.  The Lessor shall not be
responsible to the Lessee for the non-performance of any of said Rules and
Regulations, or non-compliance with said covenants, conditions and
restrictions, by any other tenant of the Building or Project.

 

5.2          Compliance
with Law; Nuisance.  The
Lessee, at the Lessee’s sole cost and expense, shall comply promptly and at all
times with all laws, requirements, ordinances, statutes, and regulations of all
municipal, state or federal authorities, or any board of fire insurance
underwriters, or other similar bodies, now in force or which may hereafter be
in force, pertaining to the Building and the Premises and the occupancy
thereof, including any law that

 

8

 

requires
alteration, maintenance or restoration of the Premises as the result of the
Lessee’s use thereof.  The judgment of
any court of competent jurisdiction, or the admission of the Lessee in any
action or proceeding against the Lessee, whether the Lessor is a party thereto
or not, that the Lessee violated any such ordinances or statutes in the use of
the Premises shall be conclusive of that fact as between the Lessor and the
Lessee.  The Lessee, at its sole
expense, shall also comply with all requirements for fire extinguishers or fire
extinguisher systems required in the Premises.

 

The Lessee shall not commit, or suffer to be committed, any waste of
the Premises, or any nuisance, annoyance or other unreasonable annoyance which
may disturb the quiet enjoyment of adjoining premises or of the Building by the
owners or occupants thereof.

 

5.3          Insurance
Cancellation.  Notwithstanding the provisions
of Section 5.1 above, the Lessee shall not do or permit anything to be done in
or about the Premises nor bring or keep anything therein, including all uses
permitted under Section 5.1 above, which will in any way increase the existing
rate of or affect any fire or other insurance upon the Building, or any other
part thereof, or of its contents, and if the Lessee’s use of the Premises
causes an increase in said insurance rates, the Lessee shall pay as additional
rent the amount of such increase.  The
Lessee shall be in default under this Lease should the Lessee cause the
cancellation of fire or other insurance upon the Building or Property or should
the Lessee fail to pay any increased insurance rate attributable to the
Lessee’s use of the Premises.  In
determining whether increased premiums are a result of the Lessee’s use or
occupancy of the Premises or Building, a schedule issued by the Lessor’s
insurer computing the insurance rate on the Premises or Building, or the
leasehold improvements showing the various components of such rate, shall be
conclusive evidence of the several items and charges which make up such rate.  The Lessee shall promptly comply with all
reasonable requirements of the insurance authority or of any insurer now or
hereafter in effect relating to the Premises.

 

5.4          Hazardous
Substances.  Any corrosive, flammable, hazardous or other
special waste or materials shall be handled or disposed of as directed by
applicable state, Federal, County and City regulations.  The Lessee shall handle, store or dispose of
such materials in a careful and prudent manner.  At the termination of the Lease, or any option period thereof,
the Lessee shall fully clean the Premises in such a manner that no residue of
such materials or waste shall remain on the Premises.  The Lessee shall notify the appropriate governmental authority of
the presence and amount of any such material or waste, and shall comply with
all conditions imposed by such authority. 
The Lessee shall contact the appropriate governmental authority prior to
occupancy to determine the existence of any records for the Building and/or Premises.  Specifically thirty (30) days prior to
occupancy, the Lessee shall submit a Hazardous Materials Management Plan (HMMP)
and a Hazardous Materials Floor Plan (HMF) to the Lessor and the appropriate
governmental authority for approval, which approval shall not be unreasonably
withheld or delayed by Lessor.  These
plans shall be attached in full to this Lease.

 

The HMMP shall include the following:

 

(a)  The company name, address
and contact person.

 

9

 

(b)  General facility
description with map showing location of all buildings and structures.

 

(c)  Facility hazardous material
storage map showing the location of each proposed hazardous material storage
area and access to such facilities.  The
map shall be updated annually by the occupant and submitted by January 1 each
year.

 

(d)  A floor plan showing the
location of each hazardous material storage area, storage area access, and the
location of emergency equipment.

 

The HMF shall include the following:

 

(a)  Hazardous Materials
Handling Report describing the safe handling of hazardous materials to prevent
accidents.

 

(b)  Separation or Hazardous
Material Report outlining the methods to be utilized to insure separation and
protection of hazardous materials from such factors that could cause fire,
explosion, spills, etc.

 

(c)  Inspection and Record
Keeping Plan indicating the procedures for inspecting each storage
facility.  An authorized record of
inspection shall be maintained by the Lessee.

 

(d)  Employee Training Program
to insure that employees know how to safety handle hazardous materials.

 

(e)  Hazardous Materials
Contingency Plan that clearly describes appropriate response procedures and
measures in case of an accident.

 

(f)  A floor plan identifying
the location and quantity of each hazardous material, including the chemical
name and quantity limit for each class.

 

The Lessee shall pay inspection fees, based on the hourly inspection
rate, for an environmental audit to be conducted by the appropriate
governmental authority, or the Lessor at the termination of the Lease and prior
to reoccupation of the Building and/or the Premises, if hazardous materials
were in use on the Building and/or Premises. 
The appropriate governmental authority shall perform or the Lessee,
shall arrange for such an audit in a timely manner to prevent economic hardship
to the Lessor and shall certify that the Premises are available for
reoccupation, or shall specify clean-up measures that will render the Premises
safe for reoccupation.  The Lessee shall
be responsible for any clean-up that may be required as a result of the audit.

 

Should the Lessee fail to comply with any duty set forth in this
Section 5.4, the Lessor may, in addition to all other remedies now or hereafter
provided by this Lease, or by law, perform such duty or make good such default,
and any amounts which the Lessor shall advance pursuant thereto shall be repaid
by the Lessee to the Lessor on demand.

 

10

 

5.5          Environmental
Laws.

 

(a) 
Compliance with Environmental Laws.  The
Lessee, in its conduct of business on or in any activity, work, thing done,
permitted or suffered by the Lessee, its agents, contractors, employees or
invitees on the Premises, shall at all times and in all respects comply with
all federal, state and county laws, ordinances and regulations (the “Hazardous
Materials Laws”) relating to industrial hygiene, environmental protection or
the use, analysis, generation, manufacture, storage, disposal or transportation
of any oil, flammable explosives, asbestos, radioactive materials or waste, or
other hazardous, toxic, contaminated or polluting materials, substances, or
wastes, including, without limitation, any “hazardous substances,” “hazardous
wastes,” “hazardous materials,” or “toxic substances” under any such laws,
ordinances or regulations (collectively, the “Hazardous Materials”).  Such laws, ordinances or regulations shall
include, but not be limited to, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq.;
the Clean Water Act, 33 U.S.C. Section 466, et seq.; the Safe Drinking Water
Act, 14 U.S.C. Section 1401, et seq.; the Superfund Amendment and
Reauthorization Act of 1986; Public Law 99-499, 100 Stat. 1613; the Toxic
Substances Control Act, 15 U.S.C. Section 2601, et seq.; as amended; those
substances defined as “hazardous waste”, “extremely hazardous waste”,
“restricted hazardous waste” or “hazardous substance” in the Hazardous Waste
Control Act, Section 25 100 et seq. of the California Health & Safety Code;
and those materials and substances similarly described in the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 136, et seq., as
amended; the Atomic Energy Act of 1954, 42 U.S.C. Section 2011, et seq., as
amended; the Porter Cologne Water Quality Control Act, Section 1300 et seq. of
the California Health & Safety Code; and any regulations adopted and
publications promulgated pursuant to said Laws.

 

(b) 
Hazardous Materials Handling.  The
Lessee shall, at its own expense, procure, maintain in effect and comply with
all conditions of any and all permits, licenses and other governmental and
regulatory approvals required for the Lessee’s use of the Premises, including,
without limitation, discharge of (appropriately treated) materials or wastes
into or through any sanitary sewer serving the Premises.  Except as discharged into the sanitary sewer
in strict accordance and conformity with all applicable Hazardous Materials
Laws, the Lessee shall cause any and all Hazardous Materials removed from the
Premises to be removed and transported solely by duly licensed haulers to duly
licensed facilities for final disposal of such materials and wastes.  The Lessee shall in all respects handle,
treat, deal with and manage any and all Hazardous Materials in, on, under or
about the Premises in total conformity with all applicable Hazardous Materials
Laws and prudent industry practices regarding management of such Hazardous
Materials.  Upon expiration or earlier
termination of the term of the Lease, the Lessee shall cause all Hazardous
Materials to be removed from the Premises and transported for use, storage or
disposal in accordance and compliance with all applicable Hazardous Materials
Laws.  The Lessee shall not take any
remedial action in response to the presence of any Hazardous Materials in or
about the Premises or the Building, nor enter into any settlement agreement,
consent, decree or other compromise in respect to any claims relating to any
Hazardous Materials in any way connected with the Premises or the Building,
without first notifying the Lessor of the Lessee’s intention to do so and
affording the Lessor ample

 

11

 

opportunity
to appear, intervene or otherwise appropriately assert and protect the Lessor’s
interest with respect thereto.

 

(c) 
Notices.  Each party shall immediately
notify the other party in writing of any of the following activities relating
to such party’s operations on the Premises: (i) any enforcement, clean-up,
removal or other governmental or regulatory action instituted, completed or
threatened pursuant to any Hazardous Materials Laws; (ii) any claim made or
threatened by any person against such party, the Premises or the Building
relating to damage, contribution, cost recovery compensation, loss or injury
resulting from or claimed to result from any Hazardous Materials in, on or
removed from the Premises or the Building; and (iii) any reports made to any
environmental agency arising out of or in connection with any Hazardous
Materials in or removed from the Premises or the Building, including any
complaints, notices, warnings or asserted violations in connection
therewith.  The Lessee shall also supply
to the Lessor as promptly as possible, and in any event within five (5)
business days after the Lessee first receives or sends the same, with copies of
all claims, reports, complaints, notices, warnings or asserted violations
relating in any way to the Premises, the Building or the Lessee’s use
thereof.  The Lessee shall promptly
deliver to the Lessor copies of hazardous waste manifests reflecting the legal
and proper disposal of all Hazardous Materials removed from the Premises.  In the event Lessor receives notice of the
matters set forth in clauses (i), (ii) or (iii) relating the activities to
Lessor or a prior tenant of the Premises, Lessor shall provide a copy of such
notice to Lessee.

 

(d) 
Indemnification.  Each party (“Indemnitor”) shall
indemnify, defend, protect, and hold the other party (“Indemnitee”), and each
of the Indemnitee’s partners, employees, agents, attorneys, successors and
assigns, free and harmless from and against any and all claims, liabilities,
penalties, forfeitures, losses or expenses (including attorneys’ fees) for
death of or injury to any person or damage to any property whatsoever arising
from or caused in whole or in part, directly or indirectly, by (A) the presence
in, on, under or about the Premises or the Building, or discharge in or from
the Premises or the Building of any Hazardous Materials or the Indemnitor’s
use, analysis, storage, transportation, disposal, release, threatened release,
discharge or generation of Hazardous Materials to, in, on, under, about or from
the Premises or the Building, but only to the extent such Hazardous Materials
are present as a result of actions of the Indemnitor, its officers, employees,
invitees, assignees, contractors, or agents, or (B) the Indemnitor’s failure to
comply with any Hazardous Materials Law. 
The Indemnitor’s obligations hereunder shall include, without
limitation, and whether foreseeable or unforeseeable, all costs of any required
or necessary repair, clean-up or detoxification or decontamination of the
Premises or the Building, and the preparation and implementation of any
closure, remedial action or other required plans in connection therewith, and
shall survive the expiration or earlier termination of the term of the
Lease.  For purposes of the release
and  indemnity provisions hereof, any
acts or omissions of the Indemnitor, or by officers, invitees, employees,
agents, assignees, contractors or subcontractors of the Indemnitor or others
acting for or on behalf of the Indemnitor (to the extent any such individual is
acting within the scope of his relationship with the Indemnitor), whether or
not such acts or omissions are negligent, intentional, willful or unlawful,
shall be strictly attributable to the Indemnitor.  Lessor hereby represents and warrants that, to the best of
Lessor’s knowledge, as of the date possession of the Premises is delivered to
Lessee, the Premises are free of asbestos and hazardous waste or

 

12

 

materials,
and the Project and the Premises are not in violation of any local, state or
federal laws relating to hazardous waste or materials.  Lessor’s indemnity obligations under this
Section 5.5(d) shall include the acts or omissions of the prior tenant of the
Premises.

 

6.             MAINTENANCE,
REPAIRS AND ALTERATIONS

 

6.1          Lessor’s
Obligations.  The
Lessor shall cause to be maintained, in good order, condition and repair, the
roof structure and membrane, and exterior walls, common windows and doors of
the Building (excluding the interior surface thereof), heating, venting and air
conditioning systems, and any public and common areas in the Building, as well
as all parking areas, driveways, sidewalks, private roads or streets,
landscaping and all other areas located within the Project other than areas
occupied by other buildings (such non-building areas being herein referred to
as “Common Areas”).  The costs of such
maintenance are a Building Operating Expense and/or a Common Area Operating
Expense and are chargeable to the Lessee on a prorata basis pursuant to Section
3.2 hereof.

 

6.2          Lessee’s
Obligations.  The
Lessee shall, during the term of this Lease, keep in good order, condition and
repair, the interior of the Premises and every part thereof, including, but not
limited to, all interior windows and doors in and to the Premises.  The Lessor shall incur no expense nor have
any obligation of any kind whatsoever in connection with the maintenance of the
interior of the Premises and the Lessee expressly waives the benefits of any
statute now or hereafter in effect which would otherwise afford the Lessee the
right to make repairs at the Lessor’s expense or to terminate this Lease
because of any failure to keep the interior of the Premises in good order,
condition and repair.  Notwithstanding
the foregoing, the Lessor shall be liable for maintenance or repairs which are
caused by the gross negligence or willful misconduct of Lessor, its agents,
contractors or employees. The Lessee shall be responsible for interior
janitorial services.

 

6.3          Alterations
and Additions.

 

(a)  The Lessee shall not,
without the Lessor’s prior written consent, which shall not be unreasonably
withheld, make any alterations, improvements, additions or utility
installations in, on or about the Premises unless such work is non-structural
and does not exceed ONE HUNDRED THOUSAND DOLLARS ($100,000). For all work, the
Lessee will provide the Lessor with as-built drawings reflecting any changes to
the Premises.  As used in this Section
6.3, the term “utility installations” shall include bus ducting, power panels,
fluorescent fixtures, space heaters, conduits and wiring.  As a condition to giving such consent, the
Lessor may require that the Lessee agree to remove any such alterations,
improvements, additions or utility installations at the expiration or sooner
termination of the term, and to restore the Premises to their prior condition.

 

(b)  All alterations,
improvements and additions to the Premises shall be performed by the Lessor’s
contractor for the Project or other licensed contractor approved by the Lessor,
which approval shall not be unreasonably withheld.  The Lessee shall pay, when due, all claims for labor or materials
furnished to or for the Lessee, at or for use in the Premises, which claims are
or may be secured by any mechanics’ or materialmen’s lien against the

 

13

 

Premises
or any interest therein, and the Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law.  Lessee agrees to, and shall indemnify and
save Lessor free and harmless from and against, liability, loss, damage, costs,
attorneys’ fees, and all other expenses on account of claims of contractors,
subcontractors, laborers or materialmen or others for work performed or
materials or supplies furnished for Lessee or persons claiming under it.  If any laborer, person or firm supplying or
providing labor, materials or equipment or services to Lessee, or to any of
Lessee’s contractors or subcontractors in connection with any alterations,
additions, improvements, fixtures, equipment or other work performed by or on
behalf of Lessee, shall make any claim or demand against Lessor, the Premises
or the Project, or shall file any claim, stop notice, lien, or otherwise,
against Lessor, the Premises, the Project or the lender for the Project and
Lessee shall not cause the effect of such claim, stop notice or lien to be
removed, rescinded or dismissed including, without limitation, the posting of a
bond pursuant to applicable law, and in the event Lessee shall fail to do so
within ten (10) days after written demand by Lessor to cause the effect of said
claim, stop notice or lien to be removed, rescinded or dismissed, such failure
shall constitute a default hereunder. 
In such event, in addition to such other remedies it may have, Lessor
shall have the right (but not the obligation) to use whatever means in its
discretion it may deem appropriate to cause said claim, stop notice, or lien to
be rescinded, discharged, compromised, dismissed or removed including, without
limitation, (a) posting a bond pursuant to applicable law; or (b) paying a sum
sufficient to discharge, in full, any and all such claims, demands, or
liens.  Any such sums paid by Lessor,
including attorneys’ fees and bond premiums, shall be immediately due and
payable to Lessor by Lessee.

 

6.4          Surrender.  On the last day of the term hereof, or on
any sooner termination, the Lessee shall surrender to the Lessor the Premises
and, subject to the provisions of Section 6.3(a) hereof, all alterations,
additions and improvements thereto, in the same condition as when received or
made, ordinary wear and tear and casualty excepted; provided, however, that the
Lessee’s machinery, equipment and trade fixtures (including utility
installations and the “clean room”) which may be removed without irreparable or
material damage to the Premises, shall remain the property of the Lessee and be
removed by the Lessee.  The Lessee shall
repair any damage to the Premises occasioned by the removal of the Lessee’s
furnishings, machinery, equipment and trade fixtures, which repair shall
include the patching and filing of holes and repair of structural damage.

 

6.5          Lessor’s
Rights.  If
the Lessee fails to perform the Lessee’s obligations under this Article 6, the
Lessor may, at its option (but shall not be required to), and with fifteen (15)
day written notice to the Lessee (except in the event of an emergency in which
event no prior notice shall be necessary), perform such obligations on behalf
of the Lessee, and the cost thereof, together with interest thereon at the rate
specified in Section 12.2(a) hereof, shall immediately become due and payable
as additional rent to the Lessor.

