Document:

Exhibit 10.15

 

LEASE AMENDMENT NO. 1

 

This Lease Amendment No. 1 (this
“Amendment”) is made and entered into this 13th day of July 2004
by and between MSI 83 King L.L.C., a Washington limited liability company (“Landlord”)
and Sound Health Solutions, a Washington corporation (“Tenant”).

 

Recitals

 

A.                                   Landlord
and Tenant, entered into a written Lease dated March 31, 2004 (the “Lease”),
whereby Tenant leased from Landlord certain Premises (501 First Avenue South)
comprising approximately 5,124 rentable square feet of space in the building
commonly known as the 83 King Building, in the City of Seattle, County of King,
State of Washington, the street address of which is 83 South King Street.

 

B.                                     All
capitalized terms used in this Amendment, but not defined herein, shall have
the meanings ascribed to them in the Lease.

 

C.                                     The
Term of the Lease expires on June 30, 2009.

 

D.                                    Landlord
and Tenant desire to amend the Lease to revise the Commencement Date and
Expiration Date of the Lease, adjust the Minimum Rent to provide for Tenant’s
Additional Tenant Improvement Allowance and revise Exhibit C (“Work Letter”).

 

NOW THEREFORE, for
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Landlord and Tenant agree to amend the Lease as follows:

 

1.                                       Section 1(f) of
the Lease is hereby deleted and replaced with the following:

 

(f)  “Commencement Date” means June 14,
2004.

 

2.                                       Section 1(g) of
the Lease is hereby deleted and replaced with the following:

 

(g)  “Expiration Date” means March 31, 2009.

 

3.                                       Section 1(i) of
the Lease is hereby deleted and replaced with the following:

 

(i)  “Minimum
Monthly Rent” means the following amounts as to the following periods during
the Term of this Lease:

 

	
  Period

  	
   

  	
  Monthly Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  June 14, 2004

  	
   

  	
  to

  	
   

  	
  June 30, 2004

  	
   

  	
  $

  	
  0.00 per month

  	
   

  
	
  July 1, 2004

  	
   

  	
  to

  	
   

  	
  September 30, 2004

  	
   

  	
  $

  	
  637.41 per month

  	
   

  
	
  October 1, 2004

  	
   

  	
  to

  	
   

  	
  June 30, 2006

  	
   

  	
  $

  	
  8,323.41 per month

  	
   

  
	
  July 1, 2006

  	
   

  	
  to

  	
   

  	
  June 30, 2007

  	
   

  	
  $

  	
  8,750.41 per month

  	
   

  
	
  July 1, 2007

  	
   

  	
  to

  	
   

  	
  June 30, 2008

  	
   

  	
  $

  	
  9,177.41 per month

  	
   

  
	
  July 1, 2008

  	
   

  	
  to

  	
   

  	
  June 30, 2009

  	
   

  	
  $

  	
  9,604.41 per month

  	
   

  

 

4.                                       Additional
Tenant Improvement Allowance. Tenant has elected to utilize the Additional
Tenant Improvement Allowance of $30,000 per the terms of Section 3 of Exhibit C
(‘Work Letter”). Landlord shall provide said $30,000 to Tenant within five (5) business
days after execution of this Lease Amendment No. 1.

 

5.                                       Early
Payoff. Tenant shall have the option, at any time without penalty, to pay
the unamortized portion of this $30,000 Additional Tenant Improvement Allowance
to Landlord. In such event, upon receipt of the unamortized amount, Landlord
and Tenant shall execute another Lease Amendment which shall reduce the Minimum
Monthly Rent by $637.41 per month throughout the remaining lease term.

 

6.                                       Effectiveness
of Lease. Except as set forth in this Amendment, all the provisions of the
Lease shall remain unchanged and in full force and effect.

 

 

 

Dated the date first above written.

 

	
  Landlord:

  	
   

  	
  Tenant:

  
	
   

  	
   

  	
   

  
	
  MSI 83 King L.L.C., a Washington limited liability
  company

  	
   

  	
  Sound Health
  Solutions, a Washington

  
	
   

  	
   

  	
  corporation

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  H. Martin Smith, III

  	
   

  	
  By:

  	
  /s/ Teresa Girolami

  
	
   

  	
  Manager

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
        President SHC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
						

This Amendment has been prepared for submission to you and your
attorney. Martin Smith Inc is not authorized to give legal or tax advice. Neither
Landlord nor Martin Smith Inc makes any representations or recommendations as
to the legal sufficiency, legal effect or tax consequences of this document or
any transaction relating thereto. These are questions for your attorney with
whom you should consult before signing the document to determine whether your
legal rights are adequately protected.

 

 

	
  MARTIN SMITH INC.

  	
   

  
	
  83 KING BUILDING

  	
  OFFICE LEASE - GROSS

  
	
  83 SOUTH KING STREET

  	
   

  
	
  SEATTLE, WA 98104

  	
  83 KING BUILDING

  
	
  TEL 682-3330 FAX 340-1283

  	
   

  

 

This Lease is made this 31st day of March 2004 by and
between MSI 83 King L.L.C., a Washington limited liability company (“Landlord”),
and Sound Health Solutions, a Washington corporation (“Tenant”), who agree as
follows:

 

1.                                       Fundamental Terms. As used in this Lease,
the following capitalized terms shall have the following meanings:

 

(a)                                  “Land”
means the land on which the Building is located, situated in the City of
Seattle, County of King, Slate of Washington, which is described on Exhibit A.

 

(b)                                 “Building”
means the building in which the Premises are located, commonly known as the 83
King Building, the street address of which is 83 South King Street. Seattle,
Washington, 98104.

 

(c)                                  “Premises”
means that certain space crosshatched on Exhibit B, located on the
first floor of the Building designated as 501 First Avenue South.

 

(d)                                 “Agreed
Areas” means the agreed amount of rentable square feet of space in the Building
and the Premises. Landlord and Tenant stipulate and agree for all purposes
under this Lease that the Building contains approximately 204,504 rentable
square feet of space (the “Building Area”) and that the Premises contain
approximately 5.124 rentable square feet of space (the “Premises Area”). Landlord
and Tenant further agree that the Building Area may exclude portions of
the Building which are used for other than office purposes, such as areas used
for retail purposes or for storage purposes.

 

(e)                                  “Tenant’s
Share” means the Premises Area divided by the Building Area, expressed as a
percentage, which is two and fifty-one/100ths percent (2.51%). Notwithstanding
the foregoing, if one or more of the facilities, services and utilities the
costs of which are included within the definition of Operating Costs is not
furnished to one or more spaces or to particular types of spaces, then in
connection with the calculation of Tenant’s Share of each of such costs the
Building Area shall be reduced by the number of rentable square feet contained
in such space and Tenant’s Share shall be separately computed as to each of
such costs. If the Building shall contain non-office uses during any period,
Landlord shall have the right to determine, in accordance with sound accounting
and management principles, Tenant’s Share of Real Property Taxes and Operating
Costs for only the office portion of the Building; in such event, Tenant’s
Share shall be based on the ratio of the rentable area of the Premises to the
rentable area of such office portion for such period.

 

If a portion of the Building is damaged or condemned,
or any other event occurs which alters the number of rentable square feet of
space in the Premises or the Building, then Landlord shall adjust Tenant’s
Share to equal the number of rentable square feet of space then existing in the
Premises (as altered by such event) divided by the number of rentable square
feet of space then existing in the Building (as altered by such event).

 

(f)                                    “Commencement
Date” means April 1, 2004, or such earlier or later date as provided to Section 4
hereof.

 

(g)                                 “Expiration
Date” means March 31, 2009.

 

(h)                                 “Term”
means the period of time commencing on the Commencement Date and ending on the
Expiration Date, unless sooner terminated pursuant to this Lease.

 

(i)                                     “Minimum
Monthly Rent” means the following amounts as to the following periods during
the Term of this Lease:

 

	
  Period

  	
   

  	
  Monthly Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  April 1, 2004

  	
   

  	
  To

  	
   

  	
  June 30, 2004

  	
   

  	
  $

  	
  0.00 per month

  	
   

  
	
  July 1, 2004

  	
   

  	
  To

  	
   

  	
  March 31, 2006

  	
   

  	
  $

  	
  7,686.00 per month

  	
   

  
	
  April 1, 2006

  	
   

  	
  To

  	
   

  	
  March 31, 2007

  	
   

  	
  $

  	
  8,113.00 per month

  	
   

  
	
  April 1, 2007

  	
   

  	
  To

  	
   

  	
  March 31, 2008

  	
   

  	
  $

  	
  8,540.00 per month

  	
   

  
	
  April 1, 2008

  	
   

  	
  To

  	
   

  	
  March 31, 2009

  	
   

  	
  $

  	
  8,967.00 per month

  	
   

  

 

(j)                                     “Permitted
Use” means office and health care management purposes, clinic that treats
individuals suffering from obesity and its related illnesses, and related uses.

 

(k)                                  “Base
Year” means the calendar year 2004.

 

(l)                                     “Prepaid
Rent” means Seven Thousand Six Hundred Eighty Six and No/100lhs Dollars
($7.686.00).

 

 

(m)                               “Security
Deposit” means Seventeen Thousand Nine Hundred Thirty Four and No/100ths
Dollars ($17,934.00).

 

(n)                                 “Landlord’s
Address for Notice” means MSI 83 King L.L.C., c/o Martin Smith Inc, Attn: H.
Martin Smith, III, 83 South King Street, Suite 606, Seattle, WA
98104.

 

(o)                                 “Landlord’s
Address for Payment of Rent” means MSI 63 King L.L.C., c/o Martin Smith Inc. P.O. Box
94685. Seattle. WA 98124-6985.

 

(p)                                 “Tenant’s
Address for Notice” means Sound Health Solutions, 15446 Bel-Red Road, Suite B-15,
Redmond, WA 98052 before the Commencement Date or 501 First Avenue South,
Seattle, WA 98104 on and after the Commencement Date.

 

(q)                                 “Landlord’s
Agent” means Martin Smith Inc or such other agent as Landlord may appoint
from time to time.

 

(r)                                    “Broker(s)”
means Martin Smith Inc representing the Landlord and Rex Noffsinger of Colliers
International representing the Tenant

 

(s)                                  “Exhibits”
means the following Exhibits to this Lease:

 

Exhibit A - Legal Description or the Property

Exhibit B - Outline Drawing of the Premises

Exhibit C - Work Letter

Exhibit D - Rules arid Regulations

Exhibit E - Janitorial Specifications

 

(t)                                    “Rider”
means the following Rider which is attached hereto: Rider dated March 31,
2004 by and between MSI 83 King L.L.C., a Washington limited liability company
(“Landlord’), and Sound Health Solutions, a Washington corporation (“Tenant”).

 

(u)                                 “Definitions”
means the words and phrases defined in Section 41 captioned “Definitions”.

 

2.                                       Consent and Notices. Whenever the consent
of either Landlord or Tenant is required under this Lease, such consent shall
not be effective unless given in writing and shall not be unreasonably withheld
or delayed, provided, however, that such consent may be conditioned as
provided in this Lease. All notices or requests required or permitted under
this Lease shall be in writing as provided in Section 42(g).

 

3.                                       Premises and Appurtenances. Landlord leases
to Tenant and Tenant leases from Landlord the Premises for the Term. Tenant,
and its authorized representatives, shall have the right to use, in common with
others and subject to the Rules and Regulations, the Common Areas of the
Building. Landlord shall have the right, in Landlord’s sole discretion, from
time to time to (i) make changes to the Building interior and exterior and
Common Areas, including without limitation, changes in the location, size,
shape, number and appearance thereof, (ii) to close temporarily any of the
Common Areas for maintenance purposes so long as reasonable access to the
Premises remains available, and (iii) to use the Common Areas while
engaged in making additional improvements, repairs or alterations to the
Building. All of the windows and exterior walls of the Premises and any space
in the Premises used for shafts, stacks, pipes, conduits, ducts, electrical
equipment or other utilities or Building facilities are reserved solely to
Landlord and Landlord shall have rights of access through the Premises for the
purpose of operating, maintaining and repairing the same, provided, however,
that such changes shall not materially affect Tenant’s access to, or use and
occupancy of, the Premises.

 

4.                                       Term.

 

(a)                                  Commencement Date. The Term shall commence
on the Commencement Date and expire on the Expiration Date, unless sooner
terminated pursuant to this Lease. The Commencement Date shall be:

 

(i)                                     The
date specified in Section 1, unless notice is delivered pursuant to Subsection 4(a)(ii),
in which case the Commencement Date shall be such later date, or Tenant
occupies the Premises earlier pursuant to Subsection 4(a)(iii), in which
case the Commencement Date shall be such earlier date;

 

(ii)                                  Such
later date on which the Tenant Improvements to be made to the Premises by
Landlord, if any, are substantially complete, provided, however, that Landlord
shall give notice of substantial completion to Tenant at least five (5) days
before such date.

 

(iii)                               If Tenant shall occupy
the Premises for the Permitted Use prior to the Commencement Date specified in Section 1
or the date specified in the notice provided for pursuant to Subsection 4(a)(ii),
then the date of such early occupancy.

 

(b)                                 Tenant Obligations. If the Tenant
Improvements, If any, are not substantially completed on the Commencement Date
specified in Section 1 primarily due to Tenant’s failure to promptly
review and approve the plans

 

2

 

and specifications for the Tenant Improvements or change orders with
respect to the Tenant Improvements or to Tenant’s failure to fulfill any other
obligation under this Lease, then the Term shall be deemed to have commenced on
the Commencement Date specified in Section 1.

 

(c)                                  Tenant Termination Rights. If Landlord is
unable to deliver possession of the Premises with the Tenant improvements, if
any, substantially completed to Tenant on the Commencement Date as a result of
causes beyond its reasonable control, Landlord shall not be liable for any
damage caused by failing to deliver possession and this Lease shall not be void
or voidable. Tenant shall not be liable for Rent until Landlord delivers
possession of the Premises to Tenant. No delay in delivery of possession of the
Premises to Tenant shall change the Expiration Date or operate to extend the
Term. If Landlord does not deliver possession of the Premises to Tenant within
three (3) months of the Commencement Date, then Tenant may elect to
terminate this Lease by giving notice to Landlord within ten (10) days
following the end of such six (6) month period.

 

(d)                                 Confirmation of Commencement Date. When the
Commencement Date as provided in Subsection 4(a)(ii) or Subsection 4(a)(iii) has
been established as an earlier or later date than the Commencement Date
specified in Section 1, Landlord shall confirm the Commencement Date by
notice to Tenant.

 

5.                                       Minimum Monthly Rent; Late Charge.

 

(a)                                  Minimum Monthly Rent. Tenant shall pay to
Landlord the Minimum Monthly Rent without deduction, offset, prior notice or
demand, in advance on the first day of each month during the Term. Minimum
Monthly Rent for any partial month shall be prorated at the rate of 1/30th of
the Minimum Monthly Rent per day. Minimum Monthly Rent is exclusive of any
sales, franchise, business or occupation or other tax based on rents (other
than Landlord’s general income taxes) and should such taxes apply during the
Term, the Minimum Monthly Rent shall be increased by the amount of such taxes. All
Rent shall be paid to Landlord at Landlord’s Address for Payment of Rent or at
such other address as Landlord may specify by notice to Tenant.

 

(b)                                 Late Charge. Tenant acknowledges that the
late payment by Tenant of any Rent will cause Landlord to incur administrative,
collection, processing and accounting costs and expenses not contemplated under
this Lease, the exact amount of which are extremely difficult or impracticable
to fix. Therefore, if any Rent is not received by Landlord from Tenant by the
fifth (5th) calendar day after such Rent is due, Tenant shall immediately pay
to Landlord a late charge equal to five percent (5%) of the amount of such Rent
or Seventy-five and No/100th Dollars ($75.00), whichever is greater. Landlord
and Tenant agree that this late charge represents a reasonable estimate of such
costs and expenses and is fair compensation to Landlord for its loss caused by
Tenant’s nonpayment. Should Tenant pay said late charge but fail to pay
contemporaneously therewith all unpaid amounts of Rent, Landlord’s acceptance
of this late charge shall not constitute a waiver of Tenant’s default with
respect to Tenant’s nonpayment nor prevent Landlord from exercising all other
rights and remedies available to Landlord under this Lease or under law.

 

6.                                       Prepaid Rent and Security Deposit. As
partial consideration for Landlord’s execution of this Lease, on execution of
this Lease, Tenant shall deposit with Landlord the Prepaid Rent, as monthly
rent for the first full month of the Term for which Rent is payable, and the
Security Deposit, as a Security Deposit for the performance by Tenant of the
provisions of this Lease. If Tenant is in default, Landlord may use the
Security Deposit, or any portion of it, to cure the default, including without
limitation, paying for the cost of any work necessary to restore the Premises,
the Tenant improvements and any alterations to good condition or to compensate
Landlord for all damage sustained by Landlord resulting from Tenant’s default. Tenant
shall within five (5) days of demand pay to Landlord a sum equal to the
portion of the Security Deposit expended or applied by Landlord as provided in
this Section so as to maintain the Security Deposit in the sum initially
deposited with Landlord. If Tenant has not been and is not then in default as
of the thirtieth (30th) month of the Term including without
limitation, in default in payment of the Rent for the thirtieth (30th)
month of the Term, then Landlord shall return one half of the Security Deposit,
without Interest, to Tenant. If Tenant is not in default as of the expiration
or termination of the Term, including without limitation, in default in payment
of the Rent for the last month of the Term, then Landlord shall return the
balance of the Security Deposit, without interest, to Tenant within a
reasonable period of time not to exceed thirty (30) days after the expiration
or termination of the Term. Landlord’s obligations with respect to the Security
Deposit are those of a debtor and not a trustee. Landlord may commingle
the Security Deposit with Landlord’s general and other funds.

 

7.                                       Real
Property Taxes.

 

(a)                                  Payment of Tenant’s Share of Increases in Real
Property Taxes. Tenant shall pay to Landlord, as Additional Rent,
monthly, in advance on the first day of each month during the Term, an amount
equal to one-twelfth (1/12th) of Tenant’s Share of all increases in Real
Property Taxes that are or will be levied or assessed against the Property
during each calendar year during the Term over and above the Real Property
Taxes that are levied or assessed against the Property during the Base Year as
reasonably estimated by Landlord. Such Additional Rent is exclusive of any
sales, franchise, business or occupation or other tax based on rents and should
such taxes apply during the Term, such Additional Rent shall be increased by
the amount of such taxes. Within one hundred twenty (120) days after the end of
each calendar year during the Term or within such longer period of time as may be
reasonably necessary, Landlord shall furnish to Tenant a statement of the Reel
Property Taxes for the preceding calendar year and Tenant’s Share of the
increase in Real Property Taxes. If Tenant’s Share of the increase in such Real
Property Taxes for that calendar year over such Real Property Taxes for the
Base Year exceeds the monthly payments made by Tenant, then Tenant shall pay
Landlord the deficiency within thirty (30) days after receipt of the statement.
If Tenant’s

 

3

 

payments made during that calendar year exceed Tenant’s Share of the
increase in such Real Property Taxes for that calendar year over such Real
Property Taxes for the Base Year, then, at Landlord’s option, either Landlord
shall pay Tenant the excess at the time Landlord furnishes the statement to
Tenant, or Tenant shall be entitled to offset the excess against the next
installment(s) of Minimum Monthly Rent and Additional Rent, provided, however,
that at the end of the Term Landlord shall pay Tenant the excess at the time
Landlord furnishes the statement to Tenant.

 

(b)                                 General and Special Assessments. With
respect to any general or special assessments which may be levied against
or upon the Property, or which under the laws then in tome may be
evidenced by improvement or other bonds or may be paid in annual
installments, only the amount of such annual installment, and interest due
thereon, shall be included in the computation of Real Property Taxes.

 

(c)                                  Proration. Tenant’s Share of Real Property
Taxes shall be prorated on the basis of a 360-day year to account for any
fractional portion of a tax year included in the Term at its commencement and
expiration.

 

(d)                                 No Effect on Minimum Monthly Rent. Notwithstanding
anything to the contrary in this Section, the Minimum Monthly Rent payable by
Tenant shall in no event be less than the Minimum Monthly Rent specified in Section 1.

 

a.                                       Personal Property Taxes. Tenant shall pay
prior to delinquency all personal property taxes assessed against and levied
upon trade fixtures, furnishings, equipment and all other personal property of
Tenant contained in the Premises or elsewhere. If possible, Tenant shall cause
such trade fixtures, furnishings, equipment and all other personal property of
Tenant to be assessed and billed separately from the Property.

 

9.                                       Operating Costs.

 

(a)                                  Payment of Tenant’s Share of Increases in Operating
Costs. Tenant shall pay to Landlord, as Additional Rent, monthly, in
advance on the first day of each month during the Term, an amount equal to
one-twelfth (1/12th) of Tenant’s Share of the increase in the Operating Costs
of the Property for each calendar year during the Term over the Operating Costs
for the Base Year as reasonably estimated by Landlord. Landlord may, in
accordance with sound accounting and management principles, both reasonably
estimate, and finally determine, the Operating Costs for the Base Year and for
each calendar year during the Term based on the Operating Costs that would have
been incurred if the Building had been 95% occupied during the Base Year or
each such calendar year, as the case may be, taking into account
historical operating costs for the Building. Such Additional Rent is exclusive
of any sales, franchise, business or occupation or other tax based on rents and
should such taxes apply during the Term, such Additional Rent shall be increased
by the amount of such taxes. Within one hundred twenty (120) days after the end
of each calendar year during the Term or within such longer period of time as may be
reasonably necessary, Landlord shall furnish to Tenant a statement of the
Operating Costs for the preceding calendar year and Tenant’s Share of the
increase in the Operating Costs. If Tenant’s Share of the increase in the
Operating Costs for that calendar year over the Operating Costs for the Base
Year exceeds the monthly payments made by Tenant, then Tenant shall pay
Landlord the deficiency within thirty (30) days after receipt of the statement.
If Tenant’s payments made during that calendar year exceed Tenant’s Share of
the increase in the Operating Costs for that calendar year over the Operating
Costs for the Base Year, then, at Landlord’s option, either Landlord shall pay
Tenant the excess at the time Landlord furnishes the statement to Tenant, or
Tenant shall be entitled to offset the excess against the next Installment(s)
of Minimum Monthly Rent and Additional Rent, provided, however, that at the end
of the Term Landlord shall pay Tenant the excess at the time Landlord furnishes
the statement to Tenant.

 

(b)                                 Proration. Tenant’s Share of Operating
Costs shall be prorated on the basis of a 360-day year to account for any
fractional portion of a year included in the Term at its commencement and
expiration.

 

(c)                                  No Effect on Minimum Monthly Rent. Notwithstanding
anything to the contrary in this Section, the Minimum Monthly Rent payable by
Tenant shall in no event be less than the Minimum Monthly Rent specified in Section 1.

 

(d)                                 Right to Examine Landlord’s Books and Records. Tenant,
or its authorized representative, shall have the right to examine Landlord’s
books and records relating to Operating Costs of the Property upon reasonable
prior notice specifying such records Tenant desires to examine, during normal
business hours at the place or places where such records are normally kept by
sending such notice no later than six (6) months following the furnishing
of the Landlord’s statement of the Operating Costs for the preceding calendar
year and Tenant’s Share of the increase in the Operating Costs. Tenant’s
authorized representative shall be compensated on an hourly or project basis
and not on (i) a contingent basis, (ii) the basis of a percentage of
any savings or refund resulting from the audit, or (iii) in any other
manner that makes such representative’s compensation for such audit in any way
dependent on the results of the audit. Tenant may take exception to
matters included in Operating Costs, or Landlord’s computation of Tenant’s
Share, by sending notice specifying such exception end the reasons therefor to
Landlord no later than thirty (30) days after Landlord makes such records
available for examination. Landlord’s statement of the Operating Costs for the
preceding calendar year and Tenant’s Share of the increase in the Operating Costs
shall be considered final, except as to matters to which exception is taken
after examination or Landlord’s books and records relating to Operating Costs
of the Property in the foregoing manner and within the foregoing times. Tenant
acknowledges that Landlord’s ability to budget and incur expenses depends on
the finality of such statement, and accordingly agrees that time is of the
essence of this

 

4

 

Section. If Tenant takes exception to any matter contained in such
statement as provided herein, Landlord shall refer the matter to an independent
certified public accountant, whose certification as to the proper amount shall
be final and conclusive as between Landlord and Tenant. Tenant shall promptly
pay the cost of such certification unless such certification determines that
Landlord’s statement of the Operating Costs overstated the Operating Costs by
more than five percent (5%). Pending resolution of any such exceptions in the
foregoing manner, Tenant shall continue paying Tenant’s Share of Operating
Costs in the amounts determined by Landlord, subject to adjustment after any
such exceptions are so resolved. If such certification determines that Landlord’s
statement of the Operating Costs overstated the Operating Costs, then Tenant
shall receive a credit for Tenant’s Share of the amount of such overstatement
against the next installment(s) of Minimum Monthly Rent and Additional Rent,
provided, however, that at the end of the Term Landlord shall pay Tenant the excess
at the time Landlord furnishes the statement to Tenant.

 

10.                                 Use. Tenant shall use the Premises for the
Permitted Use and for no other use without Landlord’s prior consent. Tenant
agrees that it has determined to its satisfaction that the Premises can be used
for the Permitted Use. Tenant waives any right to terminate this Lease if the
Premises cannot be used for the Permitted Use during the Term unless the
prohibition on use is the result of actions taken by Landlord. Tenant’s use of
the Premises shall be in accordance with the following,

 

(a)                                  Insurance. Tenant shall not do, bring, or
keep anything in or about the Premises or the Property that will cause a
cancellation of any insurance covering the Property. If the rate of any
insurance carried by Landlord on the Property as published by the Washington
Survey and Rating Bureau, or any successor rating bureau or agency, is
Increased as a result of Tenant’s use, then Tenant shall pay to Landlord not
less than ten (10) days before the date Landlord is obligated to pay a
premium on the insurance, a sum equal to the difference between the original
premium and the increased premium.

 

(b)                                 Compliance with Laws. Tenant shall comply
with all laws concerning the Premises and Tenant’s use of the Premises.

 

(c)                                  Waste, Nuisance and Improper Use. Tenant
shall not use the Premises in any manner that will constitute waste, nuisance
or unreasonable annoyance to other tenants in the Building, including without
limitation, (i) the use of loudspeakers or sound or light apparatus that
can be heard or seen outside the Premises, (ii) for cooking or other
activities that cause odors that can be detected outside the Premises, or (iii) for
lodging or sleeping rooms.

 

(d)                                 Damage to Property. Tenant shall not do
anything in, on or about the Premises that will cause damage to the Property.

 

(e)                                  Rules and Regulations. Tenant and its
authorized representatives shall comply with the Rules and Regulations set
forth on Exhibit D attached hereto. Landlord shall have the right
to reasonably amend the Rules and Regulations from time to time. In the
event of a conflict between this Lease and the Rules and Regulations, as
amended, this Lease shall control. Landlord shall have the right to enforce the
Rules and Regulations. Landlord shall have no liability or responsibility
whatsoever with respect to the noncompliance by other tenants or their
authorized representatives with any of such Rules and Regulations.

 

11.                                 Hazardous Substances. Tenant shall not
dispose of or otherwise allow the release of any Hazardous Substances in, on or
under the Premises, or the Property, or in any tenant improvements or
alterations placed on the Premises by Tenant. Tenant represents and warrants to
Landlord that Tenant’s intended use of the Premises does not involve the use,
production, disposal or bringing on to the Premises of any Hazardous
Substances, except for products normally used in general business offices which
constitute Hazardous Substances, provided that such products are used, stored
and disposed of in accordance with applicable laws and manufacturer’s and
supplier’s guidelines. Tenant shall promptly comply with all laws and with all
orders, decrees or judgments of governmental authorities or courts having
jurisdiction, relating to the use, collection, treatment, disposal, storage,
control, removal or cleanup of Hazardous Substances, on or under the Premises
or the Property, or incorporated in any tenant improvements or alterations, at
Tenant’s expense.

 

(a)                                  Compliance; Notification. After notice to
Tenant and a reasonable opportunity for Tenant to effect such compliance,
Landlord may, but is not obligated to, enter upon the Premises and take such
actions and incur such costs and expenses to effect such compliance as it deems
advisable to protect its interest in the Premises and the Property, provided,
however that Landlord shall not be obligated to give Tenant notice and an
opportunity to effect such compliance if (i) such delay might result in
material adverse harm to the Premises, or the Property, or (it) an emergency
exists. Tenant shall reimburse Landlord for the full amount of all costs and
expenses incurred by Landlord in connection with such compliance activities,
and such obligation shall continue even after expiration or termination of the
Term. Tenant shall notify Landlord immediately of any release of any Hazardous
Substances on the Premises or the Property.

 

(b)                                 Indemnity by Tenant. Tenant agrees to hold
Landlord harmless from and against any and all damages, charges, cleanup costs,
remedial actions, costs and expenses, which may be imposed on, incurred or
paid by, or asserted against Landlord, the Premises or the Property by reason
of, or in connection with the acts or omissions of Tenant, its authorized
representatives, or any subtenant or other person for whom Tenant would
otherwise be liable, resulting in the release of any Hazardous Substances on
the Premises or the Property.

 

5

 

(c)                                  Indemnity by Landlord. Landlord agrees to
hold Tenant harmless from and against any and all damages, charges, cleanup
costs, remedial actions, costs and expenses, which may be imposed on,
incurred or paid by, or asserted against Tenant, the Premises or the Property
by reason of, or in connection with the acts or omissions of Landlord, or its
employees, resulting in the release of any Hazardous Substances on the Premises
or the Property.

 

(d)                                 Acknowledgment as to Hazardous Substances. Tenant
acknowledges that the Premises may contain Hazardous Substances, and
Tenant accepts the Premises and the Building notwithstanding such Hazardous
Substances. If Landlord is required by any law to take any action to remove or
abate any Hazardous Substances, or if Landlord deems it necessary to conduct
special maintenance or testing procedures with regard to any Hazardous
Substances, or to remove or abate any Hazardous Substances, Landlord may take
such action or conduct such procedures at times and in a manner that Landlord
deems appropriate under the circumstances, and Tenant shall permit the same.

 

(e)                                  Survival. The provisions of this Section shall
survive the expiration or sooner termination of the Term. No subsequent
modification or termination of this Lease by agreement of the parties or
otherwise shall be construed to waive or to modify any provisions of this Section unless
the termination or modification agreement or other document expressly so states
in writing.

 

12.                                 Landlord’s Maintenance; Inclusion in Operating Costs.

 

(a)                                  Landlord’s Maintenance. Except as provided
in Section 13 captioned “Tenant’s Maintenance; Remedies”, Section 23
captioned “Destruction” and Section 24 captioned “Condemnation” and except
for damage caused by any negligent or intentional act or omission of Tenant or
its authorized representatives, Landlord shall maintain in good condition and
repair the following:  (i) the
structural parts of the Building, which structural parts include only the
foundations, bearing and exterior walls, subflooring and roof, (ii) the
building standard lighting fixtures, window coverings and ceiling tiles and the
unexposed electrical, plumbing and sewage systems, including without
limitation, those portions lying outside the Premises, (iii) the heating,
ventilating and air-conditioning system, if any, servicing the Building, (iv) the
lobbies, corridors, elevators, public or common restrooms and other common
areas of the Building, and (v) the sidewalks, grounds, landscaping,
parking and loading areas, if any, and other common areas of the Property.

 

(b)                                 Inclusion in Operating Costs. The cost of
maintaining, repairing, replacing or servicing the portions of the Building
that Landlord is required to maintain pursuant to this Section shall be
included in Operating Costs to the extent provided in Section 9 captioned “Operating
Costs”.

 

13.                                 Tenant’s Maintenance; Remedies.

 

(a)                                  Tenant’s Maintenance. Except as provided in
Section 12 captioned “Landlord’s Maintenance; Inclusion in Operating Costs”,
Section 23 captioned “Destruction” and Section 24 captioned “Condemnation”
and except for damage caused by any grossly negligent or intentional act or
omission of Landlord or his authorized representatives, Tenant, at its cost,
shall maintain to good condition and repair the Premises, including without
limitation, all of the Tenant Improvements, Tenant’s alterations, Tenant’s
trade fixtures, Tenant’s personal property, signs, walls, interior partitions,
wall coverings, windows, non-building standard window coverings, glass within
the Premises, doors, carpeting and resilient flooring, non-building standard
ceiling tiles, plumbing fixtures and non-building standard lighting fixtures. Tenant
shall be liable for any damage to the Premises and the Building resulting from
the acts or omissions of Tenant or its authorized representatives.

 

(b)                                 Landlord’s Remedies. If Tenant fails to
maintain the Premises in good condition and repair (reasonable wear and tear
accepted) as required by Subsection 13(a) and if such failure is not
cured within thirty (30) days after notice of such failure is given by Landlord
to Tenant, then Landlord may, at its option, cause the Premises to be
maintained in good condition and repair and Tenant shall promptly reimburse
Landlord for all reasonable costs incurred by Landlord in performance of Tenant’s
obligation to maintain the Premises.

