Document:

EXHIBIT 4.13

 

P & F INDUSTRIES, INC.

 

AMENDMENT NO. 9

TO

CREDIT AGREEMENT

 

THIS AMENDMENT NO. 9 TO CREDIT AGREEMENT, is entered into as of June 30, 2003 (the
“Amendment”), by and among P&F
INDUSTRIES, INC., a Delaware corporation  (“P&F”), FLORIDA
PNEUMATIC MANUFACTURING CORPORATION, a Florida corporation (“Florida
Pneumatic”), EMBASSY INDUSTRIES, INC., a
New York corporation (“Embassy”), GREEN
MANUFACTURING, INC., a Delaware corporation (“Green”), COUNTRYWIDE HARDWARE, INC., a Delaware
corporation (“Countrywide”), and NATIONWIDE
INDUSTRIES, INC., a Florida corporation (“Nationwide”) (P&F,
Florida Pneumatic, Embassy, Green, Countrywide and Nationwide, the
“Co-Borrowers”), and CITIBANK, N.A. (successor-in-interest
to European American Bank), a New York banking corporation (the “Bank”).

 

BACKGROUND

 

The
Co-Borrowers and the Bank are parties to a Credit Agreement, dated as of July
23, 1998 (as same has been and may be further amended, restated, supplemented
or modified, from time to time, the “Credit Agreement”), pursuant to which the
Bank provides the Co-Borrowers with certain financial accommodations.

 

The
Co-Borrowers have requested that the Bank extend the Revolving Credit
Termination Date and the Bank is willing to do so on the terms and conditions
hereinafter set forth.  Capitalized
terms used herein and not defined herein shall have the meanings given to them
in the Credit Agreement.

 

Accordingly,
in consideration of the premises and of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:

 

ARTICLE

Amendment to Credit Agreement.

 

Section
1.1             The definition of
“Revolving Credit Termination Date” in Section 1.01 of the Credit Agreement is
hereby amended in its entirety to provide as follows:

 

“Revolving
Credit Termination Date” shall mean the earlier of (i) July 26, 2004 or (ii)
the date on which the Revolving Credit Commitment shall have been terminated
hereunder.

 

ARTICLE II.

Conditions of Effectiveness.

 

Section
2.1.            This Amendment shall
become effective as of the date hereof, upon receipt by the Bank of this
Amendment, duly executed by each Co-Borrower.

 

ARTICLE III .

Representations and Warranties; Effect on Credit Agreement.

 

Section
3.1.            Each Co-Borrower hereby
represents and warrants as follows:

 

1

 

a.             This Amendment and the Credit
Agreement, as amended hereby, constitute legal, valid and binding obligations
of the Co-Borrowers and are enforceable against the Co-Borrowers in accordance
with their respective terms.

 

b.             Upon the effectiveness of this
Amendment, the Co-Borrowers hereby reaffirm all covenants, representations and
warranties made in the Credit Agreement to the extent that the same are not
amended hereby and each Co-Borrower agrees that all such covenants, representations
and warranties shall be deemed to have been remade as of the date hereof.

 

c.             No Default or Event of Default has
occurred and is continuing or would exist after giving effect to this
Amendment.

 

d.             No Co-Borrower has any defense,
counterclaim or offset with respect to the Credit Agreement.

 

Section
3.2.            Effect on Credit
Agreement.

 

a.             Upon the effectiveness of this
Amendment, each reference in the Credit Agreement to “this Agreement”,
“hereunder”, “hereof”, “herein” or words of like import shall mean and be a
reference to the Credit Agreement as amended hereby.

 

b.             Except as specifically amended
herein, the Credit Agreement, and all other documents, instruments and
agreements executed and/or delivered in connection therewith, shall remain in
full force and effect, and are hereby ratified and confirmed.

 

c.             Except as expressly provided  herein, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of the Bank, nor constitute a waiver of any provision of the
Credit Agreement, or any other documents, instruments or agreements executed
and/or delivered under or in connection therewith.

 

ARTICLE IV.

Miscellaneous.

 

Section
4.1.            This Amendment shall be
governed by and construed in accordance with the laws of the State of New York.

 

Section
4.2.            Section headings in this
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.

 

Section
4.3.            This Amendment may be
executed in one or more counterparts, each of which shall constitute an
original, and all of which, taken together, shall be deemed to constitute one
and the same agreement.

 

[next
page is signature page]

 

2

 

IN WITNESS
WHEREOF, the
Co-Borrowers and the Bank have caused this Amendment to be duly executed by
their duly authorized officers as of the day and year first above written.

 

	
  P&F INDUSTRIES, INC.

  	
  FLORIDA PNEUMATIC

  
	
   

  	
  MANUFACTURING CORPORATION

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Joseph A. Molino, Jr.

  	
   

  	
   

  	
  By:

  	
  /s/
  Joseph A. Molino, Jr.

  	
   

  
	
  Name:
  Joseph A. Molino. Jr.

  	
   

  	
  Name:
  Joseph A. Molino. Jr.

  
	
  Title:
  Vice President

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  
	
  EMBASSY INDUSTRIES, INC.

  	
  GREEN MANUFACTURING, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Joseph A. Molino, Jr.

  	
   

  	
   

  	
  By:

  	
  /s/
  Joseph A. Molino, Jr.

  	
   

  
	
  Name:
  Joseph A. Molino. Jr.

  	
   

  	
  Name:
  Joseph A. Molino. Jr.

  
	
  Title:
  Vice President

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  
	
  NATIONWIDE INDUSTRIES, INC.

  	
  COUNTRYWIDE HARDWARE, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Joseph A. Molino, Jr.

  	
   

  	
   

  	
  By:

  	
  /s/
  Joseph A. Molino, Jr.

  	
   

  
	
  Name:
  Joseph A. Molino. Jr.

  	
   

  	
  Name:
  Joseph A. Molino. Jr.

  
	
  Title:
  Vice President

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  
	
  CITIBANK, N.A.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Stephen Kelly

  	
   

  	
   

  
	
  Name:  Stephen Kelly

  	
   

  
	
  Title:
  Vice President

  	
   

  
	
   

  	
   

  
	
  Acknowledged and Accepted:

  	
   

  
	
   

  	
   

  
	
  STATE BANK OF LONG ISLAND

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Kevin T. Hennessy

  	
   

  	
   

  
	
  Name:  Kevin T. Hennessy

  	
   

  
	
  Title:
  First Vice President

  	
   

  
																

 

3Exhibit
10(c)(xv)

 

LEASE

 

 

BY AND BETWEEN

 

 

SHORELINE
PARK, LLC,

a Delaware limited liability company

as Landlord

 

 

and

 

 

AMERICAN SCIENCE AND ENGINEERING,
INC.,

as Tenant

 

 

For Premises located at

 

1383 Shorebird Way,
Mountain View, California

 

 

TABLE OF
CONTENTS

 

	
  SUMMARY OF BASIC LEASE
  TERMS

  
	
   

  
	
  ARTICLE 1 DEFINITIONS

  
	
   

  
	
  ARTICLE
  2 DEMISE, CONSTRUCTION, AND ACCEPTANCE

  
	
   

  
	
  ARTICLE
  3 RENT

  
	
   

  
	
  ARTICLE 4 USE OF PREMISES

  
	
   

  
	
  ARTICLE 5
  TRADE FIXTURES AND ALTERATIONS

  
	
   

  
	
  ARTICLE 6 REPAIR AND
  MAINTENANCE

  
	
   

  
	
  ARTICLE 7 WASTE
  DISPOSAL AND UTILITIES

  
	
   

  
	
  ARTICLE 8 COMMON
  OPERATING EXPENSES

  
	
   

  
	
  ARTICLE 9 INSURANCE

  
	
   

  
	
  ARTICLE 10 LIMITATION ON LANDLORD’S
  LIABILITY AND INDEMNITY

  
	
   

  
	
  ARTICLE 11 DAMAGE TO PREMISES

  
	
   

  
	
  ARTICLE 12 CONDEMNATION

  
	
   

  
	
  ARTICLE 13 DEFAULT AND
  REMEDIES

  
	
   

  
	
  ARTICLE 14
  ASSIGNMENT AND SUBLETTING

  
	
   

  
	
  ARTICLE 15 GENERAL
  PROVISIONS

  

 

 

LEASE

 

This Lease is dated as of the lease reference date
specified in Section A of the Summary of Basic Lease Terms and is made
by and between the party identified as Landlord in Section B of the
Summary and the party identified as Tenant in Section C of the Summary.

 

SUMMARY OF BASIC LEASE
TERMS

 

	
  SECTION

  (LEASE REFERENCE)

  	
   

  	
  TERMS

  
	
  A.

  (Introduction)

  	
   

  	
  Lease Reference Date:

  	
   

  	
  June 24, 2003

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  (Introduction)

  	
   

  	
  Landlord:

  	
   

  	
  Shoreline Park, LLC

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.

  (Introduction)

  	
   

  	
  Tenant:

  	
   

  	
  American Science and
  Engineering, Inc.

  a Massachusetts corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D.

  (§ 1.20)

  	
   

  	
  Premises:

  	
   

  	
  That area consisting of
  approximately 24,733 square feet of gross leasable area the address of which
  is 1383 Shorebird Way, Mountain View, California, and which is located within
  the Building.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E.

  (§1.21)

  	
   

  	
  Project:

  	
   

  	
  The land, Building and
  improvements shown on

  Exhibit A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  F.

  (§ 1.7)

  	
   

  	
  Building:

  	
   

  	
  The building in which
  the Premises are located having an address of 1383 Shorebird Way, Mountain
  View, California, and containing approximately 24,733 square feet of gross
  leasable area and shown on Exhibit A. 
  The gross leasable area of the Premises and Building referred to above
  shall be deemed the actual gross leasable area in the Premises and Building.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  G.

  (§ 1.28)

  	
   

  	
  Tenant’s Share:

  	
   

  	
  100% of the Building

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  H.

  (§4.5)

  	
   

  	
  Tenant’s Allocated
  Parking Stalls:

  	
   

  	
  77 parking spaces
  (based on the ratio of 3.14 parking spaces for each 1,000 square feet of
  gross leasable space in the Premises).

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I.

  (§ 1.24)

  	
   

  	
  Scheduled Commencement
  Date:  October 1,
  2003.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  J.

  (§ 1.17)

  	
   

  	
  Initial Term:

  	
   

  	
  84 calendar months
  (plus the partial month following the Commencement Date if such date is not
  the first day of a month).

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  K.