 

7.             INSURANCE

 

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

 

14

 

7.1          Lessee’s
Liability Insurance.  Broad form commercial general liability
insurance with respect to the Premises and the operations of or on behalf of
the Lessee in, on or about the Premises, including, but not limited to,
personal injury, product liability (if applicable), blanket contractual,
owner’s protective, broad form property damage liability coverage, host liquor
liability and owned and non-owned automobile liability in an amount not less than
TWO MILLION DOLLARS ($2,000,000) Combined Single Limit per occurrence and in
the aggregate.  Such policy shall
contain (i) severability of interest, (ii) cross liability, and (iii) an
endorsement stating in substance that “such insurance as is afforded by this
policy for the benefit of the Lessor shall be primary as respects any liability
or claims arising out of the occupancy of the Premises by the Lessee, or out of
the Lessee’s operations, and any insurance carried by the Lessor shall be
excess and non-contributory.

 

7.2          Lessee’s Worker’s Compensation
Insurance. 
Worker’s Compensation coverage as required by law, together with
Employer Liability coverage.

 

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

 

7.4          Policy
Requirements.  All
policies of insurance required to be carried by the Lessee pursuant to these
requirements shall be written by responsible insurance companies authorized to
do business in the State of California with a Best’s Insurance Guide Rating of
not less than A/X.  Any such insurance
required by the Lessee hereunder may be furnished by the Lessee under any
blanket policy carried by it or under a separate policy therefor.  A true and exact copy of each paid up policy
evidencing such insurance or a certificate of the insurer, certifying
that such policy has been issued, providing the coverage required and
containing the provisions specified herein, shall be delivered to the Lessor
prior to the date the Lessee is given the right to possession of the Premises,
and upon renewals, not less than thirty (30) days prior to the expiration of
such coverage.  The Lessor may, at any
time, and from time to time, inspect and/or copy any and all insurance policies required hereunder.  In no event shall the then limits of any
policy be considered as limiting the liability of the Lessee under this Lease.

 

Each policy evidencing insurance required to be carried by the Lessee
pursuant to these requirements shall contain, in form and substance
satisfactory to the Lessor: (i) a provision including the Lessor and any other
parties in interest designated by the Lessor as an additional insured; (ii) a
waiver by the Lessee’s insurer of any right to subrogation against the Lessor,
its agents, employees and representatives which arise or might arise by reason
of any payment under such policy or by reason of any act or omission of the
Lessor, its agents, employees or representatives, and (iii) a provision that
the insurer will not cancel or materially change the coverage provided by such
policy without first giving the Lessor thirty (30) days’ prior written notice.

 

15

 

7.5          Lessor’s Rights.  If
the Lessee fails to procure, maintain and/or pay for at the times and for the
durations specified in this Lease, the insurance required hereunder, or fails
to carry insurance required by any governmental requirement, the Lessor may
(but without obligation to do so), and with twenty-four (24) hours advance
notice to the Lessee, perform such obligations on behalf of the Lessee, and the
cost thereof, together with interest thereon at the rate specified in Section
12.2(a) hereof, shall immediately become due and payable as additional rent to
the Lessor.

 

7.6          Lessor’s
Insurance.  The
Lessor shall maintain during the term of this Lease such insurance against
physical damage to the Building, comprehensive liability insurance and other
insurance as the Lessor may, from time to time, reasonably determine.  The Lessor will determine the limits of
coverage, deductibles and specific perils insured against.  The Lessor may, but shall not be obliged to,
take out and carry any other form or forms of insurance as it or the mortgagees
of the Lessor may reasonably determine advisable.  Notwithstanding any contributions by the Lessee to the cost of
insurance premiums, with respect to the Building or any alterations of the
Premises as may be provided herein, the Lessee acknowledges that it has no
right to receive any proceeds from any such insurance policies carried by the
Lessor.

 

7.7          Indemnification.  To the fullest extent permitted
by law, the parties shall defend, indemnify and hold harmless one another from
and against any and all claims arising from the indemnifying party’s use of the
Premises or the conduct of its business or from any activity, work or thing
done, permitted or suffered by the indemnifying party, its agents, contractors,
employees or invitees in or about the Premises or elsewhere, and shall further
indemnify and hold harmless one another from and against any and all
claims arising from any breach or default in the performance of any obligation
on the indemnifying party’s part to be
performed hereunder, or arising from any act, neglect, fault or omission of the
indemnifying party, or of its agents, employees, or invitees, and from and
against all costs, attorney’s fees, expenses and liabilities incurred in or
about such claim or any action or proceeding brought thereon.  In case any action or proceeding be brought
against the other party by reason of any such claim, the indemnifying party,
upon notice from the other party, shall defend the same at the indemnifying
party’s expense by counsel approved in writing by the other party.  The Lessee, as a material part of the consideration
to the Lessor hereunder, hereby assumes all risk of damage to property or
injury to persons in, upon or about the Premises from any cause whatsoever,
except that which is caused by the gross negligence or willful misconduct of
Lessor, its agents, employees or contractors or the failure of the Lessor to
observe any of the terms and conditions of this Lease and such failure has
persisted for an unreasonable period of time after written notice of such
failure, and the Lessee hereby waives all of its claims in respect thereof
against the Lessor.

 

7.8          Exemption of Lessor from Liability. 
Except for the gross negligence or willful misconduct of Lessor, its
agents, employees or contractors, Lessor shall not be liable for injury to the
Lessee’s business or any loss of income therefrom or for damage to the property
of the Lessee, the Lessee’s employees, invitees, customers or any other person
in or about the Premises, nor shall the Lessor be liable for injury to the
person of the Lessee, the Lessee’s employees, agents or contractors, whether
such damage or injury is caused by or results from fire, explosion, falling
plaster, electricity, gas, water or rain, or from the breakage, leakage,

 

16

 

obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether such damage or injury results form
conditions arising upon the Premises or upon other portions of the Building, or
from other sources or places and regardless of whether the cause of such damage
or injury or the means of repairing the same is inaccessible.  The Lessor shall not be liable for
incorporeal hereditaments, including interference or obstruction of light, air
or view.  The Lessor shall not be liable
for any damages arising from any act or neglect of any other tenant of the
Building or the other portions of the Project.

 

8.             DAMAGE OR DESTRUCTION

 

8.1          Partial Damage. 
If the Premises, or so much of the Building as to cause the Premises to
be uninhabitable, are damaged by any fire or other casualty covered under
Lessor’s insurance, and the damage (exclusive of any property or improvements
installed by the Lessee in the Premises) can be repaired within ninety (90)
days without the payment of overtime, the Lessor shall, at the Lessor’s
expense, promptly commence to repair such damage (exclusive of any property of
the Lessee or improvements installed by the Lessee in the Premises) following
Lessor’s receipt of all permits and insurance proceeds and diligently prosecute
the same to completion, and this Lease shall continue in full force and
effect.  If the Premises, or so much of
the Building as to cause the Premises to be uninhabitable, are damaged by any
casualty not covered by Lessor’s insurance, or the damage (exclusive of any
property of the Lessee or improvements installed by the Lessee in the Premises)
cannot be repaired within ninety (90) days without the payment of overtime or
other premiums, the Lessor may, at the Lessor’s option, either (i) repair such
damage as soon as practicable at the Lessor’s expense, in which event this
Lease shall continue in full force and effect, or (i) give written notice to
Lessee within thirty (30) days after the date of the occurrence of such damage
of the Lessor’s intention to terminate this Lease, in which event this Lease
shall terminate as of the date of the occurrence of such damage.  Lessor shall give written notice to Lessee
within thirty (30) days after the date of the occurrence of such damage of
whether or not Lessor elects to repair the Premises or terminate this Lease
pursuant to this Section, together with a copy (“Lessor’s Contractor’s Notice”)
of Lessor’s contractor’s estimate of the number of days required to repair the
Premises (exclusive of any property or improvements installed by the Lessee in
the Premises).  If the Lessor’s
contractor estimates that the Premises cannot be repaired within ninety (90)
days without the payment of overtime or other premiums and Lessor elects to
terminate the Lease pursuant to this Section 8.1, Lessee may nullify Lessor’s
election to terminate the Lessee if Lessee delivers written notice to Lessor
within fifteen (15) after Lessor’s notice that Lessee elects, at its sole cost
and expense, to repair the Premises in which event (i) Lessee shall, at its
sole cost, repair the Premises, and Lessor pay any insurance proceeds received
from Lessor’s insurance carrier applicable to the Premises to Lessee’s
contractor for work completed in repairing the Premises, subject to Lessor’s
receipt of lien releases from Lessee’s contractor and its subcontractors and
suppliers for all work completed, (ii) Lessee shall, at its sole cost and
expense, obtain all permits required for repairing the Premises, (iii) Lessee
shall promptly commence to repair the Premises following the receipt of all
permits and diligently prosecute such work to completion within the number of
days set forth in Lessor’s Contractor’s Notice, and (iv) this Lease shall
remain in full force and effect. 
Notwithstanding the foregoing, if Lessee delivers notice to Lessor that
it elects to repair the Premises and keep the Lease in effect pursuant to this
Section, Lessor may elect to repair the

 

17

 

Premises (exclusive of any
property or improvements installed by the Lessee in the Premises), in lieu of
Lessee, upon written notice to Lessee.

 

8.2          Damage Near End of Term.  If the Premises, or so much of the Building as to cause the
Premises to be uninhabitable, are damaged during the last six (6) months of the
term of this Lease, or any renewal thereof, either party may, at such party’s
option, terminate this Lease as of the date of occurrence of such damage by
giving written notice to the other party of its election to do so within thirty
(30) days after the date of occurrence of such damage; provided, however, if
Lessor shall exercise said right of termination and at that time Lessee shall
have the right to extend the term of the Lease, Lessee may nullify Lessor’s
notice of termination, provided that Lessee, within thirty (30) days of receipt
of the notice, shall elect to extend the term of this Lease.

 

8.3          Abatement of Rent; Lessee’s Remedies

 

(a)  If the Lessor is obligated or elects to
repair the Premises as provided above, the rent payable for the period during
which such repair continues shall be abated, in proportion to the degree to
which the Lessee’s use of the Premises is impaired; provided, however, that the
aggregate period of abatement hereunder shall not exceed twelve (12)
months.  Except for such abatement, if
any, the Lessee shall have no claim against the Lessor for any damage suffered
by reason of any such damage, destruction, repair or restoration.

 

(b)  If the Lessor is obligated or elects to
repair the Premises as provided above, but does not commence such repair within
ninety (90) days after such obligation shall occur, subject to any extension or
up to another sixty (60) days for delays beyond the reasonable control of the
Lessor, the Lessee may, at the Lessee’s option, terminate this Lease by giving
the Lessor written notice of the Lessee’s election to do so at any time prior
to the commencement of such repair or restoration, in which event this Lease
shall terminate as of the date of such destruction.

 

8.4          Insurance Proceeds Upon Termination.  If this Lease is terminated pursuant to any
right given the Lessee or the Lessor to do so under this Article 8, all
insurance proceeds payable under Section 7.6 with respect to the damage giving
rise to such right of termination shall be paid to the Lessor and any
encumbrances of the Premises, as their interests may appear and all insurance
proceeds payable under Section 7.3 shall be paid to Lessee.

 

8.5          Restoration. 
The Lessor’s obligation to restore shall consist of reconstructing the
Premises to the same conditions as the Premises was delivered to Lessee, but
shall not include the restoration or replacement of the Tenant Improvements (as
herein defined) or Lessee’s furnishings, machinery, equipment, trade fixtures
or other personal property or any improvements or alterations made by the
Lessee to the Premises.  Lessor shall
make available to Lessee for the restoration or replacement of the Tenant
Improvements by Lessee the portion of Lessor’s insurance proceeds applicable to
restoring the portion of the Tenant Improvements paid by Lessor pursuant to the
Tenant Improvement Allowance payable by Lessor pursuant to Section 18.2 below,
less a proportionate share of Lessor’s insurance policy’s deductible.

 

18

 

9.             PERSONAL PROPERTY TAXES

 

The Lessee
shall pay prior to delinquency all Real Property Taxes and other taxes assessed
against, levied upon or attributable to its furnishings, machinery, equipment,
trade fixtures or other personal property contained in the Premises or
elsewhere and, if required, all improvements to the Premises in excess of the
Lessor’s “building standard” improvements, provided, however, that nothing
contained herein shall require the Lessor to insure the accuracy of any
segregation of the same for purposes of Section 3.4(b) hereof.  When practicable, the Lessee shall cause
said furnishings, machinery, equipment, trade fixtures and all other personal
property to be assessed and billed separately from the real property of the
Lessor.

 

10.          UTILITIES

 

The Lessee
shall pay for all water, gas, heat, light, power, janitorial services and other
utilities and services supplied to the Premises, together with any taxes
thereon.  If any such services are not
separately metered or charged to the Lessee, the Lessee shall pay a pro rata
proportion, as part of operating expenses, based on leasable area, of all
charges jointly metered or charged with other premises.  The Lessor shall not be liable in damages or
otherwise unless due to the Lessor’s gross negligence for any failure or
interruption of any utility services being furnished to the building and no
such failure or interruption shall entitle the Lessee to terminate this Lease.  In no event shall the Lessor be liable for
any such failure or interruption caused by the exercise of governmental
authority, strikes, riots, acts of God, war, adverse weather conditions, fire,
flood or casualties or acts of third parties beyond the Lessor’s control.  The operation and control of utilities, air
conditioning and any other energy system is subject to compliance with any
government authority governing the regulation and use of energy systems within
the commercial office or industrial building structure.  The Lessee shall not subject any of the
mechanical, electrical, plumbing, sewer or other utility or service systems or
equipment to exercise or use which causes damage to said systems or
equipment.  Any such damages to equipment
caused by the Lessee overloading such equipment shall be rectified by the
Lessee, or may, at the Lessor’s option, be rectified by the Lessor, at the
Lessee’s sole cost and expense.

 

11.          ASSIGNMENT AND SUBLETTING

 

11.1        The
Lessee shall not voluntarily or by operation of law sublet, assign, transfer,
mortgage or otherwise encumber, or grant concessions, licenses or franchises
with respect to all or any part of the Lessee’s interest in this Lease or the
Premises without the prior written consent of the Lessor, which shall not be
unreasonably withheld.  If the Lessee
desires at any time to assign this Lease or to sublet the Premises or any
portion thereof, it shall first notify the Lessor of its desire to do so and
shall submit in writing to the Lessor (i) the name of the proposed sublessee or
assignee; (ii) the nature of the proposed sublessee or assignee; (iii) the
nature of the proposed sublessee’s or assignee’s business to be carried on in
the Premises; (iv) the terms and provisions of the proposed sublease or
assignment; (v) such reasonable financial information as the Lessor may request
concerning the proposed sublessee or assignee, including, but not limited to, a
balance sheet as of a date within ninety (90) days of the request for the
Lessor’s consent, statements of income or profit and loss for the two (2) year
period preceding the request for the Lessor’s consent, and a written statement
in reasonable details as to the

 

19

 

business experience of the
proposed sublessee or assignee during the five (5) years preceding the request
for the Lessor’s consent; and (vi) the name and address of sublessee’s or
assignee’s present or previous landlord. 
The Lessor may, as a condition to granting such consent, require that
the obligations of any assignee which is a subsidiary or affiliate of another
corporation be guaranteed by the parent or controlling corporation.  Any sublease, license, concession, franchise
or other permission to use the Premises shall be expressly subject and
subordinate to all applicable terms and conditions of this Lease.  Any purported or attempted assignment,
transfer, mortgage, encumbrance, subletting, license, concession, franchise or
other permission to use the Premises contrary to the provisions of this
paragraph shall be void and, at the option of the Lessor, shall terminate this
Lease.

 

11.2        If the Lessee is a corporation, any
transfer of its stock, or any dissolution, merger or consolidation which
results in a change in the control of the Lessee from the person or persons owning
a majority of its voting stock immediately prior thereto, or the sale or other
transfer of all or substantially all of the assets of the Lessee shall
constitute an assignment of the Lessee’s interest in this Lease within the
meaning of this Article 11 and the provisions requiring consent contained
herein.  The Lessor may require, as a
condition to giving such consent, that the new controlling person(s) execute a
guaranty of this Lease.  If the Lessee
is a corporation which, under then current guidelines published by the
California commissioner of Corporations, is not deemed to be a public
corporation, the transfer, assignment or hypothecation of any interest in such
corporation in the aggregate in excess of twenty-five percent (25%) (other than
a transfer occurring by operation of law upon the death of the holder of such
interest) shall be deemed an assignment within the provisions of this Article.

 

11.3        No subletting, assignment, license,
concession, franchise or other permission to use the Premises shall relieve the
Lessee of its obligations to pay the rent or to perform all of the other
obligations to be performed by the Lessee hereunder.  The acceptance of rent by the Lessor from any other person shall
not be deemed to be a waiver by the Lessor of any provisions of this Lease.

 

11.4        At any time within ten (10) days after
the Lessor’s receipt of the information specified in Section 11.1 above, the
Lessor may by written notice to the Lessee elect to approve or disapprove such
assignment or subletting.  If the Lessor
does not act within the ten (10) days, Lessee shall deliver a second written
notice to Lessor, which shall state that if Lessor fails to respond within five
(5) business days after receipt of such notice, such failure to act shall be
deemed to be approval of such request for assignment or subletting.  If Lessee delivers such second notice
pursuant to this Section and Lessor fails to respond within five (5) business
days after receipt of such notice, such failure to act shall be deemed to be approval
of such request for assignment or subletting.