 

14.                                 Tenant Improvements; Alterations and Trade Fixtures.

 

(a)                                  Tenant Improvements. Tenant accepts the
Premises in their “AS IS” condition without any agreements, representations,
understandings or obligations on the part of Landlord to perform any
alterations, repairs or improvements or to provide any allowances unless
otherwise expressly provided in this Lease or in the Work Letter, if any,
attached hereto as Exhibit C. Tenant shall not make any
improvements or alterations to the Premises without Landlord’s prior consent.

 

(b)                                 Alterations. Any improvements and
alterations made by either party shall remain on and be surrendered with the
Premises on expiration or termination of the Term, except that Landlord can
elect by giving notice to Tenant within thirty (30) days before the expiration
of the Term, or within thirty (30) days after termination of the Term, to
require Tenant to remove any improvements and alterations that Tenant has made
to the Premises. If Landlord so elects, Tenant, at its cost, shall restore the
Premises to the condition designated by Landlord in its election (reasonable
wear and tear accepted), before the last day of the Term, or within thirty (30)
days after notice of election is given, whichever is later. Any improvements
and alterations that remain on the Premises on expiration or termination of the
Term shall automatically become the property of Landlord and title to such
improvements and alterations shall

 

6

 

automatically pass to Landlord at such time without any payment
therefor by Landlord to Tenant. If Tenant or its authorized representatives
make any improvements or alterations to the Premises as provided in this
Section, then such improvements and alterations (i) shall be made in a
first class manner in conformity with then building standard improvements,
(ii) shall be made utilizing then building standard materials, (iii) shall
be made in compliance with the Rules and Regulations and the reasonable
directions of Landlord, (iv) shall be made pursuant to a valid building
permit to be obtained by Tenant, at its cost, and (v) shall be made In
conformity with then applicable laws, including without limitation, building
codes.

 

(c)                                  Trade Fixtures. Tenant shall not install
any trade fixtures in or on the Premises without Landlord’s prior consent.

 

15.                                 Mechanics’ Liens. Tenant shall pay, or
cause to be paid, all costs of labor, services and/or materials supplied in
connection with any Work. Tenant shall keep the Property free and clear of all
mechanics’ liens and other liens resulting from any Work. Prior to the
commencement of any Work costing more than an amount equal to $25,000.00, or
the supply or furnishing of any labor, services and/or materials in connection
with any such Work, Tenant shall provide Landlord with a labor and material
payment bond, a letter of credit or other security satisfactory to Landlord in
an amount equal to one hundred percent (100%) of the aggregate price of all
contracts therefor, with release of the bond conditioned on Tenant’s payment in
full of all claims of lien claimants for such labor, services and/or materials
supplied in the prosecution of the Work. Said payment bond shall name Landlord
as a primary obligee, shall be given by a surety which is satisfactory to
Landlord, and shall be in such form as Landlord shall approve in its sole
discretion. Tenant shall have the right to contest the correctness or validity
of any such lien if, immediately on demand by Landlord, it procures and records
a lien release bond issued by a responsible corporate surety in an amount
sufficient to satisfy statutory requirements therefor in the State of
Washington. Tenant shall promptly pay or cause to be paid all sums awarded to
the claimant on its suit, and, in any event, before any execution is issued
with respect to any judgment obtained by the claimant in its suit or before
such judgment becomes a lien on the Premises, whichever is earlier. If Tenant
shall be in default under this Section, by failing to provide security for or satisfaction
of any mechanic’s or other liens, then Landlord may (but shall not be
obligated to), in addition to any other rights or remedies it may have,
discharge said lien by (i) paying the claimant an amount sufficient to
settle and discharge the claim, (ii) procuring and recording a lien
release bond, or (iii) taking such other action as Landlord shall deem
necessary or advisable, and, in any such event, Tenant shall pay as Additional
Rent, on Landlord’s demand, all reasonable costs (including reasonable attorney
fees) incurred by Landlord in settling and discharging such lien together with
interest thereon in accordance with Section 39 captioned “Interest on
Unpaid Rent” from the date of Landlord’s payment of said costs. Landlord’s
payment of such costs shall not waive any default of Tenant under this Section.

 

16.                                 Utilities and Services.

 

(a)                                  Utilities and Services Furnished by Landlord. Landlord
shall furnish the Premises with:

 

(i)                                     Electricity
for lighting and power suitable for the use of the Premises for ordinary
general office and medical/workout purposes; provided, however, that Tenant
shall not at any time have a connected electrical load for lighting purposes in
excess of the wattage per square foot of Premises Area required for building
standard amounts of lighting, or a connected load for all other power
requirements in excess of four (4) watts per square foot of Premises Area
as determined by Landlord, and the electricity so provided for lighting and
power shall not exceed such limits, subject to any lower limits set by any
governmental authority with respect thereto;

 

(ii)                                  Subject
to the reasonable limitations of the existing building systems, heating,
ventilating and air-conditioning, if the Building has an air-conditioning
system, to maintain a temperature range in the Premises which is customary for
similar office space in the Seattle, Washington area (but in compliance with
any applicable governmental regulations with respect thereto). Tenant agrees to
keep closed, when necessary, blinds, draperies and windows which must be closed
to provide for the efficient operation of the heating and air-conditioning
systems, if any, and Tenant agrees to cooperate with Landlord and to abide by
the regulations and requirements which Landlord may prescribe for the
proper functioning and protection of the heating, ventilating and
air-conditioning system, if any. If Tenant requires heating, ventilating and
air conditioning to the Premises other than during normal business hours from
6:00 A.M. to 8:30 P.M. Monday through Friday and 6..00 A.M. to
3:00 P.M. Saturday, except Sundays and those legal holidays generally
observed to the State of Washington, Landlord shall, upon Tenant’s request made
not less than 24 hours before the time Tenant requires the after hour service,
and not later than Noon on the Friday before any Saturday or Sunday on which
Tenant requires such service, and not later than Noon of the day before any
holiday on which Tenant requires such service (except as otherwise provided in
the Rules and Regulations), furnish such heating, ventilating and air
conditioning. If Tenant receives such services, then Tenant shall pay, upon
demand, an amount equal to Tenant’s proportionate share of the actual direct
cost to Landlord in providing the heating, ventilating and air conditioning
outside of normal business hours;

 

(ii)                                  Water
for restroom and drinking purposes and access to restroom facilities;

 

(iv)                              Elevator
service for general office pedestrian usage if the Building is serviced by
elevators;

 

(v)                                 Relamping
of building-standard light fixtures;

 

7

 

(vi)                              Washing
of interior end exterior surfaces of exterior windows with reasonable
frequency; and

 

(vii)                           Janitorial service five (5) times
per week, except holidays. Janitorial specifications are attached hereto as Exhibit E.
Tenant acknowledges that the standard janitorial service provided by Landlord may not
be adequate to meet Tenant’s specific cleaning requirements. Any janitorial and
cleaning services required by Tenant over and above the standard service
provided by Landlord shall be provided by Tenant at Tenant’s sole cost and
expense. Tenant may provide access to the Premises after Tenant’s business
hours for its contractors providing such additional janitorial services

 

(b)                                 Payment for Excess Utilities and Services. All
services and utilities for the Premises not required to be furnished by
Landlord pursuant to Section 16(a) shall be paid for by Tenant. If
Tenant requires, on a regular basis, water, heat, air conditioning, electric
current, elevator or janitorial service in excess of that provided for In Section 16(a),
then Tenant shall first obtain the consent of Landlord which consent may be
withheld in Landlord’s sole discretion. If Landlord consents to such excess
use, Landlord may install an electric current or water meter (including,
without limitation, any additional wiring, conduit or panel required therefor)
to measure the excess electric current or water consumed by Tenant or may cause
the excess usage to be measured by other reasonable methods (e.g. by temporary “check”
meters or by survey). Tenant shall pay to Landlord upon demand (i) the
cost of any and all water, heat, air conditioning, electric current,
janitorial, elevator or other services or utilities required to be furnished to
Tenant in excess of the services and utilities required to be furnished by
Landlord as provided in Section 16(a); (ii) the cost of installation,
maintenance and repair of any meter installed in the Premises; (iii) the
cost of all electricity and water consumed by Tenant in connection with any
dedicated heating, ventilating and/or air conditioning, computer power and/or
air conditioning, telecommunications or other special systems of Tenant, including
any power usage other than through existing standard 110-volt and 220-volt AC
outlets; and (v) any reasonable cost incurred by Landlord in keeping
account of or determining such excess utilities or services furnished to Tenant.
Landlord’s failure to bill Tenant for any such excess utilities or services
shall not waive Landlord’s right to bill Tenant for the excess at a later time.

 

(c)                                  Temperature Balance. Landlord makes no
representation to Tenant regarding the adequacy or fitness of the heating,
ventilating and air-conditioning systems in the Building to maintain
temperatures that may be required for, or because of, any of Tenant’s
equipment other than normal office equipment, such as personal computers, laser
printers, copiers, dictating machines and other small equipment normally used
in business offices, and workout equipment such as treadmills. elliptical
trainers, bicycles and stacked weights, and Landlord shall have no liability
for loss or damage suffered by Tenant or others in connection therewith. Landlord’s
obligations are limited to maintaining the HVAC in good working order and that
Landlord does not warrant that the HVAC is adequate to cool the Premises if
excess heat is generated from the exercise equipment (or the bodies on them). If
the temperature otherwise maintained in any portion of the Premises by the
heating, air conditioning or ventilation system is affected as a result of (i) any
lights, machines or equipment (including without limitation electronic data
processing machines) used by Tenant in the Premises or the use of more than one
personal computer per person, (ii) the occupancy of the Premises by more
than one person per two hundred (200) square feet of rentable area therein, (iii) an
electrical load for lighting or power in excess of the limits per square foot
of rentable area of the Premises specified in Section 16(a), or (iv) any
rearrangement of partitioning or other improvements, Landlord may install
any equipment, or modify any existing equipment (including the standard air
conditioning equipment) Landlord deems necessary to restore the temperature
balance. The cost of any such equipment, including without limitation, the cost
of design and installation thereof, and the cost of operating, metering,
maintaining or repairing the same, shall be paid by Tenant to Landlord upon
demand. Tenant shall not install or operate window-mounted heating or
air-conditioning units.

 

(d)                                 Special Electrical or Water Connections; Electricity
Use. Tenant will not, without the prior consent of Landlord, which
Landlord in its sole discretion may refuse, connect or use any apparatus
or device in the Premises (i) using current in excess of 220 volts or (ii) which
will cause the amount of electricity, water, heating, air conditioning or
ventilation furnished to the Premises to exceed the amount required for use of
the Premises for ordinary general office purposes, as determined by Landlord,
during normal business hours or (iii) which would cause Tenant’s connected
load to exceed any limits established in Section 16(a). Tenant shall not
connect with electric current except through existing outlets in the Premises
and shall not connect with water pipes except through existing plumbing
fixtures in the Premises. In no event shall Tenant’s use of electricity exceed
the capacity of existing feeders to the Building or the risers or wiring
installation, and Landlord may prohibit the use of any electrical
equipment which in Landlord’s opinion will overload such wiring or interfere
with the use thereof by other tenants in the Building. If Landlord consents to
the use of equipment requiring such changes, Tenant shall pay the cost of
installing any additional risers, panels or other facilities that may be
necessary to furnish energy to the Premises.

 

Landlord will not permit additional coring of the
floor of the Premises in order to install new electric outlets in the Premises
unless Tenant furnishes Landlord with X-ray scans of the floor area where the
Tenant wishes to place additional electrical outlets and Landlord, in its
absolute discretion, is satisfied, on the basis of such X-ray scans and other
information obtained by Landlord, that coring of the floor in order to install
such additional outlets will not weaken the structure of the floor.

 

(e)                                  Landlord’s Duties. Landlord shall not be in
default under this Lease or liable for any damages resulting from, or
incidental to, any of the following, nor shall any of the following be an
actual or constructive eviction of Tenant, nor shall the Rent be abated by
reason of:  (i) failure to furnish
or delay in furnishing any of the services

 

8

 

described in this Section when such failure or delay is caused by
accident or any condition beyond the reasonable control of Landlord, including
the making of necessary repairs or Improvements to the Premises or to the
Building, (ii) any electrical surges or spikes, or (iii) failure to
make any repair or to perform any maintenance, unless such failure shall
persist for an unreasonable time after notice of the need for such repair or
maintenance is given to Landlord by Tenant. Landlord shall use reasonable
efforts to remedy any interruption in the furnishing of such services.

 

(f)                                    Governmental Regulations. Any other
provisions of this Section notwithstanding. if any governmental authority
or utility supplier imposes any laws, controls, conditions, or other
restrictions upon Landlord, Tenant, or the Building, relating to the use or
conservation of energy or utilities, mandated changes in temperatures to be
maintained in the Premises or the Building or the reduction of automobile or
other emissions (collectively, the “Controls”), or in the event Landlord is
required or elects to make alterations to the Building in order to comply with
the Controls, Landlord may, in its sole discretion, comply and may require
Tenant to comply with the Controls or make such alterations to the Building in
order to comply with the Controls. Such compliance and the making of such
alterations shall not constitute an actual or constructive eviction of Tenant,
impose on Landlord any liability whatsoever, or entitle Tenant to any abatement
of Rent.

 

17.                                 Indemnity.

 

(a)                                  Generally. Tenant shall hold Landlord
harmless from and against any and all damages arising out of any damage to any
persons or property occurring in, on or about the Premises or the Property
resulting from the acts or omissions of Tenant or its authorized
representatives. Landlord shall hold Tenant harmless from and against any and
all damages arising out or any damage to any persons or property occurring in,
on or about the Premises or the Property resulting from the acts or omissions
of Landlord or its authorized representatives. A party’s obligation under this Section to
indemnify and hold the other party harmless shall be limited to the sum that
exceeds the amount of insurance proceeds, if any, received by the party being
indemnified.

 

(b)                                 Concurrent Negligence of Landlord and Tenant. Notwithstanding
Section 17(a) above, in the event of concurrent negligence of Tenant,
or its authorized representatives, on the one hand, and that of Landlord, or
its authorized representatives, on the other hand, which concurrent negligence
results in damage to any persons or property occurring in, on or about the
Premises or the Property, either party’s obligation to indemnity the other
party as set forth in Section 17(a) shall be limited to the extent of
the negligence of the indemnifying party, or its authorized representatives,
including the indemnifying party’s proportional share of costs and attorneys’
fees incurred in connection with any claims, actions or proceedings brought
with respect to such damage.

 

(c)                                  Waiver of Worker’s Compensation Immunity. The
indemnification obligations contained in this Section shall not be limited
by any worker’s compensation, benefit or disability laws, and each indemnifying
party hereby waives (solely for the benefit of the indemnified party) any
immunity that said indemnifying party may have under the Industrial
Insurance Act, Title 51 RCW and similar worker’s compensation, benefit or
disability laws.

 

(d)                                 Provisions Specifically Negotiated. LANDLORD
AND TENANT ACKNOWLEDGE BY THEIR EXECUTION OF THIS LEASE THAT EACH OF THE
INDEMNIFICATION PROVISIONS OF THIS LEASE (SPECIFICALLY INCLUDING BUT NOT
LIMITED TO THOSE RELATING TO WORKER’S COMPENSATION BENEFITS AND LAWS) WERE
SPECIFICALLY NEGOTIATED AND AGREED TO BY LANDLORD AND TENANT.

 

18.                                 Exemption of Landlord from Liability. Landlord
and Landlord’s Agent shall not be liable for injury to Tenant’s business or
loss of income therefrom or for damage which may be sustained by the
person, goods, wares, merchandise or property of Tenant, its authorized
representatives, or any other person in or about the Premises, caused by or
resulting from fire, steam, electricity, gas, water or rain, which may leak
or flow from or into any part of the Premises, or from the breakage,
leakage, obstruction or other defects of the pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures of the same,
whether the said damage or injury resulting from conditions arising upon the
Premises or upon other portions of the Building or the Property unless such
injury or damage is caused by the gross negligence or willful misconduct of
Landlord or its authorized representatives.

 

19.                                 Commercial General Liability and Property Damage
Insurance. Tenant, at its cost, shall maintain commercial general
liability insurance (including contractual liability and products end completed
operations liability) with liability limits of not less than $1,000,000 per
occurrence, and $2,000,000 annual aggregate, insuring against all liability of
Tenant and its authorized representatives arising out of or in connection with
Tenant’s use and occupancy of the Premises and property damage insurance with
liability limits of not less then $1,000,000. All such commercial general
liability and property damage insurance shall insure performance by Tenant of
the indemnity provisions of Section 17 captioned “Indemnity”. Landlord and
Landlord’s Agent shall be additional named insureds on such insurance policy.

 

20.                                 Tenant’s Fire Insurance. Tenant, at its
cost, shall maintain on all of Tenant’s Alterations, Trade Fixtures and
Personal Property in, on or about the Premises, a policy of standard All Risk
fire insurance, in an amount equal to at least their full replacement cost. The
proceeds of any such policy shall be used by Tenant for the restoration of
Tenant’s Alterations and Trade Fixtures and the replacement of its Personal
Property. Any portion of such proceeds not used for such restoration shall
belong to Tenant.

 

9

 

21.                                 Waiver of Claims; Waiver of Subrogation  Landlord and Tenant release each other, and
their respective authorized representatives, from, and waive their entire claim
of recovery for, any claims for damage to the Premises and the Building and to
Tenant’s alterations, trade fixtures and personal property that are caused by
or result from fire, lightning or any other perils normally included in an “all
risk” property insurance policy whether or not such loss or damage is due to
the negligence of Landlord, or its authorized representatives, or of Tenant, or
its authorized representatives. Landlord and Tenant shall cause each insurance
policy obtained by it to provide that the insurance company waives all right of
recovery by way of subrogation against either party in connection with any
damage covered by such insurance policy.

 

22.                                 Other Insurance Matters. All insurance
required to be carried by Tenant under this Lease shall: (i) be issued by
insurance companies authorized to do business in the Slate of Washington with a
rating of A/VI or better as rated in the most recent edition of Best’s
Insurance Reports; (ii) be issued as a primary policy, and (iii) contain
an endorsement requiring thirty (30) days’ prior written notice from the
insurance company to both parties, to Landlord’s Agent, and, if requested by
Landlord, to Landlord’s lender. before cancellation or change in the coverage,
scope, or amount of any policy. Each policy or a certificate of the policy,
together with evidence of payment of premiums, shall be deposited with Landlord
on or before the Commencement Date, and on renewal of the policy not less than
ten (10) days before expiration of the term of the policy.

 

23.                                 Destruction.

 

(a)                                  Insured Damage. If during the Term the
Premises or the Building are partially or totally destroyed by any casualty
that is covered by any Insurance carried by Landlord covering the Building,
rendering the Premises partially or totally inaccessible or unusable, Landlord
shall restore the Premises or the Building to substantially the same condition
as they were in immediately before such destruction, if (i) the insurance
proceeds available to Landlord equal or exceed the cost of such restoration, (ii) in
the opinion of a registered architect or engineer appointed by Landlord such
restoration can be completed within one hundred eighty (180) days after the
date on which Landlord obtains all permits necessary for such restoration, and (iii) such
restoration is permitted under then existing laws to be done in such a manner
as to return the Premises, or the Building, as the case may be, to
substantially the same condition as they were in immediately before such
destruction. To the extent that the insurance proceeds must be paid to a
mortgagee under, or must be applied to reduce any debt secured by, a mortgage
covering the Property, the Insurance proceeds shall be deemed not to be
available to Landlord unless such mortgagee permits Landlord to use the
insurance proceeds for such restoration. Such destruction shall not terminate
this Lease.

 

(b)                                 Major or Uninsured Damage. If during the
Term the Premises or the Building are partially or totally destroyed by any
casualty and Landlord is not obligated under Section 23(e) captioned “Insured
Damage” to restore the Premises or the Building, as the case may be, then
Landlord may, at its election, either (i) restore the Premises or the
Building to substantiality the same condition as they were in immediately
before such destruction, or (ii) terminate this Lease effective as of the
date of such destruction. If Landlord does not give Tenant notice within sixty
(60) days after the date of such destruction of its election to restore the
Premises or the Building, as the case may be, Landlord shall be deemed to
have elected to terminate this Lease. If Landlord elects to restore the
Premises or the Building, as the case may be, Landlord shall use
commercially reasonable efforts to complete such restoration within one hundred
eighty (180) days after the date on which Landlord obtains all permits
necessary for such restoration, provided, however, that such one hundred eighty
(180) day period shall be extended by a period equal to any delays caused by Force
Majeure, and such destruction shall not terminate this Lease. If Landlord does
not complete such restoration within one (1) year following the date of
such destruction, then Tenant may elect to terminate this Lease by giving
notice to such effect to Landlord within ten (10) days following the end
of such one (1) year period.

 

(c)                                  Damage to the Building. If during the Term
the Building is partially destroyed by any casualty and if in the opinion of
Landlord the Building should be restored in such a way as to materially alter
the Premises, then Landlord may, at Landlord’s election, terminate this Lease
by giving notice to Tenant of Landlord’s election to do so within sixty (60)
days after the date of such destruction.

 

(d)                                 Extent of Landlord’s Obligation to Restore. If
Landlord is required or elects to restore the Premises as provided in this
Section, Landlord shall not be required to restore alterations made by Tenant. Tenant’s
trade fixtures and Tenant’s personal property, such excluded items being the sole
responsibility of Tenant to restore.

 

(e)                                  Abatement or Reduction of Rent. In case of
damage to, or destruction of, the Premises or the Building the Minimum Monthly
Rent shall be abated or reduced, between the date of destruction and the date
of completion of restoration, by an amount that is in the same ratio to the
Minimum Monthly Rent as the total number of square feet of the Premises that
are so damaged or destroyed bears to the total number of square feet in the
Premises.

 

24.                                 Condemnation. If during the Term there is
any taking of part or all of the Premises or the Building by condemnation,
then the rights and obligations of the parties shall be as follows:

 

(a)                                  Minor Taking. If there is a taking of less
than ten percent (10%) of the Premises, this Lease shall remain in full force
and effect.

 

10

 

(b)                                 Major Taking. If there is a taking of ten
percent (10%) or more of the Premises and if the remaining portion of the
Premises is of such size or configuration that Tenant in Tenant’s reasonable
judgment is unable to conduct its business in the Premises, then the Term shall
terminate as of the date of taking.

 

(c)                                  Taking of Part of the Building. If
there is a taking of a part of the Building other than the Premises and if
in the opinion of Landlord the Building should be restored in such a way as to
materially alter the Premises, then Landlord may terminate the Term by
giving notice to such affect to Tenant within sixty (60) days after the date of
vesting of title in the condemnor and the Term shall terminate as of the date
specified in such notice, which date shall not be less then sixty (60) days
after the giving of such notice.

 

(d)                                 Award. The entire award for the Premises,
the Building and the Property, shall belong to and be paid to Landlord, Tenant
hereby assigning to Landlord Tenant’s interest therein, if any, provided,
however, that Tenant shall have the right to claim and recover from the
condemnor compensation for the loss of any alterations made by Tenant, Tenant’s
trade fixtures, Tenant’s personal property, moving expenses and business
interruption,

 

(e)                                  Abatement of Rent. If any part of the
Premises is taken by condemnation and this Lease remains in full force and
effect, on the date of taking the Minimum Monthly Rent shall be reduced by an
amount that is in the same ratio to the Minimum Monthly Rent as the total
number of square feet in the Premises taken bears to the total number of square
feet in the Premises immediately before the date of taking.

 

25.                                 Assignment and Subletting.

 

(a)                                  Landlord’s Consent; Definitions. Tenant
acknowledges that the Building is a multi-tenant office building, occupied by
tenants specifically selected by Landlord, and that Landlord has a legitimate
interest in the type and quality of such tenants, the location of tenants in
the Building and in controlling the leasing of space in the Building so that
Landlord can better meet the particular needs of its tenants and protect and
enhance the relative image, position and value of the Building in the office
building market. Tenant further acknowledges that the rental value of the
Premises may fluctuate during the Term in accordance with market
conditions, and, as a result, the Rent paid by Tenant under the Lease at any
particular time may be higher or lower than the then market rental value
of the Premises. Landlord and Tenant agree, and the provisions of this Section are
intended to so provide, that, if Tenant voluntarily assigns its interest in
this Lease or in the Premises or subleases any part or all of the
Premises, a portion of the profits from any increase in the market rental value
of the Premises shall belong to Landlord. Tenant acknowledges that, if Tenant
voluntarily assigns this Lease or subleases any part or all of the
Premises, Tenant’s investment in the subject portion of the Premises
(specifically including, but not limited to, tenant improvements, good will or
other assets) may be lost or reduced as a result of such action.

 

(b)                                 Consent Required. Tenant shall not voluntarily
assign or encumber its interest in this Lease or in the Premises, or sublease
any part or all of the Premises, without Landlord’s prior consent, which
consent shall not be unreasonably withheld. Any assignment, encumbrance or
sublease without Landlord’s consent shall be voidable and, at Landlord’s
election, shall constitute a default by Tenant under this Lease. In determining
whether to approve a proposed assignment or sublease, Landlord shall place
primary emphasis on the proposed transferee’s reputation and creditworthiness,
the character of the business to be conducted by the proposed transferee at the
Premises and the affect of such assignment or subletting on the tenant mix in
the Building. In addition, Landlord shall have the right to approve the
specific form of any assignment or sublease agreement, in no event shall
Landlord be obligated to consent to any assignment or subletting which increases
(i) the Operating Costs, (ii) the burden on the Building services, or
(iii) the foot traffic, elevator usage or security concerns in the
Building, or creates an increased probability of the comfort and/or safety of
the Landlord and other tenants in the Building being unreasonably compromised
or reduced (for example, but not exclusively, Landlord may deny consent to
an assignment or subletting where the space will be used for a school or
training facility, an entertainment, sports or recreation facility, retail
sales to the public (unless Tenant’s permitted use is retail sales), a
personnel or employment agency, a medical office, or an embassy or consulate or
similar office). Landlord shall not be obligated to approve an assignment or
subletting to (x) a current tenant of the Building or (y) a prospective tenant
of the Building with whom Landlord is then negotiating. Landlord’s foregoing
rights and options shall continue throughout the entire term of this Lease. No
consent to any assignment, encumbrance or sublease shall constitute a waiver of
the provisions of this Section and no other or subsequent assignment,
encumbrance or sublease shall be made without Landlord’s prior consent. Neither
an assignment or subletting nor the collection of Rent by Landlord from any
person other than Tenant, nor the application of any such Rent as provided in
this Section shall be deemed a waiver of any of the provisions of this Section or
release Tenant from its obligation to comply with the terms and provisions of
this Lease and Tenant shall remain fully and primarily liable for all of Tenant’s
obligations under this Lease, including the obligation to pay Rent under this
Lease. Any personal guarantee(s) of Tenant’s obligations under this Lease shall
remain in full force and effect following any such assignment or subletting. In
addition to Landlord’s other rights under this Section, Landlord may condition
approval of an assignment or subletting hereunder on an increase in the amount
of the Security Deposit or on receipt of personal guarantees of the assignee’s
or sublessee’s obligations under this Lease. If Landlord approves of an
assignment or subletting hereunder and this Lease contains any renewal or
extension options, expansion options, rights of first refusal, rights of first
negotiation or any other rights or options pertaining to additional space in
the Building, such rights and/or options shall not run to the assignee or
subtenant, it being agreed by the parties hereto that any such rights and
options are personal to Tenant named herein and may not be transferred.

 

11

 

(c)                                  Conditions to Assignment or Sublease. Tenant
agrees that any instrument by which Tenant assigns or sublets all or any
portion of the Premises shall expressly provide that the assignee or subtenant may not
further assign or sublet the assigned or sublet space without Landlord’s prior
consent (which consent shall not, subject to Landlord’s rights under this
Section, be unreasonably withheld or delayed), and that the assignee or
subtenant will comply with all of the provisions of this Lease and that
Landlord may enforce the Lease provisions directly against such assignee
or subtenant. If this Lease is assigned, whether or not in violation of the
terms and provisions of this Lease, Landlord may collect Rent from the
assignee. If the Premises, or any part thereof, is sublet, Landlord may,
upon a default under this Lease, collect rent from the subtenant. In either
event, Landlord may apply the amount collected from the assignee or
subtenant to Tenant’s obligation to pay Rent under this Lease.

 

d)                                     Events Constituting an Assignment or Sublease. For
purposes of this Section provided the following transactions do not result
in a decrease in the Tenant’s “net worth”, the following events shall not be
deemed an assignment or sublease, as appropriate: (i) the issuance of
equity interests (whether stock, partnership interests or otherwise) in Tenant,
or any assignee or subtenant, if applicable, or any entity controlling any of
them, to any person or group of related persons, in a single transaction or a series of
related or unrelated transactions, such that, following such issuance, such
person or group shall have Control (as defined below) of Tenant, or any
assignee or subtenant, if applicable; or (ii) a transfer of Control of
Tenant, or any assignee or subtenant, if applicable, or any entity controlling
any of them, in a single transaction or a series of related or unrelated
transactions (including, without limitation, by consolidation, merger,
acquisition or reorganization).

 

(e)                                  Processing Expenses. Tenant shall pay to Landlord
the amount of Landlord’s cost of processing each proposed assignment or
subletting including without limitation, reasonable attorneys’ and other
professional fees, and the cost of Landlord’s administrative, accounting and
clerical time (collectively, “Processing Costs”), and the amount of all
reasonable direct and indirect expense incurred by Landlord arising from the
assignee or sublessee taking occupancy of the subject space, including without
limitation, reasonable costs of freight elevator operation for moving of
furnishings and trade fixtures, security service, janitorial and cleaning
service, rubbish removal service, costs of changing signage, and costs of
changing locks and making new keys (collectively, “Occupancy Costs”). Notwithstanding
anything to the contrary herein, Landlord shall not be required to process any
request for Landlord’s consent to an assignment or subletting until Tenant has
paid to Landlord Three Hundred Dollars ($300.00), or Landlord’s estimate of the
Processing Costs and the Occupancy Costs, whichever is greater.

 

(f)                                    Consideration to Landlord. In the event of
any assignment or sublease, whether or not requiring Landlord’s consent,
Landlord shall be entitled to receive, as Additional Rent, one-half (1/2) of
any consideration, including without limitation, payment for leasehold
improvements paid for by Landlord, paid by the assignee or subtenant for the
assignment or sublease and, in the case of sublease, the excess of the amount
of rent paid for the sublet space by the subtenant over the total amount of
Minimum Monthly Rent under Section 5 and Additional Rent under Sections 7
and 9. Upon Landlord’s request, Tenant shall assign to Landlord all amounts to
be paid to Tenant by the assignee or subtenant and shall direct such assignee
or subtenant to pay the same directly to Landlord. If there is more than one
sublease under this Lease, the amounts (if any) to be paid by Tenant to
Landlord pursuant to the preceding sentence shall be separately calculated for
each sublease and amounts due Landlord with regard to any one sublease may not
be offset against rental and other consideration due under any other sublease.

 

(g)                                 Procedures. If Tenant desires to assign
this Lease or any interest therein or sublet all or part of the Premises,
Tenant shall give Landlord written notice thereof designating the space
proposed to be sublet and the terms proposed. If the proposed sublease covers
the entire Premises and if the term of the proposed sublease (including any
renewal terms) will expire during the final six (6) months of the Term (or
if Tenant has exercised a renewal option, if any, then during the final six (6) months
of the subject renewal period), then Landlord shall have the prior right and
option (to be exercised by written notice to Tenant given within fifteen (15)
days after receipt of Tenant’s notice) (i) to terminate this Lease, or (ii) to
approve Tenant’s proposal to sublet conditional upon Landlord’s subsequent
written approval of the specific sublease obtained by Tenant and the specific
subtenant named therein. If Landlord exercises its option described in (ii) above,
Tenant shall submit to Landlord for Landlord’s written approval Tenant’s
proposed sublease agreement (in which the proposed subtenant shall be named)
together with a current reviewed or audited financial statement prepared by a
certified public accountant for such proposed subtenant and a credit report on
such proposed subtenant prepared by a recognized credit reporting agency. If
Landlord fails to exercise its option to terminate this Lease, this shall not
be construed as or constitute a waiver of any of the provisions of this Section.
If Landlord exercises its option to terminate this Lease, Landlord shall not
have any liability for any real estate brokerage commission(s) or with respect
to any of the costs and expenses that Tenant may have incurred in
connection with its proposed subletting, and Tenant agrees to hold Landlord
harmless from and against any and all claims (including, without limitation,
claims for commissions) arising from such proposed subletting. Landlord’s
foregoing rights and options shall continue throughout the Term. For purposes
of this Section, a proposed assignment of this Lease in whole or in part shall
be deemed a proposed subletting of such space.