  (§ 3.1)

  	
   

  	
  Base Monthly Rent:

  	
   

  	
  Months

  	
   

  	
  Monthly Amount

  
	
   

  	
   

  	
   

  	
  1 – 12

  	
   

  	
  $14,839.80 (i.e., $0.60
  per sq. foot)

  
	
   

  	
   

  	
   

  	
   

  	
  13 – 24

  	
   

  	
  $22,259.70 (i.e., $0.90
  per sq. foot)

  
	
   

  	
   

  	
   

  	
   

  	
  25 – 36

  	
   

  	
  $25,969.65 (i.e., $1.05
  per sq. foot)

  
	
   

  	
   

  	
   

  	
   

  	
  37 – 48

  	
   

  	
  $28,442.95 (i.e., $1.15
  per sq. foot)

  
	
   

  	
   

  	
   

  	
   

  	
  49 – 60

  	
   

  	
  $30,916.25 (i.e., $1.25
  per sq. foot)

  
	
   

  	
   

  	
   

  	
   

  	
  61 – 72

  	
   

  	
  $33,389.55 (i.e., $1.35
  per sq. foot)

  
	
   

  	
   

  	
   

  	
   

  	
  73 – 84

  	
   

  	
  $35,862.85 (i.e., $1.45
  per sq. foot)

  

 

1

 

	
  L.

  (§ 3.3)

  	
   

  	
  Prepaid Rent:

  	
   

  	
  $28,079.99 representing
  $14,839.80 for Base Monthly Rent and $13,240.19 for Tenant’s Share of Common
  Operating Expenses.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  M.

  (§ 3.5)

  	
   

  	
  Security Deposit:  $35,863.00

  
	
   

  	
   

  	
   

  
	
  N.

  (§ 4.1)

  	
   

  	
  Permitted Use:
  General office, research & development and light manufacturing.

  
	
   

  	
   

  	
   

  
	
  O.

  (§ 5.2)

  	
   

  	
  Permitted Tenant’s
  Alterations limit: 
  $25,000.00

  
	
   

  	
   

  	
   

  
	
  P.

  (§9.1)

  	
   

  	
  Tenant’s Liability
  Insurance Minimum: 
  $3,000,000.00

  
	
   

  	
   

  	
   

  
	
  Q.

  (§ 1.3)

  	
   

  	
  Landlord’s Address:

  	
   

  	
  Divco West Group, LLC

  100 Park Center Plaza, Suite 425

  San Jose, California 95113

  Attn:  Property Manager

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy to:

  	
   

  	
  Divco West Group, LLC

  150 Almaden Blvd., Suite 700

  San Jose, CA 95113

  Attn.: Asset Manager

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  R.

  (§ 1.3)

  	
   

  	
  Tenant’s Address:

  	
   

  	
  American Science and
  Engineering, Inc.

  819 Middlesex Turnpike

  Billerica, MA  01821

  Attn.: General Counsel

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy to:

  	
   

  	
  Ropes & Gray

  One International Place

  Boston, MA 02110

  Attn.: David B. Walek, Esquire

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  S.

  (§15.13) 

  	
   

  	
  Retained Real Estate
  Brokers:  Colliers
  International representing Landlord and Wayne Mascia Associates representing
  Tenant. 

  
	
   

  	
   

  
	
  T.

  (§ 1.16)

  	
   

  	
  Lease:

  	
   

  	
  This Lease includes the
  summary of the Basic Lease

  Terms, the Lease, and the following exhibits and addenda:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Exhibit A - Project
  Site Plan and Outline of the Premises

  Exhibit B - Work Letter for Tenant Improvements

  Exhibit C - Acceptance Agreement

  Exhibit D - Hazardous Material Certificate

  
						

 

2

 

The foregoing Summary is hereby incorporated into and
made a part of this Lease.  Each
reference in this Lease to any term of the Summary shall mean the respective
information set forth above and shall be construed to incorporate all of the
terms provided under the particular paragraph pertaining to such
information.  In the event of any
conflict between the Summary and the Lease, the Summary shall control.

 

ARTICLE 1 DEFINITIONS

 

1.1                                 General:  Any initially capitalized term that is given
a special meaning by this Article 1, the Summary, or by any other provision of
this Lease (including the exhibits attached hereto) shall have such meaning
when used in this Lease or any addendum or amendment hereto unless otherwise
clearly indicated by the context.

 

1.2                                 Additional
Rent:  The term “Additional Rent” is defined in Section 3.2.

 

1.3                                 Address
for Notices:  The term “Address for Notices” means the addresses
set forth in Sections Q and R of the Summary, as they may be changed
from time to time pursuant to Section 15.8 below.

 

1.4                                 Agents:  The term “Agents”
means the following: (i) with respect to Landlord, the employees, contractors
and agents of Landlord; and (ii) with respect to Tenant, the employees,
contractors and agents of Tenant and Tenant’s subtenants, but in any event
Tenant’s Agents shall not include any of Landlord’s Agents.

 

1.5                                 Agreed
Interest Rate:  The term “Agreed Interest Rate” means that interest
rate determined as of the time it is to be applied that is equal to the lesser
of (i) 5% in excess of the discount rate established by the Federal Reserve
Bank of San Francisco as it may be adjusted from time to time, or (ii) the
maximum interest rate permitted by Law.

 

1.6                                 Base
Monthly Rent:  The term “Base Monthly Rent” means the fixed monthly
rent payable by Tenant pursuant to Section 3.1 which is specified in Section
K of the Summary.

 

1.7                                 Building:  The term “Building”
means the building in which the Premises are located which Building is
identified in Section F of the Summary.

 

1.8                                 Commencement
Date:  The term “Commencement Date” is the date the Lease
Term commences, which term is defined in Section 2.2.

 

1.9                                 Common
Area:  The term “Common Area” means all areas and facilities
within the Project that are not designated by Landlord for the exclusive use of
Tenant or any other lessee or other occupant of the Project, including the
parking areas, access and perimeter roads, pedestrian sidewalks, landscaped
areas, trash enclosures, recreation areas and the like.  The Common Area shall include all areas of
the Project reasonably necessary for access to the Premises.

 

1.10                           Common
Operating Expenses:  The term “Common Operating Expenses” is defined in Section
8.2.

 

1.11                           Effective
Date:  The term “Effective Date” means the date the last
signatory to this Lease whose execution is required to make it binding on the
parties hereto shall have executed this Lease.

 

1.12                           Event
of Tenant’s Default:  The term “Event of Tenant’s Default” is defined in
Section 13.1.

 

3

 

1.13                           Hazardous
Materials:  The terms “Hazardous Materials” and “Hazardous Materials Laws” are defined in
Section 7.2F.

 

1.14                           Insured
and Uninsured Peril:  The terms “Insured Peril” and “Uninsured Peril” are defined in Section
11.2E.

 

1.15                           Law:  The term “Law”
means any judicial decision, statute, constitution, ordinance, resolution,
regulation, rule, administrative order, or other requirement of any municipal,
county, state, federal or other government agency or authority having
jurisdiction over the parties to this Lease or the Premises, or both, in effect
either at the Effective Date or any time during the Lease Term, including,
without limitation, any Hazardous Material Law (as defined in Section 7.2F) and
the Americans with Disabilities Act, 42 U.S.C. §§ 12101 et.  seq.
and any rules, regulations, restrictions, guidelines, requirements or
publications promulgated or published pursuant thereto.

 

1.16                           Lease:  The term “Lease”
means the Summary and all elements of this Lease identified in Section T
of the Summary, all of which are attached hereto and incorporated herein by
this reference.

 

1.17                           Lease
Term:  The term “Lease Term” or “Term” means the Initial Term (which shall commence on the
Commencement Date and continue for the period specified in Section J of
the Summary) together with any duly exercised Extension Term as provided in
Section 2.6.

 

1.18                           Lender:  The term “Lender”
means any beneficiary, mortgagee, secured party, lessor, or other holder of any
Security Instrument.

 

1.19                           Permitted
Use:  The term “Permitted Use” means the use specified in Section
N of the Summary.

 

1.20                           Premises:  The term “Premises”
means that building area described in Section D of the Summary that is
within the Building.

 

1.21                           Project:  The term “Project”
means that real property and the improvements thereon which are specified in Section
E of the Summary.  Landlord reserves
the right, in its sole and absolute discretion, to include such other buildings
in the Project, to sell, transfer, assign or otherwise dispose of any building
or parcel in the Project and elect to remove such building and/or parcel from
the Project.

 

1.22                           Private
Restrictions:  The term “Private Restrictions” means all recorded
covenants, conditions and restrictions, private agreements, reciprocal easement
agreements, and any other recorded instruments affecting the use of the
Premises which (i) exist as of the Effective Date, copies of which have been
delivered to Tenant prior to the Effective Date, or (ii) are recorded after the
Effective Date, but any recorded after the Effective Date will be subject to
the reasonable approval of Tenant to the extent such instruments will have a
material effect on Tenant’s use and occupancy of the Premises under this Lease.

 

1.23                           Real
Property Taxes:  The term “Real Property Taxes” is defined in Section
8.3.

 

1.24                           Scheduled
Commencement Date:  The term “Scheduled Commencement Date” means the date
specified in Section I of the Summary.

 

1.25                           Security
Instrument:  The term “Security Instrument” means any underlying
lease, mortgage or deed of trust which now or at any time during the Term
affects the Project, and any renewal, modification, consolidation, replacement
or extension thereof.

 

4

 

1.26                           Summary:  The term “Summary”
means the Summary of Basic Lease Terms executed by Landlord and Tenant that is
part of this Lease.

 

1.27                           Tenant’s
Alterations:  The term “Tenant’s Alterations” or “Tenant’s Alteration” or “Tenant Alteration” means all improvements,
additions, alterations, and fixtures installed in the Premises by Tenant.

 

1.28                           Tenant’s
Share: The term “Tenant’s Share”
means the percentage obtained by dividing Tenant’s gross leasable area in the
Premises (as set forth D of the Summary) by the gross leaseable area in the
Building, which as of the Effective Date is the percentage identified in Section
G of the Summary.

 

1.29                           Trade
Fixtures:  The term “Trade Fixtures” means (i) Tenant’s
inventory, furniture, signs, and business equipment, and (ii) anything affixed
to the Premises by Tenant at its expense for purposes of trade, manufacture,
ornament or domestic use (except replacement of similar work or material
originally installed by Landlord) which can be removed without material injury
to the Premises unless such thing has, by the manner in which it is affixed,
become an integral part of the Premises.

 

ARTICLE 2 DEMISE,
CONSTRUCTION, AND ACCEPTANCE

 

2.1                                 Demise
of Premises:  Landlord hereby leases
to Tenant, and Tenant leases from Landlord, for the Lease Term upon the terms
and conditions of this Lease, the Premises together with (i) the non-exclusive
right to use the number of Tenant’s Allocated Parking Stalls within the Common
Area (subject to the limitations set forth in Section 4.5), and (ii) the
non-exclusive right to use the Common Area for ingress to and egress from the
Premises.  Landlord reserves the use of
the exterior walls, the roof and the area beneath and above the Premises,
together with the right to maintain, use, and, in locations which will not
materially interfere with Tenant’s use of the Premises, replace the
currently-existing ducts, wires, conduits and pipes leading through the
Premises.