 

11.5        Each
assignee or transferee, other than the Lessor, shall assume all obligations of
the Lessee under this Lease and shall be and remain liable jointly and
severally with the Lessee for the payment of the rent, and for the due
performance of all the terms, covenants, conditions and agreements to be
performed by the Lessee hereunder, provided, however, that a transferee other
than an assignee shall be liable to the Lessor for rent only in the amount set
forth in the assignment or transfer.  No
assignment shall be binding on the Lessor

 

20

 

unless such assignee or Lessee
shall deliver to the Lessor a counterpart of such assignment and an instrument
in recordable form which contains a covenant of assumption by such assignee
satisfactory in substance and form to the Lessor, consistent with the
requirements of this Section 11.5, but the failure or refusal of such assignee
to execute such instrument of assumption shall not release or discharge such
assignee from its liability as set forth above.

 

11.6        Except in the event of an assignment or
sublease to a Permitted Assignee pursuant to Section 11.8 below, consent by the
Lessor to any subletting or assignment shall be conditioned upon payment by the
Lessee to the Lessor of one-half (1/2) of all “Transfer Consideration” (as
hereafter defined) received or to be received, directly or indirectly, by the
Lessee on account of such assignment or subletting, less Lessee’s reasonable
costs in connection with such assignment or subletting.  Transfer Consideration shall be paid to the
Lessor at the same time or times as the same is due to the Lessee.  Failure to pay the Lessor the Transfer
Consideration, or any portion or installment thereof, shall be deemed a default
under this Lease, entitling the Lessor to exercise all remedies available to it
under law including, but not limited to, those specified in Article 12 of this
Lease.  “Transfer Consideration” shall
mean (a) in the case of a subletting, any consideration paid or given, directly
or indirectly, by the sublessee to the Lessee pursuant to the sublease for the
use of the Premises, or any portion thereof, over and above the rent and any
additional rent, however denominated, in this Lease, payable by the Lessee to
the Lessor for the use of the Premises (or portion thereof), prorating as
appropriate the amount payable by the Lessee to the Lessor under this Lease, if
less than all of the Premises is sublet, and (b) in the case of an assignment
or a sublease, any consideration paid or given, directly or indirectly, by the
sublessee or assignee to the Lessee in exchange for entering into the sublease
or assignment, but shall not include reimbursement for any security deposit, reimbursement
of any improvements, fixtures or furnishings installed in the Premises by the
Lessee or any payment for personal property of the Lessee not in excess of the
Lessee’s book value thereof.  As used
herein, consideration shall include consideration in any form, including, but
not limited to, money, property, assumption of liabilities other than those
arising under this Lease, discounts, services, credits or any other item or
thing of value.  Irrespective of the
form of such consideration, the Lessor shall be entitled to be paid in cash in
an amount equivalent to the aggregate of the cash portion of the Transfer
Consideration and the value of any non-cash portion of the Transfer
Consideration.  If any Transfer
Consideration is to be paid or given in installments, the Lessee shall pay each
such installment at the time the same is to be paid or given.

 

11.7        The
Lessee shall reimburse the Lessor for the Lessor’s reasonable costs and
attorneys’ fees incurred in conjunction with the processing and documentation
of any assignment, subletting, transfer, change of ownership or hypothecation
of this Lease or the Lessee’s interest in the Premises, in an amount not to
exceed One Thousand Five Hundred Dollars ($1,500.00) per transaction.

 

11.8        Notwithstanding
anything to the contrary contained in this Lease, Lessee shall have the right,
without the prior consent of Lessor, to assign this Lease or sublease the
Premises to a corporation or entity which: (a) is Lessee’s parent organization;
or (b) is a wholly-owned subsidiary of Lessee; or (c) is an “affiliate” of
Lessee (“Permitted Assignee”).  The term
“affiliate” shall mean any entity controlled by, controlling or under common
control with Lessee.

 

21

 

Any Transfer pursuant to this
Section 11.8 shall be subject to the following conditions: (i) Lessee shall
remain fully liable for the performance of all of the terms required to be
performed by Lessee hereunder during the unexpired Lease Term; and (ii) any
such assignment, sublease or transfer shall be subject to all of the terms,
covenants and conditions of this Lease and such assignee, sublessee or
transferee shall expressly assume the obligations of Lessee under the Lease in
a document reasonably satisfactory to Lessor.

 

12.          DEFAULTS; REMEDIES

 

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

 

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

 

(b)           The failure of the Lessee to make any
payment of rent or any other payment required to be made by the Lessee
hereunder, as and when due, where such failure shall continue for a period of
five (5) days after written notice thereof from the Lessor to the Lessee;
provided, however, that any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of Civil Procedure
Section 1161;

 

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

 

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

 

12.2        Remedies for Default by Lessee..  In the event of any
such default, the Lessor may at any time thereafter, upon notice and demand and
without limiting the Lessor in

 

22

 

the exercise of any other right
or remedy which the Lessor may have by reason of such default or breach:

 

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

 

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

 

(2)           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;

 

(3)           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

 

(4)           Any other amount necessary to
compensate the 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
releasing including necessary renovation and alteration of the Premises,
reasonable attorneys’ fees and any other reasonable cost.  The “worth at the time of award” of the
amounts referred to in subparagraphs (1) and (2) above shall be computed by
allowing interest at five (5) percentage points above the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award.  The “worth at the time of award” of the
amount referred to in subparagraph (3) above shall be computed by discounting
such amount at one (1) percentage point above such discount rate.

 

(b)           Suspend or discontinue the services
specified in Article 10 above, or any thereof, during the continuance of any
such default and any such suspension or discontinuance shall not be deemed or
construed to be an eviction or ejection of the Lessee.

 

(c)           Require the Lessee to make payment of
all rental obligations in cash or by certified cashier’s check.

 

(d)           Pursue any other remedy now or
hereafter available to the Lessor under the laws or judicial decisions of the
State of California, including, but not limited to, the remedy provided in
California Civil Code Section 1951.4 to continue this Lease in effect.

 

(e)           The Lessor, in addition to the rights
hereinbefore given in the case of the Lessee’s breach or default, may pursue
any other remedy available to the Lessor at law or in equity.

 

23

 

(f)  The Lessor shall have, and the Lessee hereby
grants to the Lessor, a present security interest in the furniture, fixtures,
equipment, improvements and other personal property of the Lessee presently, or
which may hereinafter be located on the leased Premises, and all proceeds
therefrom in accordance with the Uniform Commercial Code of the State of
California.  The security interest
granted by the Lessee to the Lessor hereunder shall secure the full and prompt
performance and observance by the Lessee of all of the Lessee’s obligations
under this Lease, and the Lessee will execute any financing statement required
by the Lessor, or any other document necessary to perfect such security
interest, and should the Lessee fail to do so, the Lessee authorizes the Lessor
to execute such financing statements or other documents to perfect such
security interest.  Notwithstanding the
foregoing, Lessor agrees to waive its security interest pursuant to this
Section 12.2(f) in favor of Lessee’s lender pursuant to a written agreement
reasonably acceptable to Lessor.

 

12.3        Default by Lessor. 
The Lessor shall not be in default of any of
the obligations of the Lessor under the Lease, uunless the Lessor fails to
perform such obligations within a reasonable time, but in no event less than
thirty (30) days after written notice by the Lessee to the Lessor specifying
wherein the Lessor has failed to perform such obligations; provided, however,
that if the nature of the Lessor’s default is such that more than thirty (30)
days are required for its cure, the Lessor shall not be in default if the
Lessor commences such cure within such thirty (30) day period and thereafter
diligently prosecutes the same to completion. 
In the event of any such default by the Lessor, the Lessee may pursue
any remedy now or hereafter available to the Lessee under the laws of judicial
decisions of the State of California, except that the Lessee shall not have the
right to terminate this Lease except as expressly provided herein nor to set
off against any payments due under this Lease. 
The Lessee waives any right to deduct the expenses of repairs done by
the Lessor on the Lessor’s behalf from the rent and waives, except as herein
provided, any of the Lessor’s obligations for tenantability of the Building or
the Premises.  Notwithstanding the
foregoing, in the event Lessor fails to perform its obligations under the Lease
within thirty (30) days after receipt of written notice, and such failure has a
material and adverse affect upon Lessee’s use or occupancy of the Premises,
Lessee shall have the right to perform such obligations on Lessor’s behalf and
Lessor shall reimburse Lessee the reasonable cost thereof within fifteen (15)
days after Lessee’s written demand therefor, except in the event of a dispute
between the parties in which event Lessor shall reimburse Lessee within fifteen
(15) days after judgement in favor of Lessee by a court of competent
jurisdiction.  If Lessor fails to reimburse
Lessee within fifteen (15) days after such court’s judgment in Lessee’s favor,
Lessee shall have the right to offset such amount against the Rent payable
under this Lease.

 

12.4        Late Charges. 
The Lessee acknowledges that the late payment by the Lessee to the
Lessor of rent and other sums due hereunder will cause the 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 on the Lessor by the terms of any mortgage or
trust deed covering the Premises. 
Accordingly, if any installment of rent or any other sum due from the
Lessee shall not be received by the Lessor, or the Lessor’s designee, within
ten (10) days after the same is due, the Lessee shall pay to the Lessor a late
charge equal to five percent (5%) of such overdue amount, monthly, until such
overdue amount is paid.  The Lessee
acknowledges

 

24

 

that such late charge
represents a fair and reasonable estimate of the cost that the Lessor will
incur by reason of a late payment by the Lessee.  Acceptance of such late charge by the Lessor shall in no event
constitute a waiver of the Lessee’s default with respect to such overdue
amounts nor prevent the Lessor from exercising any of the other rights and
remedies granted hereunder.

 

13.          CONDEMNATION OR RESTRICTION ON USE

 

13.1        Eminent Domain. 
If the whole of the Premises, or so much thereof as to render the
balance unusable by the Lessee, shall be taken under power of eminent domain,
this Lease shall automatically terminate as of the date of such condemnation,
or as of the date possession is taken by the condemning authority, whichever is
earlier.  No award for any partial or
entire taking shall be apportioned, and the Lessee hereby assigns to the Lessor
any award which may be made in such taking or condemnation, together with any
and all rights of the Lessee now or hereafter arising in or to the same or any
part thereof, provided, however, that nothing contained herein shall be deemed
to give the Lessor any interest in or to require the Lessee to assign to the
Lessor any award made to the Lessee for its relocation expenses, the taking of
personal property and fixtures belonging to the Lessee, the interruption of or
damage to the Lessee’s business and/or for the Lessee’s unamortized cost of
leasehold improvements.  The unamortized
portion of the Lessee’s expenditures for improving the Premises shall be
determined by multiplying such expenditures by a fraction, the numerator of
which shall be the number of years of the term of this Lease which shall not
have expired at the time of such appropriation or taking -and the denominator
of which shall be the number of years of the term of this Lease which shall not
have expired at the time of improving the Premises.  In no event shall unexercised options to renew or extend be taken
into consideration in determining the payment to be made to the Lessee.  The Lessee’s right to receive compensation
or damages for its fixtures and personal property shall not be affected in any
manner thereby.

 

13.2        Abatement of Rent. 
In the event of a partial taking which does not result in a termination
of this Lease, rent shall be abated in proportion to that part of the Premises
so made unusable by the Lessee.

 

13.3        Temporary Taking. 
No temporary taking of the Premises and/or of the Lessee’s rights
therein or under this Lease shall terminate this Lease or give the Lessee any
right to any abatement of rent hereunder; and any award made to the Lessee by
reason of any such temporary taking shall belong entirely to the Lessee and the
Lessor shall not be entitled to share therein.

 

13.4        Voluntary Sale as Taking.  A voluntary sale -by the Lessor to any public body or agency
having the power of eminent domain, either under threat of condemnation while
condemnation proceedings are pending, shall be deemed to be a taking under the
power of eminent domain for the purpose of this Article 13.

 

25

14.          BROKERS

 

The Lessor
acknowledges its obligation to pay a single commission to the broker(s)
specified in item 9 of the Basic Lease Provisions, if any.  The Lessee represents and warrants that it
has neither incurred nor is aware of any other broker's, finder's, or similar
fee in connection with the origin, negotiation, execution or performance of
this Lease and agrees to indemnify and hold harmless the Lessor from any loss,
liability, damage, cost or expense incurred by reason of a breach of this
representation.

 

15.          LESSOR'S LIABILITY

 

15.1        The
term "Lessor" as used herein shall mean only the owner or owners at
the time in question of the fee title or a Lessee's interest in a ground lease
of the Building.  In the event of any
transfer of such title or interest, the Lessor herein named (and in case of any
subsequent transfers, the then grantor) shall be relieved from, and after the
date of such transfers of all liability for the Lessor's obligations thereafter
to be performed; provided, however, that any funds in the hands of the Lessor
or the then grantor at the time of such transfer in which the Lessee has an
interest shall be delivered to the grantee. The obligations contained in this
Lease to be performed by the Lessor shall, subject as aforesaid, be binding on
the Lessor's successors and assigns only during their respective periods of
ownership.

 

15.2        In
consideration of  the benefits accruing
hereunder, the Lessee, its successors and assigns, agree that, in the event of
any actual or alleged failure, breach or default hereunder by the Lessor, its
successors or assigns:

 

(a)           The sole and exclusive remedy shall
be against the lessor's interest in the Project;

 

(b)           No partner or member of Lessor shall
be sued or named a party in any suit or action (except as may be necessary to
secure jurisdiction of the Lessor);

 

(c)           No service of process shall be made
against any partner or member of Lessor (except as may be necessary to secure
jurisdiction of the joint venture);

 

(d)           No partner or member of Lessor shall
be required to answer or otherwise plead to any service of process;

 

(e)            No judgment will be taken against
any partner or member or Lessor;

 

(f)            Any judgment taken against any
partner or member of Lessor may be vacated and set aside at any time nunc pro
tunc;

 

(g)           No writ of execution will ever be
levied against the assets of any partner of member of Lessor; and

 

26

 

(h)           These covenants and agreements are
enforceable by the Lessor and also by any partner or member thereof.

 

16.          PARKING

 

During the
term of this Lease, the Lessee shall have the right in common with other
tenants of the Project to use the parking area available to tenants of the
Building.  The Lessee's use of such
parking facilities or that of its invitees shall be limited to a maximum of the
number of parking spaces shown in item 10 of the Basic Lease Provisions (but
such space will not be separately identified and the Lessor shall have no
obligation to monitor the use of such parking facility), and shall be subject
to such rules and regulations as may be established, from time to time, by the
Lessor for the effective use of such parking facilities.  Such rules and regulations may include, but
shall not be limited to, designation of specific areas for use by invitees of
the Lessee and the Lessor; hours during which parking shall be available for
use; parking attendants; a parking validation or other control system to
prevent parking abuse; and such other matters affecting the parking operation
to the end that said facilities shall be utilized to maximum efficiency and in
the best interest of the Lessor, the Lessee and their respective invitees.  The Lessor may temporarily close any part of
the Common Area for such periods of time as may be necessary to prevent the
public from obtaining prescriptive rights or to make repair or
alterations.  The Lessor shall not have
any express or implied obligation  to
enforce or police the parking lot usage. 
The Lessee's right to use any area for parking purposes shall be subject
to restrictions or other limitations resulting from any laws, statutes,
ordinances and governmental rules, regulations or requirements now in force or
which may hereafter be in force, and no such event shall in any way affect this
Lease, abate rent, relieve the Lessee of any liabilities or obligations under
this Lease, or give rise to any claim whatsoever against the Lessor;
specifically, the Lessee's right to use any area for parking purposes shall be
subject to any preferential parking program for participants in any
governmentally required ridesharing program established by the Lessor.  If the Lessor reasonably determines that the
Lessee is regularly using in excess of the number of parking spaces specified
in item 10 of the Basic Lease Provisions, 
the Lessor may, after thirty (30) days written notice to Lessee
providing an opportunity to cure, in addition to any other remedy, impose a
reasonable charge for such excess usage, payable by the Lessee upon demand.

 

17.          GENERAL PROVISIONS

 

17.1        Estoppel Certificate

 

(a)           Lessee and Lessor shall at any time,
and from time to time, upon not less than ten (10) days' prior written notice
from the other party, execute, acknowledge and deliver to the other party a statement
in writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are no, to such party's knowledge, uncured defaults on
the part of the other party hereunder, or specifying such defaults if any are
claimed.  Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of the Premises.

 

27

 

(b)           The failure to deliver such statement
with five (5) business days after a second written request shall be conclusive
upon the requesting party that (i) this Lease is in full force and effect
without modification except as may be represented, (ii) there are no uncured
defaults in the other party's performance, and (iii) not more than one (1)
month's rent has been paid in advance, provided the requesting party in good
faith believes such matters to be true.

 

(c)           If 
the Lessor desires to finance or refinance the Premises, or any part
thereof, the Lessee shall deliver to any lender designated by the Lessor such
financial statements of the Lessee as may be reasonably required by such
lender. All such financial statements shall be received by the Lessor in
confidence and shall be used only for the purposes herein set forth.

 

17.2        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.

 

17.3        Time of Essence.  Time is of the essence in the performance
of all terms and conditions of this Lease in which time is an element.

 

17.4        Captions.  Article
and paragraph captions have been inserted solely as a matter of convenience and
such captions in no way define or limit the scope or intent of any provision of
this Lease.

 

17.5        Notices.  Any
notice required or permitted to be given hereunder shall be in writing and may
be served personally or by regular mail, addressed to the Lessor and the Lessee
respective at the addresses set forth before their signatures in item 11 of the
Basic Lease Provisions, or to such other or additional persons or at such other
addresses as may, from time to time, be designated in writing by the Lessor or
the Lessee by notice pursuant hereto.

 

17.6        Waivers.  No
waiver of any provision hereof shall be deemed a waiver of any other provision
hereof.  Consent to or approval of any
act by one of the parties hereto shall not be deemed to render unnecessary the
obtaining of such party's consent to or approval of any subsequent act.  The acceptance of rent hereunder by the
Lessor shall not be a waiver of any preceding breach by the Lessee of any
provision hereof, other than the failure of the Lessee to pay the particular
rent so accepted, regardless of the Lessor's knowledge of such preceding breach
at the time of acceptance of such rent.