 

(h)                                 Documentation. No permitted subletting by
Tenant shall be effective until there has been delivered to Landlord a counterpart of
the sublease in which the subtenant agrees to be and remain jointly and
severalty liable with Tenant for the payment of Rent pertaining to the sublet
space and for the performance of all of the terms and provisions of this Lease;
provided, however, that the subtenant shall be liable to Landlord for rent only
in the amount set forth in the sublease. No permitted assignment shall be
effective unless and until there has been delivered to Landlord a counterpart of
the assignment in which the assignee assumes all of Tenant’s obligations under
this Lease

 

12

 

arising on or after the date of the assignment. The failure or refusal
of a subtenant or assignee to execute any such instrument shall not release or
discharge the subtenant or assignee from its liability as set forth above.

 

(I)                                    No Merger. Without limiting any of the
provisions of this Section, if Tenant has entered into any subleases of any
portion of the Premises, the voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation by Landlord and Tenant, shall not work a
merger, and shall, at the option of Landlord, terminate all or any existing
subleases or subtenancies or, at the option of Landlord, operate as an
assignment to Landlord of any or all such subleases or subtenancies.

 

26.                                 Default. The occurrence of any of the
following shall constitute a default by Tenant under this Lease:

 

(a)                                  Failure to Pay Rent. Failure to pay Rent
when due, if the failure continues for a period of three (3) days after
notice of such default has been given by Landlord to Tenant.

 

(b)                                 Failure to Comply with Rules and Regulations. Failure
to comply with the Rules and Regulations, if the failure continues for a
period of twenty-four (2d) hours after notice of such default is given by
Landlord to Tenant. If the failure to comply cannot reasonably be cured within
twenty-four (24) hours, then Tenant shall not be in default under this Lease if
Tenant commences to cure the failure to comply within twenty-four (24) hours
and diligently and in good faith continues to cure the failure to comply.

 

(c)                                  Other Defaults. Failure to perform any
other provision of this Lease, if the failure to perform is not cured
within thirty (30) days after notice of such default has been given by Landlord
to Tenant. If the default cannot reasonably be cured within thirty (30) days,
then Tenant shall not be in default under this Lease if Tenant commences to
cure the default within thirty (30) days and diligently and in good faith
continues to cure the default.

 

(d)                                 Appointment of Trustee or Receiver. The
appointment of a trustee or receiver to take possession of substantially all of
the Tenants assets located at the Premises or of Tenant’s interest in this
Lease, where possession is not restored to Tenant within sixty (60) days; or
the attachment, execution or other judicial seizure of substantially all of
Tenant’s assets located at the Premises or of Tenant’s interest in this Lease,
where such seizure is not discharged within sixty (60) days.

 

27.                                 Remedies. If Tenant commits a default,
Landlord shall have the following alternative remedies, which are in addition to
any remedies now or later allowed by law:

 

(a)                                  Maintain Lease In Force. Maintain this
Lease in full force and effect and recover the Rent and other monetary charges
as they become due, without terminating Tenant’s right to possession,
irrespective of whether Tenant shall have abandoned the Premises. If Landlord
elects to not terminate the Lease, Landlord shall have the right to attempt to
re-let the Premises at such rent and upon such conditions and for such a term,
and to do all acts necessary to maintain or preserve the Premises as Landlord
deems reasonable and necessary without being deemed to have elected to
terminate the Lease including removal of all persons and property from the
Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant. In the event any such
re-letting occurs, this Lease shall terminate automatically upon the new Tenant
taking possession of the Premises. Notwithstanding that Landlord fails to elect
to terminate the Lease initially, Landlord at any time during the term of this
Lease may elect to terminate this Lease by virtue of such previous default
of Tenant.

 

(b)                                 Terminate Lease. Terminate Tenant’s right
to possession by any lawful means, in which case this Lease shall terminate and
Tenant shall immediately surrender possession of the Premises to Landlord. In
such event Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant’s default including without limitation
thereto, the following:  (i) The
worth at the time of award of any unpaid Rent which had been earned at the time
of such termination; plus (ii) the worth at the time of award of the
amount by which the unpaid Rent which would have been earned after termination
until the time or award exceeds the amount or such rental loss that Tenant
proves could have been reasonably avoided; plus (iii) the worth at the
time of award of the amount by which the unpaid Rent for the balance of the
Term after the time of award exceeds the amount of such rental loss that is
proved could be reasonably avoided; plus (iv) any other amount necessary
to compensate Landlord for all the detriment proximately caused by Tenant’s
failure to perform its obligations under this Lease or which in the
ordinary course of things would be likely to result therefrom. Including
without limitation, any costs or expenses incurred by Landlord in (A) retaking
possession of the Premises, including reasonable attorney fees therefor, (B) maintaining
or preserving the Premises after such default, (C) preparing the Premises
for reletting to a new tenant, including repairs or necessary alterations to
the Premises for such reletting, (D) leasing commissions incident to
reletting to a new tenant, and (E) any other costs necessary or
appropriate to relet the Premises; plus (v) at Landlord’s election, such
other amounts in addition to or in lieu of the foregoing as may be
permitted from time to time by applicable state law. The amounts described in
clauses (C) and (D) shall be amortized over the term of the new
tenant’s lease, and Tenant shall only be liable to Landlord for the portion of
such amounts attributable to the period prior to the Expiration Date of this
Lease set forth in Section 1. Upon any such re-entry Landlord shall have
the right to make any reasonable repairs, alterations or modifications to the
Premises, which Landlord in its sole discretion deems reasonable and necessary.
As used in Subsection 27(b)(i) the “worth at the time of award” is
computed by allowing interest at the rate of fifteen percent (15%) per year
from the date of default. As used in Subsections 27(b)(ii) and 27(b)(iii) the
“worth at the time of award” is computed by discounting such amounts at the
discount rate of eight percent (8%) per year.

 

13

 

28.                                 Bankruptcy.

 

(a)                                  Assumption of Lease. If Tenant becomes a
Debtor under Chapter 7 of the Bankruptcy Code (“Code”) or a petition for
reorganization or adjustment of debts is filed concerning Tenant under Chapters
11 or 13 of the Code, or a proceeding is filed under Chapter 7 of the Code and
is transferred to Chapters 11 or 13 of the Code, the Trustee or Tenant, as
Debtor and as Debtor-In-Possession, may not elect to assume this Lease
unless at the time of such assumption the Trustee or Tenant has:

 

(i)                                     Cured
all defaults under the Lease and paid all sums due and owing under the Lease or
provided Landlord with “Adequate Assurance” (as defined below) that:  (I) within ten (10) days from the date
of such assumption, the Trustee or Tenant will completely pay all sums due and
owing under this Lease and compensate Landlord for any actual pecuniary loss
resulting from any existing default or breach of this Lease, including without
limitation, Landlord’s reasonable costs, expenses, accrued interest, and
attorneys’ fees incurred as a result of the default or breach; (II) within
twenty (20) days from the date of such assumption, the Trustee or Tenant will
cure all non-monetary defaults and breaches under this Lease, or, if the nature
of such non-monetary defaults is such that more than twenty (20) days are
reasonably required for such cure, that the Trustee or Tenant will commence to
cure such non-monetary defaults within twenty (20) days and thereafter diligently
prosecute such cure to completion; and (III) the assumption will be subject to
all of the provisions of this Lease.

 

(ii)                                  For
purposes of this Section, Landlord and Tenant acknowledge that, in the context
of a bankruptcy proceeding involving Tenant, at a minimum, “Adequate Assurance”
shall mean: (i) the Trustee or Tenant has and will continue to have
sufficient unencumbered assets after the payment of all secured obligations and
administrative expenses to assure Landlord that the Trustee or Tenant will have
sufficient funds to fulfill the obligations of Tenant under this Lease; (ii) the
Bankruptcy Court shall have entered an Order segregating sufficient cash
payable to Landlord and/or the Trustee or Tenant shall have granted a valid and
perfected first lien and security interest and/or mortgage in or on property of
Trustee or Tenant acceptable as to value and kind to Landlord, to secure to
Landlord the obligation of the Trustee or Tenant to cure the monetary and/or
non-monetary defaults and breaches under this Lease within the time periods set
forth above: and (iii) the Trustee or Tenant, at the very minimum, shall
deposit a sum equal to two (2) month’s Minimum Monthly Rent to be held by
Landlord (without any allowance for interest thereon) to secure Tenant’s future
performance under the Lease.

 

(b)                                 Assignment of Lease. If the Trustee or
Tenant has assumed the Lease pursuant to the provisions of this Section for
the purpose of assigning Tenant’s interest hereunder to any other person or
entity, such interest may be assigned only after the Trustee, Tenant or
the proposed assignee have complied with all of the terms, covenants and
conditions of this Lease, including. without limitation, those with respect to
Additional Rent. Landlord and Tenant acknowledge that such terms, covenants and
conditions are commercially reasonable in the context of a bankruptcy
proceeding of Tenant. Any person or entity to which this Lease is assigned
pursuant to the provisions of the Code shall be deemed without further act or
deed to have assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall upon request execute
and deliver to Landlord an instrument confirming such assignment.

 

(c)                                  Adequate Protection. Upon the filing of a
petition by or against Tenant under the Code, Tenant, as Debtor and as
Debtor-In-Possession, and any Trustee who may be appointed agree to
adequately protect Landlord as follows:  (i) to
perform each and every obligation of Tenant under this Lease until such
time as this Lease is either rejected or assumed by Order of the Bankruptcy
Court; (ii) to pay all monetary obligations required under this Lease,
including without limitation, the payment of Minimum Monthly Rent, Tenant’s
Share of Real Property Taxes, Tenant’s Share of Operating Costs and any other
sums payable by Tenant to Landlord under this Lease which is considered
reasonable compensation for the use and occupancy of the Premises; (iii) provide
Landlord a minimum of thirty (30) days prior written notice, unless a shorter
period is agreed to in writing by the parties, of any proceeding relating to
any assumption of this Lease or any intent to abandon the Premises, which
abandonment shall be deemed a rejection of this Lease; and (iv) to perform to
the benefit of Landlord as otherwise required under the Code. The failure of
Tenant to comply with the above shall result in an automatic rejection of this
Lease.

 

29.                                 Limitation of Actions. Any claim, demand,
right or defense of any kind by Tenant which is based upon or arises in
connection with this Lease or the negotiations prior to its execution, shall be
barred unless Tenant commences an action thereon, or interposes in a legal
proceeding a defense by reason thereof, within one (1) year after the date
Tenant actually becomes aware of the act or omission on which such claim,
demand, right or defense is based.

 

30.                                 Limitation on Landlord’s Liability. Anything
in this Lease to the contrary notwithstanding, covenants, undertakings and
agreements herein made on the part of Landlord are made and intended not
as personal covenants, undertakings and agreements or for the purpose of
binding Landlord personally or the assets of Landlord except Landlord’s
interest in the Property, but are made and intended for the purpose of binding
only the Landlord’s interest in the Property. No personal liability or personal
responsibility is assumed by, nor shall at any time be asserted or enforceable
against Landlord or its partners and their respective heirs, legal representatives,
successors and assigns on account of this Lease or on account of any covenant,
undertaking or agreement of Landlord contained in this Lease.

 

31.                                 Signs. Tenant shall not have the right to
place, construct or maintain any sign, advertisement, awning, banner or other
exterior decoration without Landlord’s consent. Any sign that Tenant has
Landlord’s consent to place, construct and maintain shall comply with all laws,
and Tenant shall obtain any approval required by such laws. Landlord makes no
representation with respect to Tenant’s ability to obtain such approval.

 

14

 

32.                                 Landlord’s Right to Enter the Premises. Landlord
and its authorized representatives shall have the right to enter the Premises
at reasonable times and upon reasonable prior notice (except in an emergency
when no such notice shall be required) for any of the following purposes:  (i) to determine whether the Premises
are in good condition and whether Tenant is complying with its obligations
under this Lease, (ii) to do any maintenance; to make any restoration to
the Premises or the Building that Landlord has the right or the obligation to
perform, and to make any improvements to the Premises or the Building that
Landlord deems necessary, (iii) to serve, post or keep posted any notices
required or allowed under the provisions of this Lease, (iv) to post any
ordinary “For Sale” signs at any time during the Term and to post any ordinary “For
Lease” signs during the last ninety (90) days of the Term, and (v) to show
the Premises to prospective brokers, agents, purchasers, tenants or lenders, at
any time during the Term. Landlord acknowledges that Tenant is subject to HIPAA
regulations covering patients confidentiality and will make best efforts not to
compromise this law with regard to access.

 

Landlord shall not be liable in any manner for any
inconvenience, annoyance, disturbance, loss of business, nuisance, or other
damage arising out of Landlord’s entry on the Premises as provided in this Section,
except damage resulting from the grossly negligent or willful acts of Landlord
or its authorized representatives. Tenant shall not be entitled to an abatement
or reduction of Rent if Landlord exercises any right reserved in this Section. Landlord
shall conduct its activities on the Premises as allowed in this Section in
a reasonable manner so as to cause minimal inconvenience, annoyance or
disturbance to Tenant.

 

33.                                 Subordination. This Lease is and shall be
prior to any mortgage recorded after the date of this Lease affecting the
Property. If, however, a lender requires that this Lease be subordinate to any
mortgage, this Lease shall be subordinate to that mortgage if Landlord first
obtains from the lender a written agreement that provides substantially the
following:

 

“As long as Tenant performs its obligations under this
Lease, no foreclosure of, deed given to lieu of foreclosure of, or sale under
the mortgage, and no steps or procedures taken under the mortgage, shall affect
Tenant’s rights under this Lease.”

 

Tenant shall attorn to any purchaser at any
foreclosure sale, or to any grantee or transferee designated in any deed given
in lieu of foreclosure. Tenant shall execute the written agreement and any
other documents required by the lender to accomplish the purposes of this
Section.

 

34.                                 Right to Estoppel Certificates. Tenant,
within ten (10) business days after notice from Landlord, shall execute
and deliver to Landlord, in recordable form, a certificate stating that this
Lease is unmodified and in full force and effect, or in full force and effect
as modified and stating the modifications. The certificate shall also state the
amount of Minimum Monthly Rent, the dates to which Rent has been paid in
advance, and the amount of any Prepaid Rent or Security Deposit and such other
matters as Landlord may reasonably request. Failure to deliver the
certificate within such ten (10) business day period shall be conclusive
upon Tenant for the benefit of Landlord and any successor to Landlord, that
this Lease is in full force and effect and has not been modified except as may be
represented by Landlord requesting the certificate.

 

35.                                 Transfer of Landlord’s Interest. If
Landlord sells or transfers the Property, Landlord, on consummation of the sale
or transfer, shall be released from any liability thereafter accruing under
this Lease if Landlord’s successor has assumed in writing, for the benefit of
Tenant, Landlord’s obligations under this Lease. If any Security Deposit or
Prepaid Rent has been paid by Tenant, Landlord shall transfer such Security
Deposit or Prepaid Rent to Landlord’s successor and on such transfer Landlord
shall be discharged from any further liability with respect to such Security
Deposit or Prepaid Rent.

 

36.                                 Attorneys’ Fees. If either party shall
bring any action for relief against the other party, declaratory or otherwise,
arising out of this Lease, including any action by Landlord for the recovery of
Rent or possession of the Premises, the losing party shall pay the successful
party a reasonable sum for attorneys’ fees which shall be deemed to have
accrued on the commencement of such action and shall be paid whether or not
such action is prosecuted to judgment.

 

37.                                 Surrender; Holding Over.

 

(a)                                  Surrender. On expiration or ten (10) days
after termination of the Term, Tenant shall surrender the Premises and all
Tenant’s Improvements and alterations to Landlord broom clean and in good
condition. Tenant shall remove all of its trade fixtures and personal property,
which personal property specifically includes all cabling installed in the
Premises by Tenant (unless Tenant has received consent from Landlord that such
cabling may be surrendered with and remain in the Premises), within the
time period stated in this Section. Tenant, at its cost, shall perform all
restoration made necessary by, and repair any damage to the Premises caused by,
the removal of its trade fixtures, personal property and signs to Landlord’s
reasonable satisfaction within the time period stated in this Section. Landlord
may, at its election, retain or dispose of in any manner any of Tenant’s trade
fixtures or personal property that Tenant does not remove from the Premises on
expiration or within ten (10) days after termination of the Term as
allowed or required by the provisions of this Lease by giving ten (10) days
notice to Tenant. Title to any such trade fixtures and personal property that
Landlord elects to retain or dispose of on expiration of such ten (10) day
period shall vest in Landlord. Tenant waives all claims against Landlord for
any damage to Tenant resulting from Landlord’s

 

15

 

retention or disposition of any such trade fixtures and personal
property. Tenant shall be liable to Landlord for Landlord’s reasonable costs
for storing, removing and disposing of Tenant’s trade fixtures and personal
property. If Tenant fails to surrender the Premises to Landlord on expiration
or ten (10) days after termination of the Term as required by this
Section, Tenant shall pay Landlord Rent in an amount equal to 150% of the
Minimum Monthly Rent applicable for the month immediately prior to the
expiration or termination of the Term, or the amount provided by law, whichever
is greater, for the entire time Tenant thus remains in possession and Tenant
shall be liable for, shall indemnify Landlord against and shall hold Landlord
harmless from all damages resulting from Tenant’s failure to timely surrender
the Premises, including without limitation, (i) any Rent payable by, or
any damages claimed by, any prospective tenant of any part or all of the
Premises, and (ii) Landlord’s damages resulting from such prospective
tenant rescinding or refusing to enter into the prospective lease of part or
all of the Premises by reason of Tenant’s failure to timely surrender the
Premises. If Tenant, without Landlord’s prior consent, remains in possession of
the Premises after expiration or termination of the Term, or after the date in
any notice given by Landlord to Tenant terminating this Lease, such possession
by Tenant shall be deemed to be a tenancy at sufferance terminable at any time
by either party.

 

(b)                                 Holding Over with Landlord’s Consent. If
Tenant, with Landlord’s prior consent, remains in possession of the Premises
after expiration or termination of the Term, or after the date in any notice
given by Landlord to Tenant terminating this Lease, such possession by Tenant
shall be deemed to be a month-to-month tenancy terminable by Landlord by a
notice given to Tenant at least twenty (20) days prior to the end of any such
monthly period or by Tenant by a notice given to Landlord at least thirty (30)
days prior to the end of any such monthly period. During such month-to-month
tenancy, Tenant shall pay Rent in the amount then agreed to in writing by Landlord
and Tenant. All provisions of this Lease, except those pertaining to term,
shall apply to the month-to-month tenancy.

 

38.                                 Agency Disclosure; Agent/Broker Disclosure; Broker.

 

(a)                                  Agency Disclosure. Martin Smith Inc hereby
discloses that it represents the Landlord and Colliers International represents
the Tenant in this transaction.

 

(b)                                 Agent/Broker Disclosure. MSI 83 King L.L.C.
is a Washington limited liability company composed of H. Martin Smith, III,
as the managing member and other individuals as members. The managing member
and several of the members are licensed real estate brokers and/or real estate
agents in the State of Washington.

 

(c)                                  Broker. Landlord and Tenant each represent
to the other that neither is represented by any broker, agent or finder with
respect to this Lease in any manner, except the Broker(s). The commission due
to the Broker(s) shall be paid by Landlord pursuant to a separate agreement. Each
party agrees to indemnify and hold the other party harmless from and against
any and all liability, costs, damages, causes of action or other proceedings
instituted by any broker, agent or finder, licensed or otherwise. claiming
through, under or by reason of the conduct of the indemnifying party in any
manner whatsoever in connection with this Lease. If Tenant engages a broker,
agent or finder to represent Tenant in connection with any renewal of this
Lease, then the commission or any fee of such broker, agent or finder shall be
paid by Tenant.

 

39.                                 Interest on Unpaid Rent. In addition to the
Late Charge as provided in Section 5(b), Rent not paid when due shall bear
interest from the date due until paid at the rate of fifteen percent (15%) per
year, or the maximum legal rate of interest, whichever is less.

 

40.                                 Landlord’s Option to Relocate Tenant. [This
Section is intentionally omitted.]

 

41.                                 Definitions. As used in this Lease, the
following words and phrases, whether or not capitalized, shall have the
following meanings:

 

(a)                                  “Additional
Rent” means pass-throughs of increases in Operating Costs and Taxes, as defined
in this Lease, and other monetary sums to be paid by Tenant to Landlord under
the provisions of this Lease.

 

(b)                                 “Alteration”
means any addition or change to, or modification of, the Premises made by
Tenant, including without limitation, fixtures, but excluding trade fixtures as
defined in this Section.

 

(c)                                  “Authorized
representatives” means any officer, agent, employee, independent contractor or
invitee of either party.

 

(d)                                 “Award”
means all compensation, sums or anything of value awarded, paid or received on
a total or partial condemnation.

 

(e)                                  “Common
Areas” means all areas outside the Premises and within the Building or on the
Land that are provided and designated by Landlord from time to time for the
general, non-exclusive use of Landlord. Tenant and other tenants of the
Building and their authorized representatives, including without limitation,
common entrances, lobbies, corridors, stairways and stairwells, elevators,
escalators, public restrooms and other public portions of the Building.

 

16

 

(f)                                    “Condemnation”
means the exercise of any governmental power, whether by legal proceedings or
otherwise, by a condemnor and a voluntary sale or transfer by Landlord to any
condemnor, either under threat of condemnation or while legal proceedings for
condemnation are pending.

 

(g)                                 “Condemnor”
means any pubic or quasi-public authority or entity having the power of
condemnation.

 

(h)                                 “Damage”
means any injury, deterioration, or loss to a person, property, the Premises or
the Building caused by another person’s acts or omissions or by Acts of God. Damage
includes death.

 

(i)                                     “Damages”
means a monetary compensation or indemnity that can be recovered in the courts
by any person who has suffered damage to his person, property or rights through
another’s acts or omissions.

 

(j)                                     “Date
of taking” means the date the condemnor has the right to possession of the
property being condemned.

 

(k)                                  “Encumbrance”
means any mortgage, deed of trust or other written security device or agreement
affecting the Premises, and the note or other obligation secured by it, that
constitutes security for the payment of a debt or performance of an obligation.

 

(l)                                     “Expiration”
means the coming to an end of the time specified in the Lease as its duration,
including any extension of the Term.

 

(m)                               “Force
majeure” means strikes, lockouts, labor disputes, shortages of labor or
materials, fire or other casualty, Acts of God or any other cause beyond the
reasonable control of a party.

 

(n)                                 “Good
condition” means the good physical condition of the Premises and each portion
of the Premises, including without limitation, all of the Tenant Improvements,
Tenant’s alterations, Tenant’s trade fixtures, Tenant’s Personal Property, all as
defined in this Section, signs, walls, interior partitions, windows, window
coverings, glass, doors, carpeting and resilient flooring, ceiling tiles,
plumbing fixtures and lighting fixtures, all of which shall be in conformity
with building standard finishes, ordinary wear and tear, damage by fire or
other casualty and taking by condemnation excepted.

 

(o)                                 “Hazardous
substances” means any industrial waste, toxic waste, chemical contaminant or
other substance considered hazardous, toxic or lethal to persons or property or
designated as hazardous, toxic or lethal to persons or property under any laws,
including without limitation, asbestos material or materials containing
asbestos.

 

(p)                                 “Hold
harmless” means to defend and indemnify from all liability, losses, penalties,
damages as defined in this Section, costs, expenses (including without
limitation, attorneys’ fees), causes of action, claims or judgments arising out
of or related to any damage, as defined in this Section, to any person or
property.

 

(q)                                 “Law”
means any constitution, statute, ordinance, regulation, rule, resolution,
judicial decision, administrative order or other requirement of any federal,
state, county, municipal or other governmental agency or authority having
jurisdiction over the parties or the Property, or both, in effect either at the
time of execution of this Lease or at any time during the Term, including
without limitation, any regulation or order of a quasi-official entity or body
(e.g., board of fire examiners or public utilities) and any legally effective
conditions, covenants or restrictions affecting the Property.

 

(r)                                    “Lender”
means the mortgagee, beneficiary, secured party or other holder of an
encumbrance, as defined in this Section.

 

(s)                                  “Lien”
means a charge imposed on the Premises by someone other than Landlord, by which
the Premises are made security for the performance of an act.

 

(t)                                    “Maintenance”
means repairs, replacement, repainting and cleaning.

 

(u)                                 “Mortgage”
means any deed of trust, mortgage or other written security device or agreement
affecting the Premises, and the note or other obligation secured by it, that
constitutes security for the payment of a debt or performance of an obligation.

 

(v)                                 “Mortgagee”
means the beneficiary under a deed of trust or mortgagee under a mortgage.

 

(w)                               “Mortgagor”
means the grantor or trustor under a deed of trust or mortgagor under a
mortgage.

 

(x)                                   “Operating
Costs” means all costs of any kind incurred by Landlord in operating, cleaning,
equipping, protecting, lighting, repairing, replacing, heating,
air-conditioning, maintaining and insuring the Property. Operating Costs shall
include, without limitation, the following costs:  (i) salaries, wages, bonuses and other
compensation (including hospitalization, medical, surgical, retirement plan,
pension plan, union dues, life insurance, including group life insurance,
welfare and other fringe benefits, and vacation, holidays and other paid
absence

 

17

 

benefits) relating to employees of Landlord or its agents directly
engaged in the operation, repair, or maintenance of the Property; (ii) payroll,
social security, workers’ compensation, unemployment and similar taxes with
respect to such employees of Landlord or its authorized representatives, and
the cost of providing disability or other benefits imposed by law or otherwise,
with respect to such employees; (iii) uniforms (including the cleaning,
replacement and pressing thereof) provided to such employees; (iv) premiums
and other charges incurred by Landlord with respect to fire, earthquake, other
casualty, all risk, rent loss and liability insurance, any other insurance as
is deemed necessary or advisable in the reasonable judgment of Landlord and,
after the Base Year, costs of repairing an insured casualty to the extent of
the deductible amount under the applicable insurance policy; (v) water
charges and sewer rents or fees; (vi) license, permit and inspection fees;
(vii) sales, use and excise taxes on goods and services purchased by
Landlord in connection with the operation, maintenance or repair of the
Property and Building systems and equipment; (viii) telephone, facsimile,
messenger, express delivery service, postage, stationery supplies and other
expenses incurred in connection with the operation, management, maintenance, or
repair of the Property; (ix) property management fees and expenses; (x)
repairs to and physical maintenance of the Property, including building systems
and appurtenances thereto and normal repair and replacement of worn-out
equipment, facilities and installations, but excluding the replacement of major
building systems (except to the extent provided in (xvi) and (xvii) below);
(xi) janitorial, window cleaning, security, extermination, water treatment,
rubbish removal, plumbing and other services and inspection or service
contracts for elevator, electrical, HVAC, mechanical and other building
equipment and systems or as may otherwise be necessary or proper for the
operation or maintenance of the Property; (xii) supplies, tools, materials, and
equipment used in connection with the operation, maintenance or repair of the
Property; (xiii) accounting, legal and other professional fees and expenses;
(xiv) painting the exterior or the public or common areas of the Building and the
cost of maintaining the sidewalks, landscaping and other common areas of the
Property; (xv) all costs and expenses for electricity, chilled water, air
conditioning, water for heating, gas. fuel, steam, heat, lights, power and
other energy related utilities required in connection with the operation,
maintenance and repair of the Property; (xvi) the cost of any improvements
which Landlord elects to capitalize made by Landlord to the Property during the
Term in compliance with the requirements of any laws or regulation or insurance
requirement with which the Property was not required to comply during the Base
Year, as reasonably amortized by Landlord, with interest on the unamortized
balance at the rate of twelve percent (12%) per year, or the maximum legal rate
of interest, whichever is less; (xvii) the cost of any improvements which
Landlord elects to capitalize made by Landlord to the Property during the term
of this Lease for the protection of the health and safety of the occupants of
the Property or that are intended to reduce other Operating Costs, as
reasonably amortized by Landlord, with interest on the unamortized balance at
the rate of twelve percent (12%) per year, or the maximum legal rate of
interest, whichever is less; (xviii) a reasonable reserve for repair or
replacement of equipment used in the maintenance or operation of the Property,
(xix) the cost of furniture, draperies, carpeting, landscaping and other
customary and ordinary items of personal property (excluding paintings,
sculptures and other works of art) provided by Landlord for use to common areas
of the Building or in the Building office (to the extent that such Building
office is dedicated to the operation and management of the Property), such
costs to be amortized over the useful life thereof; (xx) Building office rent
or rental value; and (xxi) all other costs which, in accordance with generally
sound accounting and management principles used by Landlord, as applied to the
maintenance and operation of office and/or retail buildings, are property
chargeable to the operation and maintenance of the Property.

 

Operating Costs shoe not include the following:  (i) depreciation on the Building; (ii) debt
service; (iii) capital improvements, except as otherwise provided in
clauses (xvi) and (xvii) above, (iv) rental under any ground or underlying
leases; (v) Real Property Taxes, (vi) attorney’s fees and expenses
incurred in connection with lease negotiations with prospective tenants, or
default or enforcement proceedings with respect to defaulting tenants; (vii) the
cost of tenant improvements; (viii) advertising expenses; or (ix) real
estate broker’s or other leasing commissions.

 

(y)                                 “Parties” means Landlord and
Tenant.

 

(z)                                   “Party”
means Landlord or Tenant.

 

(aa)                            “Person”
means one or more human beings, or legal entities or other artificial persons,
including without limitation, partnerships, corporations, trusts, estates,
associations and any combination of human beings and legal entities.

 

(bb)                          “Property”
means the Premises, Building and Land.

 

(cc)                            “Provision”
means any term, agreement, covenant, condition, clause, qualification,
restriction, reservation, or other stipulation in the Lease that defines or
otherwise controls, establishes, or limits the performance required or
permitted by either party.

 

(dd)                          “Real
Property Taxes” means any form of tax, assessment, general assessment,
special assessment, lien, levy, bond obligation, license fee, license tax, tax
or excise on rent, or any other levy, charge or expense, together with any
statutory interest thereon, (individually and collectively, the “Impositions”),
now or hereafter imposed or required by any authority having the direct or
indirect power to tax, including any federal, state, county or city government
or any school, agricultural, lighting, drainage or other improvement or special
assessment district thereof, (individually and collectively, the “Governmental
Agencies”) on any interest of Landlord or Tenant or both (including any legal
or equitable interest of Landlord or its mortgagee, if any) in the Premises or
the Property, including without limitation:

 

18

 

(i)                                     any
Impositions upon, allocable to or measured by the area of the Premises or the
Property, or the rental payable hereunder, including without limitation, any
gross income tax or excise tax levied by any Governmental Agencies with respect
to the receipt of such rental; or

 

(ii)                                  any
Impositions upon or with respect to the possession, leasing, operation,
management, maintenance, alteration, repair or use or occupancy by Tenant or
the Premises or any portion thereof; or

 

(iii)                               any Impositions upon or
with respect to the building equipment and personal property used in connection
with the operation and maintenance of the Property or upon or with respect to
the furniture, fixtures and decorations in the common areas or the Property.

 

(iv)                              any
Impositions upon this Lease or this transaction or any document to which Tenant
is a party creating or transferring an interest or an estate fn the Premises;
or

 

(v)                                 any
Impositions by Governmental Agencies (whether or not such Impositions
constitute tax receipts) in substitution, partially or totally, of any
Impositions now or previously included within the definition of real property
taxes, including those calculated to increase tax increments to Governmental
Agencies and to pay for such services as fire protection, water drainage,
street, sidewalk and road maintenance, refuse removal or other governmental
services formerly provided without charge to property owners or occupants; or

 

(vi)                              any
and all costs, including without limitation, the fees of attorneys, tax
consultants and experts, incurred by Landlord should Landlord elect to
negotiate or contest the amount of such real property taxes in formal or
informal proceedings before the Governmental Agency imposing such real property
taxes; provided, however, that real property taxes shall in no event include
Landlord’s general income, inheritance, estate, gift or franchise taxes.

 

(ee)                            “Rent”
means Minimum Monthly Rent, as adjusted from time to time under this Lease,
Additional Rent, Prepaid Rent, Security Deposit, all as defined in this
Section, payments of Tenant’s Share of increases in Real Property Taxes and
Operating Costs, Insurance, utilities and other charges payable by Tenant to
Landlord.

 

(ff)                                “Rentable
square feet of space” as to the Premises or the Building, as the case may be,
means the number of usable square feet of space times the applicable R/U
Ratio(s) as defined in this Section.

 

(gg)                          “Restoration”
means the reconstruction, rebuilding, rehabilitation and repairs that are
necessary to return damaged portions of the Premises and the Building to
substantially the same physical condition as they were in immediately before
the damage.

 

(hh)                          “R/U
Ratio” means the rentable area of a floor of the Building divided by the usable
area of such floor, both of which shall be computed in accordance with American
National Standard Z65.1-1996 Method of Measuring Floor Space in Office
Buildings as published by the Building Owners and Managers Association, as
amended from tine to time.