 

2.2                                 Commencement
Date:  The “Commencement Date” will be the earlier of
(i) the date Landlord delivers possession of the Premises to Tenant in the
condition required hereunder after the “Tenant Improvements” have been
“Substantially Completed” (as such terms are defined in Exhibit B attached
hereto), or (ii) the date Tenant occupies the Premises for the operation of its
business.  The Lease term starts on the
Commencement Date.  The Scheduled
Commencement Date is only an estimate of the date the parties anticipate the
Tenant Improvements will be Substantially Completed.

 

2.3                                 Construction
of Improvements:  Prior to the
Commencement Date, Landlord shall construct the Tenant Improvements in
accordance with the terms of Exhibit B.

 

2.4                                 Delivery
and Acceptance of Possession: 
Landlord shall deliver the Premises to Tenant in broom clean,
weathertight condition, free of all persons and personal property (other than
the Cubicles (hereinafter defined)), in compliance with all applicable Laws
(including any work or improvements required for the Tenant Improvements (as
provided in Exhibit B), but excluding the installation of any Trade Fixtures by
Tenant) and with all building systems (including without limitation all
plumbing, HVAC, sewage and electrical systems) and building facilities (including
without limitation wiring and conduits, gas lines (if any), water pipes, and
plumbing and sewage facilities) in good working order, condition and
repair.  If Landlord is unable to
deliver possession of the Premises to Tenant in such condition with the Tenant
Improvements Substantially Completed on or before the Scheduled Commencement
Date for any reason whatsoever, then this Lease shall not be void or voidable
except as provided in this Section 2.4, and Landlord shall not be liable to
Tenant for any loss or damage resulting therefrom.  To the extent any delay in Substantially Completing the Tenant
Improvements or in delivering possession to Tenant is due to any Tenant Delay
(as defined in Exhibit B) or otherwise due to the acts or, where there
is a duty to act at law or under this Lease, the omissions of Tenant or its
employees, agents

 

5

 

or contractors (including without limitation the failure to timely
deliver plans, insurance certificates or other items as required by this
Lease), then the Commencement Date shall be deemed to be the date the
Commencement Date would have occurred but for any such delay by Tenant.
Notwithstanding the foregoing, if Landlord does not deliver possession of the
Premises to Tenant in the condition required hereunder within 90 days after the
Scheduled Commencement Date, then Tenant (if the delay was not due to a Force
Majeure Delay, Tenant Delay or otherwise due to the acts or, where there is a
duty to act at law or under this Lease, the omissions of Tenant or its
employees, agents or contractors as    provided
above) shall have the right as its sole and exclusive remedy to terminate this
Lease upon written notice to Landlord within ten 10 days after the earlier of
(i) notice from Landlord that there will be a delay beyond said time period, or
(ii) after the end of said time period. 
Provided the Premises are delivered  in the condition required
hereunder, Tenant shall accept possession and enter into good faith occupancy
of the entire Premises when delivery is offered by Landlord.

 

Tenant acknowledges that it has had an opportunity to
conduct, and has conducted, such inspections of the Premises as it deems
necessary to evaluate its condition. 
Except as otherwise specifically provided herein, and provided that
Landlord delivers the Premises to Tenant in the condition required hereunder,
Tenant agrees to accept possession of the Premises in its then existing
condition, “AS IS”.  Within ten (10)
business days after Tenant’s actual knowledge of any latent defect, Tenant
shall send written to Landlord setting forth in reasonable detail the nature of
such latent defect.  Provided such
notice is received by Landlord on or before the first (1st) anniversary of the
Commencement Date, Landlord shall, without cost to Tenant, within a reasonable
period of time after receipt of such notice, commence to correct such latent
defect, and shall diligently pursue the same to completion.  Subject to the foregoing, Tenant’s taking
possession of any part of the Premises shall be deemed to be an acceptance by
Tenant of any work or improvement done by Landlord in such part as
Substantially Complete and in accordance with the terms of this Lease except
for (a) defects of which Tenant has given Landlord written notice within thirty
(30) days after Tenant takes possession, and (b) punch list items.  Within fifteen (15) days after Landlord
delivers possession of the Premises to Tenant in the condition required
hereunder, Landlord shall prepare and Landlord and Tenant shall together
execute an acceptance agreement in the form attached as Exhibit C,
appropriately completed.  The failure of
Tenant to execute such agreement or the failure of Landlord to request such
agreement within such fifteen (15) day period shall not delay or extend the
Commencement Date nor shall Tenant’s obligation to pay Base Monthly Rent and
Additional Rent be excused or delayed because of Tenant’s failure to execute
such acceptance agreement within such fifteen (15) day period.

 

2.5                                 Early
Occupancy:  If Tenant enters or
permits its contractors to enter the Premises prior to the Commencement Date
with the written permission of Landlord (which permission shall not be
unreasonably withheld, conditioned or delayed), it shall do so upon all of the
terms of this Lease (including its obligations regarding indemnity and
insurance) except those regarding the obligation to pay rent (as defined in
Section 3.3 below), which shall commence on the Commencement Date.

 

2.6                                 Extension
Term:  Tenant shall have one (1)
option to extend the Initial Term of the Lease for a period of five (5) years
(the period shall be referred to as the “Extension
Term”) by giving written notice of exercise of such option (“Extension Option Notice”) at least one
hundred eighty (180) days, but not more than three hundred sixty-five (365)
days, prior to the expiration of the Initial Term.  The Extension Term shall commence, if at all, immediately
following the expiration of the Initial Term of the Lease.  If Tenant is in default (after notice and
the expirations of the applicable cure period) under any term or provision of
the Lease on the date of giving an Extension Option Notice, or if Tenant is in
default (after notice and the expiration of the applicable cure period) under
any term or provision of the Lease on the date of the Extension Term is to
commence, the Extension Term at the option of Landlord shall not commence and
the Lease shall expire at the end of Initial Term.  The Extension Term shall be upon all of the terms and provisions
of the Lease, except that (a) the Base Monthly Rent  during such Extension Term shall be one hundred percent (100%) of
the then Fair Market Rent, (b) any work, improvements, allowances (including
without limitation, Landlord’s Allowance as defined in Exhibit B) or concession
will not apply, and (c) Tenant shall not have any option or right to extend the
Term beyond the Extension Term.  The
foregoing option to extend is personal to the original Tenant signing

 

6

 

the Lease and a transferee under a Permitted Transfer (as defined in
Section 14.1F), but not be assigned or transferred to or exercised by any other
assignee, sublessee or transferee under a Transfer.

 

A.                                   Fair
Market Rent. The term “Fair Market Rent”
for purposes of determining Base Monthly Rent during the Extension Term shall
mean the base monthly rent generally applicable to similar leases in like
buildings for space of comparable size, age, quality of the Premises in the
Mountain View, Sunnyvale and Santa Clara, California area projected as of the
first day of the Extension Term by giving due consideration for the quality of
the Building and improvements therein (including the quality of the then
existing improvements in the Premises, including the Tenant Improvements, but
not Tenant’s Trade Fixtures), for a term comparable to the Extension Term at
the time the commencement of the Extension Term is scheduled to commence,
without any deduction for amortization or cost of tenant improvements or commissions
whether or not incurred by Landlord, and otherwise subject to the terms and
conditions of this Lease that will be applicable during the Extension Term.

 

B.                                     Procedure
to Determine Fair Market Rent. 
Within thirty (30) days of Extension Option Notice, Landlord shall
notify Tenant in writing of Landlord’s determination of the Fair Market Rent (“Landlord’s FMR”).  Within thirty (30) days after receipt of such written notice of
Landlord’s FMR, Tenant shall have the right either to: (i) elect to cancel the
Extension Option Notice for the Extension Term, (ii) accept Landlord’s FMR or
(iii) elect to have the Fair Market Rent determined in accordance with the
appraisal procedure set forth below. 
The failure of Tenant to provide written notice of its election under
the preceding sentence shall be deemed an acceptance of Landlord’s FMR.  The election (or deemed election ) by Tenant
under this section shall be non-revocable and binding on the parties.

 

C.                                     Appraisers.  If Tenant has elected to have the Fair
Market Rent determined by an appraisal, then within ten (10) days after receipt
of Tenant’s written notice of such an election, each party, by giving written
notice to the other party, shall appoint an appraiser to render a written
opinion of the Fair Market Rent for the Extension Term.  Each appraiser must be a member of the
Appraisal Institute of America (MAI) for at least five years and with at least
five years experience in the appraisal of rental rates of office buildings in
the area in which the Building is located and otherwise unaffiliated with
either Landlord or Tenant.  The two
appraisers shall render their written opinion of the Fair Market Rent for the
Extension Term to Landlord and Tenant within thirty (30) days after the
appointment of the second appraiser.  If
the Fair Market Rent of each appraiser is within five percent (5%) of each
other, then the average of the two appraisals of Fair Market Rent shall be the
Base Monthly Rent for the Extension Term. 
If one party does not appoint its appraiser as provided above, then the
one appointed shall determine the Fair Market Rent.  The Fair Market Rent so determined under this section shall be
binding on Landlord and Tenant.

 

D.                                    Third
Appraiser.  If the Fair Market Rent
determined by the appraisers is more than five percent (5%) apart, then the two
appraisers shall pick a third appraiser within ten (10) days after the two
appraisers have rendered their opinions of Fair Market Rent as provided
above.  If the two appraisers are unable
to agree on the third appraiser within said ten (10) day period, Landlord and
Tenant shall mutually agree on the third appraiser within ten (10) days
thereafter and if the parties fail to agree within said time period, then at
the request of either Landlord or Tenant, such third appraiser shall be
promptly appointed by the then Presiding Judge of the Superior Court of the
State of California for the County where the Premises are located..  The third appraiser shall be a person who
has not previously acted in any capacity for either party and must meet the
qualifications stated above.

 

E.                                      Impartial
Appraisal.  Within thirty (30) days
after its appointment, the third appraiser shall render its written opinion of
the Fair Market Rent for the applicable Extension Term (“Third Opinion”).  If the fair market rent set forth in the Third Opinion is
equidistant from the fair market rent determination of Landlord’s and Tenant’s
appraiser, then the fair market rent contained in the Third Opinion shall be
the Base Monthly Rent during the Extension Term.  If the fair market rent of the Third Opinion is not equidistant
from the fair market rent made by Landlord’s and Tenant’s appraiser, then the
two closest fair market determinations

 

7

 

made by Landlord’s appraiser, Tenant’s appraiser and the Third Opinion
shall be average and such average shall be the Base Monthly Rent during the
applicable Extension Term.  The fair
market rent determined in accordance with the foregoing procedure shall be
binding on the parties

 

F.                                      Appraisal
Costs.  Each party shall bear the
cost of its own appraiser and one-half (1/2) the cost of the third appraiser.