 

17.7        Holding Over.  If
the Lessee holds over after the expiration or earlier termination of the term
hereof without the express written consent of the Lessor, the Lessee shall
become a tenant at sufferance only at one hundred twenty-five percent (125%) of
the monthly rent for the Premises then in effect for the space prorated on a
daily basis, and otherwise upon the terms, covenants and conditions herein
specified, so far as applicable.  If
Lessee continues to occupy the Premises for three (3) months following the
expiration or earlier termination of the term without the express written
consent of Lessor, the monthly rent shall increase to one hundred fifty percent
(150%) of the monthly rent in effect upon expiration or earlier termination.

 

28

 

of  the Lease.  Acceptance by
the Lessor of rent after such expiration or earlier termination shall not
constitute a consent to a holdover hereunder or result in a renewal.  The forgoing provisions of this paragraph
are in addition to and do not affect the Lessor's right of re-entry or any
other rights of the Lessor hereunder or as otherwise provided by law.

 

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

 

17.9        Inurement.  Subject  to any provisions hereof restricting
assignment or subletting by the Lessee and subject to the provisions of Article
15 hereof, the terms and conditions contained in this Lease shall bind the
parties, their personal representatives, successors and assigns.

 

17.10      Choice of Law.  This
Lease shall be governed by the laws of the State of California.

 

17.11      Subordination. 
This Lease shall, at the Lessor's option, be
either superior or subordinate to mortgages or deeds of trust on the Premises,
whether now existing or hereinafter created. 
The Lessee shall, upon written demand by the Lessor, execute such
instruments as may be required, from time to time, to subordinate the rights
and interest of the Lessee under this Lease to the lien of any mortgage or deed
of trust on the Building. Notwithstanding any such subordination, so long as
the Lessee is not in default hereunder, this Lease shall not be terminated or
the Lessee's quiet enjoyment of the Premises disturbed in the event such
mortgage or deed of trust is foreclosed. 
In the event of such foreclosure, the Lessee shall thereupon become a
Lessee of, and attorn to, the successor in interest to the Lessor on the same
terms and conditions as are contained in this Lease.  This Lease is further subject and subordinate to:  (a) all covenants, conditions, restrictions,
easements and any other matters or documents of record, together with all
renewals, modifications, consolidations, replacements and extensions thereof;
(b) that certain Declaration of Covenants, Conditions and Restrictions and
Grant of Easements ("CC&Rs") to be recorded with respect to the
Project, together with all renewals, modifications, consolidations,
replacements and extensions thereof, provided that such CC&Rs shall permit
the use of the Premises permitted hereunder; and (c) any zoning laws of the
city, county and state where the Project is situated.  Lessee hereby covenants that Lessee, and all persons in possession
or holding under Lessee, will conform to and will not violate the terms of the
CC&Rs or said matters of record.  If
the CC&Rs are not of record as of the date of this Lease, then this Lease
shall automatically become subordinate thereto upon recordation thereof; and
Lessee further agrees to execute and return to Lessor within ten (10) days
after written demand therefor by Lessor, an agreement in recordable form
subordinating this Lease to the CC&Rs and/or any amendment or modification
thereof (it being understood that the CC&Rs and any amendment or
modification thereto shall not prevent Lessee from using the Premises for the
purpose set forth in Section 5.1 hereof).

 

17.12      Attorneys' Fees. 
If any action at law or equity, including an
action for declaratory relief, is brought to enforce the provisions of this
Lease, the prevailing party shall be entitled to recover actual attorneys' fees
incurred in bringing such action and/or enforcing any

 

29

 

judgment granted therein, all
of  which shall be deemed to have
accrued upon the commencement of the action and shall be paid whether or not
such action is prosecuted to judgment. 
The attorneys' fees to be awarded the prevailing party may be determined
by the court in the same action or in a separate action brought for that
purpose. Any judgment or order entered in such action shall contain a specific
provision providing for the recovery of actual attorneys' fees and costs
incurred in enforcing such judgment. 
The award of attorneys' fees shall not be computed in accordance with
any court schedule, but shall be made so as to fully reimburse the prevailing
party for all attorneys' fees, paralegal fees, costs and expenses actually
incurred in good faith, regardless of the size of the judgment, it being the
intention of the parties to fully compensate the prevailing party for all
attorneys' fees, paralegal fees, costs and expenses paid or incurred in good
faith.  For purposes of this section,
attorneys' fees shall include, without limitation, attorneys' fees, paralegal
fees, costs and expenses incurred in relation to any of the following
post-judgment motions; contempt proceedings, garnishment, levy and debtor or
third party examinations; discovery; and bankruptcy litigation.

 

17.13      Lessor's Access. 
The Lessor and the Lessor's agents shall have
the right to enter the Premises at reasonable times, upon reasonable notice
(except in the event of an emergency in which event no notice shall be
required) for the purpose of inspection the same, showing  the same to prospective purchasers, lessees,
or lenders, and making such alterations, repairs, improvements or additions to
the Premises or to the Building as the Lessor may deem necessary or desirable,
provided Lessor shall endeavor to minimize any interference with Lessee's
business and to conform with Lessee's security requirements.  The Lessor may at any time place on or about
the Building any ordinary  "For
Sale" signs and the Lessor may, at any time during the last one hundred
eighty (180) days of the term hereof (or during any period in which the Lessee
is in default under this Lease), place on or about the Building any ordinary
"For Sale", "For Lease" or similar signs, all without
rebate of rent or liability to the Lessee.

 

17.14      Corporate Authority.  If  the Lessee is a corporation, the Lessee
shall, at the Lessor's request, require that each individual executing this
Lease on behalf of said corporation represent and warrant that he is duly
authorized to execute and deliver this Lease on behalf of said corporation in
accordance with a duly adopted resolution of the Board of Directors of said
corporation or in accordance with the Bylaws of said corporation, and that this
Lease is binding upon said corporation in accordance with its terms.  The Lessee shall also, at the Lessor's
request, within thirty (30) days after execution of this Lease, deliver to the
Lessor a certified copy of a resolution of the Board of Directors of said
corporation authorizing or ratifying the execution of this Lease.

 

17.15      Surrender or Cancellation.  The Voluntary or
other surrender of this Lease by the Lessee, or a mutual cancellation thereof,
shall not work a merger, and shall terminate all or any existing subleases,
unless the Lessor elects to treat such surrender or cancellation as an
assignment to the Lessor of any or all such subleases.

 

17.16      Entire Agreement.   This Lease, the exhibits hereto which by this reference are
incorporated herein as though set forth in full herein, covers in full each and
every agreement of every kind or nature whatsoever between the parties hereto
concerning the Premises and Building, and all preliminary negotiations and
agreements of whatsoever kind 

 

30

 

or nature are merged
herein.  The Lessor has made no
representations or promises whatsoever with respect to the Premises or the
Building, or the design configuration of the Project, except those contained
herein, and no other person, form or corporation has at any time had any
authority from the Lessor to make any representations or promises on behalf of
the Lessor.  If any such representations
or promises have been made by others, the Lessee hereby waives all right to
rely thereon. No verbal agreement or implied covenant shall be held to vary the
provisions hereof, any statute, law or custom to the contrary notwithstanding.

 

Except as
otherwise provided herein, nothing expressed or implied herein is intended or
shall be construed to confer upon or grant any person any rights or remedies
under or by reason of any term or condition contained in this Lease.

 

17.17      Signs.   No sign, placard, picture, advertisement,
name or notice shall be inscribed, displayed, printed or affixed to or near any
part of the outside or inside of the Building without the written consent of
the Lessor first had and obtained and without full compliance with all
governmental requirements and with the Project Signage Plan and any other
required consents.  The Lessor shall
have the right to remove any such sign, placard, picture advertisement, name or
notice without notice to and at the expense of the Lessee.  Notwithstanding the foregoing, subject to
Lessor's prior review and approval as to design and location, Lessee shall be
permitted to construct and install a building sign and monument sign.  All approved signs shall be installed at the
Lessee's sole cost and expense.  The
Lessee shall not place any sign on a vehicle or movable or non-movable object
in or on the street adjacent to the Project.

 

17.18     
Interest on Past Due Obligations.     Any
amount due from the Lessee to the Lessor hereunder which is not paid when due
shall bear interest at five (5) percentage points above the discount rate of
the Federal Reserve Bank of  San
Francisco at the time of the award or the maximum allowable under the law,
whichever is greater, from the date due until paid, but the payment of such
interest shall not excuse or cure any default by the Lessee.

 

17.19      Gender; Number.  Whenever the context
of this Lease requires, the masculine gender includes the feminine or neuter,
and the singular number includes the plural.

 

17.20.    
Recording of Lease.  The Lessee shall not record this
Lease.  The Lessee may prepare a
memorandum of lease which shall be signed by the Lessor, provided said
memorandum meets with the Lessor's approval, which will not be unreasonably
withheld.  The Lessee may record said
memorandum of lease with the Santa Barbara County Recorder, provided a
conformed copy is furnished to the Lessor. 
The Lessee shall be responsible for all costs in preparing the recording
the memorandum of lease.  At the
expiration or sooner termination of this Lease, the Lessee shall execute,
acknowledge and deliver to the Lessor, within ten  (10) days after written demand from the Lessor, any quitclaim
deed or other document reasonably required by any reputable title company to
remove the cloud of this Lease from the title of  the real property subject to the Lease.

 

31

 

17.21     
Waiver of Subrogation.  The Lessor and the
Lessee each hereby waive any and all rights of recovery against the other, or
against the officers, employees and agents and representatives of the other,
for loss of or any damage to such waiving party or its property, or the
property of others under its control, to the extent that such loss or damage is
insured against under any valid and collectible insurance policy in force at
the time of such loss or damages.  The
Lessee shall, upon obtaining  the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in
this Lease.

 

17.22      Confidentiality of Lease.  The Lessee acknowledges and
agrees that the terms of this Lease are confidential and constitute proprietary
information of the Lessor. Disclosure of the terms hereof could adversely
affect the ability of the Lessor to negotiate other leases with respect to the
Building and impair the Lessor's relationship with other tenants of the
Building.  The Lessee agrees that it,
its partners, officers, directors, employees and attorneys, shall not disclose
the terms and conditions of this Lease to any other person without the prior
written consent of the Lessor. It is understood and agreed that damages would
be an inadequate remedy for the breach of this provision by the Lessee, and the
Lessor shall have the right to specific performance of this provision and to
injunctive relief to prevent its breach or continued breach.

 

17.23      Quiet Enjoyment.  Provided the Lessee has performed all of
the terms, covenants, agreements and conditions of this Lease, including the
payment for rent and all other sums due hereunder, the Lessee shall peaceably
and quietly hold and enjoy the Premises for the term hereof, but subject to the
provisions and conditions of this Lease against the Lessor and all persons
claiming by, through or under the Lessor. 
The Lessee's right to use the Premises and the Common Area as herein
provided shall be subject to restrictions or other limitations or prohibitions
resulting from any laws, statutes, ordinances and governmental rules,
regulations or requirements now in force or which may hereafter be in force and
no such event shall in any way affect this Lease, abate rent, relieve the
Lessee of any liabilities or obligations under this Lease or give rise to any
claim whatsoever against the Lessor.

 

17.24     
Window Coverage.  The Lessor shall select a standard
mini-blind type and color for all windows to be covered by the Lessee. No
window covering, including, but not limited to, coatings or draperies, shall be
used by the Lessor without the Lessor's written approval.

 

17.25      Materials Storage Restrictions.  The Lessee agrees to
conduct its business so as not to violate or exceed the design standards of the
fire protection system or any insurance policies maintained by the Lessor
pursuant to Article 7.

 

17.26     
No Agency.  Neither
party is the agent or partner of the other, and the legal relationship between
the parties hereto shall be governed solely by the terms of this Lease when
duly executed by both parties with respect to the transactions contemplated
hereby.

 

32

 

17.27     
Fore Majeure.  Notwithstanding any of the items set
forth above, Lessor and Lessee shall bear no liability of whatever kind to the
other party if, despite such party's exercise of due diligence, the carrying
out of such party's obligations, as defined herein, prevented or delayed by
legal action, nor by the exercise of governmental authority, whether Federal,
State of County, or other or by force majeure, strikes, riots, acts of God,
war, adverse weather conditions, fire, unavoidable causalities, or acts of
third parties beyond such party's control. 
Notwithstanding the foregoing, in no event shall the Rent Commencement
Dates or Lessee's obligation to pay rent be delayed as a result of a force
majeure event.

 

17.28      Accord and Satisfaction.  No payment by the
Lessee or receipt by the Lessor of a lessor amount than the rent herein
stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and the Lessor may accept such check or payment without prejudice
to the Lessor's right to recover the balance of such rent or pursue any other
remedy provided in this Lease.

 

17.29      Financial Statements.  The Lessee shall
deliver to the Lessor, prior to the execution of  this Lease, its unaudited financial statement and the audited
financial statement Inamed Corporation, a Delaware corporation
("Guarantor"), each of which shall be certified by the Lessee and
Guarantor, respectively, as true and correct. 
Such financial statements shall be based upon generally accepted
accounting principles applied on a consistent basis.  The financial statements shall clearly show sufficient
information to accurately depict the financial condition of the Lessee as of
the date thereof.  Any
misrepresentations in the Lessee's or the Guarantor's financial statements will
be considered, at the Lessor's option, as a breach of a material provision of
this Lease.  If the Lessee is a
partnership or joint venture, such financial statements shall, upon the
Lessor's request, be accompanied by similar financial statements of each
general partner or joint venture of this Lessee.  Such similar statements shall be certified to be true and correct
by the subject thereof.  Within fifteen
(15) days following written request by the Lessor, the Lessee shall provide the
Lessor with copies of the Lessee's and Guarantor's financial statements for the
end of the most recent quarter of the Lessee's and Guarantor's fiscal years,
and the Lessee's and Guarantor's financial statements (including year to date
information) for the end of the month preceding Lessor's request.  In each case, such financial statement shall
meet all of the preceding requirements for annual financial statements.  The Lessee's failure to deliver the
financial statements contemplated hereby within the time specified shall
constitute a material default by the Lessee under this Lease.

 

17.30     
Supersedes Proposal to Lease.  This Lease
supersedes any proposals regarding the leasing of the Premises, whether written
or oral, and any such proposals will be terminated, and of no force or effect,
effective upon the execution of this Lease.

 

17.31      Construction.  The
provisions of this Lease should be liberally construed to effectuate its
purposes.  The language of all parts of
this Lease shall be construed simply according to its plain meaning and shall
not be construed for or against either party, as each party has participated in
the drafting of this Lease and had the opportunity to have their counsel review
it.  Whenever the context and
construction so requires, all words used in the singular shall be 

 

33

deemed to be used in the plural, all masculine shall include the
feminine and neuter, and vice versa.

 

17.32      Non-Disturbance Agreement.  If requested by
Lessee, Lessor deliver a Non-Disturbance and Attomment Agreement in the form
attached hereto as Exhibit E, which is incorporated by this reference.

 

17.33      Consent.  Unless
herein provided, whenever a consent, or approval ( the “approval”) is required,
such approval shall not be unreasonably withheld.  Unless provision is made for a specific time period, each
response to a request for an approval shall be given by the party to whom
directed within fifteen (15) days of receipt. 
Each disapproval shall be in writing and the reasons shall be clearly
stated.

 

18.          CONSTRUCTION OF TENANT IMPROVEMENTS

 

18.1        Tenant Improvements.  Lessor shall deliver possession of the
Premises to Lessee in its current “AS IS” condition and Lessee shall be
responsible for the design and construction of the Tenant Improvements (as
defined herein) for the Premises. 
Lessor shall have the right to review and approve Lessee's plans for the
Tenant Improvements, which approval shall not be unreasonably withheld.  Tenant Improvements shall include all
improvements serving or located within the Premises, including without
limitation, framing of demising walls for the Premises, drywalling, taping and
painting of the interior surfaces of such demising walls, interior drywall
partitions and walls, flooring and carpeting, interior doors and glass,
cabinets, built-in fixtures and furnishings, electrical or other utilities, a
proportionate share (based on useable area) of the building's VAV-HVAC system,
VAV-HVAC mixing boxes, distribution ducting, vents and outlets, surface mounted
electrical and plumbing fixtures and electrical outlets, acoustical tile, drop
ceilings and all other improvements made to the Premises (the “Tenant
Improvements”).  The Tenant Improvements
shall include, without limitation, construction of a new “Quality Main
Entrance” to the Building at a cost of approximately One Hundred Thousand
dollars ($100,000.00) and windows along the south facing wall of the Building
costing not less than One Hundred Thousand dollars ($100,000.00).  Lessee shall be responsible for the payment
of all Tenant Improvements in advance including, but not limited to, design
fees, permits and all other expenses in connection therewith.  The Tenant Improvements shall be in
compliance with all applicable building codes and insurance requirements.  Lessor shall review and approve or
disapprove Lessee's plans within ten (10) days from the date such plans are
delivered to Lessor.  If the Lessor does
not act within the ten (10) days, Lessee shall deliver a second written notice
to Lessor, which shall state that if Lessor fails to respond within five (5)
business days after receipt of such notice, such failure to act shall be deemed
to be approval of Lessee's plans. If Lessee delivers such second notice
pursuant to this Section and Lessor fails to respond within five (5) business
days after receipt of such notice, such failure to act shall be deemed to be
approval of Lessee's plans.  If Lessor's
disapproves Lessee's plans, Lessor's notice of disapproval shall state the
reasons for Lessor's disapproval with reasonable particularity.  Upon delivery of possession of the Premises
to Lessee, Lessee shall be responsible for the payment of all utility costs and
shall be in place all of the insurance required under the terms of this Lease
and shall provide evidence thereof to the Lessor prior to commencing
construction of the Tenant Improvements. 
Lessee shall cause all of the Lessee's Improvements to

 

34

 

be diligently prosecuted and
completed and shall not delay substantial completion of the Premises or the
Commencement Date.