 

(ii)                                  “Substantially
complete” or “substantially completed” or “substantial completion” means the
completion of Landlord’s construction obligation, subject to completion or
correction of “punch list” items, that is, minor items of incomplete or
defective work or materials or mechanical maladjustments that are of such a
nature that they do not materially interfere with or impair Tenant’s use of the
Premises for the Permitted Use.

 

(jj)                                  “Successor”
means assignee, transferee, personal representative, heir, or other persons or
entity succeeding lawfully, and pursuant to the provisions of this Lease, to
the rights or obligations of either party.

 

(kk)                            “Tenant
Improvements” means (i) the improvements and alterations set forth in Exhibit C,
(ii) window coverings, lighting fixtures, plumbing fixtures, cabinetry and
other fixtures installed by either Landlord or Tenant at any time during the
Term, and (iii) any Improvements and alterations of the Premises made for
Tenant by Landlord at any time during the Term.

 

(ll)                                  “Tenant’s
personal property” means Tenant’s equipment, furniture, and movable property
(including cabling) placed in the Premises by Tenant.

 

(mm)                      “Tenant’s
trade fixtures” means any property attached to the Premises by Tenant.

 

(nn)                          “Termination”
means the ending of the Term for any reason before expiration, as defined in
this Section.

 

(oo)                          “Work”
means the construction of any Improvements or alterations or the performance of
any repairs done by Tenant or caused to be done by Tenant on the Premises as
permitted by this Lease.

 

42.                                 Miscellaneous Provisions.

 

(a)                                  Entire Agreement. This Lease sets forth the
entire agreement of the parties as to the subject matter hereof and supersedes
all prior discussions and understandings between them. This Lease may not
be amended

 

19

 

or rescinded in any manner except by an instrument in writing signed by
a duly authorized officer or representative of each party hereto.

 

(b)                                 Governing Law. This Lease shall be governed
by, and construed and enforced in accordance with the laws of the State of
Washington.

 

(c)                                  Severability. Should any of the provisions
of this Lease be found to be invalid, illegal or unenforceable by any court of
competent jurisdiction, such provision shall be stricken and the remainder of
this Lease shall nonetheless remain in full force and effect unless striking
such provision shall materially alter the intention of the parties.

 

(d)                                 Jurisdiction. In the event any action is
brought to enforce any of the provisions of this Lease, the parties agree to be
subject to exclusive to in personam
jurisdiction to the Superior Court of the State of Washington in and for the
County of King or in the United States District Court for the Western District
of Washington and agree that in any such action venue shall lie exclusively at
Seattle, Washington.

 

(e)                                  Waiver. No waiver of any right under this
Lease shall be effective unless contained in a writing signed by a duly
authorized officer or representative of the party sought to be charged with the
waiver and no waiver of any right arising from any breach or failure to perform shall
be deemed to be a waiver of any future right or of any other right arising
under this Lease.

 

(f)                                    Captions. Section captions contained
in this Lease are included for convenience only and form no part of
the agreement between the parties.

 

(g)                                 Notices. All notices or requests required
or permitted under this Lease shall be in writing. If given by Landlord such
notices or requests may be personally delivered, delivered by a reputable
express delivery service such as Federal Express or DHL, or sent by certified
mail, return receipt requested, postage prepaid. If given by Tenant such
notices or requests shall be sent by certified mail, return receipt requested,
postage prepaid. Such notices or requests shall be deemed given when so
delivered or mailed, irrespective of whether such notice or request is actually
received by the addressee. All notices or requests to Landlord shall be sent to
Landlord at Landlord’s Address for Notice and all notices or requests to Tenant
shall be sent to Tenant at Tenant’s Address for Notice. Either party may change
the address to which notices shall be sent by notice to the other party.

 

(h)                                 Binding Effect. Subject to the provisions
of Section 25 captioned “Assignment and Subletting”, this Lease shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns. No permitted assignment of this Lease or
Tenant’s rights hereunder shall be effective against Landlord unless and until
an executed counterpart of the instrument of assignment shall have been
delivered to Landlord and Landlord shall have been furnished with the name and
address of the assignee. The term “Tenant” shall be deemed to include the
assignee under any such permitted assignment.

 

(i)                                     Effectiveness. This Lease shall not be
binding or effective until property executed and delivered by Landlord and
Tenant.

 

(j)                                     Gender and Number. As used in this Lease,
the masculine shall include the feminine and neuter, the feminine shall include
the masculine and neuter, the neuter shall include the masculine and feminine,
the singular shall include the plural and the plural shall include the
singular, as the context may require.

 

(k)                                  Time of the Essence. Time is of the essence
to the performance of all covenants and conditions in this Lease for which time
is a factor.

 

Dated the date first above first written.

 

	
  Landlord:

  	
   

  	
  Tenant:

  
	
   

  	
   

  	
   

  
	
  MSI 83 King L.L.C., a Washington limited liability

  	
   

  	
  Sound Health
  Solutions, a Washington

  
	
  company

  	
   

  	
  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
    /s/ H. Martin Smith

  	
   

  	
  By:

  	
    /s/ Teresa Girolami

  
	
   

  	
    H. Martin Smith, III

  	
   

  	
   

  	
   

  
	
   

  	
    Manager

  	
   

  	
  Its:

  	
     President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  

 

This Lease has been prepared for submission to you and your attorney. Martin
Smith Inc is not authorized to give legal or tax advice. Neither Landlord nor
Martin Smith Inc makes any representations or recommendations as to the legal

 

20

 

sufficiency, legal effect or tax consequences of this document or any
transaction relating thereto. These are questions for your attorney with whom
you should consult before signing the document to determine whether your legal
rights are adequately protected.

 

[Notary attached]

 

21

 

RIDER

 

This Rider is part of that certain Lease dated March 31,
2004 by and between MSI 83 King L.L.C., a Washington limited liability company
(“Landlord”), and Sound Health Solutions, a Washington corporation (“Tenant”)
who further agree as follows:

 

43.                                 Parking. Landlord shall provide Tenant with
four (4) unreserved parking stalls located on the surface parking lot of
the Building and/or in the Building garage during the Term of this Lease
(subject to the following termination right on the part of Landlord). Such
perking stalls shall be made available to Tenant during periods of typical
office use from 7:00 a.m. through 6:00 p.m., Monday through Friday
each week. Tenant shall pay as rental for such unreserved parking stalls the
market rate in the location of such parking, which is currently $185.00 per
month per stall. Unreserved parking stalls may also be available on the
surface parking lot and in the Building garage 24 hours per day, Monday through
Friday each week at the market rate of $220.00 per month per stall. From time
to time the charge for such parking shall be increased to the then-prevailing
market rate in the location of such parking. Tenant shall comply with any and
all governmental rules and regulations governing such parking. Landlord may make,
modify, and enforce rules and regulations related to the parking of
automobiles in the Building garage and Tenant agrees to abide by such rules and
regulations. Notwithstanding any statement to the contrary contained elsewhere
in this Section or in this Lease. any time after March 31, 2009
Landlord may terminate all of Tenant’s parking rights if Landlord elects
to demolish the Building garage and/or if Landlord elects to develop (i.e.,
construct Improvements on) some or all of the surface parking lot of the
Building, provided Landlord gives Tenant at least ninety (90) days prior
written notice. In addition, Landlord will assist Tenant to obtain “parking
script” from the parking operator to assist Tenant’s patients with their
parking needs. This script will be purchased at Tenant’s sole cost and expense.

 

44.                                 Option to Extend. So long as Tenant is not
then in default under this Lease, Tenant shall have the option to extend the
Term of this Lease for one (1) additional five (5) year period (the “Additional
Term”). To exercise its option to extend this Lease for the Additional Term,
Tenant must deliver to Landlord a written notice (an “Option Notice”)
exercising its extension option at least nine (9) months (but not more
than fifteen (15) months) prior to the Expiration Date (i.e., the Option Notice
must be received by Landlord between January 1, 2008 and July 31,
2008). The extension option granted to Tenant pursuant to this Section 44
is personal to Tenant and may not be exercised by or for the benefit of
any assignee or sublessee of Tenant. All of the terms and conditions of this
Lease shall apply during the Additional Term except (i) the Minimum
Monthly Rent shall be an amount mutually agreed to by Landlord and Tenant or
determined by arbitration as set forth below; (ii) there shall be no
further options to extend after the commencement of the Additional Term: and (iii) there
shall be no Landlord-provided Tenant Improvements or other Landlord concessions
during the Additional Term. When the rental rate for the Additional Term is
determined, whether by agreement of the parties or pursuant to arbitration as
provided below, Landlord and Tenant shall enter into a lease extension
agreement selling forth the new Minimum Monthly Rent for the Premises and such
other terms as may be applicable. If at the time Tenant delivers the
Option Notice to Landlord, or at any time between such date and the
commencement date of the Additional Term, Tenant defaults under this Lease and
fails to cure its default within the applicable cure period, if any, Landlord may declare
the Option Notice null and void by written notice to Tenant. The Minimum
Monthly Rent for the Additional Term shall be one-twelfth (1/12th) of the then “fair
market rent” (defined below) multiplied by the number of rentable square feet
in the Premises. The term “fair market rent” means the rate per rentable square
foot per year (including increases therein over the Additional Term) that a
new, willing, non-equity tenant would pay in an arms-length transaction for the
Premises, or for comparable space in the Building, if any, or for comparable
space in comparable buildings in the Pioneer Square district of Seattle,
Washington, for leases having a five (5) year term. Landlord and Tenant
agree the fair market rent for the Additional Term shall be determined as
follows:

 

(a)                                  Promptly
after Landlord receives the Option Notice, the parties (or their designated
representatives) shall meet and attempt to agree on the fair market rent for
the Additional Term. If the parties have not agreed on the fair market rent for
the Additional Term within one hundred twenty (120) days after Landlord
receives the Option Notice, then unless otherwise agreed in writing by the
parties, the matter shall be submitted to arbitration in accordance with the
terms of the following paragraphs. The last day of such one hundred twenty
(120) day period (as the same may be extended by the written agreement of
the parties) is referred to in this Lease as the “Arbitration Commencement Date”.

 

(b)                                 Within
fifteen (15) days after the Arbitration Commencement Date, each party shall
provide the other party with written notice (a “Rent Notice”) of its
determination of fair market rent. The matter shall then be submitted for
decision to an arbitrator. The arbitrator shall be a licensed real estate
broker who has been active over the five (5) year period ending on the
Arbitration Commencement Date in the leasing of downtown office properties in
Seattle, Washington. If Landlord and Tenant are unable to agree on the
arbitrator within thirty (30) days after the Arbitration Commencement Date,
each shall select a broker who shall be qualified under the same criteria set
forth above, and so notify the other party in writing within ten (10) days
after the end of such thirty (30) day period. The two brokers so chosen by the
parties shall then appoint the arbitrator within ten (10) days after the
date of the appointment of the last appointed broker. If the two brokers so
chosen by the parties are unable to agree on the arbitrator within such ten (10) day
period, the arbitrator will be appointed by the director (or the equivalent) of
the Seattle office of the American Arbitration Association upon the application
of either party. If either party fails to timely select its broker and so
notify the other party in writing within the foregoing ten (10) day
period, and the other party timely selects its broker, then the broker selected
by the other party shall be the arbitrator for determining fair market rent.

 

 

(c)                                  Within
thirty (30) days after the selection of the arbitrator pursuant to (b) above,
the arbitrator shall determine fair market rent by selecting either the fair
market rent stated in Landlord’s Rent Notice or the fair market rent stated in
Tenant’s Rent Notice. The arbitrator shall have no power to average such
amounts or to designate a fair market rent other than that specified in either
Landlord’s Rent Notice or Tenant’s Rent Notice,

 

(d)                                 Both
parties may submit any information to the arbitrator for his or her
consideration, with copies to the other party. The arbitrator shall have the
right to consult experts and competent authorities for factual information or
evidence pertaining to the determination of fair market rent. The arbitrator
shall render his or her decision by written notice to each party. The
determination of the arbitrator will be final and binding upon Landlord and
Tenant. The cost of the arbitration (including the charges of the broker
selected by the other party) will be paid by Landlord if the fair market rent
determined by arbitration is the fair market rent specified in Tenant’s Rent
Notice, and by Tenant if the fair market rent determined by Arbitration is the
fair market rent specified in Landlord’s Rent Notice.

 

45.                                 Landlord Option to Terminate. In the event
Tenant exercises Tenant’s Option to Extend pursuant to Section 44 and
remains in the Premises after March 31, 2009, Landlord shall have the
Option to Terminate this Lease at any time after March 31, 2009 upon not
less than nine (9) month’s advance written notice in the event Landlord is
going to demolish or substantially rehabilitate the Premises in conjunction
with the construction and development of a new building on the site of the
existing parking facilities. For example, Landlord may give a Termination
Notice to Tenant on December 1, 2008 to Terminate this Lease on August 31,
2009. In the event Landlord exercises this Option to Terminate, Tenant shall
vacate the Premises on or before the date specified in Landlord’s notice and
both Landlord and Tenant will be relieved of all obligations to each other
related to this Lease.

 

Dated the date first above written.

 

	
  Landlord:

  	
   

  	
  Tenant:

  
	
   

  	
   

  	
   

  
	
  MSI 83 King L.L.C., a Washington limited liability

  	
   

  	
  Sound Health
  Solutions, a Washington corporation

  
	
  company

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
    /s/ H. Martin Smith

  	
   

  	
  By:

  	
    /s/ Teresa Girolami

  
	
   

  	
    H. Martin Smith, III

  	
   

  	
   

  	
   

  
	
   

  	
    Manager

  	
   

  	
  Its:

  	
     President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  

 

 

EXHIBIT A

LEGAL DESCRIPTION

 

83 King Building

 

Lots 1 through 3, Block 3427 of Seattle Tidelands;
Excepting all coal and mineral rights as reserved under King County Recording No. 4250469;
Situate in the City of Seattle, County of King, Stale of Washington.

 

	
   

  	
  Initials:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

LEGAL DESCRIPTION

EXHIBIT AExhibit 10.16

 

SUBLEASE AGREEMENT

 

 

BETWEEN

 

INSURANCE COMPANY OF THE WEST, A CALIFORNIA
CORPORATION,

 

AS SUBLESSOR

 

 

AND

 

IVOW, INC.

 

A DELAWARE CORPORATION

 

AS SUBTENANT

 

Reference date January 12, 2006

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  Recitals

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Principal
  Sublease Provisions

  	
  1

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Establishment of
  Subleasehold

  	
  3

  
	
   

  	
  3.1.

  	
  Agreement to Let

  	
  3

  
	
   

  	
  3.2.

  	
  Term

  	
  3

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Delivery of
  Possession

  	
  3

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Use of Premises
  and Common Area

  	
  4

  
	
   

  	
  5.1.

  	
  Permitted Use of
  Premises

  	
  4

  
	
   

  	
  5.2.

  	
  Laws

  	
  4

  
	
   

  	
  5.3.

  	
  Condition During
  Periods of Non-Use

  	
  4

  
	
   

  	
  5.4.

  	
  Use of Common
  Area

  	
  4

  
	
   

  	
  5.5

  	
  General
  Covenants and Limitations on Use

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Security Deposit

  	
  5

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Rent

  	
  6

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Sublease
  Expenses

  	
  6

  
	
   

  	
  8.1.

  	
  Definition of
  Sublease Expenses

  	
  6

  
	
   

  	
  8.2.

  	
  Subtenant’s Pro
  Rata Share

  	
  7

  
	
   

  	
  8.3.

  	
  Base Year
  Sublease Expenses

  	
  7

  
	
   

  	
  8.4.

  	
  Payment of
  Sublease Expenses

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Utilities and
  Services

  	
  8

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Taxes

  	
  8

  
	
   

  	
  10.1.

  	
  Personal
  Property Taxes

  	
  8

  
	
   

  	
  10.2.

  	
  Real Property
  Taxes

  	
  8

  
	
   

  	
   

  	
  10.2.1.

  	
  Definition of
  Taxes

  	
  8

  
	
   

  	
   

  	
  10.2.2.

  	
  Payment of Taxes

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Maintenance
  Obligations

  	
  9

  
	
   

  	
  11.1.

  	
  Subtenant’s
  Duties

  	
  9

  
	
   

  	
  11.2.

  	
  Sublessor’s
  Duties

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Net Sublease

  	
  10

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Parking

  	
  10

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Signs

  	
  10

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Rules,
  Regulations, and Covenants

  	
  11

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Early Access
  Insurance

  	
  11

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Plate-Glass
  Insurance

  	
  11

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Public Liability
  and Property Damage Insurance

  	
  11

  
	
   

  	
   

  	
   

  
	
  19.

  	
  Fire and
  Extended Coverage Insurance

  	
  12

  
	
   

  	
   

  	
   

  
	
  20.

  	
  Business
  Interruption Insurance

  	
  12

  
	
   

  	
   

  	
   

  
	
  21.

  	
  Insurance
  Generally

  	
  12

  
	
   

  	
   

  	
   

  
	
  22.

  	
  Waiver of
  Subrogation

  	
  12

  
	
   

  	
   

  	
   

  
	
  23.

  	
  Sublessor’s
  Insurance

  	
  13

  
						

 

 

	
  24.

  	
  Alterations

  	
  13

  
	
   

  	
   

  	
   

  
	
  25.

  	
  Surrender of Premises
  and Holding Over

  	
  14

  
	
   

  	
   

  	
   

  
	
  26.

  	
  Default

  	
  14

  
	
   

  	
   

  	
   

  
	
  27.

  	
  Sublessor’s Remedies

  	
  15

  
	
   

  	
  27.1.

  	
  Continuation of
  Sublease

  	
  15

  
	
   

  	
  27.2.

  	
  Rent from Reletting

  	
  15

  
	
   

  	
  27.3.

  	
  Termination of Subtenant’s Right to Possession

  	
  16

  
	
   

  	
  27.4.

  	
  Sublessor’s Right to Cure Default

  	
  16

  
	
   

  	
  27.5.

  	
  Enforcement Costs

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  28.

  	
  Interest

  	
  16

  
	
   

  	
   

  	
   

  
	
  29.

  	
  Quarterly Payments

  	
  17

  
	
   

  	
   

  	
   

  
	
  30.

  	
  Destruction

  	
  17

  
	
   

  	
   

  	
   

  
	
  31.

  	
  Condemnation

  	
  18

  
	
   

  	
   

  	
   

  
	
  32.

  	
  Assignment and Other
  Transfers

  	
  18

  
	
   

  	
   

  	
   

  
	
  33.

  	
  Common Areas

  	
  20

  
	
   

  	
   

  	
   

  
	
  34.

  	
  Relocation

  	
  20

  
	
   

  	
   

  	
   

  
	
  35.

  	
  Access by Sublessor

  	
  21

  
	
   

  	
   

  	
   

  
	
  36.

  	
  Sublessor’s Reserved
  Rights

  	
  21

  
	
   

  	
   

  	
   

  
	
  37.

  	
  Indemnity and Exemption
  of Sublessor from Liability

  	
  21

  
	
   

  	
   

  	
   

  
	
  38.

  	
  Hazardous Substances

  	
  22

  
	
   

  	
   

  	
   

  
	
  39.

  	
  Prohibition Against
  Asbestos-Containing Materials

  	
  23

  
	
   

  	
   

  	
   

  
	
  40.

  	
  Security Measures

  	
  23

  
	
   

  	
   

  	
   

  
	
  41.

  	
  Subordination and
  Attornment

  	
  24

  
	
   

  	
   

  	
   

  
	
  42.

  	
  Estoppel Certificates

  	
  24

  
	
   

  	
   

  	
   

  
	
  43.

  	
  Waiver

  	
  25

  
	
   

  	
   

  	
   

  
	
  44.

  	
  Brokers

  	
  25

  
	
   

  	
   

  	
   

  
	
  45.

  	
  Easements

  	
  25

  
	
   

  	
   

  	
   

  
	
  46.

  	
  Limitations on
  Sublessor’s Liability

  	
  26

  
	
   

  	
   

  	
   

  
	
  47.

  	
  Sale or Transfer of
  Premises

  	
  26

  
	
   

  	
   

  	
   

  
	
  48.

  	
  Quitclaim Deed

  	
  26

  
	
   

  	
   

  	
   

  
	
  49.

  	
  No Merger

  	
  26

  
	
   

  	
   

  	
   

  
	
  50.

  	
  Confidentiality

  	
  26

  
	
   

  	
   

  	
   

  
	
  51.

  	
  Miscellaneous

  	
  27

  
	
   

  	
   

  	
   

  
	
  Exhibit A — Master
  Lease

  	
   

  
	
   

  	
   

  
	
  Exhibit B — The
  Premises

  	
   

  

 

 

	
  Exhibit B-1 — Site
  Plan

  	
   

  
	
   

  	
   

  
	
  Exhibit C —
  Subtenant Improvements to the Premises

  	
   

  
	
   

  	
   

  
	
  Exhibit D —
  Building Rules and Regulations

  	
   

  
	
   

  	
   

  
	
  Addendum

  	
   

  

 

 

SUBLEASE

FOR ICW PLAZA AT TORREY RESERVE

 

This Sublease (“Sublease”) is dated for reference
purposes only as of January 12, 2006, between Insurance Company of the
West, a California corporation (“Sublessor”), and iVow, Inc., a Delaware
corporation (“Subtenant”), who agree as follows:

 

1.             Recitals.
This sublease is entered into pursuant to the following recitals of fact, which
recitals constitute an integral part of this sublease:

 

1.1.          Sublessor
is the tenant under that certain Second Amended and Restated Office Lease
Agreement dated January 22, 1997 (the “Master Lease”), with ICW Plaza,
L.P., a California limited partnership (“Master Lessor”), as landlord, to which
this Sublease is subordinate.

 

1.2.          Pursuant to
the Master Lease, Master Lessor has leased to Sublessor all of Lot 3 of
Torrey Reserve Unit No. 1 in the City of San Diego, County of San Diego,
State of California, according to Map thereof No. 13082, filed for record
in the Office of the San Diego County Recorder on January 24, 1994, as
Document No. 1994-0049955 (“Lot 3”), along with the 3-plus story
building and other improvements, landscaping and other additions and structures
located or to be constructed thereon (the “Building”) at 11455 El Camino Real, San
Diego, California 92130, and the non-exclusive right to use, in common with
Master Lessor and Master Lessor’s invitees and licensees, those easements and
rights of use granted in favor of the owner of Lot 3 under that certain
Reciprocal Easement and Maintenance Agreement dated June 13, 1995, and
recorded as Document No. 1995-0249200 in the Office of the San Diego
County Recorder (the “REA”).

 

1.3.          By this
Sublease, Sublessor intends to lease to Subtenant, and Subtenant intends to
lease from Sublessor, that certain portion of the Building described in
Paragraph 2.2, below.

 

2.             Principal
Sublease Provisions. The following are the Principal Sublease Provisions of
this Sublease. Other portions of this Sublease explain and define the Principal
Sublease Provisions in more detail and should be read in conjunction with this
Paragraph. In the event of any conflict between the Principal Sublease
Provisions and the other portions of this Sublease, the Principal Sublease
Provisions shall control. (Terms shown in quotations are defined terms used
elsewhere in this Sublease)

 

2.1.          “Project”:  Torrey Reserve Unit No. 1, in San Diego,
California. A site plan depicting the location of the Building and the Project
is attached hereto as Exhibit “B-1” and made a part hereof for
all purposes.

 

2.2.          “Premises”:  That portion of the Building designated on
the floor plans attached as Exhibit “B”, consisting of commercial
office space at 11455 El Camino Real, Suite 140, San Diego, CA 92130.

 

2.3.          Leasable
Area of the Premises:  Approximately
2,839 rentable square feet and 2,490 usable square feet of space (subject to
adjustment, at Sublessor’s election, based upon field verification of the
Premises following occupancy by Subtenant).

 

2.4.          “Initial
Sublease Term”:

 

2.4.1.       “Commencement
Date”:  the date on which Sublessor’s
Work set forth in Section 4 below are substantially completed, anticipated
to be February 1, 2006 (See Exhibit “C”).

 

2.4.2.       “Initial
Expiration Date”:  Thirty six (36) months
from the Commencement Date, anticipated to be January 31, 2009 (the
Initial Expiration Date stated herein, even if adjusted pursuant to Exhibit “C”,
must always be the last day of a calendar month).

 

2.4.3.       Extension
Rights:  Yes ý
No o (If yes, see Addendum to Sublease)

 

2.5.          “Basic
Monthly Rent”:  See attached Addendum

 

2.6.          “Security
Deposit”:  $8,282.71. Subtenant’s
Security Deposit does not

 

1

 

constitute last month’s
rent. Last month’s rent must be separately paid by Subtenant on or before the
first day of the last month of the Sublease Term.

 

2.7.          This space
intentionally left blank

 

2.8.          “Guarantor(s)”:  none

 

2.9.          “Subtenant’s
Pro Rata Share”:  1.82% (subject to
adjustment as provided in Paragraph 8.2, below)

 

2.10.        Participating
Brokers:  CB Richard Ellis/Dick Balestri
and Newmark Pacific/David Viani (“Participating Brokers”)

 

2.11.        Address
for Sublessor:

 

Insurance Company of the West

c/o American Assets, Inc.

Attn:  James
Durfey, V.P.

11455 El Camino Real, Suite 200

San Diego, CA 92130

 

2.12.        Addresses
for Subtenant:

 

(Prior to Occupancy)

2101 Faraday Avenue

Carlsbad, CA 92008-7205

 

(Following Occupancy)

The Premises

 

2.13.        Permitted
Uses By Subtenant:  Subtenant shall use
the Premises for general office purposes only (Permitted Use”).

 

2.14.        Exclusive
Use By Subtenant:  Yes o
No ý (If yes, see Addendum)

 

2.15.        Permitted
Trade Name:  iVOW. Inc.

 

2.16.        Amounts
Payable Upon Sublease Execution: 
$16,089.96 (first month’s rent of $7,807.25 plus Security Deposit of
$8,282.71)

 

3.             Establishment
of Subleasehold.

 

3.1.          Agreement
to Let. Sublessor hereby subleases the Premises to Subtenant, and Subtenant
hereby subleases the Premises from Sublessor, for the below described Term, and
upon the terms, provisions and conditions contained in this Sublease; along
with the following additional rights:

 

3.1.1.       Subtenant
is hereby granted the non-exclusive right to use, in common with Sublessor, the
other tenants in the Building, and the Sublessor’s and such other tenants’
invitees and licensees, the areas located within Lot 3 and within the
Building which are set aside, for the common use of, among others, the
occupants of the Building (the “Common Area”) upon the terms, provisions, and
conditions of this Sublease.

 

3.1.2.       Subtenant
is hereby granted the non-exclusive right to use, in common with others,
including Sublessor, Master Lessor, and those claiming any interest in
Lot 3 (or any portion thereof) by or through Master Lessor, and their
respective invitees and licensees, those easements and rights of use granted in
favor of the owner of Lot 3 under the REA; which REA provides for the
common use and maintenance of Lot 1 in the Project (the “Project Common
Area”) upon the terms, provisions, and conditions of this Sublease.

 

2

 

3.2.          Term.
The term of this Sublease (the “Term”) will commence on the “Commencement Date,”
as defined in Paragraph 2.4.1 above, and shall expire on the “Initial
Expiration Date,” as defined in Paragraph 2.4.2 above, subject to (i) any
modifications to such dates resulting from construction work by Sublessor, as
described in Exhibit “C” to this Sublease, (ii) any extension
rights described in the Addendum to this Sublease, and (iii) earlier
termination, as provided in this Sublease. The term “Expiration Date”, as used
in this Sublease will mean the Initial Expiration Date, any earlier date upon
which this Sublease is terminated by Sublessor, as provided below, or, if the
Term is extended, then any extended Term expiration date. Sublessor and
Subtenant shall execute a supplemental writing to this Sublease to reflect the
exact Commencement Date; however, any failure to do so will not affect the
Commencement Date. If the actual Commencement Date is different than the
estimated Commencement Date set forth in Paragraph 2.4.1 of this Sublease, then
(A) the Commencement Date provided for under this Section will
control, (B) the Initial Expiration Date will be automatically extended by
the same number of days by which the actual Commencement Date extended beyond
the estimated Commencement Date specified in Paragraph 2.4.1, above (except
that if such modified Initial Expiration Date would not, by reason of such
recalculation, be the last day of a calendar month, then the Initial Expiration
Date will be further extended by the minimum number of days necessary to make
the Initial Expiration Date be the last day of a calendar month), and (C) Paragraphs
2.4.1 and 2.4.2 of this Sublease will be deemed amended accordingly.

 

4.             Delivery
of Possession. On or before the Commencement Date, Sublessor, at its cost,
shall have substantially completed the work, if any, required to be completed
by Sublessor prior to the delivery of the Premises to Subtenant, as described
in Exhibit “C” to this Sublease (the “Sublessor’s Work”). For
purposes of this Paragraph, the term “substantially complete” shall mean
completed to such an extent that Subtenant can commence its work, if any, to be
undertaken by Subtenant, as described in Exhibit “C” to this
Sublease (the “Subtenant’s Work”), without material delay or interference due
to the completion of Sublessor’s Work, or if no such Subtenant’s Work is to be
undertaken, then such term shall mean completed to such an extent that the
Sublessor’s Work can be finally completed within 30 days and without material
interference to Subtenant’s occupancy and use of the Premises. If possession of
the Premises (including, without limitation, substantial completion of
Sublessor’s Work, if any) is not delivered to Subtenant on or before the
Commencement Date, then Sublessor shall not be liable for any damage caused by
such delay, and such delay shall neither affect the validity of this Sublease,
affect Subtenant’s obligations under this Sublease, nor extend the Term, except
that, unless Subtenant has caused or contributed to such delay, all rental
obligations of Subtenant (including the obligation to pay Basic Monthly Rent)
shall be abated until possession of the Premises is delivered to Subtenant. If
any such delay is caused or contributed to by Subtenant then, upon demand,
Subtenant shall pay to Sublessor rent (at the rate of 1/30th of the Basic
Monthly Rent per day) shall be abated until possession of the Premises is
delivered to Subtenant. Except for any items set forth on a “punch-list” of
excepted items delivered to Sublessor upon the date possession of the Premises
are delivered to Subtenant, and except as otherwise provided to the contrary in
this Sublease, Subtenant shall, by acceptance of possession of the Premises, be
deemed to have (i) acknowledged that Sublessor’s Work has been
substantially completed and that the Premises are in first-class condition
and repair (ii) accepted the Premises in its then as-is condition with no
right to require Sublessor to perform any additional work therein, except
as set forth on the punch list, (iii) acknowledged that the Premises
comply with all applicable laws and ordinances, and (iv) waived any
express or implied warranties regarding the condition of the Premises,
including any implied warranties of fitness for a particular purpose or
merchantability.

 

5.             Use
of Premises and Common Area.

 

5.1.          Permitted
Use of Premises. Subtenant may use the Premises for the Permitted Use
specified in Paragraph 2.13 and for no other use. Any changes in the Permitted
Use (or any change in Subtenant’s trade name from the Permitted Trade Name
identified in Paragraph 2.15 above) shall require Sublessor’s prior written
consent, which consent may be granted or withheld in Sublessor’s sole
discretion. Furthermore, Subtenant shall at all times faithfully observe and be
in compliance with the rules and regulations set forth, on Exhibit “D”
attached hereto as relating to the Premises, Building, Project and Common
Areas, which rules and regulations may be modified or amended from
time to time in Sublessor’s sole, but reasonable, discretion, with notice of
same being provided to Subtenant.

 

5.2.          Laws.
Subtenant shall comply with all laws concerning the Premises including, without
limitation, the obligation at Subtenant’s sole cost to alter, maintain, and
restore the Premises in compliance with all applicable laws, even if such laws
are enacted after the date of this Sublease, even if compliance entails costs
to Subtenant of a substantial nature, and even if compliance requires structural

 

3

 

alterations. Such obligation to comply with laws shall include without
limitation compliance with any amendments arising after the Commencement Date
to Title III of the Americans With Disabilities Act of 1990 (42 U.S.C. 12181 et seq.) (the “ADA”). If Subtenant’s use
of the Premises results in the need for modifications or alterations to any
portion of the Common Area or the Project in order to comply with the ADA, then
Subtenant shall additionally be responsible for the cost of such modifications
and alterations.

 

5.3.          Condition
During Periods of Non-Use. During any period of time in which Subtenant is
not continuously using and occupying the Premises, Subtenant shall take such
measures as may be necessary or desirable, in Sublessor’s reasonable
opinion, to secure the Premises from break-ins and use by unauthorized persons,
to minimize the appearance of non-use, and to otherwise maintain the interior
and exterior portions of Subtenant’s Premises, including all windows and doors,
in first class condition and consistent with the manner in which the
Premises were maintained during Subtenant’s occupancy.