 

G.                                     Acknowledgment
of Rent.  After the Fair Market Rent
for the Extension Term has been established in accordance with the foregoing
procedure, Landlord and Tenant shall promptly execute an amendment to the Lease
to reflect the Base Monthly Rent  for
the Extension Term.

 

ARTICLE 3 RENT

 

3.1                                 Base
Monthly Rent:  Commencing on the
Commencement Date and continuing throughout the Lease Term, Tenant shall pay to
Landlord the Base Monthly Rent set forth in Section K of the Summary.

 

3.2                                 Additional
Rent:  Commencing on the
Commencement Date and continuing throughout the Lease Term, Tenant shall pay
the following as additional rent (the “Additional
Rent”) as and when due: (i) any late charges or interest due
Landlord pursuant to Section 3.4; (ii) Tenant’s Share of Common Operating
Expenses as provided in Section 8.1; (iii) Landlord’s share of any Subrent
received by Tenant upon certain assignments and sublettings as required by
Section 14.1; (iv) any legal fees and costs due Landlord pursuant to Section
15.9; and (v) any other charges due Landlord pursuant to this Lease.

 

3.3                                 Payment
of Rent:  Concurrently with the
execution of this Lease by both parties, Tenant shall pay to Landlord the
amount set forth in Section L of the Summary as prepayment of rent for
credit against the first installment(s) of Base Monthly Rent and Tenant’s Share
of estimated Common Operating Expenses.   
The term “Rent” or “rent” shall mean Base Monthly Rent,
Additional Rent and other sums required to be paid by Tenant to Landlord under
this Lease.  All rent required to be
paid in monthly installments shall be paid in advance on the first day of each
calendar month during the Lease Term. 
All rent shall be paid in lawful money of the United States, without any
abatement, deduction or offset whatsoever (except as specifically provided in
Section 6.4, Section 11.4 and Section 12.3), and without any prior demand therefor.  Rent shall be paid to Landlord at its
address set forth in Section Q of the Summary, or at such other place as
Landlord may designate by written notice to Tenant from time to time.  Tenant’s obligation to pay rent shall be
prorated at the commencement and expiration of the Lease Term.

 

3.4                                 Late
Charge, Interest and Quarterly Payments:

 

(a)                                  Late
Charge.  Tenant acknowledges that
the late payment by Tenant of any installment of rent, or any other sum of
money required to be paid by Tenant under this Lease, will cause Landlord to
incur certain costs and expenses not contemplated under this Lease, the exact
amount of such costs being extremely difficult and impractical to fix.  Such costs and expenses will include,
without limitation, attorneys’ fees, administrative and collection costs, and
processing and accounting expenses and other costs and expenses necessary and
incidental thereto.  If any Base Monthly
Rent or Additional Rent is not received by Landlord from Tenant when such
payment is due, then Tenant shall, upon demand, pay to Landlord a late charge
equal to 5% of such delinquent rent as liquidated damages for Tenant’s failure
to make timely payment; provided, however, that Landlord agrees that Tenant
shall not have to pay such late charge if it makes its payment in full within
five (5) days after receipt of written notice from Landlord, except that this
notice and cure period shall only be applicable for the first two times each
calendar year that Tenant fails to pay any Base Monthly Rent or any Additional
Rent when due.  If Landlord has provided two notices of a late
payment or default during a calendar year, Landlord shall not be obligated to
provide any notice thereafter for the remainder of such calendar year and such
late charge shall be due if payment is not made when due without any grace
period or notice..  In no event
shall this provision for a late charge be deemed to grant to Tenant a grace
period or extension of time

 

8

 

within which to pay any rent or, subject to Section 13 below, prevent
Landlord from exercising any right or remedy available to Landlord upon
Tenant’s failure to pay any rent due within the notice and cure periods
otherwise provided under this Lease, including any right to terminate this
Lease pursuant to Section 13.2B.

 

(b)                                 Interest.  If any rent remains delinquent for a period
in excess of ten (10) days then, in addition to such late charge, Tenant shall
pay to Landlord interest on any rent that is not paid when due at the Agreed
Interest Rate following the date such amount became due until paid.

 

(c)                                  INTENTIONALLY
OMITTED.

 

3.5                                 Security
Deposit:  On the Effective Date,
Tenant shall deposit with Landlord the amount set forth in Section M of
the Summary as security for the performance by Tenant of its obligations under
this Lease, and not as prepayment of rent (the “Security Deposit”). 
Landlord may from time to time apply such portion of the Security
Deposit as is reasonably necessary for the following purposes: (i) after the
expiration of applicable notice and cure periods set forth in Section 13 below
(except in an emergency), to remedy any default by Tenant in the payment of
rent; (ii) after the expiration of applicable notice and cure periods set forth
in Section 13 below, to repair damage to the Premises caused by Tenant; (iii)
to the extent Tenant fails to do so, to put the Premises in broom clean
condition upon the expiration or earlier termination of the Lease; and (iv)
after the expiration of applicable notice and cure periods set forth in Section
13 below, to remedy any other default of Tenant to the extent permitted by Law
and, in this regard, Tenant hereby waives any restriction on the uses to which
the Security Deposit may be put contained in California Civil Code Section
1950.7, it being agreed that Landlord may, in addition, claim those sums
reasonably necessary to compensate Landlord for any other loss or damage,
foreseeable or unforeseeable, caused by the act or, where there is a duty to
act at law or under this Lease, the omission of Tenant or any officer,
employee, agent or invitee of Tenant in violation of the terms of this
Lease.  In the event the Security
Deposit or any portion thereof is so used, Tenant agrees to pay to Landlord
promptly upon demand an amount in cash sufficient to restore the Security
Deposit to the full original amount. 
Landlord shall not be deemed a trustee of the Security Deposit, may use
the Security Deposit in business, and shall not be required to segregate it
from its general accounts.  Tenant shall
not be entitled to any interest on the Security Deposit.  If Landlord transfers the Premises during
the Lease Term, Landlord shall pay the Security Deposit to any transferee of
Landlord’s interest in conformity with the provisions of California Civil Code
Section 1950.7 and/or any successor statute, in which event the transferring
Landlord will be released from all liability for the return of the Security
Deposit so paid over. The Security Deposit or the remaining proceeds therefrom,
as applicable, shall be returned to Tenant within thirty (30) days after the
end of the Term.

 

3.6                                 INTENTIONALLY
OMITTED.

 

ARTICLE 4 USE OF PREMISES

 

4.1                                 Limitation
on Use:  Tenant shall use the
Premises solely for the Permitted Use specified in Section N of the Summary.  There shall not be any change in use without
the prior written consent of Landlord which will not be unreasonably withheld,
conditioned or delayed.  Tenant shall
not do anything in or about the Premises which will (i) cause structural injury
to the Building, or (ii) cause damage to any part of the Building except to the
extent reasonably necessary for the installation of Tenant’s Trade Fixtures and
Tenant’s Alterations, and then only in a manner which has been first approved
by Landlord in writing, which approval will not be unreasonably withheld,
conditioned or delayed.  Tenant shall
not operate any equipment within the Premises which will (i) materially damage
the Building or the Common Area, (ii) overload existing electrical systems or
other mechanical equipment servicing the Building, (iii) impair the efficient
operation of the sprinkler system or the heating, ventilating or air
conditioning (“HVAC”) equipment
within or servicing the Building, or (iv) damage, overload or corrode the
sanitary sewer system.  Tenant shall not
attach, hang or suspend anything from the ceiling, roof, walls or columns of
the Building or set any load on the floor in excess of the load limits for
which such items are designed nor operate hard wheel forklifts within the Premises.  Any

 

9

 

dust, fumes, or waste products generated by Tenant’s use of the
Premises shall be contained and 
disposed so that they do not (i) create an unreasonable fire or health
hazard, (ii) damage the Premises, or (iii) result in the violation of any
Law.  Except as otherwise set forth
herein or as  approved by Landlord,
which approval shall not be unreasonably withheld, conditioned or delayed,
Tenant shall not change the exterior of the Building or install any equipment
or antennas on or make any penetrations of the exterior or roof of the
Building.  Tenant shall not commit any
waste in or about the Premises, and Tenant shall keep the Premises in a neat,
clean, attractive and orderly condition, free of any nuisances.  If Landlord designates a standard window
covering for use throughout the Building, Tenant shall use this standard window
covering to cover all windows in the Premises. 
Tenant shall not conduct on any portion of the Premises or the Project
any sale of any kind, including any public or private auction, fire sale,
going-out-of-business sale, distress sale or other liquidation sale.

 

4.2                                 Compliance
with Regulations:  Tenant shall not
use the Premises in any manner which violates any Laws or Private Restrictions
which affect the Premises.  Tenant shall
abide by and promptly observe and comply with all Laws and Private Restrictions
applicable to Tenant’s particular use and occupancy of the Premises or the
manner in which it conducts its business therein or due to any Tenant
Alteration.  Tenant shall not use the
Premises in any manner which will cause a cancellation of any insurance policy
covering Tenant’s Alterations or any improvements installed by Landlord at its
expense or which poses an unreasonable risk of damage or injury to the
Premises.  Tenant shall not sell, or
permit to be kept, used, or sold in or about the Premises any article which may
be prohibited by the standard form of fire insurance policy.  Tenant shall comply with all reasonable
requirements of any insurance company, insurance underwriter, or Board of Fire
Underwriters which are necessary to maintain the insurance coverage carried by
either Landlord or Tenant pursuant to this Lease.  Except to the extent required of Tenant under this Section 4.2 of
under Section 5.3 hereof, Landlord shall, at its sole cost and expense (but,
subject to Section 8.2D below, subject to reimbursement pursuant to Section 5.4
and Section 8.1), comply with all Private Restrictions, Laws and any direction
of any public office or officer acting in their lawful capacity relating to the
maintenance of the structural parts of the Building as a combination office,
research, development and light manufacturing building.  Landlord shall, at its sole cost and expense
(but, subject to Section 8.2D below, subject to reimbursement pursuant to
Section 5.4 and Section 8.1), comply with any Laws applicable to the Common
Area.

 

4.3                                 Outside
Areas:  No materials, supplies,
tanks or containers, equipment, finished products or semi-finished products,
raw materials, inoperable vehicles or articles of any nature shall be stored
upon or permitted to remain outside of the Premises except in fully fenced and
screened areas outside the Building which have been designed for such purpose
and have been approved in writing by Landlord for such use by Tenant.