 

18.2        Tenant Improvement Allowance.

 

(a)           Lessor agrees to provide to Lessee a
tenant improvement allowance of Two Million One Hundred Thousand Dollars
($2,100,000.00) (the “Tenant Improvement Allowance”).  The Tenant Improvement Allowance shall be applied to the costs of
the Tenant Improvements (including hard construction costs, soft costs and all architectural,
space planning, engineering and consultant fees) and all charges for permits
and governmental or quasi-governmental fees necessary or appropriate in
connection with the Tenant Improvements (the “Tenant Improvement Expenses”).  Lessee shall pay all Tenant Improvement
Expenses in excess of the Tenant Improvement Allowance (“Lessee's Share”).  Lessee shall provide Lessor with a copy of
the signed construction contract for the Tenant Improvements.  Lessee's Share shall include, without
limitation, the increase in the Tenant Improvement Expenses as a result of any
and all change orders, which shall be paid by Lessee.  The Tenant Improvement Allowance shall not be payable by Lessor
until Lessor has paid the full amount of Lessee's Share toward the Tenant
Improvement Expenses.  In the event of
any change orders following Lessor's commencement of payment of the Tenant
Improvement Allowance, Lessee shall pay the increase in the Tenant Improvement
Expenses pursuant to such change orders prior to and as a condition to further
payment of the Tenant Improvement Allowance.

 

(b)           Following full payment of Lessee's
Share, Lessee may request payment of the Tenant Improvement Allowance not more
than once every month (“Payment Request Period”) for costs actually incurred by
Lessee for the Tenant Improvement Expenses in accordance with the approved
plans and specifications [less ten percent (10%) retention].  Each such request shall be made by Lessee
utilizing a standard AIA payment request form to be completed, signed and
furnished to Lessor, together with copies of contracts, invoices, and original
completed and signed conditional waiver and mechanics' lien releases for the
current payment period and unconditional waiver and mechanic's lien releases
for all prior payment periods from all subcontractors and contractors who
perform labor or supply materials in connection with Tenant Improvements.  Each such payment request shall be subject
to Lessor's and Lessor's lender's approval, which shall not be unreasonable
withheld.  Lessor may withhold only that
portion of any payment not properly documented or for work which fails to
conform with the approved plans and specifications or is otherwise in dispute.  Within twenty (20) days after receipt of
each such request which is in accordance with the provisions of this paragraph
and approved by Lessor and Lessor's lender, Lessor shall pay such request.  If Lessor disputes any payment request by
Lessee, Lessor agrees to instruct its lender to pay the undisputed amount
requested by Lessee.  Lessor shall
promptly pay any disputed amount upon resolution of such dispute in favour of
Lessee.  Lessor shall have the right to
have its architect or its appointed representative inspect the Tenant
Improvements in order to determine whether the work has been performed in
accordance with plans and specifications prior to Lessor approving any payment
request by Lessee.  Lessor's inspection
of the Tenant Improvements and /or approval of Lessee's payment request shall
not be deemed to be an acceptance by the Lessor of defective work.  All progress payments shall be subject to a
ten percent (10%) retention.

 

35

 

(c)           Final payment of the Tenant
Improvement Allowance shall be made within thirty-five (35) days after
completion of the Tenant Improvements, and a notice of completion ahs been
recorded, subject to Lessee providing Lessor with as-built plans for the Tenant
Improvements, a certificate of occupancy and unconditional mechanics' lien
releases from all contractors and subcontractors performing work or providing
materials in connection with the Tenant Improvements.

 

(d)           The payment terms shall be subject to
Lessor's leader's requirements and may be modified as reasonably requested by
Lessor's lender, provided any such modifications requested by Lessor's lender
do not materially and adversely affect Lessee's rights or obligations under
this Lease.

 

36

EXHIBIT A

 

SITE PLAN FOR INITIAL PREMISES

 

 

 

A-1

 

BUILDING CP-3

CAMPUS POINTE

EXHIBIT A - INITIAL PREMISES

 

[BUILDING CP-3 CAMPUS POINTE
GRAPHIC]

 

 

EXHIBIT A-1

 

SITE
PLAN FOR REMAINING PREMISES

 

 

 

A-1-1

 

BUILDING CP-3

CAMPUS POINTE

EXHIBIT A - INITIAL PREMISES

 

 

[BUILDING CP-3 CAMPUS POINTE
GRAPHIC]

 

 

EXHIBIT B

 

CONFIGURATION OF PROJECT,

LOCATION OF BUILDING(S), PREMISES

AND ASSOCIATED COMMON AND PARKING AREAS

 

 

 

B-1

 

BUILDING CP-3

CAMPUS POINTE

EXHIBIT B - SITE PLAN

 

 

 

[BUILDING CP-3 CAMPUS POINTE
GRAPHIC]

 

 

ONE & SEVEN SOUTH LOS CARNEROS

SITE PLAN

 

[SITE PLAN GRAPHIC]

 

 

EXHIBIT C

 

RULES AND REGULATIONS

 

1.             Except as otherwise provided in Section
17.17, no sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Building without the written consent of Lessor first had and obtained and
Lessor shall have the right to remove any such sign, placard, picture,
advertisement, name or notice to and at the expense of Lessee.

 

All approved signs or lettering on doors shall be printed, painted,
affixed or inscribed at the expense of Lessee by a person approved of by
Lessor.

 

Lessee shall
not place anything or allow anything to be placed near the glass of any window,
door, partition or wall which may appear unsightly from outside the Premises.

 

2.             The directory of name
identification of the Building, if any, will be provided exclusively for the
display of the names and location of Lessee and other tenants in the Building,
and Lessor reserves the right to exclude any other names therefrom.

 

3.             All sidewalks, halls, passages,
exits, entrances of the Building, if any, shall not be obstructed by any lessee
or used by him for any purpose other than for ingress to an egress from his
respective Premises.  The halls,
passages, exits, entrances, elevators, stairways, balconies and pool are not
for the use of general public and Lessor shall in all cases retain the right to
control and prevent access thereto by all persons whose presence in the
judgment of Lessor shall be prejudicial to the safety, character, reputation
and interests of the Building and its lessees, provided that nothing herein
contained shall be construed to prevent such access to persons with whom Lessee
normally deals in the ordinary course of Lessee’s business unless such persons
are engaged in illegal activities.  No
lessee and no employee or invitee of any lessee shall go upon the roof of the
Building without the prior consent of Lessor. 
For purposes of Lessee’s obligations, if any, of repair and maintenance
of the heating, ventilating and air conditioning systems of the Premises,
Lessee shall use a maintenance firm selected or designated by Lessor unless
Lessee demonstrates by written evidence reasonably satisfactory to Lessor that
the rates quoted by such firm for such work are not competitive with rates
quoted by one or more other firms which Lessee proposes to use.

 

4.             Lessee may install new or
additional locks or any bolts on any door of the Premises; however, Lessee
shall provide Lessor with access to the Premises in the event of an emergency
access requirement upon one hour notice.

 

5.             Lessee shall not overload the floor
of the Premises or mark, drive nails, screws or drill into the partitions,
woodwork or plaster or in any way deface the Premises or any part thereof.

 

C-1

 

6.             Lessee shall not use, keep or
permit to be used or kept any foul or noxious gas or substance in the Premises,
or permit or suffer the Premises to be occupied or used in a manner offensive
or objectionable to Lessor 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 in or
kept in or about the Premises of the Building.

 

7.             Lessee shall be
entitled to install a cafeteria/dining area for the use of Lessee’s employees
and invitees and ordinary office purposes. 
The Premises shall not be used for washing clothes, for lodging, or for
any improper, objectionable or immoral purposes.

 

8.             Other than customary office
cleaning and janitorial supplies used in reasonable quantities and stored in a
proper manner allowed by governmental ordinances and in a manner consistent
with Article 5.4 of this Lease, Lessee shall not use or keep in the
Premises or the Building any kerosene, gasoline or inflammable or combustible
fluid or material except in connection with Lessee’s permitted use of the
Premises under this Lease and in strict conformance with applicable law, or use
any method of heating or air conditioning other than that supplied by Lessor.  Any permitted corrosive, flammable or other
special wastes shall be handled for disposal as director by Lessor.

 

9.             Each lessee, upon the termination
of his tenancy, shall deliver to Lessor the keys of offices, rooms and toilet
rooms, if any, which shall have been furnished the lessee or which the lessee
shall have had made, and in the event of loss of any keys so furnished, shall
pay Lessor therefor.

 

10.           No lessee shall lay linoleum, tile,
carpet or other similar floor covering so that the same shall be affixed to the
floor of the Premises in any manner except as approved by Lessor.  The expense of repairing any damage
resulting from a violation of this rule or removal of any floor covering shall
be borne by the lessee by whom, or by whose contractors, employees or invitees,
the damage shall have been caused.

 

11.           Lessee shall see that the doors of
the Premises are closed and securely locked before leaving the Building and
must observe strict care and caution that all water faucets or water apparatus
are entirely shut off before Lessee or Lessee’s employees leave the Building,
and that all electricity shall likewise be carefully shut off, so as to prevent
waste or damage, and for any default or carelessness Lessee shall make good all
injuries sustained by other tenants or occupants of the Building or Lessor.

 

12.           Lessor reserves the right to exclude
or expel from the Building any person who, in the reasonable judgment of
Lessor, is intoxicated or under the influence of liquor or drugs, or who shall
in any manner do any act in violation of any of the Rules and Regulations of
the Building.

 

13.           Requirements of Lessee as to any
matters within Lessor’s obligations pursuant to its Lease will be attended to
only upon application at Lessee’s address for notices.  Employees of Lessor shall not perform any
work or do anything outside of their regular duties unless under

 

C-2

 

special instructions from
Lessor, and no employee will admit any person (Lessee or otherwise) to any
office without specific instructions from Lessor.

 

14.           Lessor shall have the right,
exercisable without notice and without liability to Lessee (other than
reimbursement of costs actually incurred by Lessee in the revision of any
stationery or promotional materials), to change the name and street address of
the Building of which the Premises are a part, but the street address shall not
be changed unless required by a governmental agency.

 

15.           Lessee shall not disturb, solicit or
canvass any occupant of the Building and shall cooperate to prevent same.

 

16.           Without the written consent of
Lessor, Lessee shall not use the name of the Building in connection with or in
promoting or advertising the business of Lessee except as Lessee’s address.

 

17.           Lessee’s use of the common areas
shall be limited to access and parking purposes and under no circumstances
shall Lessee be permitted to store any goods or equipment, conduct any
operations, or construct or place any improvements, barriers or obstructions in
the common areas, or otherwise adversely affect the appearance thereof.

 

18.           Canvassing, soliciting and peddling
in the Building are prohibited and Lessee shall cooperate to prevent the same.

 

19.           Lessee shall not install any radio or
television antenna, loudspeaker or other device on the roof or exterior walls
of its Premises, provided Lessee may install an antenna or other communications
devise on the roof of the Premises with Lessor’s prior written consent, which
shall not be unreasonably withheld, provided (i) such antenna or devise is
adequately screened with materials consistent with other materials of the
Premises and Building, (ii) Lessee has received all permits and approvals from
governmental agencies having jurisdiction for the construction thereof, (iii) Lessee
shall bear all costs, expenses and damages (including roof leaks) resulting
from such installation, and (iv) Lessee shall indemnify, protect, defend and
hold Lessor harmless from and against any claims, demands, costs or
expenses(including reasonable attorney’s fees) incurred by Lessor to the extent
resulting from the installation and/or operation of such equipment.  Upon the expiration or earlier termination
of this Lease, Lessee shall, upon Lessor’s written request, remove the antenna
or communications devise and promptly repair all damage caused by such removal.

 

20.           Lessor reserves the right to make
such other and further nondiscriminatory Rules and Regulations as in its
reasonable judgment may be necessary for the safety, care and cleanliness of the
Premises and the Building and for the preservation of good order therein.  Lessee agrees to abide by all such Rules and
Regulations which are adopted.

 

C-3

 

EXHIBIT D

 

GUARANTEE OF LEASE

 

THIS GUARANTEE
OF LEASE (“Guarantee”) is entered into as of the 15th day of NOVEMBER,
1999, by INAMED CORPORATION, a Delaware corporation, whose address is 5540
EKWILL, SANTA BARBARA, CA 93111 
(“Guarantor”) for the benefit of ROCKBER PARTNERS, LLC, a Delaware
limited liability company (“Lessor”), with reference to the following facts:

 

A.            Lessor and McGhan Medical
Corporation, a California corporation (“Lessee”) have entered or will enter
into a lease of even date herewith (the “Lease”).

 

B.            By its covenants herein set forth,
Guarantor has induced Lessor to enter into the Lease with Lessee, which was
made and entered into in consideration for Guarantor’s covenants.

 

1.             Guarantor unconditionally
guarantees, without deduction by reason of setoff, defense or counterclaim, to
Lessor and its successors and assigns the full and punctual payment,
performance and observance by Lessee, of all of the terms, covenants and
conditions in the Lease contained on Lessee’s part to be kept, performed or
observed.

 

2.             If Lessee shall at any time default
in the performance or observance of any of the terms, covenants or conditions
in the Lease contained on Lessee’s part to be kept, performed or observed,
Guarantor will keep, perform and observe same, as the case my be, in the place
and stead of Lessee.

 

3.             Any act of Lessor, or its
successors or assigns, consisting of a waiver of any of the terms or conditions
of the Lease, or the giving of any consent to any manner or thing relating to
the Lease, or the granting of any indulgences or extension of time to Lessee,
may be done without notice to Guarantor and without releasing Guarantor from
any of its obligations hereunder.

 

4.             The obligations of Guarantor
hereunder shall not be released by Lessor’s receipt, application or release of
any security given for the performance and observance of any covenant or
condition in the Lease contained on Lessee’s part to be performed or observed,
nor by any modification of the Lease, regardless of whether Guarantor consents
thereto or receives notice thereof.

 

5.             The liability of Guarantor
hereunder shall in no way be affected by (a) the release or discharge of Lessee
in any creditor’s receivership, bankruptcy or other proceeding; (b) the
impairment, limitation or modification of the liability of Lessee or the estate
of Lessee in bankruptcy, or of any remedy for the enforcement of Lessee’s
liability under the Lease resulting from the operation of any present or future
provision of the National Bankruptcy Act or other statue or from the decision
in any court; (c) the rejection or disaffirmance of the Lease in any

 

D-1

 

such proceedings; (d) the
assignment or transfer of the Lease by Lessee; (e) any disability or other
defense of Lessee; (f) the cessation from any cause whatsoever of the liability
of Lessee; (g) the exercise by Lessor of any of its rights or remedies reserved
under the Lease or by law; or (h) any termination of the Lease.

 

6.             Guarantor further agrees that it
may be joined in any action against Lessee in connection with the obligations
of Lessee under the Lease and recovery may be had against Guarantor in any such
action.  Lessor may enforce the
obligations of Guarantor hereunder without first taking any action whatsoever
against Lessee or its successors and assigns, or pursue any other remedy or
apply any security it may hold, and Guarantor hereby waives all right to assert
or plead at any time any statute of limitations as relating to the Lease, the
obligations of Guarantor hereunder and any and all surety or other defenses in
the nature thereof including, without limitation, the provisions of California
Civil Code Sections 2845 through 2856 or any similar, related or successor
provision of law.

 

7.             Until all the covenants and
conditions in the Lease on Lessee’s part to be performed and observed, are
fully performed and observed, Guarantor (a) shall have no right of subrogation
against Lessee by reason of any payments or performance by Guarantor hereunder;
and (b) subordinates any liability or indebtedness of Lessee now or hereafter
held by Guarantor to the Obligations of Lessee to Lessor under the Lease.

 

8.             If Lessor desires to sell, finance
or refinance the Center, or any part thereof, Guarantor hereby agrees to
deliver to any lender or buyer designated by Lessor such financial statements
of Guarantor as may be reasonably required by such lender or buyer.  Such statements shall include the past three
(3) years’ financial statements of Guarantor. 
All such financial statements shall be received by Lessor in confidence
and shall be used only fro the foregoing purposes.

 

9.             This Guarantee shall apply to the
Lease, any extension, renewal, modification or amendment thereof and to any
assignment, subletting or other tenancy thereunder or to any holdover term
following the term granted under the Lease or any extension or renewal thereof,
regardless of whether Guarantor consents thereto or receives notice thereof.

 

10.           In the event this Guarantee shall be
held ineffective or unenforceable by any court of competent jurisdiction or in
the event of any limitation of Guarantor’s liability hereunder other than as
expressly provided herein, then Guarantor shall be deemed to be Lessee under
the Lease with the same force and effect as if Guarantor were expressly named as
a joint and several Lessee therein with respect to the obligations of Lessee
thereunder hereby guaranteed.

 

11.           In the event of any litigation
between Guarantor and Lessor with respect to the subject matter hereof, the
unsuccessful party to such litigation agrees to pay to the successful party all
fees, costs and expenses thereof, including reasonable attorneys’ fees and
expenses.

 

12.           No delay on the part of Lessor in
exercising any right hereunder or under the Lease shall operate as a waiver of
such right or of any other right of Lessor under the Lease

 

D-2

 

or hereunder, nor shall any
delay, omission or waiver on any one occasion be deemed a bar to a waiver of
the same or any other right on any future occasion.

 

13.           If there is more than one undersigned
Guarantor, the term Guarantor, as used herein, shall include all of the
undersigned; each and every provision of this Guarantee shall be binding on
each and every one of the undersigned jointly and severally liable hereunder;
and Lessor shall have the right to join one or all of them in any proceeding or
to proceed against them in any order.