 

5.4.          Use of
Common Area. Subtenant’s use of the Common Area and the Project Common Area
must at all times comply with the applicable provisions of the REA and all rules and
regulations regarding such use as Sublessor or the Manager named in the REA
(the “Manager”) may from time to time reasonably adopt; provided, however,
that the rules and regulations are not inconsistent with the terms and
provisions of this Sublease and shall be uniformly applicable to all tenants
and occupants of the Project and shall be enforced by Sublessor on a
non-discriminatory basis. By its execution of this Sublease, Subtenant
acknowledges receiving a copy of the REA and agrees to be bound by, and to
comply with, all of the provisions of the REA, as it may be amended from
time to time.

 

5.5.          General
Covenants and Limitations on Use. Subtenant may not do, bring, or keep
anything in or about the Premises that will cause a cancellation of any
insurance covering the Premises, the Building, or the Project. If the rate of
any insurance carried by Sublessor or the Manager is increased as a result of
Subtenant’s use or occupancy of the Premises, Subtenant shall pay to Sublessor,
within 10 days after Sublessor delivers to Subtenant a notice of such increase,
the amount of such increase. Furthermore, Subtenant covenants and agrees that
no light will be emitted from the Premises by Subtenant which is unreasonably
bright or causes unreasonable glare; no sounds will be emitted from the
Premises by Subtenant which are unreasonably loud or annoying; and no odor will
be emitted from the Premises by Subtenant which is or might be unreasonably
noxious or offensive to others in the Building, on the Project, or on adjacent
or near-by property. In addition, Subtenant covenants and agrees to use
commercially reasonable efforts so that no unsightliness will be permitted upon
the Premises by Subtenant. Without limiting the generality of the foregoing, no
refuse, scraps, debris, garbage, trash, hazardous or toxic substances, bulk
materials, or waste may be kept, stored, or accumulated within the
Premises except as may be properly enclosed and which meets the other requirements
of this Sublease; the Premises may not be used for sleeping or washing
clothes, nor may Subtenant use the Premises for cooking or the
preparation, manufacture, or mixing of anything that might emit any odor or
objectionable noises or lights onto the Project or nearby properties, except as
otherwise provided to the contrary in this Sublease; and all pipes, wires,
poles, antennas, and other facilities for utilities or the transmission or
reception of audio or visual signals must be kept and maintained enclosed
within the Premises. Subtenant will be solely responsible for the timely
removal of all refuse, scraps, debris, garbage, trash, bulk materials, or waste
from the Premises and the deposit thereof in the trash containers or dumpsters
to be maintained by Sublessor on Lot 3. Further, Subtenant may not
keep or permit to be kept any animal (excluding seeing-eye dogs), bird,
reptile, or other exotic creature on the Premises. Neither Subtenant nor
Subtenant’s guests, invitees, customers, and licensees (collectively, “Subtenant’s
Invitees”) may do anything that will cause damage or waste to the Building
or Project. Neither the floor nor any other portion of the Premises may be
overloaded. No machinery, apparatus, or other appliance may be used or
operated in or on the Premises that will in any manner injure, vibrate, or
shake all or any part of the Building or the balance of the Project. In
the event of any breach of this Paragraph 5.5 by Subtenant or Subtenant’s
Invitees, Sublessor, at its election, may pay the cost of correcting such
breach and Subtenant shall immediately, upon demand, pay (as Additional Rent)
the cost thereof plus an administrative fee of ten percent (10%) of such cost.

 

6.             Security
Deposit. Upon the execution of this Sublease, Subtenant shall deposit with
Sublessor cash or check in the amount of the Security Deposit, to secure the
performance by Subtenant of its obligations under this Sublease, including
without limitation Subtenant’s obligations (i) to pay Basic Monthly Rent
and Additional Rent, (ii) to repair damages to the Premises and/or the
Project caused by Subtenant or Subtenant’s agents, employees, contractors,
licensees, and invitees (collectively, “Subtenant’s Invitees”), (iii) to
clean the Premises upon the termination of this Sublease, and (iv) to
remedy any other defaults by Subtenant in the performance of any of its
obligations under this Sublease. If Subtenant

 

4

 

commits any default under this Sublease, Sublessor may, at its election,
use the Security Deposit to cure such defaults, and to compensate Sublessor for
all damage suffered by Sublessor from such defaults, including, without
limitation, attorneys’ fees and costs incurred by Sublessor. Upon demand by
Sublessor, Subtenant shall promptly pay to Sublessor a sum equal to any portion
of the Security Deposit so used by Sublessor, in order to maintain the Security
Deposit in the amount set forth in Paragraph 2.6 above. Within 45 days
following the Expiration Date or earlier termination of this Sublease,
Sublessor shall deliver to Subtenant, at Subtenant’s last known address, any
portion of the Security Deposit not used by Sublessor, as provided in this
Paragraph. Sublessor may commingle the Security Deposit with Sublessor’s
other funds and Sublessor shall not pay interest on such Security Deposit to
Subtenant. Subtenant waives the provisions of California Civil Code Section 1950.7
(or any successor statute), and any similar principals of law with respect to
Sublessor’s ability to apply the Security Deposit against future rent damages. Furthermore,
upon lawful termination of the Sublease as a result of Subtenant’s default,
Sublessor shall be entitled to immediately apply the Security Deposit against
damages computed under California Civil Code Section 1951.2, without the
requirement that Subtenant first be given notice and an opportunity to cure,
and notwithstanding that the damages have not been finally adjudicated by a
court

 

7.             Rent.
Subtenant shall pay to Sublessor as minimum monthly rent, the Basic Monthly
Rent described in Paragraph 2.5, above (subject to adjustment as provided in
the attached Addendum), in advance, on the first day of each calendar month
throughout the Term. If the Commencement Date is other than the first day of a
calendar month, then the Basic Monthly Rent payable by Subtenant for the first
calendar month of the Term during which rent is payable (which shall be payable
upon the Commencement Date) will be prorated on the basis of the actual number
of days during the Term occurring during the relevant calendar month. All “Rental”
(which includes Basic Monthly Rent and any “Additional Rent” hereunder) must be
paid to Sublessor at the same address as notices are to be delivered to
Sublessor pursuant to Paragraph 2.11, above, or such other address as Sublessor
may designate in writing to Subtenant.

 

8.             Sublease
Expenses.

 

8.1.          Definition
of Sublease Expenses. As used in this Sublease, the term “Sublease Expenses”
shall mean and refer to all reasonable costs and expenses, of any kind or
nature, which are paid or incurred by Sublessor relative to the REA or the
operation, repair, replacement, maintenance, and/or management of Lot 3
including without limitation all costs and expenses relating to:  (i) all personnel directly and
exclusively involved in the operation, repair, replacement, maintenance, and
management of the Project (other than Sublessor’s corporate officers) including
wages, fringe benefits, and other labor payments, (ii) water, sewage
disposal, drainage, refuse collection and disposal, gas (excluding
electricity), and other utility services, excluding therefrom submetered or
allocated utility charges billed separately to any tenant, (iii) general
maintenance and repair of Lot 3, including the structural components of
the Building and other improvements located within Lot 3, repainting of
improvements, and exterior window washing (excluding janitorial services), (iv) maintenance
of landscaping and, where and when reasonably necessary, replanting, (v) keeping
the parking area free from litter, dirt, debris, and other obstructions, (vi) any
expenses payable by Sublessor relative to the REA pursuant to the provisions of
the Master Lease, (vii) all real property or real estate taxes,
assessments, and other impositions, whether general, special, ordinary, or
extraordinary, and of every kind and nature, which may be levied, assessed
or imposed upon or with respect to Lot 3, or any portion thereof, by any
local, state, or federal entity (viii) any personal property taxes,
assessments, or other impositions levied, assessed, or imposed upon any
personal property of Sublessor used in connection with the Project, (ix) the
cost of all casualty, liability, rental loss, and other insurance obtained by
Sublessor relative to Lot 3, including all premiums therefore and any
deductibles payable with respect to any loss insured thereby,
(x) management fees and legal, accounting, inspection, and consultation
fees (other than as related to new leases, enforcing Sublessor’s rights under
existing leases, or sales of the Building), (xi) the cost of capital
improvements or structural modifications required by any change in laws,
ordinances, rules, or regulations governing Lot 3, or other capital
improvements or structural modifications deemed reasonably necessary or
desirable by Sublessor, including without limitation capital improvements or
structural modifications which reduce Sublease Expenses; provided, however, any
costs of such capital improvements or structural modifications shall be
amortized over the useful life of such capital improvements or structural
modifications, on a straight-line basis, including an interest factor.

 

8.2.          Subtenant’s
Pro Rata Share. For purposes of this Sublease, the term “Subtenant’s Pro
Rata Share” will mean and refer to the share of Sublease Expenses and other
costs, to be borne by Subtenant under this Sublease. Subtenant’s Pro Rata Share
will be computed utilizing a fraction,

 

5

 

the numerator of which will be the total number of rentable square feet
located within the Premises, and the denominator of which will be the total
aggregate number of rentable square feet of space in the Building that
participate in reimbursement of the expense item(s) or category(ies). Subject
to prior written notice to and approval by Subtenant, Subtenant’s Pro Rata
Share for one expense item or category may differ from Subtenant’s Pro
Rata Share of another expense item or category, to the extent that other
leasable areas within the Building participate in full, partial, or
extraordinary reimbursement of a particular expense item or category. No change
in Subtenant’s Pro Rata Share resulting from an increase or decrease in the
leasable area of the Building due to construction or demolition of improvements
will be effective until the first day of the first full calendar year following
such construction or demolition.

 

8.3.          Base
Year Sublease Expenses. As used in this Sublease, the term “Base Year
Sublease Expenses” shall mean and refer to the Sublease Expenses paid or
incurred by Sublessor during the calendar year in which the Commencement Date
takes place, said year being 2006. Notwithstanding anything contained
herein to the contrary, Base Year Sublease Expenses shall be calculated as if
the Project were ninety-five percent (95%) occupied and adjusted for a one
hundred percent (100%) tax assessment.

 

8.4.          Payment
of Sublease Expenses. Subtenant shall pay to Sublessor, on the first day of
each calendar month during the Lease Term, commencing January 1, 2007, an
amount (“Subtenant’s Monthly Payment”) equal to one-twelfth of Subtenant’s Pro
Rata Share of the excess of Sublease Expenses over the Base Year Sublease
Expenses (“Increased Sublease Expenses), as estimated by Sublessor in the most
recently delivered Estimated Statement (as defined below). Sublessor intends to
deliver to Subtenant, prior to the commencement of each calendar year during
the Term, a written statement (“Estimated Statements”) setting forth Sublessor’s
estimate of Sublease Expenses and Increased Sublease Expenses allocable to the
ensuing calendar year, and Subtenant’s Pro Rata Share of such Increased
Sublease Expenses. Within approximately 90 days after the end of each calendar
year during the Term, Sublessor shall deliver to Subtenant a written statement
(“Actual Statement”), setting forth the actual Sublease Expenses for the
preceding calendar year. Subtenant’s failure to object to Sublessor regarding
the contents of an Actual Statement, in writing, within 30 days after delivery
to Subtenant of such Actual Statement, shall constitute Subtenant’s absolute
and final acceptance and approval of the Actual Statement. If the sum of
Subtenant’s Monthly Payments actually paid by Subtenant during any calendar
year exceeds Subtenant’s Pro Rata Share of the excess of actual Increased
Sublease Expenses, then such excess will be credited against future Subtenant’s
Monthly Payments, unless such calendar year was the calendar year during which
the Expiration Date or earlier termination of this Sublease occurs (the “Last
Calendar Year”), in which event Sublessor shall pay to Subtenant such excess. If
the sum of Subtenant’s Monthly Payments actually paid by Subtenant during any
calendar year is less than Subtenant’s Pro Rata Share of the excess of actual
Sublease Expenses for such calendar year over the Base Year Sublease Expenses,
then Subtenant shall, within 30 days of delivery of the Actual Statement, pay
to Sublessor the amount of such deficiency. Sublessor’s delay in delivering any
Estimated Statement or Actual Statement will not release Subtenant of its
obligation to pay any Subtenant’s Monthly Payment or any such excess upon
receipt of the Estimated Statement or the Actual Statement, as the case may be.
The references in this Paragraph to the actual Sublease Expenses allocable to a
calendar year, shall include (i) if such calendar year is the calendar
year during which the Commencement Date occurs, the actual Sublease Expenses
allocable to the portion of such calendar year following the Commencement Date,
and (ii) if such calendar year is the Last Calendar Year, the actual
Sublease Expenses allocable to the portion of the Last Calendar Year prior to
the Expiration Date or earlier termination of this Sublease.

 

9.             Utilities
and Services. Except as otherwise provided in the Addendum to this
Sublease, Sublessor, at Sublessor’s expense, will provide ordinary and
customary amounts and quantities of water, and janitorial services (5 days per
week), sewer, gas, trash collection, and interior window washing to the
Premises. If Subtenant’s use of water, sewer and/or other utilities exceeds
ordinary and customary usage levels, then Subtenant shall pay Sublessor the
actual reasonable cost of such excess (determined in Sublessor’s reasonable
discretion). Except for Sublessor’s obligations set forth above, Subtenant
shall make all arrangements for and pay the cost of all utilities and services
furnished to the Premises or used by Subtenant. Sublessor shall not be liable
for failure to furnish any utilities or services to the Premises when such
failure results from causes beyond Sublessor’s reasonable control, and such
failure shall neither be deemed and actual or constructive eviction, nor
release Subtenant from its obligations under this Sublease, including without
limitation, Subtenant’s obligation to pay Rental. If Sublessor constructs new
or additional utility facilities, including without limitation wiring,
plumbing, conduits, and/or mains, resulting solely from Subtenant’s changed or
increased utility requirements, Subtenant shall on demand promptly pay to
Sublessor the total cost of such items. If any governmental authority having
jurisdiction over the Project imposes mandatory controls, or suggests voluntary
guidelines applicable to the Project, relating to

 

6

 

the use or conservation of water, gas, electricity, power, or the
reduction of automobile emissions, Sublessor, at its reasonable discretion, may comply
with such mandatory controls or voluntary guidelines and, accordingly, require
Subtenant to so comply. Sublessor shall not be liable for damages to persons or
property for any mandatory reduction, nor shall such mandatory reduction in any
way be construed as a partial eviction of Subtenant; cause an abatement of
rent, or operate to release Subtenant from any of Subtenant’s obligations under
this Sublease.

 

10.           Taxes.

 

10.1.        Personal
Property Taxes. Subtenant shall pay before delinquency all taxes,
assessments, license fees, and other charges that are levied or assessed
against, or based upon the value of, Subtenant’s personal property installed or
located in or on the Premises including without limitation trade fixtures,
furnishings, equipment, and inventory (collectively, “Subtenant’s Personal
Property”), subject to Subtenant’s right to diligently and reasonably contest
same. On demand by Sublessor, Subtenant shall furnish Sublessor with
satisfactory evidence of such payments. If any such taxes, assessments, license
fees, and/or other charges are levied against Sublessor or Sublessor’s
property, or if the assessed value of the Premises or Lot 3 is increased
by the inclusion of a value placed on Subtenant’s Personal Property, and if
Sublessor pays such taxes, assessments, license fees, and/or other charges or
any taxes based on the increased assessments caused by Subtenant’s Personal
Property, then Subtenant, on demand, shall immediately reimburse Sublessor for
the sum of such taxes, assessments, license fees, and/or other charges so
levied against Sublessor, or the proportion of taxes resulting from such
increase in Sublessor’s assessment. Sublessor may, at its election, pay such
taxes, assessments, license fees, and/or other charges or such proportion, and
receive such reimbursement regardless of the validity of the levy.

 

10.2.        Real
Property Taxes.

 

10.2.1.     Definition
of Taxes. As used in this Sublease, the term “Taxes” shall mean and refer
to all real property or real estate taxes, assessments, and other impositions,
whether general, special, ordinary, or extraordinary, and of every kind and
nature, which may be levied, assessed, imposed upon or with respect to the
Project, or any portion thereof, by any local, state, or federal entity from
time to time.

 

10.2.2.     Payment
of Taxes. Subtenant shall pay to Sublessor, on the first day of each
calendar month during the Term, commencing with the first day of the first January following
the Commencement Date, as Additional Rent, an amount (“Subtenant’s Monthly Tax
Payment”) equal to one-twelfth (1/12th) of Subtenant’s Pro Rata Share of the
amount by which the Taxes for such calendar year exceed the Taxes which are
assessed against the Project during the calendar year in which the Commencement
Date takes place (the “Increased Taxes”), as estimated by Sublessor in the most
recently delivered Estimated Tax Statement (as defined below). Sublessor
intends to deliver to Subtenant, prior to the commencement of each calendar
year during the Term, a written statement (“Estimated Tax Statement”) setting
forth Sublessor’s estimate of the Taxes and Increased Taxes allocable to the
ensuing calendar year, and Subtenant’s Pro Rata Share of such Increased Taxes. Sublessor
may, at its option, during any calendar year, deliver to Subtenant a revised
Estimated Tax Statement, revising Sublessor’s estimate of the Taxes and
Increased Taxes, in accordance with Sublessor’s most current estimate. No later
than 90 days after the end of each calendar year during the Term, Sublessor
intends to deliver to Subtenant a written statement (“Actual Tax Statement”)
setting forth the actual Taxes allocable to the preceding calendar year or, in
the case of the calendar year in which the Commencement Date occurs, such
Actual Tax Statement will set forth the Taxes which are assessed against the Project
during the calendar year in which the Commencement Date takes place. Subtenant’s
failure to object to Sublessor regarding the contents of an Actual Tax
Statement, in writing, within 30 days after delivery to Subtenant of such
Actual Tax Statement, shall constitute Subtenant’s absolute and final
acceptance and approval of the Actual Tax Statement. If the sum of Subtenant’s
Monthly Tax Payments actually paid by Subtenant during any calendar year
exceeds Subtenant’s Pro Rata Share of the actual Increased Taxes allocable to
such calendar year, then such excess will be credited against future Subtenant’s
Monthly Tax Payments, unless such calendar year was the Last Calendar Year, in
which event either (i) such excess shall be credited against any monetary
default of Subtenant under this Sublease, or (ii) if Subtenant is not in
default under this Sublease, then Sublessor shall pay to Subtenant such excess.
If the sum of Subtenant’s Monthly Tax Payments actually paid by Subtenant
during any calendar year is less than Subtenant’s Pro Rata Share of the actual
Increased Taxes allocable to such calendar year, then Subtenant shall, within
10 days of delivery of the Actual Tax Statement, pay to Sublessor the amount of
such deficiency. Sublessor’s delay in delivering any Estimated Tax Statement or
Actual Tax Statement will not release Subtenant of its

 

7

 

obligation to pay any Subtenant’s Monthly Tax Payment or any such
excess upon receipt of the Estimated Tax Statement or the Actual Tax Statement,
as the case may be. The references in this Paragraph to the actual
Increased Taxes allocable to a calendar year, shall include, if such calendar
year is the Last Calendar Year, the actual Increased Taxes allocable to the
portion of the Last Calendar Year prior to the Expiration Date.

 

11.           Maintenance
Obligations.

 

11.1.        Subtenant’s
Duties. Subtenant shall at its sole cost maintain and keep, all in good
condition, all portions of the Premises (except those portions of the Premises to
be maintained by Sublessor as expressly set forth below), ordinary wear and
tear excepted. Subtenant is additionally liable for any damage to the Project
resulting from the grossly negligent acts or omissions of Subtenant, including,
without limitation, any damage to the roof or damage relating to a roof
penetration caused by Subtenant. If Subtenant fails to maintain any portion of
the Premises as provided above, or if Subtenant damage any portion of the
Project, then Sublessor may (beyond the expiration of all applicable
notice and cure periods), at its election, maintain any such portion of the
Premises or the Project and Subtenant shall promptly reimburse Sublessor for
Sublessor’s actual reasonable cost thereof.

 

11.2.        Sublessor’s
Duties. Sublessor shall maintain, repair and replace the Premises (except
as expressly set forth in Section 11.1 above), load-bearing columns, floor
slabs and other structural components, the mechanical, electrical and plumbing
systems and equipment (pipes, fixtures, electrical wiring, breakers and
switches), plate glass windows, elevators, bathrooms, exterior lighting and
landscaping of the Project, trash receptacles, heating, air conditioning and
ventilation systems, pest and termite control services, telephone lines and wiring
and all wiring, fixtures, lamps and tubes serving the Building and the
Premises, in good working order. Sublessor’s failure to perform its
obligations set forth in the preceding sentence will not release Subtenant of
its obligations under this Sublease, including without limitation Subtenant’s
obligation to pay Rental, except as otherwise provided to the contrary in this
Sublease. Subtenant waives the provisions of California Civil Code Section 1942
(or any successor statute), and any similar principals of law with respect to
Sublessor’s obligations for tenantability of the Premises and Subtenant’s right
to make repairs and deduct the expense of such repairs from rent.

 

12.           Modified
Gross Sublease. This Sublease is intended to be a “modified gross lease” with
Subtenant’s liability for Building operating costs limited to any increased
Sublease Expenses in excess of the Base Year Sublease Expenses.

 

13.           Parking.
Subject to the remaining provisions of this Paragraph, as long as Subtenant is
not in default under this Sublease, Sublessor grants to Subtenant (for the
benefit of Subtenant and Subtenant’s Invitees) the right to the non-exclusive
use of up to four (4) parking spaces per 1,000 useable square feet in the
Premises within the parking area within the boundaries of and serving
Lot 3 along with the other parking areas within the Project relative to
which Sublessor has the right to grant parking rights pursuant to the REA (the “Parking
Area”). In addition and with respect to two (2) of the four (4) parking
spaces per 1,000 useable square feet in the Premises referenced above,
Sublessor grants to Subtenant (for the benefit of Subtenant’s executives) the
right to use the Project’s subterranean executive parking area at a rate of
$75.00 per space per month (the non-exclusive parking spaces and subterranean
parking spaces shall be referred to herein as, the “Parking Allocation”). The
parking fee shall be subject to adjustment during the term of the Sublease. Notwithstanding
anything to the contrary in this Sublease, Subtenant shall be required to
declare in writing to Sublessor (the “Parking Declaration”) the actual number
of reserved parking space that Subtenant will use and pay for during the
Sublease Term subject to the terms of this Sublease within the thirty (30) day
period prior to the Commencement Date. Upon making such Parking Declaration,
Subtenant shall not be entitled to increase or decrease such number of
subterranean reserved parking spaces that Subtenant will use and pay for during
the entirety of the Sublease Term. The number of subterranean reserved parking
spots paid for by Subtenant during the first month after the Commencement Date
shall be deemed the Parking Declaration, unless otherwise indicated by
Subtenant pursuant to this Paragraph.

 

Subtenant’s use of the Parking Area shall be subject
to such rules as Sublessor or the Manager (as the case may be) may,
in its reasonable discretion, adopt from time to time with respect to the
Parking Area at all times during the term of this Sublease and any renewals or
extensions thereof, and to the extent included within the foregoing; (i) rules providing
for the payment of charges or fees by users of the Parking Area in order to
reimburse Sublessor or the Manager for the expense of a parking attendant
and/or an automated parking system, (ii) rules limiting tenants of
the Project (including, without limitation,

 

8

 

Subtenant) to the use of, or excluding the use of, certain parking
spaces or certain portions of the Parking Area, in order to maintain the
availability of accessible parking spaces for clients, guests, and invitees of
tenants of the Project, and (iii) rules limiting tenants of the
Project (including without limitation Subtenant) to the use of a restricted
number of parking spaces or a restricted area. Notwithstanding anything to the
contrary in this Paragraph, Sublessor (and the Manager) may, at its election,
construct improvements upon or otherwise alter in any manner the Parking Area
provided that Sublessor makes reasonable amounts of parking available (or
reasonable amounts of parking will remain available) to Subtenant elsewhere on
the Project, or within a reasonable distance from the Project. Subject to the
immediately preceding sentence, Sublessor reserves the right to grant certain
tenants in the Building the exclusive right to park in specified areas of the
Parking Area, to the exclusion of all other tenants. Subtenant acknowledges
that the exercise of the rights reserved to Sublessor under this Paragraph may result
in a decrease in the number of parking spaces available to Subtenant and
Subtenant’s Invitees, and no such decrease shall affect Subtenant’s obligations
under this Paragraph or entitle Subtenant to any abatement of Rental.

 

14.           Signs.
Except as otherwise provided to the contrary in this Sublease, Subtenant may not
place, construct, or maintain any sign, advertisement, awning, banner, or other
exterior decoration (collectively, “sign”) in the Premises which are visible
from the exterior of the Premises, or on the Building, without the prior
written consent of Sublessor. Any sign that Subtenant is permitted by Sublessor
to place, construct, or maintain in the Premises or on the Building shall
comply with Sublessor’s sign criteria applicable to the Project, including,
without limitation, criteria relating to size, color, shape, graphics, and
location (collectively, the “Sign Criteria”), and shall comply with all
applicable laws, ordinances, rules, or regulations, and Subtenant shall obtain
any approval required by such laws, ordinances, rules, and regulations. Sublessor
makes no representation with respect to Subtenant’s ability to obtain any such
approval. Subtenant shall, at Subtenant’s sole cost, make any changes to any
sign, in the Premises or on the Building as required by any new or revised
applicable laws, ordinances, rules, or regulations, or any changes in the Sign
Criteria. Notwithstanding the foregoing, the Sublessor shall provide standard
building lobby directory and suite identification signage for the benefit
of Subtenant at the Sublessor’s sole cost.

 

15.           Rules,
Regulations, and Covenants. Subtenant shall observe faithfully and comply
strictly with any reasonable rules and regulations which Sublessor or the
Manager may from time to time adopt for Lot 3 or the Project as well
as any recorded covenants, conditions, or restrictions affecting the Premises
or the Project, whether now existing or hereafter adopted or amended from time
to time so long as Sublessor provides Subtenant with reasonable notice of any
proposed changes or amendments to such rules and regulations (all of the
foregoing, collectively, “rules”). Sublessor has no duty or obligation to
enforce any rule against any other tenant, and Sublessor will not be
liable to Subtenant for violation of any rule by any other tenant, or any
other tenant’s agents, employees, officers, independent contractors, customers,
invitees, visitors, or licensees. Subtenant acknowledges that Sublessor
reserves the right, from time to time, to enter into leases or other agreements
by which Sublessor agrees to restrict the use of all or any portion of the
space in the Building (including the Premises) from certain uses. All such use
restrictions, whether now existing or entered into in the future, shall be
binding upon Subtenant and in no event shall Subtenant utilize the Premises for
any use so prohibited

 

16.           Early
Access Insurance. At any time prior to the Commencement Date that Subtenant
is making any Alterations (as defined below) to the Premises or performing any
of the Subtenant’s Work (as defined on Exhibit “C”), (i) Subtenant
shall, at Subtenant’s sole cost, maintain (a) ”Builder’s Risk” insurance
with respect to Subtenant’s Work at the Premises, reasonably satisfactory to
Sublessor, and (b) all of the insurance to be maintained by Subtenant
during the Term, including without limitation public liability and property
damage insurance, fire and extended coverage insurance, boiler and machinery
insurance, and workers compensation insurance, (ii) the provisions of the
Paragraph in this Sublease entitled “Indemnity and Exemption of Sublessor from
Liability” shall be operative, and (iii) the provisions of the Paragraph
in this Sublease entitled “Utilities and Services” shall be operative. Any
Alterations pursuant to this Paragraph shall be subject to all the provisions
of the Paragraph in this Sublease entitled “Alterations”. Nothing in this
Paragraph shall be construed as granting permission to Subtenant to enter the
Premises, or to make any Alterations, prior to the Commencement Date, except as
otherwise provided to the contrary in this Sublease.

 

17.           Plate-Glass
Insurance. Sublessor shall at its sole cost maintain full coverage
plate-glass insurance on the Premises, in which Subtenant and any lender holding
a security interest in Lot 3 (“Lender”) shall be named as an additional
insured.

 

9

 

18.           Public
Liability and Property Damage Insurance. Subtenant shall, at Subtenant’s
sole cost, maintain public liability and property damage insurance (i) with
a single combined liability limit and property damage limit of not less than
$2,000,000.00, (ii) insuring (a) against all liability of Subtenant
arising out of or in connection with Subtenant’s use or occupancy of the
Premises, and (b) performance by Subtenant of the indemnity provisions set
forth in this Sublease, (iii) naming Sublessor and any Lender as
additional named insureds, (iv) containing cross-liability endorsements,
and (v) which includes products liability insurance (if Subtenant is to
sell merchandise or other products derived from the Premises). Not more
frequently than once every year, if in the opinion of Sublessor the amount or
scope of such insurance at that time is not adequate, Subtenant shall increase
such insurance as reasonably required by Sublessor. Additionally, if Subtenant
sells or serves alcoholic beverages from the Premises, Subtenant shall obtain
and maintain “dram shop” coverage and such other insurance coverage as
Sublessor may designate from time to time and in such amounts as Sublessor
deems reasonably appropriate.

 

19.           Fire
and Extended Coverage Insurance. Subtenant shall, at Subtenant’s sole cost,
maintain on Subtenant’s Alterations and Subtenant’s Personal Property (as
defined below) a policy of standard fire and extended coverage insurance, with
vandalism and malicious mischief endorsements, coverage with respect to
increased costs due to building ordinances, demolition coverage, boiler and
machinery insurance, and sprinkler leakage coverage, in each case to the extent
of at least one hundred percent (100%) of full replacement value, and (if
reasonably deemed appropriate by Sublessor) business interruption insurance,
issued in the names of Sublessor, Subtenant, and Sublessor’s Lender, as their
interests may appear. Such “full replacement value” shall be determined by
the company issuing such policy at the time the policy is initially obtained. Not
more frequently than once every two years, either Sublessor or Subtenant may,
at its election, notify the other that it elects to have the replacement value
redetermined by an insurance company. Such redetermination shall be made
promptly and in accordance with the rules and practices of the Board of
Fire Underwriters, or a like board recognized and generally accepted by the
insurance company, and Sublessor and Subtenant shall be promptly notified of
the results by the company. Such policy shall be promptly adjusted according to
such redetermination.

 

20.           Business
Interruption Insurance. Subtenant shall obtain business interruption
insurance in amounts sufficient to reimburse Subtenant for direct or indirect
loss of earnings attributable to all perils commonly insured against by prudent
tenants or attributable to prevention of access to the Premises or to the
Project as a result of such perils.

 

21.           Insurance
Generally. If Subtenant fails during the Term to maintain any insurance
required to be maintained by Subtenant under this Sublease, then Sublessor may,
at its election, arrange for any such insurance, and Subtenant shall reimburse
Sublessor for any premiums for any such insurance within five (5) days
after Subtenant receives a copy of the premium notice. If any such premiums are
allocable to a period, a portion of which occurs during the Term and the
remainder of which occurs before or after the Term, then such premiums shall be
apportioned between Sublessor and Subtenant based upon the number of days
during such period that occur during the Term and the number of days that occur
before or after the Term, such that Subtenant pays for the premiums that are
allocable to the period during the Term. Insurance required to be maintained by
Subtenant under this Sublease (i) shall be issued as a primary policy by
insurance companies authorized to do business in the state in which the
Premises are located with a Best’s Rating of at least “A” and a Best’s
Financial Size Category rating of at least “X,” as set forth in the most
current edition of “Best’s Insurance Reports” (unless otherwise reasonably approved
by Sublessor), (ii) shall name Sublessor and any Lender as additional
named insureds, (iii) shall consist of “occurrence” based coverage,
without provision for subsequent conversion to “claims” based coverage, (iv) shall
not be cancelable or subject to reduction of coverage or other modification
except after 30-days’ prior written notice to Sublessor and any Lender, and (v) shall
not provide for a deductible or co-insurance provision in excess of $5,000.00. Subtenant
shall, at least 30 days prior to the expiration of each such policy, furnish
Sublessor with a renewal of or “binder” extending such policy. Subtenant shall
promptly upon written request deliver to Sublessor copies of such policy or
policies or certificates evidencing the existence and amounts of such insurance
together with evidence of payment of premiums.

 

22.           Waiver
of Subrogation. Sublessor and Subtenant release each other, from all claims
for damage, loss, or injury to the Project, to Subtenant’s Personal Property,
and to the fixtures and Alterations of either Sublessor or Subtenant in or on
the Project to the extent such damage, loss or injury is covered by any
insurance policies carried by Sublessor and/or Subtenant and in force at the
time of such damage. Subject to the remaining provisions of this Paragraph,
Sublessor and Subtenant shall each cause all insurance policies obtained by it
pursuant to this Sublease to provide that the insurance company waives all
right of recovery by way of subrogation against Sublessor and Subtenant in
connection with any damage,

 

10

 

loss, or injury covered by such policy. If any such policy cannot be
obtained with a waiver of subrogation, or is obtainable only by the payment of
an additional premium charge above that charged by insurance companies issuing
policies without waiver of subrogation endorsements, the party undertaking to
obtain such policy (the “Undertaking Party”) shall so notify the other party
(the “Notified Party”). The Notified Party shall, within 10 days after the
giving of such notice, either obtain such policy from a company that is
reasonably satisfactory to the Undertaking Party and that will issue such
policy with a waiver of subrogation endorsement, or agree to pay the additional
premium if such policy is obtainable at additional cost. If such policy cannot
be obtained with a waiver of subrogation endorsement or the Notified Party
refuses to pay such additional premium, then the Undertaking Party shall not be
required to obtain a waiver of subrogation endorsement with respect to such
policy.