 

4.4                                 Signs:  Tenant shall have the right, at tits sole
cost and expense, to erect and maintain up to two (2) marquee signs on the
exterior of the Building (the “Exterior Signage”), provided (i) the
Exterior Signage complies with all Laws and Private Restrictions (and Tenant
shall have obtained any necessary permits prior to erecting the Exterior
Signage), (ii) the size, location, materials, design and lighting of the
Exterior Signage, and any requested changes thereto, shall be subject to
Landlord’s prior written approval, which approval shall not be unreasonably
withheld, conditioned or delayed, and (iv) Tenant shall at all times maintain
the Exterior Signage in good condition and repair, and shall remove the
Exterior Signage and restore the affected area at the expiration or sooner
termination of this Lease.  At no cost
or undertaking by Landlord, Landlord agrees to reasonably cooperate with Tenant
in obtaining any necessary governmental approvals and permits in connection
with the Exterior Signage.  Tenant shall
have the right, from time to time throughout the Lease Term, to replace the
Exterior Signage (if any) with signage which is equivalent to the signage being
replaced, subject to all of the terms and conditions of this Section 4.4.  Tenant acknowledges and agrees that the
foregoing signage rights are personal to Tenant and its affiliates, but may not
be exercised by or applicable to any transferee under a Transfer.  Tenant also acknowledges and agrees that
obtaining such Exterior Signage is not a condition precedent or subsequent to
the Lease nor a covenant by Landlord. 
The failure of Tenant to obtain all requisite

 

10

 

approvals for the Exterior Signage shall not entitle Tenant to any
abatement in rent or other change in the terms of this Lease.  Tenant shall not place on any portion of the
exterior of the Building any other sign, placard, lettering in or on windows,
banner, displays or other advertising or communicative material which is
visible from the exterior of the Building without the prior written approval of
Landlord, which approval shall not be unreasonably withheld, conditioned or
delayed.  All such approved signs shall
strictly conform to all Laws, Private Restrictions, and Landlord’s reasonable
sign criteria then in effect and shall be installed at the expense of
Tenant.  Tenant shall maintain such
signs in good condition and repair. 
Tenant shall have the right, at its sole cost and expense, without
Landlord’s consent, to install sign(s), placard(s), banner(s), display(s)
and/or other advertising or communicative material(s) within the interior of
the Premises, provided such materials are not visible from the exterior of the
Building.

 

4.5                                 Parking:  Tenant is allocated and shall have the
non-exclusive right to use not more than the number of Tenant’s Allocated
Parking Stalls contained within the Project described in Section H of
the Summary for its use and the use of Tenant’s Agents, the location of which
may be designated from time to time by Landlord within reasonable proximity to
the Building.  Tenant shall not at any
time use more parking spaces than the number so allocated to Tenant or park its
vehicles or the vehicles of others in any portion of the Project not designated
by Landlord as a non-exclusive parking area. 
Tenant shall not have the exclusive right to use any specific parking
space.  If Landlord grants to any other
tenant the exclusive right to use any particular parking space(s), Tenant shall
not use such spaces.  Landlord reserves
the right, after having given Tenant at least one (1) business day’s prior
written notice, to have any vehicles owned by Tenant or Tenant’s Agents
utilizing parking spaces in excess of the parking spaces allowed for Tenant’s
use to be towed away at Tenant’s cost. 
All trucks and delivery vehicles shall be (i) parked at the rear of the
Building, (ii) loaded and unloaded in a manner which does not interfere with
the businesses of other occupants of the Project, and (iii) permitted to remain
on the Project only so long as is reasonably necessary to complete loading and
unloading.  In the event Landlord elects
or is required by any Law to limit or control parking in the Project, whether
by validation of parking tickets or any other method of assessment, Tenant
agrees to participate in such validation or assessment program under such
reasonable rules and regulations as are from time to time established by
Landlord.

 

4.6                                 Rules
and Regulations:  Landlord may from
time to time promulgate reasonable and nondiscriminatory rules and regulations
applicable to all occupants of the Project for the care and orderly management
of the Project and the safety of its tenants and invitees.  Such rules and regulations shall be binding
upon Tenant upon delivery of a copy thereof to Tenant, and Tenant agrees to
abide by such rules and regulations.  If
there is a conflict between the rules and regulations and any of the provisions
of this Lease, the provisions of this Lease shall prevail.  Landlord shall not be responsible for the
violation by any other tenant of the Project of any such rules and
regulations.  Upon written notice from
Tenant, Landlord shall use commercially reasonable efforts to remedy any such
violation if such violation unreasonably interferes with Tenant’s rights
hereunder.

 

ARTICLE 5 TRADE FIXTURES
AND ALTERATIONS

 

5.1                                 Trade
Fixtures:  Throughout the Lease
Term, Tenant may provide and install, and shall maintain in good condition, any
Trade Fixtures required in the conduct of its business in the Premises, except
to the extent (a) any Trade Fixture will use, generate, store or dispose of any
Hazardous Material in which case it shall be subject to the requirements set
forth in Section 7.2 below, or (b) any Trade Fixture will constitute a Tenant
Alteration, in which case it shall be subject to the requirements set forth
below for the construction of a Tenant Alteration, including, without
limitation, the prior written consent of Landlord.  All Trade Fixtures shall remain Tenant’s property.

 

5.2                                 Tenant’s
Alterations:  Construction by Tenant
of a Tenant Alteration shall be governed by the following:

 

11

 

A.                                   Consent
Required.  Except as otherwise set
forth herein, Tenant shall not construct any Tenant’s Alterations or otherwise
alter the Premises without Landlord’s prior written approval, which will not be
unreasonably withheld, conditioned or delayed unless such Tenant Alteration
affects areas outside of the Premises or the exterior of the Building or the
structural parts of the Building, in which case Landlord may withhold its
consent in its sole and absolute discretion. 
Notwithstanding the foregoing, Landlord’s consent shall not be required
for any Alteration to the interior of the Premises that is cosmetic in nature
such as painting or for any Tenant Alteration that complies with the following
requirements (herein referred to as a “Minor
Alteration”): (a) does not affect the roof or any area outside of
the Premises or require work inside the walls or above the ceiling of the
Premises; (b) does not affect the structural parts of the Building or
electrical, plumbing, HVAC or mechanical systems in the Building or servicing
the Premises, or the sprinkler or other life safety system; and (c) costs less
than the Permitted Tenant Alterations Limit specified in Section O of the
Summary in each instance and does not exceed two (2) times the Permitted Tenant
Alteration Limit in the aggregate for all of such Minor Alterations during each
calendar year. Tenant shall provide Landlord with prior written notice of any
Minor Alteration that requires a building permit.  In the event Landlord’s approval for any Tenant’s Alterations is
required, (i) Landlord shall respond to Tenant’s request within ten (10) days
after receipt of the name of the proposed licensed contractor and plans and
specifications for such Alterations, and (ii) Tenant shall not construct the
Tenant Alteration until Landlord has approved in writing the plans and
specifications therefor, and (iii) such Tenant’s Alterations shall be
constructed substantially in compliance with such approved plans and
specifications by a licensed contractor reasonably approved by Landlord.  All Tenant’s Alterations constructed by
Tenant shall be constructed by  a
licensed contractor in accordance with all Laws using new materials of good
quality.

 

B.                                     Other
Requirements.  Tenant shall not
commence construction of any Tenant’s Alterations until (i) all required
governmental approvals and permits have been obtained, (ii) all requirements
regarding insurance imposed by this Lease have been satisfied, (iii) Tenant has
given Landlord at least five days’ prior written notice of its intention to
commence such construction (the “Construction Notice”), and (iv) if
reasonably requested by Landlord at the time of Landlord’s approval thereof, or
in the case of Alterations not requiring Landlord’s consent, within five (5)
days after receipt of the Construction Notice, Tenant has obtained contingent
liability and broad form builders’ risk insurance in an amount reasonably
satisfactory to Landlord if there are any perils relating to the proposed
construction not covered by insurance carried pursuant to Article 9.

 

C.                                     Restoration.  All Tenant’s Alterations shall remain the
property of Tenant during the Lease Term but shall not be altered or removed
from the Premises.  At the expiration or
sooner termination of the Lease Term, all Tenant’s Alterations shall be
surrendered to Landlord as part of the realty and shall then become Landlord’s
property, and Landlord shall have no obligation to reimburse Tenant for all or
any portion of the value or cost thereof; provided, however, that if Landlord
requires Tenant to remove any Tenant’s Alterations, Tenant shall so remove such
Tenant’s Alterations prior to the expiration or sooner termination of the Lease
Term.  Notwithstanding the foregoing,
Tenant shall not be obligated to remove any Tenant’s Alterations with respect
to which the following is true: (i) at the time Tenant requested Landlord’s
approval, or, in the case of Alterations not requiring Landlord’s approval, in
the Construction Notice Tenant requested of Landlord in writing that Landlord
inform Tenant of whether or not Landlord would require Tenant to remove such
Tenant Alteration at the expiration of the Lease Term; and (ii) at the time
Landlord granted its approval, or, in the case of Alterations not requiring
Landlord’s approval, within five (5) days after receipt of the Construction
Notice, Landlord did not inform Tenant that Landlord would require Tenant to
remove such Alteration at the expiration of the Lease Term.  Tenant shall not be obligated to remove the
initial Tenant Improvements constructed in the Premises pursuant to Exhibit
B to this Lease.

 

5.3                                 Alterations
Required by Law:  Tenant shall make
any alteration, addition or change of any sort to the Premises that is required
by any Law because of (i) Tenant’s particular use or change of use of the
Premises; (ii) Tenant’s application for any permit or governmental approval; or
(iii) Tenant’s construction or installation of any Tenant’s Alterations or
Trade Fixtures.  Any other alteration,
addition, or change required by

 

12

 

Law which is not the responsibility of Tenant pursuant to the foregoing
shall be made by  Landlord (subject to
Landlord’s right to reimbursement from Tenant specified in Section 5.4).

 

5.4                                 Amortization
of Certain Capital Improvements: 
Tenant shall pay Additional Rent in the event Landlord reasonably elects
or is required to make any of the following kinds of capital improvements to
the Project: (i) capital improvements required to be constructed in order to
comply with any Law (excluding any Hazardous Materials Law) not in effect or
applicable to the Project as of the Effective Date; (ii) modification of
existing or construction of additional capital improvements or building service
equipment for the purpose of reducing the consumption of utility services or
Common Operating Expenses of the Project; and (iii) replacement of capital
improvements or building  service
equipment existing as of the Effective Date when required because of normal
wear and tear.  The amount of Additional
Rent Tenant is to pay with respect to each such capital improvement shall be
determined as follows:

 

A.                                   Amortization
Period.  All costs paid by Landlord
to construct such capital improvements (including financing costs) shall be
amortized over the useful life of such capital improvement (as reasonably
determined by Landlord in accordance with generally accepted accounting
principles) with interest on the unamortized balance at the then prevailing
market rate Landlord would pay if it borrowed funds to construct such capital
improvements from an institutional lender, and Landlord shall inform Tenant of
the monthly amortization payment required to so amortize such costs, and shall
also provide Tenant with the information upon which such determination is made.