 

14.           This instrument constitutes the
entire agreement between Lessor and Guarantor with respect to the subject matter
hereof, superseding all prior oral or written agreements or understandings with
respect thereto and may not be changed, modified, discharged or terminated
orally or in any manner other than by an agreement in writing signed by
Guarantor and Lessor.

 

15.           This Guarantee shall be governed by
and construed in accordance with the laws of the State of California.

 

16.           Notice hereunder shall be in writing
and shall be effective upon personal service or five (5) days after deposit
thereof in the United States Mail, registered or certified delivery, return
receipt requested, to the other party at its above address, except that under
no circumstances shall Lessor be obligated to give Guarantor any notice not
specifically required to be given by Lessor pursuant to this Guarantee.  Either party may by notice given as
aforesaid designate a different address for notice purposes.  Any action to declare or enforce any rights
or obligations under the Lease may be commenced by Lessor in the Superior Court
of the Country in which the center is located. 
Guarantor hereby consents to the jurisdiction of such court for such
purposes and agrees that any notice, compliant or legal process so delivered
shall constitute adequate notice and service of process for all purposes and
shall subject Guarantor to the jurisdiction of such Court for purposes of
adjudicating any matter related to this Guarantee.

 

IN WITNESS
WHEREOF, Guarantor has executed this Guarantee as of the date first above
written.

 

	
   

  	
  “GUARANTOR”

  
	
   

  	
   

  
	
   

  	
  INAMED
  CORPORATION,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Richard G. Babbitt

  
	
   

  	
  Name and
  Title:

  	
  CHAIRMAN
  & CEO

  
	
   

  	
  
Address:

  
	
   

  	
  

  
	
   

  	
  

  
				

 

D-3

 

EXHIBIT E

 

Recording Requested By:

 

 

 

When Recorded, Mail To:

 

 

SUBORDINATION, NON-DISTURBANCE

AND ATTORNMENT AGREEMENT

 

THIS AGREEMENT, made and entered into as of the     day of          , 199 , by and between           , with its principal office at        , (hereinafter called “Beneficiary”),                         , with its principal
office at               , (hereinafter
called “Lessor”) and               ,
having its principal office at              
(hereinafter called “Lessee”);

 

W  I  T  N
E  S  S  E  T  H

 

WHEREAS, Lessee has heretofore under date of                 by a written lease (hereinafter called the
“Lease”) leased from Lessor all or part of certain real estate and improvements
thereon, located at                       
(hereinafter called the “Demised Premises”); and

 

WHEREAS, Lessor has encumbered the Demised Premises as security for a
loan from Beneficiary to Lessor (the “Deed of Trust”); and

 

WHEREAS, Lessee, Lessor and Beneficiary have agreed to the following as
respects their mutual rights and obligations pursuant to the Lease and the Deed
of Trust;

 

NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt whereof is hereby acknowledged, the parties hereto do hereby covenant
and agree as follows:

 

1.             Lessee’s interest
in the Lease and all rights of Lessee thereunder Lease shall be and hereby are
declare subject and subordinate to the Deed of Trust upon the Demised
Premises.  The term “Deed of Trust” as
used herein shall also include any amendment, supplement, modification, renewal
or replacement thereof.

 

2.             In the event of a
foreclosure or conveyance in lieu of foreclosure, and provided that the Lease,
immediately prior to such foreclosure or conveyance in lieu of foreclosure,
shall

 

E-1

 

have been in full force and
effect and Lessee shall not then be in default thereunder beyond any grace
period therein provided for curing the same, then in any of such events, Lessee
shall not be made a party in any action or proceeding to remove or evict Lessee
or to disturb its possession, nor shall the leasehold estate of Lessee created
by the Lease be affected in any way, and the Lease shall continue in full force
and effect as a direct lease between Lessee and Beneficiary.

 

3.             After the receipt by Lessee of
notice from Beneficiary or any foreclosure or any conveyance of the Demised
Premises in lieu of foreclosure, Lessee will thereafter attorn to and recognize
Beneficiary as its substitute Lessor, and having thus attorned, Lessee’s
possession shall not thereafter be disturbed providing, and as long as, it
shall continue to pay annual rental under the Lease, and otherwise observers or
performs the covenants, terms and conditions of the Lease to be observed and
performed by Lessee thereunder.  Any such
attornment and recognition of a substitute Lessor shall be upon all of the
terms, covenants, conditions and agreements as are then set forth in the Lease
except as otherwise stated herein.

 

4.             Lessee shall not prepay any of the
rents or income from the Demised Premises for more than one month except with
the written consent of Beneficiary.

 

5.             In no event shall Beneficiary be
liable for any prior act or omission of the Lessor except Lessee shall retain
all rights and remedies available to Lessee against the Lessor at law or
pursuant to the Lease.  Nor shall
Beneficiary be subject to any offsets or deficiencies which Lessee may be
entitled to assert against the Lessor as a result of any act or omissions of
Lessor occurring prior to Beneficiary’s obtaining possession of the Demised
Premises, unless Lessee shall have delivered, concurrently with the notice to
Lessor, written notice to Beneficiary of the deficiencies which gave rise to
such offset and permitted Beneficiary, without the obligation to cure such
defaults or take such action, such time in addition to that which Lessor is
entitled under the Lease as my be reasonably necessary to cure such defaults or
take such action, provided Beneficiary has indicated its intention to cure or
take action and pursues the same with diligence.

 

6.             No conveyance by Lessor of its
interest in the Demised Premises shall insofar as Beneficiary, its successors
and assigns are concerned, cause the fee simple ownership of the Demised
Premises and the Lessee’s leasehold estate created by the Lease to merge, but
said estate shall remain separate and distinct notwithstanding the union of
such estates in Beneficiary, Lessee or any third party by reason of purchase or
otherwise.

 

7.             Beneficiary has received an
assignment of the Lease and the Lease may not be amended or altered and Lessee
may not be released therefrom or from any of its obligations except with the
written consent of Beneficiary or as provided for Sections           , or elsewhere in the Lease.

 

8.             This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, including without limitation, any purchaser at any
foreclosure sale.

 

E-2

 

IN WITNESS
WHEREOF, this Agreement has been fully executed under seal on the day and year
first above written.

 

 

	
   

  	
  MCGHAN
  MEDICAL CORPORATION

  
	
   

  	
  Lessee

  
	
   

  	
  By:

  	
  /s/ C. S. Eschbach

  
	
   

  	
  
By:

  	
   

  
	
   

  	
  

  
	
   

  	
  Beneficiary

  
	
   

  	
  
By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  

  
	
   

  	
  Lessor

  
	
   

  	
  
By:

  	
   

  
	
   

  	
  
By:

  	
   

  

 

E-3

 

EXHIBIT B TO LANDLORD ESTOPPEL

 

SUBORDINATION, ATTORNMENT

AND NONDISTURBANCE AGREEMENT

 

[Attached]

 

 

 

 

	
  Recording
  Requested By:

  	
  Recorded

  	
    REC FEE       55.00

  
	
   

  	
  Official Records

  	
   

  
	
  Fidelity
  National Title

  	
  County Of

  	
   

  
	
  When Recorded, Return to:

  	
  SANTA BARBARA

  	
   

  
	
  Real Estate
  Loan Servicing Department

  	
  KENNETH A. PETTIT

  	
   

  
	
  Santa
  Barbara Bank & Trust

  	
  Recorder

  	
   

  
	
  P. O. Box
  128

  	
  LARRY G. HERRERA

  	
   

  
	
  Santa
  Barbara, CA 93101

  	
  Assistant

  	
    BGC

  
	
   

  	
  08:00AM 09-fEB-2000

  	
    Page 1 of 17

  
	
  Loan No. 99-1498

  	
   

  	
   

  
	
   

  	
   

  	
   

  

(Space above this line for Recorder’s use

 

SUBORDINATION,
ATTORNMENT AND NONDISTURBANCE AGREEMENT

(subordination
to new financing by existing lessee)

 

 

NOTICE:
THIS AGREEMENT CONTAINS A SUBORDINATION CLAUSE

WHICH MAY
RESULT IN YOUR LEASEHOLD INTEREST IN THE PROPERTY

BECOMING
SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME

OTHER OR
LATER SECURITY INSTRUMENT.

 

 

THIS
AGREEMENT,
dated for reference purposes of the 22ND day of JANUARY, 2000, is entered by
and by and among MCGHAN MEDICAL CORPORATION, a California Corporation
(herein, the “Lessee”),
ROCKBER PARTNERS, LLC, A DELAWARE LIMITED LIABILITY COMPANY,
(herein, the “Borrower”
or the “Lessor”), and SANTA BARBARA BANK
& TRUST, a California corporation (herein, the “Lender”), and is
made with reference to the following facts:

 

RECITALS:

 

A.            Lender has agreed to
make a loan (herein, the “Loan”) to Borrower, to be evidenced by a promissory
note (the “Note”), the payment of which will be secured by a Deed of Trust (the
“Deed of Trust”) on that certain real property more particularly described in
Exhibit A, attached hereto and by this reference incorporated herein, and any
improvements situated thereon (herein, the “Property”).

 

B.            Lessee is the
present lessee under that certain lease in which Borrower is named as the
Lessor date NOVEMBER 16, 1999, demising all or some portion of the Property
to Lessee (such lease and all amendments thereto being referred to collectively
herein as the “Lease”).

 

 

 

C.            The agreement
pursuant to which Lender is making the Loan (herein, the “Loan Agreement”)
requires the Deed of Trust be the senior encumbrance on the Property and
further requires, as a condition precedent to Lender’s disbursement of the Loan
proceeds, that Lessee subordinate the Lease and its interest in the Property in
all respects to the lien of the Deed of Trust.

 

NOW,
THEREFORE, for
valuable consideration, the parties hereto, intending to be legally bound,
hereby agree as follows:

 

1.             LEASE TERMS

 

Lessor and Lessee (a) have completed and delivered to Lender
concurrently with their execution and delivery of this Agreement a Summary of
Lease Terms setting forth the salient terms and conditions of the Lease, and
(b) certify that (i) the Summary of Lease Terms delivered to Lender is complete
and correct, (ii) that the copy of the Lease attached to the Summary of Lease
Terms is a true, correct and complete copy, and (iii) that there are no
agreements or understandings between Lessor and Lessee with respect to the
Lease or the rights of Lessee to use, occupy, develop and acquire the Property
that is the subject of the Lease other than as set forth in the documents that
are attached to such Summary.

 

2.             SUBORDINATION

 

2.1          PRIORITY OF DEED OF TRUST. The Lease is hereby subordinated to the Deed
of Trust.  Accordingly, the leasehold
estate arising under the Lease, and the rights of Lessee in, to or under the
Lease and in and to the Property, are and shall remain in all respects and for
all purposes junior and subordinate to (a) the lien of the Deed of Trust, (b)
all advances made thereunder, (c) any and all amendments, supplements,
modifications, renewals, extensions or replacements thereof, and (d) the rights
and interest of the holder the Deed of Trust, as fully and with the same effect
as if the Deed of Trust had been duly executed, acknowledged and recorded, and
the indebtedness secured thereby had been fully disbursed, prior to the
execution of the Lease or possession of the Property by Lessee or its
predecessors-in-interest.

 

2.2          APPROVAL OF LOAN TERMS. Lessee consents to and approves (a) all
provisions of the Note and the Deed of Trust in favor of Lender, and (b) all
agreements, including but not limited to any loan or escrow agreements, between
Borrower and Lender for the disbursement of the proceeds of such Loan.

 

2.3          DISBURSEMENT OF LOAN PROCEEDS. Lessee acknowledges that Lender is under no
obligation or duty to monitor or supervise the application or use of the Loan
proceeds.  Lender has made no
representations to Lessee as to whom the Loan proceeds will be disbursed or how
the proceeds will be applied or expanded. 
Any application or use of the Loan proceeds for purposes other than as
provided for by the Loan Agreement shall not defeat or impair in whole or in
part the subordination of the Lease to the Deed of Trust.

 

2.4          RELIANCE BY LENDER. Lessee intentionally and unconditionally
waives, relinquishes and subordinates the lease in favor of the lien or charge
of the Deed of Trust in favor of Lender and

 

 

2

 

understands
that, in reliance upon, and in consideration of, this waiver, relinquishment
and subordination, specific loans and advances are being and will be made and,
as part and parcel thereof, specific monetary and other obligations are being
and will be entered into which would not be made or entered into but upon this
waiver, relinquishment and subordination.

 

3.             WARRANTIES AND COVENANTS OF LESSOR AND LESSEE

 

3.1          ACCURACY OF LEASE SUMMARY. Lessor and Lessee each certify that (a) the
Summary of Lease Terms completed and delivered to Lender concurrently with the
execution of this Agreement is true, complete and correct, (b) that the copy of
the Lease attached to the Summary is complete and correct, and (c) that there
are no agreements or understandings between Lessor and Lessee with respect to
the Lease or the rights of Lessee to use, occupy, develop and acquire the
Property that is the subject of the Lease other than as set forth in the
documents that are attached to such Summary.

 

3.2          PREPAID RENTS. Lessee shall not prepay, and Lessor shall
not accept, any of the rents or income due under the Lease for more than one
(1) month in advance, except with the written consent of Lender.

 

3.3          AMENDMENTS TO LEASE. Lessor and Lessee shall not alter, amend or
terminate the Lease, or enter into an agreement for the cancellation of the
Lease or a surrender of the leasehold estate, without the prior written consent
of Lender.

 

3.4          ASSIGNMENT OF RENTS. The Deed of Trust contains an assignment by
Lessor to Lender of Lessors interest in and to the rents and other payments due
under the Lease, either absolutely or as additional security, subject to a
license in favor of Lessor to collect such rents for so long as Lessor is not
in default under any of the documents or instruments creating, evidencing,
guaranteeing or securing the payment of the Loan (the “Loan Documents”).  Should Borrower default in the performance
of its obligations under the Loan Documents, Lender may, at its option, require
that all rents and other payments due under the Lease be paid directly to Lender.  Lessor hereby authorizes and directs Lessee,
and the Lessee agrees, to remit any payments due under the terms of the Lease
directly to Lender upon Lessee’s receipt of notice of any such default from
Lender, Lessee shall be credited under the Lease for all amounts remitted to
Lender pursuant to this Section 3.4.

 

3.5          LENDERS CURE RIGHTS. 
Lessee shall not exercise any right to terminate the Lease,
or to assert a claim of partial or total eviction, on account of an alleged
default by the Lessor under the Lease, until (a) Lessee has given notice of
such alleged default both to Lessor and Lender (a “Default Notice”) and (b)
Lessor or Lender has failed to remedy the alleged default within the applicable
cure period provided by the Lease.  In
the case of any alleged default by Lessor that the Lender undertakes to remedy
but which cannot practically be remedied without possession of the Property,
Lender shall be provided with a cure period or a reasonable extension to any
cure period in which to remedy the alleged default provided that Lender
proceeds with reasonable diligence to obtain possession of the

3

 

Property
and, upon obtaining possession of the Property, proceeds with reasonable
diligence to cure the alleged default.

 

4.             RIGHTS
AND DUTIES UPON ACQUISITION OF LESSORS INTEREST

 

Should Lender or any other person acquire the interests of the Lessor
under the Lease by judicial or nonjudicial foreclosure or by a conveyance in
lieu of foreclosure (a “Successor Lessor”), then:

 

4.1          ATTORNMENT BY LESSEE. Lessee will attorn to and recognize the
Successor Lessor as the substitute Lessor under the Lease, and shall be bound
such Successor Lessor under all of the terms, covenants and conditions of the
Lease for the balance of the term thereof, and any extensions or renewals
thereof effected in accordance with the terms of the Lease.

 

4.2          LESSEE’S RIGHTS TO POSSESSION. So long as Lessee is not in default (beyond
any period given to Lessee under the Lease, to cure defaults) in the payment of
rent or other amounts owing under the Lease or in the performance of any of the
terms, covenants or conditions of the Lease or this Agreement, neither Lender
nor any other Successor Lessor shall disturb or interfere with Lessee’s
possession of the Property or Lessee’s rights and privileges under the Lease,
or any extensions or renewals thereof effected in accordance with the terms of
the Lease.

 

4.3          PERFORMANCE OF OBLIGATIONS OF LESSOR. Successor Lessor shall perform the duties
and obligations of the Lessor under the Lease to the extent that such duties
and obligations arise after the date on which the Successor Lessor has acquired
its interest and are susceptible of performance by the Successor Lessor, and
subject to the provisions of this Section, Lessee shall have the same remedies
against a Successor Lessor for a breach of the Lease as the Lessee would have
had against the original Lessor.

 

4.4          UNCURED DEFAULTS. Should any default by a prior Lessor under
the Lease remain uncured at the time that a Successor Lessor acquires title to
the Property, Lessee will give the Successor Lessor such time as is reasonably
required to remedy such default as provided by Section 3.5, above, provided the
Successor Lessor proceeds with reasonable diligence to do so.  Lessee agrees, that notwithstanding any
provision of the Lease to the contrary, (a) Lessee shall not be entitled to
abate or offset against the rent any claims Lessee has against any prior
Lessor, and (b) Lessee will not be entitled to cancel the Lease, or to exercise
any other right or remedy available to Lessee under the Lease, unless and until
Lender has been given notice of the default and reasonable opportunity to cure
such default as provided herein, notwithstanding any prior failure by a prior
Lessor to cure such default within a reasonable period of time after notice
thereof.

 

4.5          NEW LEASE. If the acquisition by a Successor Lessor of
the interests of the Borrower in the Property results of a termination of the
Lease, then there shall be deemed to be created a new lease between Lessee and
the Successor Lessor on the same terms and conditions as the Lease, including
any renewal options, for the remainder of the term of the Lease.