 

23.           Sublessor’s
Insurance. Sublessor may, at its election, maintain any of the following
insurance, in such amounts and with such limits as Sublessor shall determine in
its reasonable discretion:  (i) Public
liability and property damage insurance, and products liability insurance; (ii) Fire
and extended coverage insurance, with vandalism and malicious mischief
endorsements, and coverage with respect to increased costs due to building
ordinances, demolition, and sprinkler leakage; (iii) boiler and machinery
insurance; (iv) fidelity insurance; (v) earthquake insurance; (vi) Plate-glass
insurance; and (vii) rental loss and/or business interruption insurance,
with respect to the Building, the Premises, the Common Areas and the Project. The
premiums, costs, expenses, and deductibles (or similar costs or charges) of
and/or with respect to any such insurance (all of the preceding, collectively, “Insurance
Expenses”) shall be included as part of the Sublease Expenses.

 

24.           Alterations.
Subtenant shall not make any structural or material non-structural alterations,
improvements, additions, installations, or changes of any nature in or to the
Premises (any of the preceding, “Alterations”) unless (i) Subtenant first
obtains Sublessor’s written consent, (ii) Subtenant complies with all
conditions which may be imposed by Sublessor, including without limitation
Sublessor’s selection of specific contractors or construction techniques, and (iii) Subtenant
pays to Sublessor the reasonable costs and expenses of Sublessor for
architectural, engineering, or other consultants which reasonably may be
incurred by Sublessor in determining whether to approve any such Alterations. At
least 30 days prior to making any Alterations, Subtenant shall submit to
Sublessor, in written form, proposed detailed plans for such Alterations. Subtenant
shall, prior to the commencement of any Alterations, at Subtenant’s sole cost, (i) acquire
(and deliver to Sublessor a copy of) all necessary permits from appropriate
governmental agencies to make such Alterations (any conditions of which permits
Subtenant shall comply with, at Subtenant’s sole cost, in a prompt and
expeditious manner), (ii) obtain and deliver to Sublessor (unless this
condition is waived in writing by Sublessor) a lien and completion bond in an
amount equal to one hundred fifty percent (150%) of the estimated cost of the
proposed Alterations, to insure Sublessor against any liability for mechanics’
liens and to insure completion of the work, (iii) provide Sublessor with
10 days’ prior written notice of the date the installation of the Alterations
is to commence, so that Sublessor can post and record an appropriate notice of
non-responsibility, and (iv) obtain (and deliver to Sublessor proof of)
reasonably adequate workers compensation insurance with respect to any of
Subtenant’s employees installing or involved with such Alterations (which
insurance Subtenant shall maintain in force until completion of the
Alterations). All Alterations shall upon installation become the property of
Sublessor and shall remain on and be surrendered with the Premises on the
Expiration Date, except that Sublessor may, at its election, require Subtenant
to remove any or all of the Alterations, by so notifying Subtenant in writing
on or before the Expiration Date, in which event, Subtenant shall, at its sole
cost, on or before the Expiration Date or earlier termination of this Sublease,
repair and restore the Premises to the condition of the Premises prior to the
installation of the Alterations which are to be removed. Subtenant shall pay
all costs for Alterations and other construction done or caused to be done by
Subtenant and Subtenant shall keep the Premises free and clear of all mechanics’
and materialmen’s lien’s resulting from or relating to any Alterations or other
construction. Subtenant may, at its election, contest the correctness or
validity of any such lien provided that (a) immediately on demand by
Sublessor, Subtenant procures and records a lien release bond, issued by a
corporation reasonably satisfactory to Sublessor and authorized to issue surety
bonds in the state in which the Premises are located, in an amount equal to one
hundred fifty percent (150%) of the amount of the claim of lien, which bond
meets the requirements of California Civil Code Section 3143 or any
successor statute, and (b) Sublessor may, at its election, require
Subtenant to pay Sublessor’s reasonable attorneys’ fees and costs in
participating in such an action.

 

25.           Surrender
of Premises and Holding Over. On the Expiration Date or earlier termination
of this Sublease, (i) Subtenant shall surrender to Sublessor the Premises
and all Alterations (except for Alterations that Subtenant is obligated to
remove as expressly set forth above) in good condition, ordinary

 

11

 

wear and tear, damage by casualty or condemnation and defects excepted,
(ii) Subtenant shall remove all of Subtenant’s Personal Property and perform all
repairs and restoration required by the removal of any Alterations or Subtenant’s
Personal Property, and (iii) Subtenant shall surrender to Sublessor all
keys to the Premises (including without limitation any keys to any exterior or
interior doors). Sublessor may elect to retain or dispose of in any manner
any Alterations or Subtenant’s Personal Property that Subtenant does not remove
from the Premises on the Expiration Date or earlier termination of this
Sublease as required by this Sublease by giving written notice to Subtenant. Any
such Alterations or Subtenant’s Personal Property that Sublessor elects to
retain or dispose of shall immediately upon notice to Subtenant vest in
Sublessor. Subtenant waives all claims against Sublessor for any damage to
Subtenant resulting from Sublessor’s retention or disposition of any such
Alterations or Subtenant’s Personal Property. Subtenant shall be liable to
Sublessor for Sublessor’s reasonable costs for storing, removing or disposing
of any such Alterations or Subtenant’s Personal Property. Subtenant waives all
claims against Sublessor for any damage to Subtenant resulting from Sublessor’s
retention or disposition of any such Alterations or Subtenant’s Personal
Property. If Subtenant fails to surrender the Premises to Sublessor on the
Expiration Date or earlier termination of this Sublease, without Sublessor’s
consent, which consent shall not be unreasonably withheld or delayed, Subtenant
shall indemnify Sublessor against all reasonable liabilities, damages, losses,
costs, expenses, attorneys’ fees and claims resulting from such failure,
including without limitation any claim for damages made by a succeeding tenant.
If Subtenant, with Sublessor’s consent, remains in possession of the Premises
after the Expiration Date or earlier termination of this Sublease, such
possession by Subtenant shall be deemed to be a month-to-month tenancy
terminable on 30-days’ written notice given at any time by Sublessor or
Subtenant. During any such month-to-month tenancy, Subtenant shall pay, as Basic
Monthly Rent, one hundred fifty percent (150%) of the Basic Monthly Rent in
effect immediately prior to the Expiration Date or earlier termination of this
Sublease, as the case may be. All other provisions of this Sublease,
except for those pertaining to the Term, shall apply to such month-to-month
tenancy.

 

26.           Default.
The occurrence of any of the following shall constitute a material default and
breach of this Sublease by Subtenant:

 

26.1.        The
vacating or abandoning of the Premises by Subtenant.

 

26.2.        Subtenant’s
failure to make any payment of Rental as and when due. No grace period prior to
the imposition of a late charge pursuant to Paragraph 28 below, shall extend
the date when such Rental is due and payable, and Subtenant shall be in default
under this Sublease if such payment is not paid by such date.

 

26.3.        Subtenant’s
failure to observe or perform any of the provisions of this Sublease to be
observed or performed by Subtenant, other than those described in the preceding
two Paragraphs, where such failure shall continue for a period of 10 days after
written notice of such failure from Sublessor to Subtenant; provided, however,
that any such notice shall be in lieu of, and not in addition to, any notice
required under applicable unlawful detainer statutes; and provided further,
however, that if the nature of Subtenant’s default is such that more than 10
days are required for its cure, then Subtenant shall not be deemed to be in
default if Subtenant commenced such cure within such ten-day period and thereafter
diligently prosecutes such cure to completion within 30 days after Sublessor’s
written notice.

 

26.4.        Subtenant’s
failure to pay its debts (other than under this Sublease) as they become due. For
purposes of this Paragraph, a debt shall be deemed overdue when the earliest of
the following occurs:  (i) 30 days
from the date a statement for such debt is rendered; (ii) the date on
which any action or proceeding for such debt is commenced; or (iii) the
date on which a formal notice of default or demand is sent.

 

26.5.        Subtenant’s
failure to deliver to Sublessor, within 10 days after Sublessor’s written
request, any financial statement of Subtenant (including without limitation a
current annual balance sheet of Subtenant) reasonably requested by Sublessor,
or if any financial statement given to Sublessor by Subtenant, or by any
assignee, subtenant, or guarantor of Subtenant, is materially false or
evidences that Subtenant’s net worth is negative, and Subtenant fails to
furnish to Sublessor, within 10 days after written notice from Sublessor to
Subtenant, with cash as an additional security deposit in an amount equal to
the aggregate Rental payable under this Sublease for the six full calendar
months immediately following such notice.

 

26.6.        The
making by Subtenant of any general arrangement or assignment for the benefit of
creditors; Subtenant’s becoming bankrupt, insolvent or a “debtor” as defined in
11 U.S.C.

 

12

 

Section 101, or any successor statute (unless, in the case of a
petition filed against Subtenant, such petition is dismissed within 30 days
after its original filing); the institution of proceedings under the bankruptcy
or similar laws in which Subtenant is the debtor or bankrupt (unless such proceeding
is dismissed within 30 days after its original filing); the appointing of a
trustee or receiver to take possession of substantially all of Subtenant’s
assets located at the Premises or of Subtenant’s interest in this Sublease
(unless possession is restored to Subtenant within 30 days after such taking);
or the attachment, execution, or judicial seizure of substantially all of
Subtenant’s assets located at the Premises or Subtenant’s interest in this
Sublease (unless such attachment, execution, or judicial seizure is discharged
within 30 days after such attachment, execution, or judicial seizure).

 

27.           Sublessor’s
Remedies. Sublessor shall have the following remedies if Subtenant commits
a default or breach under this Sublease, these remedies are not exclusive, but
are cumulative and in addition to any remedies provided elsewhere in this
Sublease, or now or later allowed by law.

 

27.1.        Continuation
of Sublease. No act by Sublessor (including without limitation the acts set
forth in the succeeding sentence) shall terminate Subtenant’s right to
possession unless Sublessor notifies Subtenant in writing that Sublessor elects
to terminate Subtenant’s right to possession. As long as Sublessor does not
terminate Subtenant’s right to possession, Sublessor may (i) continue
this Sublease in effect, (ii) continue to collect Rental when due and
enforce all the other provisions of this Sublease, (iii) enter the
Premises and relet them, or any part of them, to third parties for
Subtenant’s account, for a period shorter or longer than the remaining term of
this Sublease, and (iv) have a receiver appointed to collect Rental and
conduct Subtenant’s business. Subtenant shall pay to Sublessor all costs
Sublessor incurs in such reletting, including, without limitation, brokers’
commissions, attorneys’ fees, advertising costs, and expenses of remodeling the
Premises for such reletting.

 

27.2.        Rent
from Reletting. If Sublessor elects to relet all or any portion of the
Premises as permitted above, rent that Sublessor receives from such reletting
shall be applied to the payment of, in the following order and priority, (i) any
indebtedness from Subtenant to Sublessor other than Basic Monthly Rent due from
Subtenant, (ii) all costs incurred by Sublessor in such reletting, and (iii) Basic
Monthly Rent due and unpaid under this Sublease. After applying such payments
as referred to above, any sum remaining from the rent Sublessor receives from
such reletting shall be held by Sublessor and applied in payment of future
Basic Monthly Rent as it becomes due under this Sublease. In no event shall
Subtenant be entitled to any excess rent received by Sublessor unless and until
all obligations of Subtenant under this Sublease, including all future
obligations, are satisfied in full.

 

27.3.        Termination
of Subtenant’s Right to Possession. Sublessor may terminate Subtenant’s
right to possession of the Premises at any time, by notifying Subtenant in
writing that Sublessor elects to terminate Subtenant’s right to possession. On
termination of this Sublease, Sublessor has the right to recover from Subtenant
(i) the worth at the time of the award of the unpaid Basic Monthly Rent
which had been earned at the time of such termination, (ii) the worth at
the time of the award of the amount by which the unpaid Basic Monthly Rent
which would have been earned after such termination until the time of award
exceeds the amount of such loss of Basic Monthly Rent that Subtenant proves
could have been reasonably avoided, (iii) the worth at the time of the
award of the amount by which the unpaid Basic Monthly Rent for the balance of
the Term after the time of award (had there been no such termination) exceeds
the amount of such loss of Basic Monthly Rent that Subtenant proves could be
reasonably avoided, and (iv) any other reasonable amount necessary to
compensate Sublessor for all detriment proximately caused by Subtenant’s
failure to perform Subtenant’s obligations under this Sublease or in the
ordinary course of things would be likely to result therefrom. The “worth at the
time of the award” of the amounts referred to in Clauses (i) and (ii) above
is to be computed by allowing interest at the Default Rate, as set forth below,
or if no Default Rate is set forth, then at the maximum rate permitted by
applicable law. The “worth at the time of the award” of the amount referred to
in Clause (iii) above is to be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%).

 

27.4.        Sublessor’s
Right to Cure Default. Sublessor, at any time after Subtenant commits a
default or breach under this Sublease, may cure such default or breach at
Subtenant’s sole cost. If Sublessor at any time, by reason of Subtenant’s
default or breach, pays any reasonable sum or does any act that requires the
payment of any reasonable sum, such sum shall be due immediately upon Sublessor’s
written demand to Sublessor, and shall be deemed Additional Rent under this
Sublease. If Subtenant fails to timely pay any amount due under this Paragraph,
then (without curing such default) interest at the rate of

 

13

 

ten percent (10%) per annum shall accrue (and be immediately payable)
on such overdue amount from and after the date of such notice until it is paid.

 

27.5.        Enforcement
Costs. All costs and expenses incurred by Sublessor in connection with
collecting any amounts and damages owing by Subtenant pursuant to the
provisions of this Sublease, or to enforce any provision of this Sublease,
including reasonable attorneys’ fees, whether or not any action is commenced by
Sublessor, shall be paid by Subtenant to Sublessor upon demand. If Subtenant
fails to timely pay any amount due under this Paragraph, then (without curing
such default) interest at the rate of ten percent (10%) per annum shall accrue
(and be immediately payable) on such overdue amounts from and after the date of
such notice until it is paid.

 

28.           Interest
and Late Charges. Late payment by Subtenant to Sublessor of Rental will
cause Sublessor to incur costs not contemplated by this Sublease, the exact
amount of which would be impracticable or extremely difficult to fix. Such
costs include, without limitation, processing, collection and accounting
charges, and late charges that may be imposed on Sublessor by the terms of
any deed of trust covering the Premises. Therefore, if any Rental is not
received by Sublessor within 10 days of its due date, then, without any
requirement for notice to Subtenant, Subtenant shall pay to Sublessor an
additional sum of ten percent (10%) of such overdue amount as a late charge. Such
late charge represents a fair and reasonable estimate of the costs that
Sublessor will incur by reason of any late payment by Subtenant, and therefore
this Paragraph is reasonable under the circumstances existing at the time this
Sublease is made. Acceptance of such late charge by Sublessor shall not
constitute a waiver of Subtenant’s default with respect to such overdue amount,
nor prevent Sublessor from exercising any of the other rights and remedies
available to Sublessor under this Sublease. In addition to the late charge
payable by Subtenant, as provided above, if any such Rental is not paid within
30 days of the date such Rental was due, then Subtenant shall pay to Sublessor
interest on such overdue Rental at the rate of three percent (3%) above the “reference
rate” announced from time to time by Bank of America, NT&SA (the “Default
Rate”). Such interest shall additionally accrue and be payable by Subtenant
relative to any other amounts payable by Subtenant to Sublessor under the
provisions of this Sublease which are not paid when due (if such reference rate
ceases to be announced, then a comparable “prime rate” shall be utilized,
selected by Sublessor).

 

29.           Quarterly
Payments. If a late charge is payable under this Sublease, whether or not
collected, for two installments of Basic Monthly Rent or other Rental due under
this Sublease during any one calendar year during the Term, then Basic Monthly
Rent, and Subtenant’s Monthly Payments, shall automatically become due and
payable quarterly in advance, rather than monthly. All monies paid to Sublessor
under this Paragraph may be commingled with other monies of Sublessor and
shall not bear interest. If Subtenant breaches any provision of this Sublease,
then any balance remaining from funds paid to Sublessor under the provisions of
this Paragraph may, at Sublessor’s election, be applied to the payment of any
monetary default of Subtenant in lieu of being applied to the payment of
personal property taxes, real property taxes and insurance premiums.

 

30.           Destruction.
If the Project, the Building, the Common Areas or the Premises is totally or
partially destroyed during the Term, rendering the Premises totally or
partially inaccessible, untenantable or unusable, then, subject to the
remainder of this Paragraph, (i) Sublessor shall restore the Project to
substantially the same condition as it was in immediately before such
destruction, (ii) Sublessor shall not be required to restore Subtenant’s
Alterations or Subtenant’s Personal Property, unless they are an integral part of
the Premises and specifically covered by insurance proceeds received by
Sublessor, such excluded items being the sole responsibility of Subtenant to
restore, (iii) such destruction shall not terminate this Sublease, and (iv) all
obligations of Subtenant under this Sublease shall remain in effect, except
that the Basic Monthly Rent shall be abated or reduced, between the date of
such destruction and the date of completion of restoration, by the ratio of (a) the
area of the Premises rendered unusable, untenantable or inaccessible by the
destruction to (b) the area of the Premises prior to such destruction. Notwithstanding
anything to the contrary in this Sublease, either Subtenant or Sublessor may,
at its election, terminate this Sublease by so notifying the other in writing
on or before the later of 120 days after such destruction or 60 days after
Sublessor’s receipt of the proceeds from insurance maintained by Sublessor, if (A) then-existing
laws do not permit such restoration, (B) such destruction occurs during
the last year of the Term, (C) such destruction exceeds twenty-five
percent (25%) of the then-replacement value of the Premises or the Building, or
(D) Sublessor determines that the cost of such restoration exceeds the
amount of insurance proceeds relating to such destruction actually received by
Sublessor from insurance maintained by Sublessor. If Sublessor or Subtenant so
terminates this Sublease, then (1) Sublessor shall have no obligation to
restore the Project, (2) Sublessor shall retain all insurance proceeds
relating to such destruction, and (3) this Sublease shall terminate as of
30 days after such notice of termination. Regardless

 

14

 

of whether Sublessor restores the Premises as provided above, Subtenant
waives the provisions of California Civil Code Sections 1932(2) and 1933(4) or
any successor statute with respect to any destruction of the Premises.

 

31.           Condemnation.
If during the Term, or during the period of time between the execution of this
Sublease and the Commencement Date, there is any taking of all or any part of
the Project, the Building, the Common Areas, the Premises or any interest in this
Sublease by the exercise of any governmental power, whether by legal
proceedings or otherwise, by any public or quasi-public authority, or private
corporation or individual, having the power of condemnation (any of the
preceding a “Condemnor”), or a voluntary sale or transfer by Sublessor to any
Condemnor, either under threat of condemnation or while legal proceedings for
condemnation are pending (any of the preceding, a “Condemnation”), the rights
and obligations of Sublessor and Subtenant shall be determined pursuant to this
Paragraph. Sublessor shall immediately provide Subtenant written notice of any
proposed taking, whether or not Sublessor receives written notice of such
taking. If such Condemnation is of a substantial portion of or the entire Project,
Building, Common Areas or Premises, then this Sublease shall terminate on the
date the Condemnor takes possession of same (the “Date of Condemnation”). A
temporary Condemnation of the Premises, or any part of the Premises, for
less than 180 days, shall not constitute a Condemnation under this Paragraph;
but the Rental shall abate as to the portion of the Premises affected during
such temporary Condemnation. If such Condemnation is of any portion, but not
all or a substantial portion, of the Project, the Building, the Common Areas,
the Premises, then this Sublease shall remain in effect, except that, if the
remaining portion of the Project, the Building, the Common Areas, the Premises
is rendered unsuitable for Subtenant’s continued use, inaccessible or untenantable,
then Subtenant may elect to terminate this Sublease, by so notifying
Sublessor in writing (the “Termination Notice”) within 30 days after the date
that the nature and extent of the Condemnation have been determined. Such
termination shall be effective on the earlier of (i) the date that is 30
days after the giving of the Termination Notice, and (ii) the Date of
Condemnation. If Subtenant does not give to Sublessor the Termination Notice
within such 30-day period, then all obligations of Subtenant under this
Sublease shall remain in effect, except that (unless the Premises are restored
as set forth below) Rental shall be reduced by the ratio of (a) the area
of the Premises taken, rendered unsuitable, inaccessible or untenantable to (b) the
area of the Premises immediately prior to the Date of Condemnation. Notwithstanding
anything to the contrary in this Paragraph, if, within 20 days after Sublessor’s
receipt of the Termination Notice, Sublessor notifies Subtenant that Sublessor
at its cost will add to the remaining Premises (or substitute for the Premises
other comparable space in the Project) so that the area of the Premises will be
substantially the same after the Condemnation as they were before the
Condemnation, and Sublessor commences the restoration promptly and completes it
within 150 days after Sublessor so notifies Subtenant, then all obligations of
Subtenant under this Sublease shall remain in effect, except that Rental shall
be abated or reduced during the period from the Date of Condemnation until the
completion of such restoration by the ratio of (A) the area of the
Premises taken, rendered, unsuitable, inaccessible or untenantable to (B) the
area of the Premises immediately prior to the Date of Condemnation. Unless
Sublessor restores the Premises pursuant to the preceding sentence, or unless
Subtenant gives to Sublessor the Termination Notice within the relevant 30-day
period, Subtenant at its sole cost shall accomplish any restoration required by
Subtenant to use the Premises. All compensation, sums, or anything of value
awarded, paid, or received on a total or partial Condemnation (the “Award”)
shall belong to and be paid to Sublessor. Subtenant shall have no right to any part of
the Award, and Subtenant hereby assigns to Sublessor all of Subtenant’s right,
title, and interest in and to any part of the Award, except that Subtenant
shall receive from the Award any sum paid expressly to Subtenant from the
Condemnor for Subtenant’s loss of goodwill. Sublessor and Subtenant waive the
provisions of any statute (including without limitation California Code of
Civil Procedure Section 1265.130 or any successor statute) that allows
Sublessor or Subtenant to petition the superior court (or any other local
court) to terminate this Sublease in the event of a partial taking of the
Premises.

 

32.           Assignment
and Other Transfers. Without Sublessor’s prior written consent, which shall
not be unreasonably withheld none of the following shall occur (nor be
permitted by Subtenant to occur), voluntarily, involuntarily, by operation of
law, or otherwise (any of the following, a “Transfer”):  (i) any assignment, sublease,
disposition, sale, concession, license, mortgage, encumbrance, hypothecation,
pledge, collateral assignment, or other transfer, by Subtenant of this
Sublease, any interest in this Sublease, or all or any portion of the Premises;
or (ii) any assignment, disposition, sale, transfer, acquisition, or
issuance of equitable interests (whether stock, partnership or otherwise) in
Subtenant, to or by any person, entity, or group of related persons, whether in
a single transaction or in a series of related or unrelated transactions,
which results in such person, entity, or group holding (or assigning,
transferring, disposing of, or selling) fifty percent (50%) or more of the
aggregate issued and outstanding equitable interests in Subtenant. Sublessor
shall not be liable in damages to Subtenant or to any proposed Subtenant,
assignee or other

 

15

 

transferee (any of the preceding a “Proposed Transferee”) if such
consent is adjudicated to have been unreasonably withheld, and, in such event,
Subtenant’s sole remedy shall be to have the proposed Transfer declared as
valid as if Sublessor’s consent had been given, although Subtenant shall be
entitled to reasonable attorney’s fees and court costs if Subtenant is the
prevailing party in such litigation. At least 30 days prior to entering into
any proposed Transfer, Subtenant shall submit to Sublessor the sum of $400.00
(as payment toward Sublessor’s and Sublessor’s attorneys’ cost of reviewing,
consenting to, rejecting and/or consummating any proposed Transfer), and a
written notice (“Subtenant’s Notice”) which includes or sets forth in
reasonable detail (a) the form of the proposed Transfer, including
without limitation all related agreements, documents, instruments, exhibits,
and escrow instructions, (b) the name and address of the Proposed
Transferee, (c) the terms and conditions of the proposed Transfer,
including without limitation the commencement or effective date of the proposed
Transfer, which shall be at least 30 days after Subtenant’s Notice is given,
and (d) the nature, character, and credit information and references with
respect to the Proposed Transferee and the business of the Proposed Transferee
(including without limitation tax returns for the three most-recent years, a
business plan with cash-flow projections and financial projections with
assumptions and competitive market analysis), in reasonably sufficient detail
to enable Sublessor to determine the Proposed Transferee’s financial
responsibility. Within 30 days after Sublessor’s receipt from Subtenant of such
sum and Subtenant’s Notice, Sublessor shall notify Subtenant whether Sublessor
has consented to the proposed Transfer. Any consent by Sublessor to any
proposed Transfer shall not constitute a consent with respect to any other
Transfer. If Sublessor consents to any proposed Transfer, and Subtenant fails
to consummate such Transfer on or before the commencement or effective date of
the proposed Transfer (as set forth in Subtenant’s Notice), then such consent
shall be deemed withdrawn and Subtenant shall be required again to comply with
this Paragraph before making a Transfer. Sublessor shall not have unreasonably
withheld its consent with respect to any Transfer if (among other reasons)
Sublessor shall not have received such sum or Subtenant’s Notice, if the nature
or character of the Proposed Transferee, or the proposed use and occupancy of
the Premises by the Proposed Transferee, is not in keeping with the dignity and
character of the Building, the Project, or the surrounding area, if the
proposed Transfer will result in the diminution of the value or marketability
of the Premises or the Project, if Sublessor is not reasonably satisfied that
the Proposed Transferee is creditworthy, if the Master Lessor reasonably
objects to the proposed Transfer, or if the proposed Transfer will conflict
with or result in a breach of any of the provisions of, or constitute a default
under, any agreement, instrument, or document to which Sublessor is a party, or
by which the Project may be bound. No Transfer shall release or discharge
Subtenant from any liability, whether past, present, or future, under this
Sublease and Subtenant shall continue to remain primarily liable under this
Sublease. Subtenant irrevocably assigns to Sublessor, as security for Subtenant’s
obligations under this Sublease, all rent and other amounts from any Transfer,
and Sublessor, as assignee and as special attorney-in-fact for Subtenant, or a
receiver for Subtenant appointed on Sublessor’s application, may collect
all rent and other amounts from any Transfer and apply them toward Subtenant’s
obligations under this Sublease; except that, unless Subtenant defaults under
this Sublease, Subtenant shall have the exclusive right to collect such rent
and other amounts. Unless otherwise agreed to by all parties, the Subtenant’s
security deposit, if any, shall be retained by Sublessor and returned to the lawful
tenant in possession at the time of the Sublease termination, subject to the
terms and conditions of this Sublease relating to the return of such security
deposit. Any Transfer must contain the following provisions, which provisions
whether contained in such Transfer or not, shall apply to such Transfer:  (A) Such Transfer shall be subject and
subordinate to all provisions of this Sublease and the Master Lease; (B) No
Proposed Transferee shall be permitted to enter into any Transfer without
Sublessor’s prior written consent; and (C) At Sublessor’s option, in the
event of cancellation or termination of this Sublease for any reason or the
surrender of this Sublease, whether voluntarily, involuntarily, by operation of
law or otherwise, prior to the expiration of such Transfer, the Proposed
Transferee shall make full and complete attornment to Sublessor for the balance
of the term of such Transfer, unless such cancellation or termination is at the
election of Sublessor. Such attornment shall be evidenced by an agreement in form and
substance reasonably satisfactory to Sublessor which the Proposed Transferee
shall execute and deliver to Sublessor within 5 days after request by Sublessor.
Subtenant shall promptly reimburse Sublessor for Sublessor’s reasonable cost
(less any payment made by Subtenant with Sublessor as set forth above) of
reviewing, consenting to, rejecting and/or consummating any proposed Transfer,
including without limitation reasonable attorneys’ fees. Subtenant shall
promptly pay to Sublessor seventy-five percent (75%) of all rents and other
consideration, of whatever nature, payable by the Proposed Transferee (or
receivable by Subtenant) pursuant to any Transfer, which exceed (1) if a
sub-sublease of a portion of the Premises, the portion of the Rental that is
allocable to the portion of the Premises sub-subleased (such allocation based
on the area of the portion sub-subleased), or (2) if any other Transfer,
the Basic Monthly Rental. Sublessor additionally has the right, at its
election, by giving written notice (the “Recapture Notice”) to Subtenant within
15 days after receipt of Subtenant’s Notice, to recapture the Premises and
terminate this Sublease. If Sublessor elects to exercise such right and
delivers a Recapture Notice to

 

16

 

Subtenant, this Sublease shall automatically be deemed terminated as of
the commencement or effective date stated in Subtenant’s Notice for the
proposed Transfer, and Subtenant shall surrender possession of the Premises as
of such date (and any failure to do so shall constitute a default hereunder). Sublessor’s
giving of a Recapture Notice shall not constitute Sublessor’s consent to
Subtenant’s proposed Transfer.

 

33.           Common
Areas. Sublessor may, at its election, (i) temporarily close any of
the Common Areas to the extent required in the reasonable opinion of Sublessor’s
legal counsel to prevent a dedication of any of the Common Areas or the accrual
of any rights to any person or to the public in and to any portion of the
Common Areas, (ii) close, temporarily, any of the Common Areas for
maintenance purposes, (iii) designate other property outside the
boundaries of the Project to become part of the Common Areas using sound
business judgment, (iv) temporarily close off or otherwise temporarily
utilize portions of the Common Area while constructing improvements or making
repairs or alterations to any portion of the Project, and/or (v) make any
changes to the Common Areas, or any part of the Project, including without
limitation changes to buildings or other improvements, the addition of new
buildings or other improvements, and/or changes in the location of driveways,
entrances, exits, vehicular parking spaces, or the direction of the flow of
traffic. Furthermore, except as otherwise provided to the contrary in this
Sublease, Subtenant acknowledges that the Manager may exercise similar
rights with respect to the Project Common Area, and the exercise of such rights
by the Sublessor or the Manager will not constitute constructive eviction nor
entitle Subtenant to any damages, abatement of rent, or right of offset.

 

34.           Relocation.
Sublessor may, at its election, upon at least 30 days’ written notice to
Subtenant, relocate Subtenant and substitute for the Premises other space in the
Project containing at least as much useable area as the Premises. If Subtenant
confirms in writing to Sublessor within five days of receipt of such written
notice from Sublessor that it will vacate the Premises and occupy the new
location within the time frame set forth in the notice from Sublessor, then
Sublessor shall, at its cost, improve such substitute space with improvements
at least equal in quantity and quality to those then existing in the Premises
and Sublessor shall reimburse Subtenant for Subtenant’s reasonable expenses
incurred in connection with such relocation, including moving expenses, door
lettering, and telephone relocation. If Subtenant fails to send such written
confirmation notice to Sublessor within such five day period, such failure
shall be deemed to constitute Subtenant’s election to continue to occupy the
Premises for an additional 15 day period beyond the time frame set forth in
Sublessor’s notice, in which event Sublessor shall have no obligations to
improve such substitute space and pay Subtenant’s reasonable relocation costs
as set forth in the preceding sentence. Failure by Subtenant to relocate as
provided in this Paragraph shall constitute a default under this Sublease and
Subtenant acknowledges that it will, in addition, be liable for Sublessor’s
additional damages incurred as a result of any failure by Subtenant to timely
vacate the Premises (including damages resulting from lost opportunities). Sublessor
shall not be held liable for any damages arising out of Subtenant’s relocation.
Such substitute space shall become the “Premises” for purposes of this Sublease
following Subtenant’s taking possession of such substitute space.