 

B.                                     Payment.  Provided that Tenant shall not be obligated
to pay for any portion of any capital improvement made to any portion of the
Project other than the Building and the Common Area, as Additional Rent, Tenant
shall pay at the same time the Base Monthly Rent is due an amount equal to
Tenant’s Share of that portion of such monthly amortization payment fairly
allocable to the Building (as reasonably determined by Landlord in good faith)
for each month after such capital improvements are completed until the first to
occur of (i) the expiration of the Lease Term (as it may be extended), or (ii)
the end of the term over which such costs were amortized.

 

5.5                                 Mechanic’s
Liens:  Tenant shall keep the
Project free from any liens and shall pay when due all bills arising out of any
work performed, materials furnished, or obligations incurred by Tenant or
Tenant’s Agents relating to the Project. 
If any claim of lien is recorded as a result of any such work by Tenant
or Tenant’s Agents, Tenant shall bond against or discharge the same within 20
days after receipt of notice that the same has been recorded against the
Project.  Should any lien be filed
against the Project or any action be commenced affecting title to the Project,
the party receiving notice of such lien or action shall immediately give the
other party written notice thereof.

 

5.6                                 Taxes
on Tenant’s Property:  Tenant shall
pay before delinquency any and all taxes, assessments, license fees and public
charges levied, assessed or imposed against Tenant or Tenant’s estate in this
Lease or the property of Tenant situated within the Premises which become due
during the Lease Term.  If any tax or
other charge is assessed by any governmental agency because of the execution of
this Lease, such tax shall be paid by Tenant. 
On demand by Landlord, Tenant shall furnish Landlord with satisfactory
evidence of these payments.

 

ARTICLE 6 REPAIR AND MAINTENANCE

 

6.1                                 Tenant’s
Obligation to Maintain:  Except as
otherwise provided in Section 5.3, Section 6.2, Section 11.1, and
Section 12.3, Tenant shall be responsible for the following during the
Lease Term:

 

A.                                   General.  Provided the Premises are delivered to
Tenant in the condition required hereunder, Tenant shall clean and maintain in
good order, condition, and repair and replace when necessary the Premises and
every part thereof, through regular inspections and servicing, including, but
not limited to: (i) all

 

13

 

plumbing and sewage facilities (including all sinks, toilets, faucets
and drains), and all ducts, pipes, vents or other parts of the plumbing system;
(ii) all fixtures, interior walls, floors, carpets and ceilings; (iii) all
windows, doors, entrances, plate glass, showcases and skylights (including
cleaning both interior and exterior surfaces); (iv) all electrical facilities
and all equipment (including all lighting fixtures, lamps, bulbs, tubes, fans,
vents, exhaust equipment and systems); and (v) any automatic fire extinguisher
equipment in the Premises.

 

B.                                     Utilities
and Glass.  Provided the Premises
are delivered to Tenant in the condition required hereunder, with respect to
utility facilities serving the Premises (including electrical wiring and
conduits, gas lines, water pipes, and plumbing and sewage fixtures and pipes),
Tenant shall be responsible for the maintenance and repair of any such
facilities which serve only the Premises, including all such facilities that
are within the walls or floor, or on the roof of the Premises, and any part of
such facility that is not within the Premises, but only up to the point where
such facilities join a main or other junction (e.g., sewer main or electrical
transformer) from which such utility services are distributed to other parts of
the Project as well as to the Premises.

 

C.                                     Windows.  Tenant shall replace any damaged or broken
glass in the Premises (including all interior and exterior doors and windows)
with glass of the same kind, size and quality. 
Subject to Section 6.2 below, Tenant shall repair any damage to the
Premises (including exterior doors and windows) caused by vandalism or any
unauthorized entry. Tenant shall maintain continuously throughout the Lease
Term a service contract for the washing of all windows (both interior and
exterior surfaces) in the Premises with a contractor, which contract provides for
the periodic washing of all such windows at least once every 90 days during the
Lease Term.  Tenant shall notify
Landlord of the name and address of such contractor.

 

D.                                    Standards.  All repairs and replacements required of
Tenant shall be promptly made with new materials of like kind and quality.  If the work affects the structural parts of
the Building or if the estimated cost of any item of repair or replacement is
in excess of the Permitted Tenant’s Alterations Limit, then Tenant shall first
obtain Landlord’s written approval of the scope of the work, plans therefor,
materials to be used, and the contractor, which approval shall not be
unreasonably withheld, conditioned or delayed.

 

6.2                                 Landlord’s
Obligation to Maintain:

 

A.                                   General.  Landlord shall repair, maintain and operate
the Common Area and repair and maintain the roof, exterior and structural parts
of the building(s) located on the Project so that the same are kept in good
order and repair.  In addition, Landlord
shall repair any damage caused by the acts or, where there is a duty to act
under this Lease, the omissions of Landlord and/or Landlord’s Agents.  Landlord shall not be responsible for
repairs required by an accident, fire or other peril or for damage caused to
any part of the Project by any act or, where there is a duty to act at law or
under this Lease, the omission of Tenant or Tenant’s Agents except as otherwise
required by Article 11.  Landlord may
engage contractors of its choice to perform the obligations required of it by
this Article, and the necessity of any expenditure to perform such obligations
shall be at the sole discretion of Landlord.

 

B.                                     HVAC.  In addition, Landlord agrees to maintain,
repair and replace when necessary the HVAC unit(s) which serve only the
Premises, and shall keep the same in good working condition through periodic
inspection and servicing.  The cost for
such work will not be included in Common Operating Expenses, provided such work
is not due to the negligence, willful misconduct or misuse by Tenant or any of
Tenant’s Agents.  If such work is
required due to the negligence, willful misconduct or misuse by Tenant or any
of its Agents, Tenant shall be responsible for payment of such costs as
additional rent within ten (10) days after written request by Landlord.  If Landlord replaces an HVAC unit, then
after the time each such HVAC unit has been replaced, the cost to repair,
maintain and service such replaced unit and related equipment will be included
in Common Operating Expenses.

 

14

 

6.3                                 Control
of Common Area:  Landlord shall at
all times have exclusive control of the Common Area.  Provided there is no material interference with Tenant’s use and
occupancy of the Premises and Tenant’s rights under Section 4.5 above, Landlord
shall have the right, upon at least five (5) business days’ prior written
notice to Tenant (except in an emergency), without the same constituting an
actual or constructive eviction and without entitling Tenant to any abatement
of rent, to: (i) close any part of the Common Area to whatever extent required
in the opinion of Landlord’s counsel to prevent a dedication thereof or the
accrual of any prescriptive rights therein; (ii) temporarily close the Common
Area to perform maintenance or for any other reason deemed sufficient by
Landlord; (iii) change the shape, size, location and extent of the Common Area;
(iv) eliminate from or add to the Project any land or improvement, including
multi-deck parking structures; (v) make changes to the Common Area including,
without limitation, changes in the location of driveways, entrances,
passageways, doors and doorways, elevators, stairs, restrooms, exits, parking
spaces, parking areas, sidewalks or the direction of the flow of traffic and
the site of the Common Area; (vi) remove unauthorized persons from the Project;
and/or (vii) change the name or address of the Building or Project.  Subject to Section 4.5 above, Tenant shall
keep the Common Area clear of all obstructions created or permitted by Tenant.  If in the opinion of Landlord unauthorized
persons are using any of the Common Area by reason of the presence of Tenant in
the Building, Tenant, upon demand of Landlord, shall restrain such unauthorized
use by appropriate proceedings.  In
exercising any such rights regarding the Common Area, (i) Landlord shall make a
reasonable effort to minimize any disruption to Tenant’s business, and (ii)
Landlord shall not exercise its rights to control the Common Area in a manner
that would materially interfere with Tenant’s use of the Premises without first
obtaining Tenant’s consent.  Landlord
shall have no obligation to provide guard services or other security measures
for the benefit of the Project.  Tenant
assumes all responsibility for the protection of Tenant and Tenant’s Agents
from acts of third parties; provided, however, that nothing contained herein
shall prevent Landlord, at its sole option, from providing security measures
for the Project.

 

6.4                                 Interruption
of Services:  If any service which
Landlord is required to provide hereunder is discontinued for three (3)
consecutive business days and (i) such discontinuance is caused by the
negligence or willful misconduct of Landlord or any of its Agents, then Tenant
shall be entitled to an abatement of Base Monthly Rent and Additional Rent in
proportion to the extent to which the failure prevents Tenant from using the
Premises for Tenant’s normal purposes, with such abatement to begin on the
fourth (4th) business day after such occurrence and continuing until such
failure has been cured; or (ii) as a result of such discontinuance of such
service, Tenant is prevented from conducting all or any portion of its business
operations in the Premises and was not due to the negligence, willful
misconduct, act or omission of Tenant, and the cause of such discontinuance is
covered by any loss of rental or other similar insurance coverage that Landlord
is then carrying with respect to the Building (it being understood that
Landlord has no obligation to maintain such coverage), then Tenant shall be
entitled to an abatement of Base Monthly Rent and Additional Rent equal to the
insurance proceeds actually received by Landlord with respect to the Premises
from the insurance carrier providing such insurance coverage.  The provisions of this Section 6.4 shall not
apply in the event of a discontinuation of such service caused by fire or other
casualty, which shall be governed by Section 11 below, or in the event of a
taking, which shall be governed by Section 12 below.

 

ARTICLE 7 WASTE DISPOSAL
AND UTILITIES

 

7.1                                 Waste
Disposal:  Tenant shall store its
waste either inside the Premises or within outside trash enclosures that are
fully fenced and screened in compliance with all Private Restrictions, and
designed for such purpose.  All  entrances to such outside trash enclosures
shall be kept closed, and waste shall be stored in such manner as not to be
visible from the exterior of such outside enclosures.  Tenant shall cause all of its waste to be regularly removed from
the Premises at Tenant’s sole cost. 
Tenant shall keep all fire corridors and mechanical equipment rooms in
the Premises free and clear of all obstructions at all times.