 

4

 

4.6          RELEASE
FROM LIABILITY UPON SALE.   A
Successor Lessor shall automatically be released and discharged from all
liability arising under the Lease from and after  the sale or other transfer of its interest in the Property.

 

5.             LIMITATION
ON LIABILITY OF LENDER

 

Nothing in
this Agreement herein shall be construed to be an assumption by Lender of any of
the duties or obligations of Lessor under the Lease.  Lender shall not be liable for the performance of any duties or
obligations of the Lessor unless and until Lender acquires Lessors interest in
the Lease, and then only for as long as Lender holds such interest.

 

5.1          DEFAULT
PRIOR TO ACQUIRING INTEREST.   Lessee shall have no claim against
Lender or any other Successor Lessor resulting from, and neither Lender nor any
other Successor Lessor shall be liable for, any act, omission and/or breach of
the Lease by any prior lessor (including the Borrower) occurring prior to the
date on which the Successor Lessor acquires title to the Property, or for the
payment of damages or any other amount to which Lessee might be entitled by
reason of any such act or omission.

 

5.2          PREPAID
RENTS AND SECURITY DEPOSITS.  A Successor Lessor shall not be
liable for (a) any security deposit or prepaid rent except to the extent
actually received by Lender from Borrower, or (b) any rent or additional rent
which Lessee has paid for more than the then-current installment.

 

5.3          CERTAIN
OBLIGATIONS.  A Successor lesser shall not be bound by:

 

5.3.1  Any amendment to the Lease made without
Lender’s consent; or

 

5.3.2  Any provisions of the Lease regarding the
commencement or completion of any construction.

 

5.3.3  Any provision of the Lease relating to the
application of insurance or condemnation proceeds or the restoration of the
Property by the Lessor upon the occurrence of a casualty loss thereto or a
taking thereof, if such provision is inconsistent with the provisions of the
Deed of Trust, to the extent that such provision purports to give the Lessor or
the Lessee access to (a) the insurance or condemnation proceeds if Lender’s
security is impaired and the Property cannot be restored in manner that
provides Lender with continuing security comparable in nature and value to the
security that existed prior to the damage, destruction or taking or, (b)
surplus insurance proceeds if the Lessor or Lessee are permitted to utilize the
insurance or condemnation proceeds to restore the Property to a usable
condition.

 

6.             GENERAL
PROVISIONS

 

6.1          SUCCESSORS
AND ASSIGNS.  This Agreement
and each and every covenant, agreement and other provision hereof shall be
binding upon the parties hereto and their respective heirs, administrators,
representatives, successors, assigns and personal representatives, including
without

 

5

 

limitation each and every
holder of the Lease or any other person having an interest therein and shall
insure to the benefit of the Lender and its successors and assigns.

 

6.2          MERGER
OF INTERESTS.  If both the Lessor’s and the Lessee’s estates
in the Property or the improvements or both become vested in the same owner,
the Lease shall nonetheless survive and shall not be terminated by the merger
of such estates except at the express written election of Lender.

 

6.3          ADDITIONAL
DOCUMENTS.  Lessee’s
attornment to and recognition of a Success Lessor shall be upon all of the
terms, covenants and conditions set forth in the Lease, as modified by this
Agreement, and shall be effective immediately upon Lender’s succeeding to the
interest of the Lessor under the Lease. 
Upon request of either party, Lessee and the Successor Lessor shall
execute and deliver appropriate agreements of attornment and recognition, or
any new lease called for by Section 4.5, above, but this Agreement shall be
self-executing and no such separate agreements shall be required to effectuate
Lessee’s recognition of and attornment to a Successor Lessor as provided herein.

 

6.4          NOTICES.  Any notices permitted or required hereunder
shall be in writing and shall be deemed to have been given (a) on the date of
delivery if delivery of a legible copy was made personally or by facsimile
transmission, or (b) on the third business day after the date on which mailed
by registered or certified mail, return receipt requested, addressed to the
party for whom intended at the address set forth on the signature page of this
agreement or such other address, notice of which is given as provided herein.

 

6.5          MODIFICATION
OR AMENDMENT.  This Agreement
may not be amended or modified in any manner other than by agreement in writing
signed by all of the parties hereto.

 

 

(Signatures appear on the following page)

 

6

 

IN WITNESS WHEREOF,
the parties hereto have each caused this Subordination, Nondisturbance and
Attornment Agreement to be executed on the dates set forth below.

 

 

NOTICE: 
THIS AGREEMENT CONTAINS A SUBORDINATION CLAUSE

WHICH ALLOWS THE LESSOR UNDER YOUR LEASE TO OBTAIN A LOAN,

A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES 

THAN IMPROVEMENT OF THE LEASED PROPERTY

 

	
  LESSEE:

  	
   

  	
  BORROWER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:  JANUARY
  22, 2000

  	
   

  	
  Date:  FEBRUARY
  7, 2000

  
	
   

  	
   

  	
   

  
	
  MCGHAN MEDICAL CORPORATION, A

  	
   

  	
  ROCKBER PARTNERS, A DELAVWARE

  
	
  CALIFORNIA CORPORATION

  	
   

  	
  LIMITED LIABILITY COMPANY

  
	
   

  	
   

  	
   

  
	
  By :

  	
  /s/ C. S.
  Eschbach

  	
   

  	
   

  	
  BY: LOS CARNEROS INVESTORS, LLC, A

  
	
  C. S. ESCHBACH, PRESIDENT & CEO

  	
   

  	
  CALIFORNIA LIMITED LIABILITY

  
	
   

  	
   

  	
  COMPANY, ITS MEMBER

  
	
   

  	
   

  	
  BY: BERMANT DEVELOPMENT, A

  
	
  Address for
  Notices:

  	
   

  	
  CALIFORNIA CORPORATION, ITS

  
	
  7 SOUTH LOS CARNEROS ROAD

  	
   

  	
  MANAGER

  
	
  SANTA BARBARA, CA 93101

  	
   

  	
   

  
	
   

  	
   

  	
  BY:

  	
  /s/ Jeffrey C. Bermant

  
	
   

  	
   

  	
  JEFFREY C. BERMANT, PRESIDENT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BY:

  	
  /s/ Arthur F. Burke

  
	
   

  	
   

  	
  ARTHUR F. BURKE, CHIEF FINANCIAL

  
	
   

  	
   

  	
  OFFICER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address for
  Notices:

  
	
   

  	
   

  	
  5383 hollister avenue, suite
  150

  
	
   

  	
   

  	
  santa barbara, ca 93111

  
						

 

7

 

	
  LENDER:

  
	
   

  
	
  Santa Barbara Bank & Trust

  
	
  a California corporation

  
	
  By:

  	
  /s/ DONALD F. RAPP

  	
   

  
	
  DONALD F. RAPP,

  
	
  SENIOR VICE PRESIDENT

  
	
   

  
	
  Address for
  Notices:

  
	
  Real Estate Loan Servicing Department

  
	
  Santa Barbara Bank & Trust

  
	
  P. O. Box 128

  
	
  Santa Barbara, CA 93102

  

 

8

 

CALIFORNIA
ALL-PURPOSE ACKNOWLEDGMENT

 

	
  State of
  California

  	
  }

  
	
   

  	
  } ss.

  
	
  County of

  	
  SANTA
  BARBARA

  	
  }

  
	
   

  	
   

  
	
  On

  	
  2/7/00

  	
  , before me,

  	
  ROBERT
  RAMIREZ

  	
  ,

  
	
   

  	
  Date

  	
   

  	
  Name and
  Title of Officer (e.g., “Jane Doe, Notary Public”)

  	
   

  
	
   

  	
   

  
	
  personally
  appeared 

  	
  JEFFREY C.
  BERMANT & ARTHUR F. BURKE

  	
  ,

  
	
   

  	
  Name(s) of Signer(s)

  	
   

  
										

 

	
   

  	
  ý 
  personally known to me

  
	
   

  	
  o 
  proved to me on the basis of satisfactory evidence

  
	
   

  	
   

  
	
  [NOTARY PUBLIC SEAL]

   

  	
  to be the
  person(s) whose name(s) is/are subscribed to the within instrument and
  acknowledged to me that he/she/they executed the same in his/her/their
  authorized capacity(ies), and that by his/her/their signature(s) on the
  instrument the person(s), or the entity upon behalf of which the persons(s)
  acted, executed the instrument.

  
	
   

  	
   

  
	
   

  	
  WITNESS my
  hand and official seal.

  
	
   

  	
   

  
	
  Place Notary Seal Above

  	
  /s/
  [ILLEGIBLE]

  
	
   

  	
   

  	
  Signature of
  Notary Public

  

 

	
   

  	
  OPTIONAL

  	
   

  
	
   

  	
   

  

 

Though the information below is not required
by law, it may prove valuable to persons relying on the document 

and could prevent fraudulent removal and reattachment of this form to another
document.

 

	
  Description of Attached Document

  
	
  Title or
  Type of Document:

  	
   

  
	
   

  
	
  Document
  Date:

  	
   

  	
  Number of Pages:

  	
   

  
	
   

  
	
  Signer(s)
  Other Than Named Above:

  	
   

  
	
   

  
	
  Capacity(ies) Claimed by Signer

  
	
  Signer’s
  Name:

  	
   

  	
  RIGHT

  
	
   

  	
   

  	
  THUMBPRINT

  
	
  o Individual

  	
  OF SIGNER

  
	
  o Corporate Officer – Title(s):

  	
   

  	
  top of thumb here

  
	
  o Partner – o
  Limited  o
  General

  	
   

  
	
  o Attorney in Fact

  	
   

  
	
  o Trustee

  	
   

  
	
  o Guardian or Conservator

  	
   

  
	
  o Other :

  	
   

  	
   

  
	
   

  	
   

  
	
  Signer is
  Representing:

  	
   

  	
   

  
											

 

 

CALIFORNIA
ALL-PURPOSE ACKNOWLEDGMENT

 

	
  State of
  California

  	
  }

  
	
   

  	
  } ss.

  
	
  County of 

  	
  SANTA
  BARBARA

  	
  }

  
	
   

  	
   

  
	
  On

  	
  Jan. 26, 2000

  	
  , before me,

  	
  Martee
  Molnar, Notary Public

  	
  ,

  
	
   

  	
  Date

  	
   

  	
  Name and
  Title of Officer (e.g., “Jane Doe, Notary Public”)

  	
   

  
	
   

  	
   

  
	
  personally
  appeared 

  	
  C. Scott
  Eschbach

  	
  ,

  
	
   

  	
  Name(s) of Signer(s)

  	
   

  
										

 

	
   

  	
  ý personally known to me

  
	
   

  	
  o proved to me on the basis of satisfactory
  evidence

  
	
   

  	
   

  
	
  [NOTARY PUBLIC SEAL]

   

  	
  to be the
  person whose name is subscribed to the within instrument and acknowledged to
  me that he executed the same in his authorized capacitiy, and that by his
  signature on the instrument the person, or the entity upon behalf of which
  the person acted, executed the instrument.

  
	
   

  	
   

  
	
   

  	
  WITNESS my
  hand and official seal.

  
	
   

  	
   

  
	
  Place Notary Seal Above

  	
  /s/  Martee Molnar

  
	
   

  	
  Signature of Notary Public

  

 

	
   

  	
  OPTIONAL

  	
   

  
	
   

  	
   

  

 

Though the information below is not required
by law, it may prove valuable to persons relying on the document 

and could prevent fraudulent removal and
reattachment of this form to another document.

 

	
  Description of Attached Document

  
	
  Title or
  Type of Document:

  	
   

  
	
   

  
	
  Document
  Date:

  	
   

  	
    Number of Pages:

  	
   

  
	
   

  
	
  Signer(s)
  Other Than Named Above:

  	
   

  
	
   

  
	
  Capacity(ies) Claimed by Signer

  
	
  Signer’s
  Name:

  	
   

  	
  RIGHT

  
	
   

  	
   

  	
  THUMBPRINT

  
	
  o Individual

  	
  OF SIGNER

  
	
  o Corporate Officer – Title(s):

  	
   

  	
  Top of thumb here

  
	
  o Partner – o
  Limited  o
  General

  	
   

  
	
  o Attorney in Fact

  	
   

  
	
  o Trustee

  	
   

  
	
  o Guardian or Conservator

  	
   

  
	
  o Other:

  	
   

  	
   

  
	
   

  	
   

  
	
  Signer is
  Representing:

  	
   

  	
   

  
											

 

 

CALIFORNIA
ALL-PURPOSE ACKNOWLEDGMENT

 

	
  State of
  California

  	
  }

  
	
   

  	
  } ss.

  
	
  County of 

  	
  SANTA
  BARBARA

  	
  }

  
	
   

  	
   

  
	
  On

  	
  Feb. 8, 2000

  	
  , before me,

  	
  Blanca Rivas

  	
  ,

  
	
   

  	
  Date

  	
   

  	
  Name and
  Title of Officer (e.g., “Jane Coe, Notary Public”)

  	
   

  
	
   

  	
   

  
	
  personally
  appeared

  	
  Donald E.
  Rapp

  	
  ,

  
	
   

  	
  Name(s) of Signer(s)

  	
   

  
										

 

	
   

  	
  ý personally known to me

  
	
   

  	
  o proved to me on the basis of satisfactory
  evidence

  
	
   

  	
   

  
	
  [NOTARY PUBLIC SEAL]

   

  	
  to be the
  person(s) whose name(s) is/are subscribed to the within instrument and
  acknowledged to me that he/she/they executed the same in his/her/their
  authorized capacity(ies), and that by his/her/their signature(s) on the
  instrument the person(s), or the entity upon behalf of which the person(s)
  acted, executed the instrument

  
	
   

  	
   

  
	
   

  	
  WITNESS my
  hand and official seal.

  
	
   

  	
   

  
	
  Place Notary Seal Above

  	
  /s/  Blanca Rivas

  
	
   

  	
  Signature of Notary Public

  
	
   

  	
   

  

 

	
   

  	
  OPTIONAL

  	
   

  
	
   

  	
   

  

 

 

Though the information below  is not required by law, it may prove
valuable to persons relying on the document 

and could prevent fraudulent removal and
reattachment of this form to another document.

 

	
  Description of Attached Document

  
	
  Title or
  Type of Document:

  	
  S. W. A. A.

  
	
   

  
	
  Document
  Date:

  	
  1/22/00

  	
          Number of Pages:

  	
  14

  
	
   

  
	
  Signer(s)
  Other Than Named Above:

  	
   

  
	
   

  
	
  Capacity(ies) Claimed by Signer

  
	
  Signer’s
  Name:

  	
   

  	
  RIGHT

  
	
   

  	
   

  	
  THUMBPRINT

  
	
  o Individual

  	
  OF SIGNER

  
	
  o Corporate Officer – Title(s):

  	
   

  	
  Top of thumb here

  
	
  o Partner – o
  Limited  o
  General

  	
   

  
	
  o Attorney in Fact

  	
   

  
	
  o Trustee

  	
   

  
	
  o Guardian or Conservator

  	
   

  
	
  o Other:

  	
   

  	
   

  
	
   

  	
   

  
	
  Signer is
  Representing:

  	
   

  	
   

  
											

 

 

	
  ATTACHED TO
  SUBORDINATION AGREEMENT

  	
  /s/

  	
  CSE

  
	
  ROCKBER
  PARTNERS, LLC

  	
   

  	
   

  
	
  January 22,
  2000

  	
  /s/

  	
  JCB

  
	
  073-330-17

  	
   

  	
   

  
	
   

  	
  /s/

  	
  AFB

  

 

EXHIBIT “A”

 

Those portions of the Rancho
Los dos Pueblos, situated in the County of Santa Barbara, State of California,
described as follows:

 

PARCEL ONE:

 

Beginning at the Northwesterly
corner of the tract of land described as Parcel One in the deed from
Transamerica Title Insurance Company to the County of Santa Barbara, recorded
April 9, 1965 as Instrument No. 12686 in Book 2099, Page 553 of Official
Records, records of said County; said point being a  point in the Northerly line of the 210.278 acre parcel shown as
Parcel Two on the map of a survey filed in Book 62, pages 79 and 80 of Record
of Surveys, in the office of the County Recorder of said County; thence first,
South 0°18’02” West,
leaving said Northerly line and along the Westerly line of said Parcel One and
the Westerly line of Los Carneros Road 306.84 feet to an angle point in said
line; thence second, South 4°50’28” East,
continuing along said Westerly line, 195.61 feet to an angle point in said
line;  thence third, South 1°06’45”
East continuing along said line 260.24 feet to the beginning of a non-tangent
curve concave Westerly, having a delta of 27°44’28”
and a radius of 945.00 feet, the radial to said point bears south 88°56’56”
East; thence fourth, Southerly, continuing along said line and the arc of said
curve, 457.54  feet to the end of said
curve; thence fifth, South 24°05’37” West,
continuing along said line, 61.20 feet to an angle point in said line; thence
sixth, South 28°47’32” West,
continuing along said Westerly line 248.07 feet to a point from which center
line station 112 + 51.95 of Los Carneros Road bears South 61°12’28”
East, 50.00 feet; thence seventh, North 61°12’28”
West, leaving said Westerly line, 48.81 feet to the beginning of a curve
concave Southerly, having a delta of 39°
14’44” and a radius of 1000.00 feet; thence eighth, Westerly, along the
arc of said curve, 684.96 feet to the end of said curve; thence ninth, South 79°32’48”
West at 35.85 feet, point “A”, a distance of 521.44 feet to the beginning of a
curve concave Southeasterly, having a delta of 25°52’40”
and a radius of 500.00 feet; thence tenth Westerly along the arc of said curve,
225.83 feet to the end of said curve; thence eleventh South 53°40’08”
West, 171.08 feet to a point in the center line of a sanitary sever easement
described as Parcel “C” in the deed from Transamerica Title Insurance Company
to the Isla Vista Sanitary District recorded November 4, 1966 as Instrument No.
35828 in Book 2171. Page 720 of Official Records, records of said County;
thence twelfth North 36°19’00” West,
along said center line, at 654.36 feet the intersection with the Northeasterly
prolongation of the center line of Cortona Drive, according to the map of Tract
No. 10212, Unit No. One, recorded in Book 58, Page 28 of Maps, in the office of
the County Recorder of said County, said point being hereinafter referred to as
point “B” a distance of 867.69 feet to the beginning of a curve concave
Southwesterly having a delta of  27°40’49”
and a radius of 1416.07 feet; thence thirteenth, Northwesterly, along the arc
of said curve and said center line and its Northwesterly prolongation, 684.12
feet to the intersection of said prolongation with the Northerly line of the
210.278 acre parcel shown as Parcel Two on the map of a survey filed in Book
62, Pages 79 and 80 of Record of Surveys hereinbefore referred to,  said point being in the southerly line of
the Southern Pacific Railroad Company right-of-way as shown on said map; thence
fourteenth, North 74°34’00” East,
along said Southerly line and the

 

 

Northerly line of said Parcel
Two, a distance of 110.69 feet to the beginning of a taper curve that is
concentric with and distant Southerly 50.00 feet from the taper 1/2 curve in
the center line of said Southern Pacific Railroad Company right-of-way, as
shown on said map of Parcel Two, hereinbefore referred to; thence fifteenth,
Easterly, along said taper curve in said Southerly line to the beginning of a
curve concave Southerly, having a delta of 8°08’00”  and a radius of 11,409.18 feet; thence
radial to said point bears North 15°21’30”
West; thence sixteenth, Easterly continuing along said Southerly line and the
arc of said curve that is concentric with and distant Southerly 50.00 feet from
the taper 1/2 curve in the center line of said Southern Pacific Railroad
Company right-of-way as shown on said map of Parcel Two; thence seventeenth,
Easterly, continuing along said taper curve; thence eighteenth, North 82°51’
East, continuing along said Southerly line 1,093.58 feet to the point of
beginning.