 

35.           Access
by Sublessor. Sublessor and any of Sublessor’s Invitees shall have the
right to enter the Premises at all reasonable times, during normal business
hours (except in the case of an emergency), and upon reasonable notice (except
in the case of an emergency), (i) to determine whether the Premises are in
good condition and whether Subtenant is complying with its obligations under
this Sublease, (ii) to do any necessary maintenance or make any
restoration to the Premises that Sublessor has the right or obligation to
perform, (iii) to serve, post, or keep posted any notices required or
allowed under this Sublease, (iv) to post “for sale” “for rent” or “for
lease” signs, (v) to show the Premises to brokers, agents, prospective
buyers, prospective tenants or other persons interested in a listing of,
financing, purchasing, or occupying Lot 3, the Premises or any portion of
Lot 3 or the Premises, and (vi) to shore the foundations, footings,
and walls of the Project, and to erect scaffolding and protective barricades
around and about the Premises, but not so as to prevent or obstruct entry to
the Premises, and to do any other act or thing necessary for the safety or
preservation of the Premises if any excavation or other construction is
undertaken or is about to be undertaken on any adjacent property or nearby
street. In the event of an emergency Sublessor shall have the right to enter
the Premises at any time, without prior notice to Subtenant. Sublessor’s rights
under this Paragraph extend, with Sublessor’s consent, to the owner of adjacent
property on which excavation or construction is to take place and the adjacent
property owner’s agents, employees, officers, and contractors. Sublessor shall
not be liable for any inconvenience, disturbance, loss of business, nuisance,
or other damage arising out of any entry on the Premises as provided in this
Paragraph except damage resulting directly from the grossly negligent acts of
Sublessor or Sublessor’s Invitees. Subtenant shall not be entitled to any
abatement or reduction of Basic Monthly Rent or other Rental because of the
exercise by Sublessor of any rights under this Paragraph.

 

17

 

36.           Sublessor’s
Reserved Rights. Subject to the terms of this Sublease, Sublessor, as
lessee of Lot 3, reserves the right from time to time:  (i) to change the name of the Building; (ii) to
temporarily utilize portions of the Common Areas for entertainment, outdoor
shows, displays, automobile and other product shows, the leasing of kiosks, or
such other uses which, in Sublessor’s reasonable judgment, tend to attract the
public; and (iii) to utilize the lighting standards and other areas or
improvements in the Common Areas for advertising purposes.

 

37.           Indemnity
and Exemption of Sublessor from Liability. Subtenant hereby indemnifies
Sublessor against all Claims (as defined below) and all costs, expenses, and
attorneys’ fees incurred in the defense or handling of any such Claims or any
action or proceeding brought on any of such Claims. For purposes of this
Sublease, “Claims” shall mean all liabilities, damages, losses, costs,
expenses, attorneys’ fees, and claims (except to the extent they result from
Sublessor’s grossly negligent acts or willful misconduct) arising from or which
seek to impose liability under or because of (i) Subtenant’s use of the
Premises, (ii) the conduct of Subtenant’s business, (iii) any
activity, work, or things done or suffered by Subtenant in or about the
Premises or elsewhere, (iv) any breach or default in the performance of
any obligation to be performed by Subtenant under this Sublease, and/or (v) any
negligence of Subtenant or Subtenant’s Invitees. If any action or proceeding is
brought against Sublessor by reason of any such Claims, Subtenant upon notice
from Sublessor shall defend such action or proceeding at Subtenant’s sole cost
by legal counsel satisfactory to Sublessor. Except to the extent caused by
Sublessor’s grossly negligent acts or willful misconduct, Subtenant assumes all
risk of, Subtenant waives all claims against Sublessor in respect of, and
Sublessor shall not be liable for, any of the matters set forth above in this
Paragraph or any of the following: injury to Subtenant’s business, loss of
income from such business, or damage or injury to the goods, wares,
merchandise, or other property or the person of Subtenant, Subtenant’s
Invitees, or any other persons in, upon, or about the Premises, whether such
damage, loss, or injury is caused by or results from criminal acts, fire,
steam, electricity, gas, water, rain, the breakage, leakage, obstruction or
other defects of pipes, sprinklers, wires, appliances, plumbing,
air-conditioning or lighting fixtures, or any other cause, conditions arising
upon the Premises, or other sources or places, and regardless of whether the
cause of such damage, loss, or injury or the means of repairing such damage, loss,
or injury is inaccessible to Subtenant. Thus Sublease shall not be affected or
impaired by any change to any part of the Project or any sidewalks,
streets or improvements nearby the Project.

 

38.           Hazardous
Substances. Sublessor hereby notifies Subtenant, and Subtenant hereby
acknowledges that, prior to the leasing of the Premises pursuant to this
Sublease, Subtenant has been notified, pursuant to California Health and Safety
Code Section 25359.7 (or any successor statute), that Sublessor knows, or
has reasonable cause to believe, that certain hazardous substances (as such
term is used in such Section 25359.7), including without limitation common
cleaning supplies, office supplies, spillage of petroleum products from motor
vehicles, and other consumer products, may have come to be located on or
beneath the Premises and/or the Project. Subtenant hereby indemnifies Sublessor
against all Environmental Claims (as defined below) and all costs, expenses,
and attorneys’ fees incurred in the defense of any such Environmental Claims or
any action or proceeding brought on any of such Environmental Claims. For
purposes of this Paragraph, “Environmental Claims” shall mean all liabilities,
damages, losses, costs, expenses, attorneys’ fees, and claims (except to the
extent they arise as a result of Sublessor’s grossly negligent acts or willful
misconduct), arising from or which seek to impose liability (i) because of
or relating to any discharges, releases, or threatened releases of noise,
pollutants, contaminants, herbicides, pesticides, insecticides, or hazardous or
toxic wastes, substances, or materials (any of the preceding a “Hazardous
Material”) into ambient air, water, or land from, on, under, or above the
Premises, (ii) relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or hazardous or toxic wastes, substances, or materials from, on,
or under, the Premises, or (iii) under any environmental law (which shall
mean any federal, state or local law, statute, regulation, ordinance,
guideline, or common law principle relating to public health or safety or the
use or control of the environment, including without limitation the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Carpenter-Presley-Tanner Hazardous Substance Account Act, the California
Hazardous Waste Control Law, the Federal Clean Air Act, the California Air
Resources Act, the Federal Clean Water Act, the California Porter-Cologne Water
Quality Control Act, the Federal Resource Conservation and Recovery Act, the
California Nejedly-Z’berg-Dills Solid Waste Management and Recovery Act, and
California Health and Safety Code Section 25359.7) and relating to the
Premises, from the beginning of the Term to the end of the Term. Subtenant
agrees to promptly reimburse Sublessor for all of Sublessor’s costs arising
from periodic monitoring of Subtenant’s use, handling, or storage of Hazardous
Substances at or surrounding the Premises. Neither Subtenant nor any of
Subtenant’s Invitees shall use, manufacture, store, or dispose of any Hazardous
Materials anywhere within the Premises or the Project which are or could (a) be
detrimental to the Project, human health, or the

 

18

 

environment, except in accordance with all applicable laws, or (b) adversely
affect the value of the Premises or the Project. If the Premises are
contaminated (or, due to the acts or omissions of Subtenant or Subtenant’s
Invitees, the Project is contaminated) by any Hazardous Material during the
Term, then (1) Subtenant shall promptly notify Sublessor in writing of
such contamination, and (2) Sublessor may elect to either (A) demand
that Subtenant perform all remediation required by Sublessor (to Sublessor’s
satisfaction and at Subtenant’s sole cost, necessary to return the Premises
(and/or the Project) to at least as good a condition as the Premises (or the
Project) are in as of the date of this Sublease, which Subtenant shall
immediately do upon receipt of notice from Sublessor, or (B) proceed to
cause such investigation, clean-up, and remediation work which Sublessor deems
necessary or desirable to be undertaken, whereupon the entire cost thereof
(plus a supervisory fee equal to ten percent (10%) of such cost) will be
payable by Subtenant to Sublessor upon demand as Additional Rent. If Subtenant
does not promptly commence and diligently pursue such remediation, then
Sublessor may, at Sublessor’s election, perform or cause to be performed
such remediation and Subtenant shall immediately, upon demand, pay the cost
thereof, plus a supervisory fee in the amount of ten percent (10%) of such
cost.

 

39.           Prohibition
Against Asbestos-Containing Materials. Subtenant shall not cause any
materials which contain asbestos in any form or concentration (“Asbestos-Containing
Materials”) to be used or stored in the Premises or used in the construction of
any improvements or alterations to the Premises, including, without limitation,
building or construction materials and supplies in violation of any
environmental laws. Such prohibition against Asbestos-Containing Materials
shall apply regardless of whether the Asbestos-Containing Materials may be
considered safe or approved for use by a manufacturer, supplier, or
governmental authority, or by common use or practice. Sublessor shall have the
right, upon reasonable notice, to enter upon and conduct inspections of the
Premises to determine Subtenant’s compliance with this Paragraph. If Subtenant
causes Asbestos-Containing Materials to be used or stored in the Premises or
used in the construction of any improvements or alterations to the Premises in
violation of any environmental laws, (a) Subtenant shall, upon notice from
Sublessor, immediately remove such Asbestos-Containing Materials at Subtenant’s
sole cost, (b) such removal shall comply with all applicable laws,
regulations, and requirements concerning asbestos and the removal and disposal
of Asbestos-Containing Materials, (c) Subtenant shall reimburse Sublessor
for all reasonable expenses incurred in connection with any inspection of the
Premises conducted by Sublessor, and (d) unless Subtenant completes such
removal within 30 days after notice from Sublessor, Sublessor may, at its
election, do either or both of the following: 
(i) declare Subtenant in breach of this Sublease and (ii) remove
and dispose of the Asbestos-Containing Materials and obtain reimbursement from
Subtenant for the reasonable cost of such removal and disposal. Except as
otherwise provided to the contrary in this Sublease, Subtenant shall indemnify
Sublessor and Sublessor’s directors, officers, employees, and agents against
all reasonable costs, liability, expenses, penalties, and claims for damages,
including, without limitation, litigation costs and attorneys” fees, arising
from (A) the presence of Asbestos-Containing Materials upon the Premises
in violation of any environmental laws arising after the effective date of this
Sublease, but only to the extent that such Asbestos-Containing Materials are
used or stored in the Premises or used in the construction of any improvements
or alterations to the Premises by Subtenant or Subtenant’s agents, employees,
representatives, or independent contractors, (b) any lawsuit, settlement,
governmental order, or decree relating to the presence, handling, removal, or
disposal of Asbestos-Containing Materials upon or from the Premises in
violation of any environmental laws arising after the effective date of this
Sublease, but only to the extent that such Asbestos-Containing Materials are
used or stored in the Premises or used in the construction of any improvements
or alternations to the Premises by Subtenant or Subtenant’s agents, employees,
representatives or independent contractors, or (C) Subtenant’s failure to
perform its obligations to remove such Asbestos-Containing Materials under
this Paragraph.

 

40.           Security
Measures. Subtenant acknowledges (i) that the Basic Monthly Rent does
not include the cost of any security measures for any portion of the Project (ii) that
neither Sublessor nor the Manager shall have any obligation to provide any such
security measures, (iii) that neither Sublessor nor the Manager has made
any representation to Subtenant regarding the safety or security of the
Project, and (iv) that Subtenant will be solely responsible for providing
any security it deems necessary to protect itself, its property, and Subtenant’s
Invitees in, on, or about the Building, Lot 3, and the Project. If
Sublessor or the Manager provides any security measures at any time, then
neither Sublessor not the Manager shall be obligated to continue providing such
security measures and Sublessor and the Manager shall not be obligated to
provide such security measures with any particular standard of care. Subtenant
assumes all responsibility for the security and safety of Subtenant and
Subtenant’s property. Except as otherwise provided to the contrary in this
Sublease, Subtenant releases Sublessor, Master Lessor, and the Manager from all
claims for damage, loss, or injury to Subtenant, Subtenant’s Invitees, and/or
to the personal property of Subtenant and/or of Subtenant’s Invitees, even if
such damage, loss, or injury is caused by or

 

19

 

results from the criminal or negligent acts of third parties. Sublessor
and the Manager shall have no duty to warn Subtenant of any criminal acts or
dangerous conduct that has occurred in or near the Project, regardless of their
knowledge of such crimes or conduct, and Subtenant is hereby instructed to
conduct its own investigation through local police agencies regarding any
criminal acts or dangerous conduct that has occurred in or near the Project.

 

41.           Subordination
and Attornment. This Sublease and Subtenant’s rights under this Sublease
are subject and subordinate to any mortgage, deed of trust, ground lease, or
underlying lease, including the Master Lease (and to all renewals,
modifications, consolidations, replacements, or extensions thereof), now or
hereafter affecting the Premises, provided any lender, beneficiary or ground
lessor under any such instrument shall agree that in the event of a foreclosure
or termination of ground lease or Master Lease, Subtenant’s possession of the
Premises shall not be disturbed so long as Subtenant is not in default under
this Sublease. The provisions of this Paragraph shall be self-operative, and no
further instrument of subordination shall be required. In confirmation of such
subordination, however, Subtenant shall promptly execute and deliver any
instruments that Sublessor, any Lender, or the lessor under any ground or
underlying lease, may reasonably request to evidence such subordination,
so long as such instruments are reasonably acceptable to Subtenant. Subtenant
hereby irrevocably constitutes and appoints Sublessor as Subtenant’s special
attorney-in-fact to execute and deliver such instruments. Notwithstanding the
preceding provisions of this Paragraph, if any ground lessor or Lender elects
to have this Sublease prior to the lien of its ground lease, deed of trust, or
mortgage, and gives written notice thereof to Subtenant that this Sublease
shall be deemed prior to such ground lease, deed of trust, or mortgage, whether
this Sublease is dated prior or subsequent to the date of such ground lease,
deed of trust, or mortgage, then this Sublease shall be deemed to be prior to
the lien of such ground lease or mortgage and such ground lease, deed of trust,
or mortgage shall be deemed to be subordinate to this Sublease. If any Lender,
or the lessor of any ground or underlying lease affecting the Premises, shall
hereafter succeed to the rights of Sublessor under this Sublease, whether by
foreclosure, deed in lieu of foreclosure or otherwise, then (i) such
successor landlord shall not be subject to any offsets or defenses which
Subtenant might have against Sublessor, (ii) such successor landlord shall
not be bound by any prepayment by Subtenant of more than one month’s
installment of Basic Monthly Rent or any other Rental, (iii) such
successor landlord shall not be subject to any liability or obligation of
Sublessor except those arising after such succession, (iv) Subtenant shall
attorn to and recognize such successor landlord as Subtenant’s landlord under
this Sublease, (v) Subtenant shall promptly execute and deliver any
instruments that may be necessary to evidence such attornment, (vi) Subtenant
hereby irrevocably appoints Sublessor (and such successor landlord) as
Subtenant’s special attorney-in-fact to execute and deliver such instruments on
behalf of Subtenant, and (vii) upon such attornment, this Sublease shall
continue in effect as a direct lease between such successor landlord and
Subtenant upon and subject to all of the provisions of this Sublease.

 

42.           Estoppel
Certificates. Within 10 days after notice from Sublessor, Subtenant shall
execute and deliver to Sublessor, in recordable form, a certificate stating, (i) that
this Sublease is unmodified and in full force and effect, or in full force and
effect as modified, and stating all modifications, (ii) the then-current
Basic Monthly Rent, (iii) the dates to which Basic Monthly Rent has been
paid in advance, if any, (iv) the amount of any Security Deposit, or
prepaid rent or other payment constituting Rental which has been paid, if any, (v) whether
or not Subtenant or Sublessor is in default under this Sublease and whether
there currently exist any defenses or rights of offset under the Sublease, and (vi) such
other factual matters as Sublessor shall reasonably request. Subtenant’s
failure to deliver such certificate within such 10-day period shall be
conclusive upon Subtenant for the benefit of Sublessor, and any successor in
interest to Sublessor, any lender or proposed lender, and any purchaser of the
Project that, except as may be represented by Sublessor, this Sublease is
unmodified and in full force and effect, no Rental has been paid more than 30
days in advance, and neither Subtenant nor Sublessor is in default under this
Sublease. Subtenant irrevocably constitutes and appoints Sublessor as its special
attorney-in-fact to execute and deliver such certificate to any third party if
Subtenant fails to deliver such certificate within such 10-day period.

 

43.           Waiver.
No delay or omission in the exercise of any right or remedy of Sublessor or
Subtenant in the event of any default by the other shall impair such right or
remedy or be construed as a waiver. The receipt and acceptance by Sublessor of
delinquent Rental shall not constitute a waiver of any default other than the
particular Rental payment accepted. Sublessor’s receipt and acceptance from
Subtenant, on any date (the “Receipt Date”), of an amount less than Rental due
on such Receipt Date, or to become due at a later date but applicable to a
period prior to such Receipt

 

20

 

Date, shall not release Subtenant of its obligation (i) to pay the
full amount of such Rental due on such Receipt Date or (ii) to pay when
due the full amount of such Rental to become due at a later date but applicable
to a period prior to such Receipt Date. No act or conduct of Sublessor,
including without limitation, the acceptance of the keys to the Premises, shall
constitute an acceptance by Sublessor of the surrender of the Premises by
Subtenant before the Expiration Date. Only a written notice from Sublessor to
Subtenant stating Sublessor’s election to terminate Subtenant’s right to
possession of the Premises shall constitute acceptance of the surrender of the
Premises and accomplish a termination of this Sublease. Sublessor’s consent to
or approval of any act by Subtenant requiring Sublessor’s consent or approval
shall not be deemed to waive or render unnecessary Sublessor’s consent to or
approval of any other or subsequent act by Subtenant. Any waiver by Sublessor
or Subtenant of any default must be in writing and shall not be a waiver of any
other default concerning the same or any other provision of this Sublease. Subtenant
hereby waives any rights granted to Subtenant under California Code of Civil
Procedure Section 1179, California Civil Code Section 3275, and/or
any successor statute(s). Subtenant represents and warrants that if Subtenant
breaches this Sublease (beyond the expiration of all applicable notice and cure
periods) and, as a result, this Sublease is terminated, Subtenant will not
suffer any undue hardship as a result of such termination and, during the Term,
will make such alternative or other contingency plans to provide for its
vacation of the Premises and relocation in the event of such termination. Subtenant
acknowledges that Subtenant’s waivers set forth in this Paragraph are a
material part of the consideration for Sublessor’s entering into this
Sublease and that Sublessor would not have entered into this Sublease in the
absence of such waivers.

 

44.           Brokers.
Subtenant represents that, except as to the Participating Brokers, if any, no
real estate broker, agent, finder, or other person is responsible for bringing
about or negotiating this Sublease and Subtenant has not dealt with any real
estate broker, agent, finder, or other person, relative to this Sublease in any
manner. Subtenant hereby indemnifies Sublessor against all liabilities,
damages, losses, costs, expenses, attorneys’ fees and claims arising from any
claims that may be made against Sublessor by any real estate broker,
agent, finder, or other person (other than as set forth above), alleging to
have acted on behalf of or to have dealt with Subtenant.

 

45.           Easements.
Subtenant acknowledges that each of Master Lessor and Sublessor may, at its
election, from time to time, grant such easements, rights and dedications, and
cause the recordation of parcel maps and restrictions affecting the Premises
and the Project. Subtenant shall promptly sign any documents or instruments to
accomplish the foregoing upon request by Sublessor. Subtenant irrevocably
appoints Sublessor as Subtenant’s special attorney-in-fact to execute and
deliver such documents or instruments on behalf of Subtenant if Subtenant
refuses or fails to do so.

 

46.           Limitations
on Sublessor’s Liability. If Sublessor is in default of this Sublease, and
as a consequence Subtenant recovers a money judgment against Sublessor, such
judgment shall be satisfied only out of the proceeds of sale received upon
execution of such judgment and levy against the right, title, and interest of
Sublessor in the Project, and out of rent or other income from the Project
receivable by Sublessor or out of the consideration received by Sublessor from
the sale or other disposition of all or any part of Sublessor’s right, title,
and interest in the Project. Neither Sublessor nor Sublessor’s shareholders,
officers, directors, or the partners comprising Sublessor (if any) shall be
personally liable for any deficiency.

 

47.           Sale or
Transfer of Premises. If Sublessor sells or transfers the Premises, the
Building or the Project, Sublessor, on consummation of the sale or transfer,
shall be released from any liability thereafter accruing under this Sublease. If
any security deposit or prepaid rent has been paid by Subtenant, Sublessor may transfer
the security deposit and/or prepaid rent to Sublessor’s successor-in-interest
and on such transfer Sublessor shall be discharged from any further liability
arising from the security deposit or prepaid rent.

 

48.           Quitclaim
Deed. Subtenant shall execute and deliver to Sublessor on the Expiration
Date of this Sublease, promptly on Sublessor’s request, a quitclaim deed to the
Premises, in recordable form, designating Sublessor as transferee.

 

49.           No
Merger. The voluntary or other surrender of this Sublease by Subtenant, or
a mutual cancellation of this Sublease, or a termination by Sublessor, shall
not work a merger, and shall, at the option of Sublessor, terminate any
existing subleases or may, at the option of Sublessor, operate as an assignment
to Sublessor of any such subleases.

 

50.           Confidentiality.
Except as essential to the consummation of the transaction contemplated by this
Sublease (together with all amendments and addendums hereto):

 

21

 

50.1.        Subtenant
shall keep and maintain the terms of this Sublease and the transactions
contemplated by this Sublease or any aspect of this Sublease in strict
confidence; and

 

50.2.        Subtenant
may not make or allow any notices, statements, disclosures, communication,
or news releases concerning this Sublease, the terms of this Sublease and the
transactions contemplated by this Sublease or any aspect of this Sublease.

 

Nothing provided herein, however, shall prevent Subtenant from
disclosing to its legal counsel and/or certified public accountants,
prospective purchasers, or lenders the existence and terms of this Sublease or
any transaction under this Sublease, or any aspect of this lease, or from
complying with any governmental or court order or similar legal requirement
which requires such party to disclose this Sublease, the terms of this
Sublease, the transaction contemplated by this Sublease and/or any aspect of
this Sublease; provided that such party uses reasonable and diligent good faith
efforts to disclose no more than is absolutely required to be disclosed by such
legal requirement. If Subtenant violates this confidentiality provision, in
addition to all other remedies to which Sublessor may be entitled under
law or in equity, Sublessor shall be entitled to receive immediately the entire
value of any rent relief, rent abatement, free rent, reimbursement, or other
concession which Sublessor has previously granted to Subtenant.

 

51.           Miscellaneous.

 

51.1.        Subtenant
covenants and agrees not to protest or in any way oppose any application for a
license to serve or sell liquor filed by tenants or other users of space within
the Project.

 

51.2.        Upon
Sublessor’s written request, Subtenant shall promptly furnish to Sublessor,
from time to time, with financial statements certified by Subtenant to be true
and correct, reflecting Subtenant’s then current financial condition. Such
financial statements shall include a current balance sheet and a profit and
loss statement covering the most recent 12-month period available. In addition,
upon Sublessor’s written request, Subtenant shall allow Sublessor, or a
certified public accountant of Sublessor’s choosing, to determine Subtenant’s
current financial condition by reviewing Subtenant’s current financial books,
records, and accounts.

 

51.3.        Notwithstanding
any other provision in this Sublease to the contrary, Subtenant shall refrain
from selling or otherwise distributing any alcoholic beverages unless such sale
is specifically included as a Permitted Use, and in any event, such sales shall
be expressly forbidden under this Sublease unless and until Subtenant holds the
appropriate license as issued and/or approved by the California Alcoholic
Beverage Control Agency.

 

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

 

51.5.        For
purposes of venue and jurisdiction, this Sublease shall be deemed made and to
be performed in the City of San Diego, California and Sublessor and Subtenant
hereby consent to the jurisdiction of the Courts of the County of San Diego. The
sole and exclusive venue for adjudication of disputes or controversies relating
to this Sublease shall be the City of San Diego, California.

 

51.6.        This
Sublease may be executed in counterparts, each of which shall be deemed an
original and all of which together shall constitute one document.

 

51.7.        Whenever
the context so requires, all words used in the singular shall be construed to
have been used in the plural (and vice versa), each gender shall be construed
to include any other genders, and the word “person” shall be construed to
include a natural person, a corporation, a firm, a partnership, a joint
venture, a trust, an estate or any other entity.

 

51.8.        Each
provision of this Sublease shall be valid and enforceable to the fullest extent
permitted by law. If any provision of this Sublease or the application of such
provision to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Sublease, or the application of such provision
to persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected by such invalidity or unenforceability,
unless such provision or such application of such provision is essential to
this Sublease.

 

22

 

51.9.        In
the event any litigation, arbitration, mediation, or other proceeding (“Proceeding”)
is initiated by any party against any other party to enforce, interpret or
otherwise obtain judicial or quasi-judicial relief in connection with this
Sublease the prevailing party in such Proceeding shall be entitled to recover
from the unsuccessful party all reasonable costs, expenses, and actual attorney’s
fees and expert witness fees relating to or arising out of such Proceeding
(whether or not such Proceeding proceeds to judgment), and any post-judgment or
post-award proceeding including without limitation one to enforce any judgment
or award resulting from any such Proceeding. Any such judgment or award shall
contain a specific provision for the recovery of all such subsequently incurred
costs, expenses, and actual attorney’s fees and expert witness fees.

 

51.10.      This
Sublease shall become effective when it has been executed by each of Sublessor
and Subtenant.

 

51.11.      Subject
to any restriction on transferability contained in this Sublease, this Sublease
shall be binding upon and shall inure to the benefit of the
successors-in-interest and assigns of each party to this Sublease. Nothing in
this Paragraph shall create any rights enforceable by any person not a party to
this Sublease, except for the rights of the successors-in-interest and assigns
of each party to this Sublease, unless such rights are expressly granted in
this Sublease to other specifically identified persons.

 

51.12.      The
headings of the Paragraphs of this Sublease have been included only for
convenience, and shall not be deemed in any manner to modify or limit any of
the provisions of this Sublease, or be used in any manner in the interpretation
of this Sublease.

 

51.13.      Time
and strict and punctual performance are of the essence with respect to each
provision of this Sublease.

 

51.14.      This
Sublease contains the entire agreement between Sublessor and Subtenant with
respect to the subject matter of this Sublease, is a complete and exclusive
statement of the terms of such agreement, and supersedes all prior
understandings, agreements, representations and warranties, if any, with
respect to such subject matter.

 

51.15.      Each
party to this Sublease and its legal counsel have had an opportunity to review
and revise this Sublease. The rule of construction that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Sublease or any Addendum or Exhibit to this
Sublease, and such rule of construction is hereby waived by Subtenant.

 

51.16.      All
notices or other communications required or permitted to be given to Subtenant
or Sublessor shall be in writing and shall be personally delivered, sent by
certified mail, postage prepaid, return receipt requested, or sent for next day
delivery by a reputable overnight express courier service that provides written
confirmation of delivery, to Subtenant at the address set forth in Paragraph
2.11 of this Sublease and to Sublessor at the address set forth in Paragraph
2.10 of this Sublease. Each such notice or other communication shall be deemed
given, delivered and received upon its actual receipt except that if it is sent
by mail in accordance with this Paragraph, then it shall be deemed given,
delivered and received three days after the date such notice or other
communication is deposited with the United States Postal Service in accordance
with this Paragraph. Sublessor or Subtenant may give a notice of a change
of its address to the other.

 

51.17.      Neither
this Sublease not any memorandum hereof shall be recorded in any public records
without the prior written consent of Sublessor; provided, however, upon the
written request of Subtenant or Sublessor, the parties hereto shall execute and
acknowledge a short form lease in a mutually acceptable form to
Sublessor and Subtenant, which either party, at its option, may record.

 

51.18.      If
more than one person is Subtenant, then the obligations of Subtenant under this
Sublease shall be the joint and several obligations of each of such persons;
provided, however, that any act or signature of one or more of any of such
persons and any notice or refund given to or served on any one of such persons
shall be fully binding on each of such persons.

 

51.19.      All
provisions, whether covenants or conditions, to be performed or observed by
Subtenant shall be deemed to be both covenants and conditions.

 

23

 

51.20.      All
payments to be made by Subtenant to Sublessor under this Sublease shall be in
United States currency.

 

51.21.      The
Exhibits and Addendum attached to this Sublease are incorporated herein by this
reference.

 

51.22.      Upon
Sublessor’s request, Subtenant shall provide Sublessor with a statement
reflecting the dollar amount of all sales and business transacted at or through
the Premises, for an interval period to be determined by Sublessor, but in no
event more frequently than monthly. Subtenant shall provide such information
within 15 days of Sublessor’s request. Sublessor shall be entitled to use such
information as it deems appropriate, including providing such information to
prospective lenders and purchasers.

 

51.23.     The parties hereto waive trial by jury in
connection with proceedings or counterclaims brought by either of the parties
hereto against the other.

 

51.24.      This
Sublease and the Exhibits A, B, C and Addendum(s) 1 attached hereto and forming
a part hereof, as set forth herein, constitute all of the covenants,
promises, assurances, representations, warranties, statements, agreements,
conditions and understandings between Sublessor and Subtenant concerning the
Premises and the Project and there are no covenants, promises, assurances,
representations, warranties, statements, conditions, or understandings, either
oral or written, between them, other than as herein set forth. Except as herein
otherwise provided, no subsequent alteration, change, or addition to this
Sublease shall be binding upon Sublessor or Subtenant unless reduced to writing
and signed by each of them.

 

51.25.      This
Sublease supersedes and revokes any and all previous negotiations,
arrangements, letters of intents, offers to lease, lease proposals or drafts,
brochures, representations, and information conveyed, whether oral or written,
between parties hereto or their respective representations or any other person
purported to represent Sublessor or Subtenant. The Subtenant acknowledges it
has not been induced to enter into this Sublease by any representations not set
forth in the Sublease, nor has it relied on any such representations. No such
representations should be used in the interpretation or construction of this
Sublease and the Sublessor shall have no liability for any consequences arising
as a result of any such representations.

 

51.26.      To
the extent that the terms and provisions of this Sublease are inconsistent with
the terms and provisions of the Master Lease, the terms and provisions of the
Master Lease shall be paramount and controlling. Subtenant shall not do or
permit any act, condition or thing to occur that would or may constitute a
default under the Master Lease.

 

[Signature Page to Follow]

 

24

 

	
   

  	
  SUBLESSOR:
   Insurance Company of the West, a
  California corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  American Assets, Inc., as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Durfey

  
	
   

  	
   

  	
  James Durfey

  
	
   

  	
   

  	
  Vice President — Office Leasing and Management

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  1/16/06

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SUBTENANT:  iVow, Inc.,  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
      /s/ Michael H. Owens

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  01/12/06

  

 

	
  CONSENT TO SUBLEASE AND ACKNOWLEDGEMENT

  OF SUBTENANT’S RIGHTS UNDER SECTION 41 ONLY:

  	
   

  
	
   

  	
   

  
	
  MASTER LESSOR:

  	
   

  
	
   

  	
   

  
	
  ICW Plaza, L.P.,

  	
   

  
	
  a California limited partnership

  	
   

  
	
   

  	
   

  
	
  By:

  	
  ICW Plaza, Inc., a California
  corporation,

  	
   

  
	
   

  	
  Its General Partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Illegible 

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  1/16/06

  	
   

  

 

25

 

EXHIBIT “B”

 

TO STANDARD OFFICE LEASE

DEMISED PREMISES

 

 

EXHIBIT “B-1”

 

SITE PLAN OF THE PROJECT

 

 

EXHIBIT
“C”

 

SUBTENANT”
IMPROVEMENTS TO THE PREMISES

 

General recital:  Subtenant accepts the Premises in “As-Is”
condition, and Sublessor shall provide certain tenant improvements for the
Premises, subject to the terms and conditions as more completely described
herein. Subtenant shall construct any and an future improvements subject to the
terms and conditions as more completely described herein.

 

Section 1.               Sublessor’s
Work. Following execution of this Lease by Sublessor and Subtenant,
Sublessor sole responsibility with respect to improving the Premises shall be
to cause the carpet in the Premises to be cleaned and the walls within the
Premises re-painted using building standard paint (“Sublessor’s Work”).
Sublessor shall be responsible for bearing all costs and expenses relating to
Sublessor’s Work.

 

Sections 2 through 5.          Intentionally Deleted.

 

Section 6.               Future
Improvements by Subtenant to the Premises; Plan Approval. In the event that
Subtenant shall desire to perform improvements to the Premises during the term.
of the Sublease or any extension thereof, Subtenant shall cause detailed plans
and specifications (the ”Plans”) to be prepared and delivered to
Sublessor; which Plans shall reflect the work to be performed within the
Premises by Subtenant in order to suitably prepare the Premises for Subtenant’s
use (“Subtenant’s Work”). Sublessor shall, within a reasonable period of time
following its receipt of the Plans, either approve such Plans or provide
Subtenant with the reasons that Sublessor is withholding such consent.
Performance of the Subtenant’s Work shall strictly conform to the approved
Plans and any deviation will require Sublessor’s prior approval. All costs
arising from said future Subtenant’s Work shall be the sole and exclusive
responsibility of Subtenant to pay, in a prompt and timely fashion as said
costs become due.