 

7.2                                 Hazardous
Materials:  Landlord and Tenant
agree as follows with respect to the existence or use of Hazardous Materials on
the Project:

 

15

 

A.                                   Hazardous
Materials Disclosure Certificate. 
Prior to executing this Lease, Tenant has delivered to Landlord Tenant’s
executed initial Hazardous Materials Disclosure Certificate, in the form
attached hereto as Exhibit D (the “Initial
Hazardous Materials Certificate”). 
Tenant covenants, represents and warrants to Landlord that the
information in the Initial Hazardous Materials Certificate is true and correct
and accurately describes the use(s) of Hazardous Materials which will be made
and/or used on the Premises by Tenant. 
Tenant shall, commencing with the date which is one year from the
Commencement Date and continuing every year thereafter, deliver to Landlord, an
executed and updated Hazardous Materials Disclosure Certificate, substantially
in the form attached hereto as Exhibit D (the “Annual Hazardous Materials Certificate”) describing Tenant’s
proposed use of Hazardous Materials on the Premises for the upcoming year, and
any other reasonably necessary documents as requested by Landlord.

 

B.                                     Hazardous Material Usage. 
Other than the Hazardous Materials referenced on the Initial Hazardous
Materials Certificate, Tenant shall not be entitled to use, store,
generate, transport or dispose of any Hazardous Materials (herein referred to
as “Hazardous Materials Usage”)
on, in, or about any portion of the Premises and the Project without, in each
instance, obtaining Landlord’s prior written consent thereto, which consent shall
not be unreasonably withheld, conditioned or delayed.  If Landlord consents in writing to any such Hazardous Material
Usage, then Tenant shall be permitted to use only those Hazardous Materials
that are necessary for Tenant’s business, in Tenant’s reasonable judgment, and
as expressly approved by Landlord in writing. 
Any such Hazardous Materials Usage may only be to the extent of the
quantities of Hazardous Materials as specified in the then applicable Hazardous
Material Disclosure Certificate or as otherwise expressly approved by
Landlord.  Any Hazardous Material Usage
of Hazardous Materials by Tenant and Tenant’s Agents after the Effective Date
in or about the Project shall strictly comply with all applicable laws,
including all Hazardous Materials Laws now or hereinafter enacted.  Tenant agrees that any changes to the type
and/or quantities of Hazardous Materials specified in the most recent approved
Hazardous Material Disclosure Certificate may be implemented only with the
prior written consent of Landlord, which consent shall not be unreasonably
withheld, conditioned or delayed. 
Tenant shall not be entitled nor permitted to install any underground
tanks at the Premises or Project for the storage of Hazardous Materials without
the express written consent of Landlord, which may be given or withheld in
Landlord’s sole and absolute discretion.  
Tenant shall not be entitled nor permitted to install any aboveground or
below ground tanks at the Premises or Project for the storage of Hazardous
Materials without the express written consent of Landlord, in its sole and
absolute discretion.

 

C.                                     Tests
and Inspections.  Upon at least one
(1) business day’s prior written notice (except in an emergency), and provided
that Landlord is accompanied by a representative of Tenant, Landlord shall have
the right at all times during the Term of this Lease to (i) inspect the
Premises, (ii) conduct tests and investigations to determine whether Tenant is
in compliance with the provisions of this Section 7.2 or to determine if Hazardous
Materials are present in, on or about the Project, and (iii) request lists of
all Hazardous Materials used, stored or otherwise located by Tenant and/or
Tenant’s Agents on, under or about any portion of the Premises and/or the
Common Areas.  The cost of all such
inspections, tests and investigations shall be borne by Tenant to the extent
that Landlord reasonably determines that Tenant or any of Tenant’s Agents are
directly or indirectly responsible in any manner for any contamination revealed
by such inspections, tests and investigations. 
The aforementioned rights granted herein to Landlord and its
representatives shall not create (a) a duty on Landlord’s part to inspect,
test, investigate, monitor or otherwise observe the Premises or the activities
of Tenant and Tenant’s Representatives with respect to Hazardous Materials,
including without limitation, Tenant’s operation, use and any remediation
related thereto, or (b) liability on the part of Landlord and its
representatives for Tenant’s use, storage, disposal or remediation of Hazardous
Materials, it being understood that Tenant shall be solely responsible for all
liability in connection therewith. 
Landlord shall use commercially reasonable efforts to minimize any
unreasonable interference with Tenant’s business operations and use and
occupancy of the Premises in connection with the exercise any of the foregoing
rights under this Section 7.2C.

 

16

 

D.                                    Notice.  Tenant shall give to Landlord prompt verbal
and follow-up written notice of any spills, releases, discharges, disposals,
emissions, migrations, removals or transportation of Hazardous Materials on,
under or about any portion of the Premises, Common Areas or Project by Tenant
or any of Tenant’s Agents; provided that Tenant has actual, implied or
constructive knowledge of such event(s). 
Tenant, at its sole cost and expense, covenants and warrants to promptly
investigate, clean up, remove, restore and otherwise remediate (including,
without limitation, preparation of any feasibility studies or reports and the
performance of any and all closures) any spill, release, discharge, disposal,
emission, migration or transportation or other Hazardous Material Usage of
Hazardous Materials to the extent arising from or related to the acts or, where
there is a duty to act at law or under this Lease, the omissions of Tenant or
Tenant’s Agents such that the affected portions of the Project and any adjacent
property are returned, to the extent possible, to the condition existing prior
to the appearance of such Hazardous Materials and otherwise in compliance with
Laws.  Any such investigation, clean up,
removal, restoration and other remediation shall only be performed after Tenant
has obtained Landlord’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed. 
Notwithstanding the foregoing, Tenant shall be entitled to respond
immediately to an emergency without first obtaining Landlord’s prior written
consent.  Tenant, at its sole cost and
expense, shall conduct and perform, or cause to be conducted and performed, all
closures as required by any Hazardous Materials Laws or any agencies or other
governmental authorities having jurisdiction thereof to the extent such
closures are due to the acts or, where there is a duty to act at law or under
this Lease, the omissions of Tenant or Tenant’s Agents.  If, after receipt of reasonable prior
written notice, Tenant fails to so promptly investigate, clean up, remove,
restore, provide closure or otherwise so remediate, Landlord may, but without
obligation to do so, take any and all steps necessary to rectify the same and
Tenant shall promptly reimburse Landlord, upon demand, for all reasonable costs
and expenses to Landlord of performing investigation, clean up, removal,
restoration, closure and remediation work. 
All such work undertaken by Tenant, as required herein, shall be
performed in such a manner so as to enable Landlord to make full economic use
of the Premises and the other portions of the Project in compliance with
then-existing Laws after the satisfactory completion of such work.

 

E.                                      Indemnity.  Subject to Section 9.3 below, Tenant shall
indemnify, hold harmless, and, at Landlord’s option (with such attorneys as
Landlord may reasonably approve in advance and in writing), defend Landlord and
Landlord’s officers, directors, shareholders, partners, members, managers,
employees, contractors, property managers, agents and mortgagees and other lien
holders, from and against any and all “Losses” (hereinafter defined) arising
from or related to: (a) any violation or alleged violation by Tenant or any of
Tenant’s Agents of any of the Laws, including, without limitation, the
Hazardous Materials Laws, to the extent required under Section 4.2, Section 5.3
and/or this Article 7; (b) any breach of the provisions of this Section 7.2 or
any subsection thereof by Tenant or any of Tenant’s Agents; or (c) any
Hazardous Materials Usage on, about or from the Premises of any Hazardous
Material approved by Landlord under this Lease. The term “Losses” shall mean all claims, demands,
expenses, actions, judgments, damages (whether consequential, direct or
indirect, known or unknown, foreseen or unforeseen), penalties, fines,
liabilities, losses of every kind and nature (including, without limitation,
property damage, diminution in value of Landlord’s interest in the Leased
Premises or the Project, damages for the loss or restriction on use of any
space or amenity within the Building or the Project, damages arising from any
adverse impact on marketing space in the Project, sums paid in settlement of
claims and any costs and expenses associated with injury, illness or death to
or of any person), suits, administrative proceedings, costs and fees,
including, but not limited to, attorneys’ and consultants’ fees and expenses,
and the costs of cleanup, remediation, removal and restoration, that are in any
way related to any matter covered by the foregoing indemnity.  Tenant’s indemnity under this Section 7.2E
will not be applicable for any Losses due to a Release of any Hazardous
Material by any other party other than Tenant or its Agents.

 

Landlord agrees that it shall not release any
Hazardous Materials in the Building or Common Area in violation of the
applicable Hazardous Materials Laws.  If
any Hazardous Materials have been released in the Building or Common Area in
violation of the Hazardous Materials Laws, other than by Tenant or any of its
Agents, and such Hazardous Materials are required to be remediated under the
applicable Hazardous Materials Law by a governmental authority having
jurisdiction over the subject matter at the Building, then Landlord agrees to
remediate such Hazardous Materials, at its sole cost and expense, to the extent
required under the Hazardous Materials Laws and otherwise in a manner
determined by Landlord in its reasonable good faith

 

17

 

discretion and in a manner that minimizes, to the extent reasonably
possible, interference with Tenant’s use of the Premises.

 

F.                                      Hazardous
Material.  As used herein, the term
“Hazardous Material” means any
hazardous or toxic substance, material or waste which is or becomes regulated
by any local governmental authority, the State of California or the United
States Government or under any Hazardous Material Law.  The term “Hazardous Material,” includes,
without limitation, petroleum products, asbestos, PCB’s, and any material or
substance which is (i) listed under Article 9 or defined as hazardous or
extremely hazardous pursuant to Article 11 of Title 22 of the California
Administrative Code, Division 4, Chapter 20, (ii) defined as a “hazardous
waste” pursuant to Section 1004 of the Federal Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq. (42 U.S.C. 6903), or (iii) defined as a
“hazardous substance” pursuant to Section 101 of the Comprehensive
Environmental Response; Compensation and Liability Act, 42 U.S.C. 9601 et seq.
(42 U.S.C. 9601).  As used herein, the
term “Hazardous Material Law”
shall mean any statute, law, ordinance, or regulation of any governmental body
or agency (including the U.S. Environmental Protection Agency, the California
Regional Water Quality Control Board, and the California Department of Health
Services) which regulates the use, storage, release or disposal of any
Hazardous Material.

 

G.                                     Survival.  The obligations of Landlord and Tenant under
this Section 7.2 shall survive the expiration or earlier termination of the
Lease Term.  The rights and obligations
of Landlord and Tenant with respect to issues relating to Hazardous Materials
are exclusively established by this Section 7.2.  In the event of any inconsistency between any other part of this
Lease and this Section 7.2, the terms of this Section 7.2 shall control.