 

EXCEPTING therefrom an
undivided 1/2 interest in and to all oil, gas and other hydrocarbon substances
and other minerals and mineral rights in and beneath said land as started in
a  deed recorded March 14, 1957 as
Instrument No. 5115 in Book 1435, Page 85 of Official Records.

 

ALSO EXCEPTING therefrom all
oil, gas, and other hydrocarbon substances and other minerals and mineral
rights in and beneath said land, provided however, that grantor, on its own
behalf and on behalf of the grantees named in that certain deed dated March 11,
1957, executed by Thomas B. Bishop Company, a corporation, to Anna H. Bishop,
et al., recorded March 14, 1957 as in Instrument No. 5115 in Book 1435, at Page
85 of Official Records, records of said County, their successors and assigns,
does hereby waive and relinquish all rights to enter upon the surface of said
land and any portion of the subsurface therof to a depth of 500 feet below said
surface as stated in a deed recorded March 22, 1967 as Instrument No. 7856 in
Book 2184, Page 1477 of Official Records.

 

PARCEL TWO:

 

A non-exclusive easement over,
under, upon and through a strip of land, 32.00 
feet wide, lying parallel and concentric with, adjacent to and Southerly
of the seventh through eleventh courses hereinbefore described in Parcel One
for road and public utility purposes.

 

PARCEL THREE:

 

A non-exclusive easement for
road and public utility purposes over, under, upon and through a strip of land,
60.00 feet wide, lying 30.00 feet on each side of the following described
center line:

 

Beginning at Point “B”
hereinbefore described in Parcel One; thence South 49°35’39”
West, 147.52 feet to the Northeasterly terminus of the center line of Cortona
Drive, according to the map of tract No. 10212, Unit No. One, in the County of
Santa Barbara, State of California, as shown on map filed in Book 58, Page 28
of Maps, in the office of the County Recorder of said County.

 

 

Please Complete and Sign

 

APPENDIX 1 TO

 

SUBORDINATION, ATTORNMENT AND NONDISTURBANCE
AGREEMENT

 

SUMMARY OF LEASE TERMS

 

TO:         SANTA BARBARA BANK & TRUST

                P. O. Box 128

                Santa Barbara, California 93101

 

THIS SUMMARY OF LEASE TERMS
is being executed and delivered to Santa Barbara Bank & Trust (the
“Lender”) by the Lessor and the Lessee identified in the Lease described below
pursuant to the terms and conditions of a SUBORDINATION, ATTORNMENT AND
NONDISTURBANCE AGREEMENT in connection with a loan being made by the Lender to
the Lesser under such Lease.

 

	
  1.

  	
   

  	
  BASIC LEASE DATA

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.1

  	
   

  	
  LEASE DATED:

  	
  NOVEMBER 15, 1999

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.2

  	
   

  	
  LANDLORD:

  	
  ROCKBER PARTNERS, LLC, A DELAWARE LIMITED

  	
   

  
	
   

  	
   

  	
   

  	
  LIABILITY COMPANY

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  TENANT:

  	
  MCGHAN MEDICAL CORPORATION, A

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  CALIFORNIA CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.3

  	
   

  	
  PROPERTY:

  	
  1 SOUTH LOS CARNEROS ROAD, GOLETA, CA

  	
   

  
	
   

  	
   

  	
   

  	
  93117

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.4

  	
   

  	
  COMMENCEMENT DATE:

  	
  The  11TH day
  of NOVEMBER , 1999.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  LEASE TERMS.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
																							

 

The Lease
commenced on the date set forth in Section 1, above, and is in full force and
effect.  The salient lease terms are as
follows:

 

2.1          BASE
RENT.   The amount of fixed
monthly rent is currently $129,466.11.
Rental payments and all other amounts owing under the lease have been paid for
all periods through the      day of   N/A  19   .  FIRST
MONTH’S RENT HAS BEEN PAID RENT INSTALLMENTS BEGIN MARCH 1, 2000.

 

 

2.2          Security Deposit.  The amount of the security deposit (if any) being held by
Landlord under the Lease is $129,466.11  No other security deposits have been made,
and none of the security deposit has been applied by Landlord to the payment of
rents or any other amounts due under the Lease.

 

2.3          PREPAID RENT. 
Landlord is holding the sum of $129,466.11
as prepaid rent, which is to be credited against the rent for the (o
last) (8TH ) month of the lease
term.

 

2.4          SCHEDULED EXPIRATION.  The current term of the Lease is scheduled to expire on the 12TH
day of  DECEMBER, 2014 .

 

2.5          RENEWAL OPTIONS. 
The Tenant has (o no renewal
options) (ý) 2 renewal options under the Lease for a total
of 10  years).  The term of the
Lease cannot be extended beyond the 12TH
day of DECEMBER, 2024.

 

2.6          CONCESSIONS AND INDUCEMENTS.  Tenant is not entitled to any free rent,
partial rent, rebates, rental abatements, or rent concessions of any kind, other
than (o none) (o
the following):

 

FREE RENT FROM NOVEMBER 16, 1999 TO MARCH 1, 2000

 

 

2.7          TENANT OPTIONS. Tenant (o
does) (ý does not) hold an option or right of first
refusal to purchase the all or any portion of the Property.

 

2.8          LANDLORD OPTIONS,  Landlord 
(ý  does)
(o  does
not) hold an option to purchase; the leasehold estate or to cancel the lease
upon the happening of certain events or by giving the Tenant notice of
cancellation.

 

2.9          LEASE MODIFICATIONS:  The Lease, has not been amended, modified, supplemented,
extended, renewed or assigned except by the documents identified below:.

 

	
  DESCRIPTION
  OF DOCUMENT (IF NONE, WRITE “None”)

  	
   

  	
  DATE

  
	
  

  	
   

  	
   

  
	
  

  	
   

  	
   

  
	
  

  	
   

  	
   

  
	
  

  	
   

  	
   

  

 

2.10        COPY OF LEASE. 
The Lease, as modified and amended to date, represents the entire agreement
between the Landlord and the Tenant with respect to the occupancy and use of
the Property by the Tenant.  A true,
correct and complete copy of the lease and all of the of the amendments,
modifications and supplements thereto is attached to this Certificate.

 

 

2

 

3.             LEASE PERFORMANCE

 

3.1          POSSESSION.  Landlord has tendered possession of the Property to Tenant, and
Tenant is in occupancy of the Property pursuant to the Lease.

 

3.2          PERFORMANCE
BY TENANT.  As of the date on
which this Certificate is being executed by the Landlord, there are no defaults
by the Tenant under the Lease or events which with notice or the passage of
time or both would constitute a default by the Tenant in the performance of any
of its obligations, monetary or otherwise, under the terms of the Lease.

 

3.3          PERFORMANCE
BY LANDLORD.  Landlord has completed any construction,
buildout, improvements, alterations, or additions to the leased property
required under the Lease.  As of the
date on which this certificate is being executed by the  Tenant, there are no defaults by the
Landlord under the Lease or events which with notice or the passage of time or
both would constitute a default by the Landlord in the performance of any of
its obligations under the terms of the Lease.

 

(Signatures appear on the following page)

 

IN WITNESS WHEREOF,
Landlord and Tenant have executed this Summary of Lease Terms on the dates set
forth below with the knowledge and understanding that the Santa Barbara Bank
& Trust will rely on the accuracy of the information contained in this
Summary in making the proposed loan to Landlord.

 

3

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date: JANUARY 22, 2000

  	
   

  	
  Date: JANUARY 22, 2000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ROCKBER PARTNERS, A DELAWARE

  	
   

  	
  MCGHAN MEDICAL CORPORATION, A

  	
   

  
	
  LIMITED LIABILITY COMPANY

  	
   

  	
  CALIFORNIA CORPORATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BY: LOS CARNEROS INVESTORS, LLC, A

  	
   

  	
  By :

  	
  /s/ C. S.
  Eschbach

  	
   

  
	
  CALIFORNIA LIMITED LIABILITY

  	
   

  	
  C. S. ESCHBACH, PRESIDENT & CEO

  	
   

  
	
  COMPANY, ITS MEMBER

  	
   

  	
   

  	
   

  
	
  BY: BERMANT DEVELOPMENT, A

  	
   

  	
   

  	
   

  
	
  CALIFORNIA CORPORATION, ITS

  	
   

  	
   

  	
   

  
	
  MANAGER

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
  /s/ Jeffrey
  C. Bermant

  	
   

  	
   

  	
   

  
	
  JEFFREY C. BERMANT, PRESIDENT

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
  /s/ Arthur
  F. Burke

  	
   

  	
   

  	
   

  
	
  ARTHUR F. BURKE, CHIEF FINANCIAL

  	
   

  	
   

  	
   

  
	
  OFFICER

  	
   

  	
   

  	
   

  
						

 

4EXHIBIT 10.16

 

AMENDMENT TO LEASE

Dated
September 1, 2001

 

This amendment to Lease is entered into this
1st day of September 2001, by and between Ekwill Street, LP a California
limited partnership, hereinafter referred to as “Landlord,” and McGhan Medical Corporation,
hereinafter referred to as “Tenant.”

 

WHEREAS, Landlord and
Tenant entered into that certain Lease Agreement dated July 1, 1985, as
amended, for the premises commonly known as 5511, 5531, 5551 and 5571 Ekwill
Street, Santa Barbara, California.

 

WHEREAS, the parties desire to amend said
lease as follows:

 

1.                                       Articles 2, Term:  The
term of the above referenced lease is amended as follows:

 

The lease term for the
building containing 11,200 SF commonly known as 5551 Ekwill Street is hereby
extended for eighteen (18) months.  The
lease termination date is hereby changed to December 31, 2003.  All the lease termination dates pertaining
to 5511, 5531 and 5571 Ekwill Street will remain as specified in the Amendments
to Lease dated December 15, 1999 and May 1, 2001.

 

2.                                       Articles 10 and 11, Insurance and Taxes:  Tenant shall continue to pay all of the costs associated with
property and casualty insurance and property taxes to September 1, 2001. From
September 1, 2001 to January 1, 2002, Tenant shall pay 75% of the above
referenced costs. From January 1, 2002 to July 1, 2002, tenant shall pay 50% of
the above referenced costs. From July 1, 2002 to January 1, 2004, tenant shall
pay 25% of the above referenced costs.

 

3.                                       Articles 3.1 and 3.2, Minimum Monthly Rent and Rental Adjustment:

 

A.                                   From July 1,
2001 to September 1, 2001, the minimum monthly base rent will be fifty-eight
thousand ninety four and 68/100 dollars ($58,094.68) per month plus a rent
increase calculated as specified in Article 3.2 of the above referenced lease
as amended;

 

B.                                     From September
1, 2001 to January 1, 2002, the minimum monthly base rent will be forty-three
thousand five hundred seventy one and 01/100 dollars ($43,571.01);

 

C.                                     From January 1,
2002 to July 1, 2002, the minimum monthly base rent will be twenty-nine
thousand forty-seven and 34/100 dollars ($29,047.34); and

 

D.                                    From July 1,
2002 to July 1, 2003, the minimum monthly base rent will be fifteen thousand
six hundred eighty dollars ($15,680.00). From July 1, 2003 to January 1, 2004,
a rent increase calculated as specified in Article 3.2 of the above referenced
lease, as amended, shall be applied to the minimum monthly base rent.

 

 

4.                                       Prior to
vacating the individual buildings comprising the leased premises, Tenant will
complete the work described in exhibit “A” attached hereto and included by
reference.  Tenants failure to complete
the work on or before the times described shall constitute a material default
under the lease and upon any such default, Landlord is entitled to (A)
terminate the lease (B) recover as damages the costs incurred by Landlord in
causing such work to be completed. The obligation of the Tenant hereunder shall
survive the termination of the lease.

 

5.                                       Item one (1) of
Exhibit “A” of the Amendment to Lease dated December 15, 1999 will be deleted
as it pertains to 5571 Ekwill only. 
Tenant will leave the interior of 5571 Ekwill in broom clean condition
with its current wall partitions and clean room facility left in place.

 

EXCEPT as set forth
in this Amendment to Lease, all provisions of the original Lease Agreement and
subsequent Lease Amendments will remain unchanged and in full force and effect,
and the parties hereby ratify and confirm said lease as so amended, and agree
to be bound by its terms.

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  	
   

  
	
  Ekwill Street, LP

  	
   

  	
  McGhan Medical Corporation

  	
   

  
	
  a California limited
  partnership

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By

  	
  /s/ James P. Knell

  	
   

  	
  By

  	
  /s/ Nicholas Teti

  	
   

  
	
   

  	
  James P. Knell, General
  Partner

  	
   

  	
   

  	
  Nicholas Teti, President
  and CEO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
  September 1, 2001

  	
   

  	
  Dated

  	
  Nov. 2, 2001

  	
   

  
								

 

 

 

EXHIBIT “A”

 

McGhan Medical Corporation (“Tenant”) is
responsible to perform the work and pay all the costs associated with the
following upon vacating the Property. 
Tenant will complete the work described below (A) not later than August
31, 2001 with respect to the building known as 5571 Ekwill; (B) not later than
December 31, 2001 with respect to the building known as 5531 Ekwill; (C) not
later than June 30, 2002 with respect to the building known as 5511 Ekwill (D)
and not later than December 31, 2003 with respect to the building known as 5551
Ekwill.  All the above referenced
buildings hereinafter shall be known as the “Property”.

 

1.             Remove all temporary walls and
partitions constructed at any time during the life of the lease;

2.             Repair, resurface and stripe the
entire parking lot per the previously agreed to specifications;

3.                                       Tear off and
replace the roof covering the manufacturing building located at 5551 Ekwill per
the previously agreed to specifications;

4.                                       Maintain the
landscaping for the Property during the two-year period ending 6 30-2002.
Ekwill Street, LP (“Landlord”) will contribute towards the cost during the
second year (2) on a pro-rata basis, based upon the ratio between the original
square footage of the leased premises and the square footage of the area being
leased  by the Tenant during the second
year. Landlord will contract with and pay for the landscaper to maintain the
landscaping at the Property from July 1, 2002 forward and Tenant will reimburse
Landlord for 25% of the costs relating to the landscaping from July 1, 2002 to
January 1, 2004.

5.                                       Upon vacating
the Property, leave the interior of the premises in broom clean condition and
clean all of the windows.

6.                                       Landlord will
hire a professional engineering company to perform all of the required
procedures involved in Phase II Environmental testing.  If the tests show no contamination resulting
from the Tenant’s business practices, than Landlord will pay for the
testing.  If any contamination  is found, Tenant will pay for the tests and
all costs associated with the clean up of the contamination.

7.                                       Any and all
additions to the Property, whether attached to the buildings or free standing,
(fences, additions, storage, signage...), shall be removed and all damage
associated with the removal shall be repaired.

8.                                       Upon move out,
each of the four (4) buildings will contain four (4) operational entry doors
and four (4) fully functioning roll-up doors. 
The entry doors shall be constructed in the same fashion as those on
site during the October 1999 inspection. 
The roll up doors will be constructed in the same fashion as those on
site during the October 1999 inspection.

9.                                       All work must
by performed by a licensed, bonded and insured contractor.  Tenant will obtain all lien releases upon
completion of the required construction . 
All costs relating to the above-described work, unless specified to the
contrary, are the sole responsibility of Tenant.  Tenant agrees to fully indemnify Landlord and all of its affiliates,
against any and all issues that arise from the work performed as a result of
the move-out.

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
  Ekwill Street, LP

  	
   

  	
  McGhan Medical Corporation

  
	
  a California limited
  partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/ James P. Knell

  	
   

  	
  By

  	
  /s/ Nicholas Teti

  
	
   

  	
  James P. Knell, General
  Partner

  	
   

  	
   

  	
  Nicholas Teti, President
  and CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated

  	
  September 1, 2001

  	
   

  	
  Dated

  	
  Nov. 2, 2001

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