 

Section 6.1             Construction
of Subtenant Improvements by Subtenant’s Contractor. After the Plans for
the Subtenant’s Work have been approved by Sublessor, Subtenant, and the local
governing agencies, Subtenant shall submit to Sublessor the name, address,
license number, evidence of insurance, and any other information required by
Sublessor of Subtenant’s proposed contractor(s) (“Contractor”) for Sublessor’s
review and approval. If Sublessor deems, in Sublessor’s reasonable discretion,
that Subtenant’s proposed Contractor is unacceptable, Subtenant shall resubmit
information on a replacement contractor until a mutually approved Contractor is
selected. Upon said selection, Subtenant shall enter into a construction
contract with the Contractor which shall include a provision for compliance
with Sublessor’s rules and regulations as defined herein, and Subtenant shall
provide Sublessor with a copy of said contract. In no event shall Subtenant be
permitted to perform Subtenant’s Work prior to providing all information
requested by Sublessor relating to Subtenant’s Work. Failure by Subtenant to
provide any information requested by Sublessor, including but not limited to
evidence of Subtenant’s and Subtenant’s Contractor’s compliance with all of the
insurance requirements hereof, shall constitute a default of the Sublease in
the event Subtenant proceeds with Subtenant’s Work. Violations of Sublessor’s
rules, regulations, and requirements as set forth herein or as otherwise
established by Sublessor shall constitute a default of this Sublease if not
corrected by Subtenant and/or Subtenant’s Contractor within twenty four (24)
hours notice,

 

 

either written or
oral, by Sublessor to Subtenant. Sublessor shall have the right to post a
notice of non-responsibility at a prominent location within Subtenant’s
Premises.

 

It shall be the
responsibility of Subtenant to enforce the following requirements of
Subtenant’s Contractor, and all subcontractors of Subtenant’s Contractor, at
every level:

 

6.1.1        Subtenant’s
Contractor shall perform Subtenant’s Work in a manner and at times which do not
impede or delay Sublessor’s contractor in the Project. Any delays in the
completion work by the Sublessor or Sublessor’s contractor on the Project, or
the commencement of the annual rental and any damage to any work caused by
Subtenant’s Contractor shall be at me sole cost and expense of Subtenant.

 

6.1.2        Subtenant’s
Contractor shall be responsible for the repair, replacement, or clean-up of any
damage by him to other contractors’ work which specifically includes access
ways to the Premises which may be concurrently used by others. Fire, lanes,
sidewalks, hallways, and access to other Subtenant’s suites may not be blocked
or obstructed at any time.

 

6.1.3        Subtenant’s
Contractor shall accept the Premises prior to starting any trenching
operations. Any rework of sub-base or compaction required after Subtenant’s
Contractor’s initial acceptance of the Premises shall be done by Subtenant’s
Contractor, which shall include the removal from the Premises of any
excess soil or debris. All work shall be done in accordance with sound
construction practices and, as required, in compliance with specifications of a
soils engineer or consultant as approved by Sublessor.

 

6.1.4        Subtenant’s
Contractor shall contain his storage of materials and his operations within the
Premises and such other space as he may be assigned by Sublessor.
Should he be assigned space outside of the Premises, he shall move to such
other space as Sublessor shall direct from time to time to avoid interference
or delays with other work. Subtenant’s Contractor shall park construction
vehicles in areas designated by Sublessor.

 

6.1.5        All
trash and surplus construction materials shall be stored within the Premises
and shall be promptly removed from the Premises. Subtenant’s Contractor shall
not use common area trash enclosures or waste bins for disposal of trash or
surplus construction material.

 

6.1.6        Subtenant’s
Contractor shall provide temporary utilities, portable toilet facilities and
portable drinking water as required for his work within the Premises.

 

6.1.7        Noise
shall be kept to a minimum at all times, and shall not be permitted to
interfere with the conduct of other Subtenant’s business, or the general
operation of the Project. Subtenant’s Contractor shall notify Sublessor’s
project manager of any planned work to be done on weekends or other than normal
job hours.

 

6.1.8        Subtenant
and Subtenant’s Contractor are responsible for compliance with all applicable
codes and regulations of duly constituted authorities having jurisdiction as
far as the performance of the Subtenant’s Work is concerned and for all
applicable safety regulations established by the Sublessor, OSHA, or other
regulatory agencies, and Subtenant further agrees to save and hold Sublessor
harmless for Subtenant’s actions arising from Subtenant’s Work Prior

 

2

 

to commencement of
construction, Subtenant shall submit to Sublessor evidence of insurance as
required by this Sublease and evidence of insurance for Subtenant’s Contractor.

 

6.1.9        Subtenant’s
Contractor shall not post signs on any part of the Project or on the Premises,
without Sublessor’s prior written approval.

 

6.1.10      Subtenant
shall be responsible for and shall obtain and record a Notice of Completion
promptly following completion of Subtenant’s work.

 

6.1.11      Sublessor
may require that, prior to the commencement of construction, Subtenant shall
obtain or cause its contractor to obtain payment and performance bonds covering
the faithful performance of the contract for the construction of the
Subtenant’s Work and the payment of all obligations arising thereunder. Such
bonds shall be for the mutual benefit of both Sublessor and Subtenant.

 

6.1.12      Subtenant
shall provide to Sublessor a copy of the fully executed construction contract,
including all addendum and a line item breakdown by trade thereto, between
Subtenant and its Contractor for the Subtenant’s Work.

 

6.1.13      All
required permits and approvals, including but not limited to Planning,
Building, Fire, and Health department permits, must be obtained and all
necessary calculations, including, but not limited to, those required under
Title 24, must be submitted to the local governing agencies for all work to be
performed by Subtenant or Subtenant’s Contractor in the Premises.

 

6.1.14      Any
modifications to the building exterior shall be subject to Sublessor’s prior
approval. No romex wiring shall be allowed, nor shall water lines be placed in
slabs, unless approved by Sublessor prior to installation. All equipment placed
upon the roof as a result of the Subtenant’s Work, and all roof penetrations,
shall be approved by Sublessor prior to the commencement of work.

 

6.1.15      Sublessor,
at Sublessor’s reasonable discretion, may from time to time establish such
other rules and regulations for protection of property and the general safety
of occupants and invitees of the Project. Such rules and regulations shall
apply to Subtenant and Subtenant’s Contractor as though established upon the
execution of this Exhibit “C”.

 

Section 6.2             Coordination
of Construction. Subtenant covenants and agrees that Subtenant and
Subtenant’s Contractor shall not destroy or in any way damage any portion of
the Project. Further, Subtenant covenants and agrees that Subtenant and
Subtenant’s Contractor shall coordinate the Subtenant’s Work with any
construction schedule for any work being performed by or on behalf of Sublessor
or any other Subtenant, and that the performance of the Subtenant’s Work shall
not interfere with Sublessor’s or any other Subtenant’s construction
activities. If there be such interference or conflict, notice thereof shall be
given to Subtenant, and immediately after receipt of such notice the
Subtenant agrees to cease or cause to be terminated such interference or
conflict. Further, should Subtenant delay Sublessor’s work due to acts of
Subtenant or Subtenant’s Contractor, Construction Change Orders, subsequent
review and approvals required or other matters that materially affect
Sublessor’s construction progress, Subtenant shall be responsible to Sublessor
for any lost rents due to the delay of the

 

3

 

commencement of the Sublease Term. Subtenant further covenants and
agrees that Subtenant and Subtenant’s Contractor shall comply with all rules
and regulations promulgated by Sublessor, or its agent, and all directives of
Sublessor governing construction or installation activities, including but not
limited to, permissible hours for construction or installation activities,
storage of equipment and responsibility for cleaning of work areas. If
Subtenant or Subtenant’s Contractor shall fail to comply with the provisions of
this Section any costs incurred by Sublessor as a result of such failure shall
be at Subtenant’s sole and exclusive expense.

 

Section 6.3             No
Sublessor Liability. Sublessor shall not be liable for any loss, cost,
damage, or expense incurred or claimed by Subtenant or any other person or
party on account of the construction or installation of the Subtenant’s Work or
any other person or party on account of the construction or installation of the
Subtenant’s Work or any other improvements to the Premises made by Subtenant.
Subtenant hereby acknowledges and agrees that the compliance of the Subtenant’s
Work, or other Alterations made to the Premises by the Subtenant and any plans
therefore, with all applicable governmental laws, codes, and regulations shall
be solely Subtenant’s responsibility. Sublessor assumes no liability or
responsibility resulting from the failure of the Subtenant to comply with all
applicable governmental laws, codes and regulations or for any defect in any of
the Subtenant’s Work or other Alteration to the Premises made by Subtenant. Subtenant
further agrees to indemnify, defend, and hold harmless Sublessor from any loss,
cost, damage or expense incurred, claimed, asserted, or arising’ in connection
with any of the foregoing.

 

Section 8. Subtenant Representative. Subtenant
designates the following individual(s) as its authorized signatures and/or
decision makers with respect to matters contained in this Exhibit C. Sublessor
shall be entitled to rely on such persons decisions as being absolute and
binding on Subtenant.

 

Sublessor _______
Subtenant _______

 

4

 

EXHIBIT
D

ICW BUILDING

 

BUILDING
RULES AND, REGULATIONS

 

Subtenant shall comply
with the following Rules and Regulations. Sublessor shall not be responsible to
Subtenant for the nonperformance of any of these rules and Regulations.

 

1.             Locks; Keys. Subtenant shall not alter any lock or
install any new or additional locks or bolts on any doors or windows of the
Premises without obtaining Sublessor’s prior written consent. Subtenant shall bear
the cost of any lock changes or repairs required by Subtenant. Sublessor for
the Premises shall furnish two keys, and any additional keys required by
Subtenant must be obtained from Sublessor at a reasonable cost to be
established by Sublessor.

 

2.             Doors Opening to Public Corridors. All doors opening to public corridors
must be kept closed at all times except for normal ingress to and egress from
the Premises.

 

3.             Securing Doors; Admission to Building. Sublessor reserves the right to close
and keep locked all entrance and exit doors of the Building during the hours
when Comparable Building are customarily dosed and locked. When departing after
the Building’s normal Business Hours, Subtenant and Subtenant’s employees and
agents must be sure that the doors to the Building are securely dosed and
locked. Any person, including Subtenant and Subtenant’s employees and agents,
who enters or leaves the Building at any time when it is locked or at any
time considered to be after the Building’s normal Business Hours, may be
required to sign the Building register. Access to the Building may be refused
unless the person seeking access has proper identification or has previously
arranged a pass for access to the Building. Sublessor and its agents shall not
be able for damages for any error concerning the admission to, or exclusion
from, the Building of any person. Sublessor reserves the right, in the event of
invasion, mob, riot, public excitement, or any other commotion, to prevent
access to the Building or Project during the continuance of that event by any
means it considers appropriate for the safety and protection of life and
property.

 

4.             Furniture, Freight, and Equipment;
Service Deliveries.
No furniture, freight, or equipment of any kind may be brought into the Building
without prior notice to Sublessor. All moving activity into or out of the
Building must be scheduled with Sublessor and done only at a time and in the
manner designated by Sublessor. No service deliveries (other than
Messenger services) shall be allowed between the hours of 4:00 PM and 6:00 PM,
Monday through Friday. Sublessor may at any time restrict the elevators and
areas of the Building into which messengers may enter and may require that
Subtenant leave deliveries at the lobby security desk for pickup. Sublessor may
prescribe the weight, size, and position of all safes and other heavy property
brought into the Building and the times and manner of moving those items within
and on of the Building. Subtenant shall not

 

 

overload the floor
of the Premises. If considered necessary by Sublessor, safes and other
heavy objects must stand on supports that are adequate to distribute the weight
properly. Sublessor shall not be responsible for loss of or damage to any safe
or property. Any damage to any part of the Building or to its contents,
occupants, or visitors caused by moving or maintaining any safe or other
property referred to in this clause shall be the sole responsibility and
expense of Subtenant.

 

5.             Receipt of Deliveries; Use of Elevators. No furniture, packages, supplies,
equipment, or merchandise may be received in. the Building or carried up or
down the elevators, except between those hours and in that specific elevator
that Sublessor shall designate.

 

6.             No Disturbance of Other Occupants. Subtenant shall not disturb, solicit,
or canvass any occupant of the Project and shall cooperate with Sublessor and
Sublessor’s agents to prevent these actions.

 

7.             Use of Restrooms; Responsibility for
Damage. The
restrooms, urinals, wash bowls, and other apparatus shall not be used for any
other purpose other than that for which they were constructed, and no foreign
substance of any kind shall be thrown into them. The expense of any breakage,
stoppage, or damage resulting from the violation of this rule shall be borne by
the Subtenant who caused, or whose employees or agents caused, the
breakage, stoppage, or damage.

 

8.             Heating and Air-Conditioning. Subtenant shall not use any method of
heating or air-conditioning, other than that supplied by Sublessor, without
Sublessor’s prior written consent.

 

9.             Foul or Noxious Gases or Substances
Noninterference With Others. Subtenant shall not use or keep, or allow to be used
or kept, any foul or noxious gas or substance in or on the Premises. Subtenant
shall not allow the Premises to be occupied or used in a manner causing noise,
odors, or vibrations that are offensive or objectionable to Sublessor or other
occupants of Project.

 

10.           Animals, Birds, and Vehicles. Subtenant shall not bring into, or keep
within, the Premise, Building or Project any animals, birds, or vehicles
(e.g., bicycles).

 

11.           Cooking, No use of the Premises for
Improper Purposes.
No cooking shall be done or permitted on the Premises, except that
Underwriter’s Laboratory (UL)-approved equipment and microwave ovens may be
used in the Premises for heating food and brewing coffee, tea, hot chocolate,
and similar beverages for employees and visitors. This must be in accordance
with all applicable federal, state, and city laws, codes, ordinances, rules, and
regulations.

 

12.           Telephone and Other Wires. Subtenant may not introduce telephone
wires or other wires into the Premises without first obtaining Sublessor’s
approval of the method and location of such introduction. No boring or cutting
for telephone wires or other wires shall be allowed without Sublessor’s
consent. The location

 

2

 

of telephones,
call boxes, and other office equipment affixed to the Premises shall be subject
to Sublessor’s approval.

 

13.           Exclusion or Expulsion. Sublessor reserves the right to exclude
or expel from the Project any person who, in Sublessor’s judgment, is under the
influence of alcohol or drugs or commits and act in violation of theses Rules
and Regulations.

 

14.           Loitering Prohibited. Subtenant and Subtenant’s employees and
agents shall not loiter in or on the entrances, corridors, sidewalks, lobbies,
halls, stairways, elevators, or common areas for the purpose of smoking tobacco
products or for any other purpose. Subtenant and Subtenant’s employees and
agents shall not obstruct these areas but use them only as a means of ingress
to and egress from the Premises.

 

15.           Operation of Electricity, Water, and Air
Conditioning.
Subtenant shall not waste electricity, water, or air-conditioning and shall
cooperate fully with Sublessor to ensure the most effective operation of the
Building’s heating and air-conditioning system. Subtenant shall not adjust any
controls of that heating and air-conditioning system.

 

16.           Disposal of Trash and Garbage. Subtenant shall store all trash and
garbage within the interior of the Premises. Subtenant shall not place or have
placed in the trash boxes or receptacles any material that may not or cannot be
disposed of in the ordinary and customary manner of removing and disposing; of
trash in the vicinity of the Building. In disposing of trash and garbage,
Subtenant shall comply fully with any law or ordinance governing that disposal.
All trash, garbage, and refuse disposal shall be made only through entry-ways
and elevators provided for that purpose and shall be made only at times
designated by Sublessor.

 

17.           Compliance With Safety Regulations. Subtenant shall comply with all safety,
fire protection and evacuation procedures and regulations established by
Sublessor or by any government agency.

 

18.           Protection of Premises. Subtenant shall assume all
responsibility, including keeping doors locked and other means of entry to the
Premises dosed, for protecting the Premises from theft, robbery, and
pilferage.

 

19.           Awnings, Curtains, and Electrical Ceiling
Fixtures. No
awnings or other projection shall be attached to the outside walls of the
Building without Sublessor’s prior written consent. No curtains, blinds,
shades, or screens, shall be attached to, hung in, or used in connection with
any window or door of the Premises without Sublessor’s prior written consent.
All electrical ceiling fixtures hung in offices or spaces along the perimeter
of the Building must be fluorescent or of a quality, type, design, and bulb
color approved by Sublessor. Subtenant shall abide by Sublessor’s regulations
concerning the opening and closing of

 

3

 

window coverings attached to those windows, if any, in
the Premises that have a view of any interior portion of the Building or
Building Common Area.

 

20.           Non-obstruction of Light. Subtenant shall not cover or obstruct
the sashes, sash doors, skylights, windows, and doors that reflect or admit
light and air into halls, passageways, or other public places in the Building.
Subtenant shall not place any bottles, parcels, or other articles on the
windowsills.

 

21.           Provision of Information to Subtenant’s
Employees.
Subtenant shall comply with requests by Sublessor that Subtenant informs
Subtenant’s employees of items of importance to Sublessor.

 

22.           Hand Trucks and Similar Equipment. Without Sublessor’s prior consent,
Subtenant shall not use, in any space or in the public halls of the Building,
any hand trucks unless they are equipped with rubber ties and side guards
or similar equipment. Subtenant shall not bring any other vehicles of any kind
into the Building.

 

23.           Use of Building’s Name or Likeness. Without Sublessor’s prior written
consent, Subtenant shall not use me Building’s name or any photograph or other
likeness of the Building in connection with, or in promoting or advertising,
Subtenant’s business, except that Subtenant may include the Building’s name in
the Subtenant’s address.

 

24.           Parking Rules and Regulations. Without Sublessor’s prior written
consent, no automobile detailing or washing shall be permitted in the
parking areas of the Building or Project.

 

25.           Rules Changes; Waivers. Sublessor reserves the right at any
time to change or rescind any one or more of these Rules and Regulations or to
make any additional reasonable Rules and Regulations that, in Sublessor’s
judgment, may be necessary for:  (a) The
management, safety, care, and cleanliness of the Premises, Building, and
Project; (b) The preservation of good order, and (c) The convenience of other
occupants and tenants in the Premises, Building, and Project.

 

26.           Flames. Subtenant shall not have any open flames in the
Premises, Building or Project at anytime whatsoever, including, but not limited
to, lit candles, lighters, matches or as it relates to cooking.

 

Sublessor may waive any
one or more of these Rules and Regulations for the benefit of any particular
tenants. No waiver by Sublessor shall be constructed as a waiver of those Rules
and Regulations in favor of any other Subtenant, and no waiver shall prevent
Sublessor from enforcing those Rules and Regulations against any other
Subtenant of the Project. Subtenant shall be considered to have read these
Rules and Regulations and to have agreed to abide by them as a condition of
Subtenant’s occupancy of the Premises.

 

4

 

ADDENDUM NO. 1

TO STANDARD SUBLEASE

 

1.             RENT
COMMENCEMENT DATE

 

The payment of Basic Monthly Rent shall commence upon
the Commencement Date.

 

2.             BASIC MONTHLY RENT

 

Basic Monthly Rent for each Sublease Year, (as defined
below), during the Sublease Term shall be as follows:

 

	
  ANNUAL

  	
   

  	
  MONTHLY

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sublease Year 1

  	
   

  	
  $

  	
  93,697.00

  	
   

  	
  Basic Monthly Rent

  	
   

  	
  $

  	
  7,807.25

  	
   

  
	
  Sublease Year 2

  	
   

  	
  $

  	
  96,497.64

  	
   

  	
  Basic Monthly Rent

  	
   

  	
  $

  	
  8,041.47

  	
   

  
	
  Sublease Year 3

  	
   

  	
  $

  	
  99,392.52

  	
   

  	
  Basic Monthly Rent

  	
   

  	
  $

  	
  8,282.71

  	
   

  

 

In addition, Subtenant shall pay for all individually
and separately metered utilities for the Premises.

 

The term “Sublease Year” shall mean (i) as to the
first Sublease Year, that period commencing on the Sublease Commencement Date
and ending 12 months following the Rent Commencement Date (provided; however,
if the Rent Commencement Date falls on a day other than the first day of a
calendar month, then the first Sublease Year will be extended through the final
day of the calendar month in which the first annual anniversary of the Rent
Commencement Date occurs), (ii) as to every subsequent Sublease Year other
than the final Sublease Year of the Term, the 12 month period following the
prior Sublease Year, and (iii) as to the final Sublease Year of the Term,
the period commencing on that day immediately following the final day of the
penultimate Sublease Year of the Term and ending on the Expiration Date.”

 

(As an example of the foregoing, a Sublease
Commencement Date of April 20, 1951 followed by a Rent Commencement Date
of June 15, 1951 would yield a first Sublease Year of April 20, 1951
through June 30, 1952. The following Sublease Year would be July 1,
1952 through June 30, 1953. A “three year” Term would end on June 30,
1954.)

 

4.             OPTION TO EXTEND

 

Subtenant shall have the option to extend the Term of
this Sublease (the “Option”) for one (1) period of three (3) years
(such period an “extension term”) provided Subtenant gives Sublessor and
Sublessor is in receipt thereof a written notice delivered by U.S. Postal
Service, certified mail return receipt requested, of Subtenant’s election to
exercise the Option a minimum of 270 days prior to the Expiration Date of the
Term of this Sublease and a maximum of 365 days prior to the Expiration Date of
the Term of this Sublease (or the then applicable extension term, to the extent
the Term has been previously extended by the terms of this Article). The terms
and conditions governing each such extension terra will be the same as those
for the Initial Sublease Term, except and to the extent modified by the terms
of Paragraphs E and F, below. Time is of the essence with respect to each and
every term of this article.

 

A.            The
Option is personal to the Subtenant originally named in this Sublease and may not
be exercised by or be assigned to, voluntarily or involuntarily, any other
person or entity. The Option herein granted to Subtenant may not be
assigned with any permitted assignment of this Sublease or subSublease of the
Premises (or any portion thereof).

 

B.            Subtenant
shall not have the right to exercise the Option, notwithstanding anything set
forth above to the contrary:

 

 

1.             During
any period of time commencing from the date Sublessor gives to Subtenant a
written notice that Subtenant is in default under any provision of this
Sublease, and continuing until the default alleged in said notice is cured;

 

2.             During
the period of time commencing on the day after a monetary obligation to Sublessor
is due from Subtenant and unpaid (without any necessity for notice thereof to
Subtenant) and continuing until the obligation is paid;

 

3.             At
any time after the occurrence of any default described in Paragraph 26 of the
Sublease other than those described in the preceding paragraphs (without any
necessity of Sublessor to give notice of such default to Subtenant); or

 

4.             In
the event that Sublessor has given to Subtenant two or more notices of default
or a late charge has become payable under the Sublease during the twelve-month
period prior to the time that Subtenant intends to exercise the Option.

 

C.            The
period of time within which the Option may be exercised shall not be
extended or enlarged by reason of Subtenant’s inability to exercise the Option
because of the foregoing provisions of Paragraph B, even if the effect thereof
is to eliminate Subtenant’s right to exercise the Option.

 

D.            All
rights with respect to the Option shall terminate and be of no further force or
effect even after Subtenant’s due and timely exercise of the Option, if, after
such exercise, but prior to the commencement of the applicable extension term, (1) Subtenant
fails to pay to Sublessor a monetary obligation of Subtenant for a period of
ten days after such obligation become due (without any necessity of Sublessor
to give notice thereof to Subtenant); (2) Subtenant fails to cure a
non-monetary default within 30 days after the date the Sublessor gives notice
to Subtenant of such default; or (3) Sublessor gives to Subtenant two or more
notices of default or a late charge becomes payable for any such default,
whether or not such defaults are cured.

 

E.             The
Basic Monthly Rent shall be increased on the first day of each extension term
(the “Rental Adjustment Date”) to the “fair rental value” of the Premises,
determined in the following manner.

 

1.             Not
later than 120 days prior to the applicable Rental Adjustment Date, Sublessor
and Subtenant shall meet in an effort to negotiate, in good faith, the fair
rental value of the Premises as of such applicable Rental Adjustment Date. If
Sublessor and Subtenant have not agreed upon the fair rental value of the
Premises at least 90 days prior to the applicable Rental Adjustment Date, the
fair rental value shall be determined by appraisal as described below.

 

2.             If
Sublessor and Subtenant are not able to agree upon the fair rental value of the
Premises within the time period prescribed in Paragraph 1, then Sublessor and
Subtenant shall attempt to agree in good faith upon a single appraiser not
later than 75 days prior to the applicable Rental Adjustment Date. If Sublessor
and Subtenant are unable to agree upon a single appraiser within such time
period, then Sublessor and Subtenant shall each appoint an appraiser not later
than 65 days prior to the applicable Rental Adjustment Date. Within five days
thereafter, the two appointed appraisers shall appoint a third appraiser. If
Sublessor and Subtenant agree upon an appraiser, or if either Sublessor or
Subtenant fails to appoint its appraiser within the prescribed time period, the
single appraiser appointed shall determine the fair rental value of the
Premises. If both parties fail to appoint appraisers within the prescribed time
periods, then the first appraiser thereafter selected by a party shall determine
the fair rental value of the Premises. Each party shall bear the cost of its
own appraiser and the parties shall share equally the cost of the single or
third appraiser if applicable. Each such appraiser must have at least five
years experience in the appraisal of commercial/industrial real property in the
area in which the Project is located and shall be members of a professional
organization such as MAI or equivalent.

 

 

3.             For
the purposes of such appraisal, the term “fair rental value” shall mean the
price that a ready and willing Subtenant would pay, as of the applicable Rental
Adjustment Date, as monthly rent to a ready and willing Sublessor of property
comparable to the Premises if such property were exposed for Sublease on the
open market for a reasonable period of time and taking into account all of the
purposes for which such property may be used. If a single appraiser is
chosen, then such appraiser shall determine the fair rental value of the
Premises. Otherwise, the fair rental value of the Premises shall be the
arithmetic average of the two of the three appraisals which are closest in
amount, and the third appraisal shall be disregarded. In no event, however,
shall the Basic Monthly Rent for the first year of the extension term be less
than the Basic Monthly Rent payable by Subtenant during the last year of the
preceding Sublease term.

 

Sublessor and Subtenant shall instruct the
appraiser(s) to complete their determination of the fair rental value no later
than 30 days prior to the applicable Rental Adjustment Date. If,
notwithstanding such instruction, the fair rental value is not determined
before the first day of an extension term, then Subtenant shall continue to pay
to Sublessor the Basic Monthly Rent applicable to the Premises immediately prior
to such extension term, until the fair rental value of the Premises is
determined. When the fair rental value of the Premises is determined, Sublessor
shall deliver notice thereof to Subtenant, and Subtenant shall pay to
Sublessor, within ten days after receipt of such notice, the difference between
the Basic Monthly Rent actually paid by Subtenant to Sublessor and the new
Basic Monthly Rent determined hereunder.

 

F.             On
each annual anniversary date of the commencement of an extension term the Basic
Monthly Rent will increase by a fixed amount of five percent, unless other
terms of adjustment are otherwise agreed to in writing by a mutually executed
document between Sublessor and Subtenant.

 

5.             PROJECT EXPANSION/MODIFICATION

 

A.            Further
Construction. Subtenant acknowledges that Sublessor may, from time to time,
at its sole election, construct, reconstruct, modify, expand, or otherwise
alter the Project (collectively, “Construction Work”), or portions thereof (in
no event however will Sublessor have any obligation to do so). Subtenant
acknowledges that any such Construction Work will necessarily involve, among
other things, the generation of noise, dust, and vibrations, barricading
portions of the Project and the placement of scaffolding within the Project,
demolition, structural alterations, storage of materials and equipment within
the Project, and the presence of workmen within the Project, all of which may require
the rearrangement of parking areas, common areas, roadways, lighting
facilities, and the re-direction of vehicular and pedestrian traffic. Except as
provided below, Subtenant waives any and all claims, defenses, rights of
offset, or deductions based upon any inconvenience suffered by Subtenant or any
interruption of or interference with Subtenant’s business including, without
limitation, any loss of business, decreased sales, or inconvenience to
Subtenant or Subtenant’s Invitees as a result of or relating to such
Construction Work. Sublessor hereby reserves for itself and its agents,
employees, licensees and contractors, the right to enter the Premises to the
extent reasonably necessary to pursue such Construction Work upon 24 hours’
prior notice to Subtenant. The exercise of any of Sublessor’s rights pursuant
to this paragraph will not entitle Subtenant to any abatement of Rent or other
claim, right of offset, or defense against Sublessor, except that Subtenant
shall have the right to bring an action against Sublessor (as Subtenant’s sole
remedy) in the event Subtenant suffers any damages as a result of Sublessor’s
gross negligence or intentional misconduct in pursuing such Construction Work. Subtenant
further acknowledges that expansion of the Project may affect the amount
of the Sublease Expenses and the portion thereof payable by Subtenant.

 

B.            Reserved
Rights. Sublessor hereby reserves such licenses and easements in, on, above
or below the Premises as may be reasonably required (i) for the
installation, inspection, surveying, maintenance, or construction of mains,
conduits, shafts, columns, footings, piers, pipes or other

 

 

facilities to serve any building within the Project,
or (ii) for any Construction Work; provided, however, Sublessor will use
its best efforts to minimize any unreasonable interference with Subtenant’s
use, occupancy, or enjoyment of the Premises as contemplated by this Sublease.

 

C.            Right
of Abatement. Notwithstanding anything to the contrary contained in
Paragraph A, above, in the event any Construction Work undertaken by Sublessor
prevents Subtenant from conducting its business within the Premises, Subtenant’s
Base Monthly Rent will be abated during the period during which Subtenant is
unable to conduct it business at the Premises as a result thereof. The
foregoing right of abatement will constitute Subtenant’s sole and absolute
right against Sublessor or otherwise in connection with any such Construction
Work and Subtenant reSubleases and waives any other claims, defenses, or rights
in connection therewith.

 

D.            Remodel.
Sublessor may in the future remodel, renovate or refurbish (“remodel”) all
or any portion of the storefronts or other portions of the Project, which
remodel may include the Premises. The remodeling will be done in
accordance with design specifications prepared by the project architect and
reviewed and approved by Sublessor. Subtenant agrees that Subtenant will not,
through any act or omission on the part of Subtenant, in any way impede,
delay or prevent the completion of such remodeling in a timely manner. If a new
storefront is required as part of the remodeling, Subtenant shall pay the
cost of said storefront but not to exceed $____ per Linear foot. As part of
the design specifications, a new exterior Subtenant sign criteria may be
developed, in which case Subtenant shall comply with Paragraph 14 with respect
to the removal and replacement of its signs at Subtenant’s sole cost.

 

6.             CONDITION OF THE PREMISES

 

By taking possession hereunder, Subtenant is accepting
the Premises in “As-Is” condition. Subtenant acknowledges and agrees that
Sublessor has no obligation to improve the Premises other than as set forth
specifically in this Sublease, if at all. In particular, Subtenant acknowledges
that any additional improvements or alterations needed to accommodate Subtenant’s
intended use shall be made solely at Subtenant’s sole cost and expense, and
strictly in accordance with the requirements of this Sublease (including the
requirement to obtain Sublessor’s consent thereto), unless such improvements
and alterations are specifically required of Sublessor and expressly set forth
in this Sublease and in Exhibit “C”. Should Subtenant improvements be made
to the Premises in the future, the Premises shall be constructed in accordance
with the procedures outlined in Exhibit “C” of this Sublease. Sublessor
shall have no responsibility to do any work required under any building codes
or other governmental requirements not in effect or applicable at the time the
Premises were constructed, including without limitation any requirements
related to sprinkler retrofitting, seismic structural requirements,
accommodation of disabled persons, or hazardous materials.

 

7.             FIELD VERIFICATION OF THE PREMISES

 

Sublessor may elect to measure the leasable
portion of the Premises at any time following the Sublease Commencement Date,
for the purpose of verifying the actual floor area thereof. Sublessor shall use
a licensed architect for the purpose of such measurement, and shall use the
prevailing standards for measurement of similar types of buildings in the
vicinity. In the event that the architect’s measurements differ from the area
stated in Section 2.3 of this Sublease, Sublessor, at Sublessor’s
election, may adjust the monthly rental for the Premises accordingly.

 

8.             BUILDING HOURS OF OPERATION

 

The Building standard operating hours are from 7:00AM
to 6:00PM Monday through Friday and 9:00AM to 1:00PM on Saturdays. Sundays and
major holidays are excluded. After hours HVAC usage shall be at $25.00 per hour
for the Premises. Subtenant shall pay for such additional use of the Building
beyond the aforementioned hours at the actual cost to Sublessor.

 

 

9.             UTILITIES

 

Notwithstanding the terms of Paragraph 9 of the
Sublease, the Premises are separately sub-metered for electricity and Subtenant
shall reimburse Sublessor or Sublessor’s designee directly, payable as
Additional Rent, for all such costs, fees and consumption charges arising from
said sub-meter.

 

	
   

  	
  SUBLESSOR:
  Insurance Company of the West, a California corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  American Assets, Inc., as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Durfey 

  	
   

  
	
   

  	
   

  	
  James Durfey — V.P., Office Leasing and Management

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  1/16/06

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUBTENANT: iVOW, Inc. a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael H. Owens

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  01/12/06

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