 

7.3                                 Utilities:  Tenant shall promptly pay, as the same
become due, all charges for water, gas, electricity, telephone, sewer service,
waste pick-up and any other utilities, materials or services furnished directly
to or used by Tenant on or in the Premises during the Lease Term, including,
without limitation, (i) meter, use and/or connection fees, hook-up fees, or
standby fee (excluding any connection fees or hook-up fees which relate to
making the existing electrical, gas, and water service available to the Premises
as of the Commencement Date, which shall be paid by Landlord, if necessary),
and (ii) penalties for discontinued or interrupted service, unless such
discontinuation or interruption results from the acts, or where there is a duty
to act at law or under this Lease, the omissions of Landlord or Landlord’s
Agents, in which event Landlord shall pay such penalties.

 

7.4                                 Compliance
with Governmental Regulations: 
Landlord and Tenant shall comply with all rules, regulations and
requirements promulgated by national, state or local governmental agencies or
utility suppliers concerning the use of utility services, including any
rationing, limitation or other control. 
Tenant shall not be entitled to terminate this Lease nor to any
abatement in rent by reason of such compliance.

 

ARTICLE 8 COMMON
OPERATING EXPENSES

 

8.1                                 Tenant’s
Obligation to Reimburse:  As
Additional Rent, Tenant shall pay Tenant’s Share (specified in Section G
of the Summary) of all Common Operating Expenses; provided, however, if the
Project contains more than one building, then Tenant shall pay Tenant’s Share
of all Common Operating Expenses allocated to the Building in Landlord’s
reasonable good faith judgment, including (a) all Common Operating Expenses
paid with respect to the maintenance, repair, replacement and use of the
Building, and (b) a proportionate share of all Common Operating Expenses which
relate to the Project in general that are not fairly allocable to any one
building that is part of the Project. 
Tenant shall pay Tenant’s Share of Common Operating Expenses in advance
in estimated monthly installments, in accordance with the following: (i) on or
before the commencement of each of Landlord’s fiscal years during the Term,
Landlord shall deliver to Tenant Landlord’s reasonable estimate of the Common
Operating Expenses it anticipates will be paid or incurred for the following
fiscal year; (ii) during such  fiscal
year, Tenant shall pay Tenant’s Share of the estimated Common Operating
Expenses in advance in monthly installments as estimated by Landlord at the
same time as the installments of 

 

18

 

Base Monthly Rent are paid; and (iii) within 180 days after the end of
each Landlord’s fiscal year, Landlord shall furnish to Tenant a statement in
reasonable detail of the actual Common Operating Expenses paid or incurred by
Landlord during the just ended Landlord’s fiscal year (the “Annual Reconciliation Statement”) and
thereupon there shall be an adjustment between Landlord and Tenant, with payment
to Landlord or credit by Landlord against the next installment(s) of Base
Monthly Rent, as the case may require, within thirty (30) days after delivery
by Landlord to Tenant of said statement, so that Landlord shall receive the
entire amount of Tenant’s Share of all Common Operating Expenses for such
Landlord’s fiscal year and no more.  The
failure of Landlord to delivery such annual reconciliation statement within
said 180-day period under clause (iii) above shall not constitute a waiver or
otherwise release a party from its obligation to make a payment or credit when
such reconciliation is actually done.

 

Notwithstanding anything to the contrary in this
Lease, the Project may consist of multiple buildings and certain Common
Operating Expenses may pertain to a particular building(s) and other Common
Operating Expenses may pertain to the Project as a whole.  Landlord reserves the right in its
reasonable good faith discretion to allocate any such costs applicable to any
particular building within the Project to the building in question whose
tenants shall be responsible for payment of their respective proportionate
shares in the pertinent building and other such costs applicable to the Project
to each building in the Project (including the Building) with the tenants in
each such building being responsible for paying their respective proportionate
shares in such building of such costs to the extent required under the
applicable leases. Landlord shall in good faith attempt to allocate such costs
to the buildings (including the Building) in a reasonable, non-discriminatory
manner and such allocation shall be binding on Tenant.

 

8.2                                 Common
Operating Expenses Defined:  The
term “Common Operating Expenses”
shall mean the total reasonable amounts paid or payable, whether by Landlord or
others on behalf of Landlord, in connection with the ownership, maintenance,
repair, and operations of the Building, the Common Areas and the Project,
including without limitation, the following:

 

A.                                   All
reasonable costs and expenses paid or incurred by Landlord in doing the
following (including payments to independent contractors providing services
related to the performance of the following): (i) maintaining, cleaning,
repairing, resurfacing and replacing the roof (including repair of leaks) and
the exterior surfaces (including painting) of all buildings located on the
Project; (ii) maintenance of the liability, fire, property damage, earthquake
and other insurance covering the Project carried by Landlord pursuant to
Section 9.2 (including the prepayment of premiums for coverage of up to one
year); (iii) maintaining, repairing, operating and replacing when necessary
HVAC equipment, utility facilities and other building service equipment; (iv)
providing utilities to the Common Area (including lighting, trash removal and
water for landscaping irrigation); (v) complying with all applicable Laws in
effect on or after the Commencement Date and Private Restrictions; (vi)
operating, maintaining, repairing, cleaning, painting, re-striping and resurfacing
the Common Area; (vii) replacement or installation of lighting fixtures,
directional or other signs and signals, irrigation systems, trees, shrubs,
ground cover and other plant materials, and all landscaping in the Common Area;
and (viii) providing security (provided, however, that Landlord shall not be
obligated to provide security and if it does, Landlord may discontinue such
service at any time and in any event Landlord shall not be responsible for any
act or omission of any security personnel); and (ix) capital improvements as
provided in Section 5.4 hereof;

 

B.                                     The
following costs: (i) Real Property Taxes as defined in Section 8.3; (ii) up to
$10,000 of the amount of any commercially reasonable “deductible” paid by
Landlord with respect to damage caused by any Insured Peril; (iii) the
reasonable cost to repair damage caused by an Uninsured Peril up to a maximum
amount in any 12 month period equal to $10,000; and (iv) that portion of all
reasonable compensation (including benefits and premiums for workers’
compensation and other insurance) paid to or on behalf of employees of Landlord
below the level of senior property manager or regional property manager but
only to the extent they are involved in the performance of the work described
by Section 8.2A that is fairly allocable to the Project;

 

19

 

C.                                     Commercially
reasonable fees for management services rendered by either Landlord or a third
party manager engaged by Landlord (which may be a party affiliated with
Landlord), except that the total amount charged for management services and
included in Tenant’s Share of Common Operating Expenses shall not exceed the
monthly rate of 3% of the monthly Rent.

 

D.                                    All
additional reasonable costs and expenses incurred by Landlord with respect to
the operation, protection, maintenance, repair and replacement of the Project
which would be considered a current expense (and not a capital expenditure)
pursuant to generally accepted accounting principles.

 

E.                                      Common
Operating Expenses shall not include any of the following: (i) payments
(including without limitation interest, principal, points and fees) on any
loans or ground leases affecting the Project; (ii) depreciation of any
buildings or any major systems or building service equipment within the
Project; (iii) advertising and other fees and costs (including without
limitation legal and architectural fees, leasing commissions and tenant
improvement allowances) incurred in procuring tenants; (iv) the cost of work done
for tenant improvements and redecoration work in leasable space or services
furnished for the exclusive use of other tenants of the Project; (v) any cost
incurred in complying with Hazardous Materials Laws, which subject is governed
exclusively by Section 7.2; (vi) costs to the extent paid directly by
individual tenants to suppliers, including tenant electricity, telephone and
other utility costs; (vii) costs relating to creating or maintaining Landlord’s
existence as a corporation, partnership or other entity; (viii) the cost of any
items to the extent for which Landlord is reimbursed by (or is entitled to
reimbursement by) insurance, condemnation awards, refund, rebate or otherwise,
and any expenses for repairs or maintenance to the extent covered by warranties,
guaranties and service contracts, provided that any charges for obtaining or
maintaining such warranties or guarantees or enforcing warranty or guarantee
claims shall be included in Common Operating Expenses, and Landlord agrees to
use its good faith discretion in determining whether to pursue such enforcement
or collection efforts; (ix) costs incurred in connection with any disputes
between Landlord and its employees, between Landlord and property management,
or between Landlord and other tenants or occupants; (x) costs, expenses and
charges incurred in connection with the sale of any portion of the Project;
(xi) costs of repairs or maintenance required by reason of the negligence or
willful misconduct of Landlord, or of the active negligence of other occupants
of the Project, or of the officers, directors, employees, contractors, or
agents of any of them; (xii) costs incurred as a consequence of any default or
breach by Landlord hereunder; and (xiii) payments to affiliates of Landlord for
goods or services provided to Landlord to the extent such payments exceed the
customary charges for such goods or services for comparable buildings in the
vicinity of the Project.

 

8.3                                 Real
Property Taxes Defined:  The term “Real Property Taxes” shall mean all taxes,
assessments, levies, and other charges of any kind or nature whatsoever,
general and special, foreseen and unforeseen (including all installments of
principal and interest required to pay any existing or future general or
special assessments for public improvements, services or benefits, and any
increases resulting from reassessments resulting from a change in ownership,
new construction, or any other cause, all of which shall be paid over the
longest period allowed by Law), now or hereafter imposed by any governmental or
quasi-governmental authority or special district having the direct or indirect
power to tax or levy assessments, which are levied or assessed against, or with
respect to the value, occupancy or use of all or any portion of the Project (as
now constructed or as may at any time hereafter be constructed, altered, or
otherwise changed) or Landlord’s interest therein, the fixtures, equipment and
other property of Landlord, real or personal, that are an integral part of and
located on the Project, the gross receipts, income, or rentals from the
Project, or the use of parking areas, public utilities, or energy within the
Project.  If at any time during the
Lease Term the method of taxation or assessment of the Project prevailing as of
the Effective Date shall be altered so that in lieu of or in addition to any
Real Property Tax described above there shall be levied, assessed or imposed
(whether by reason of a change in the method of taxation or assessment,
creation of a new tax or charge, or any other cause) an alternate or additional
tax or charge (i) on the value, use or occupancy of the Project or Landlord’s
interest therein, or (ii) on or measured by the gross receipts, income or
rentals from the Project, on Landlord’s business of leasing the Project, or
computed in any manner with respect to the operation of the Project, then any
such tax or charge,

 

20

 

however designated, shall be included within the meaning of the term
Real Property Taxes for purposes of this Lease.  If any Real Property Tax is based upon property or rents
unrelated to the Project, then only that part of such Real Property Tax that is
fairly allocable to the Project shall be included within the meaning of the
term Real Property Taxes. 
Notwithstanding the foregoing, the term Real Property Taxes shall not
include (a) income, estate, excise, capital levy, state, payroll, stamp,
profit, inheritance, transfer taxes to record a conveyancing document, gift or
franchise taxes, however designated, except to the extent to which after the
Commencement Date Landlord demonstrates that such tax is first being imposed in
lieu of or in substitution for one or more “Real Property Taxes” as above
defined; or (b) any increase in Real Property Taxes due to an increase in the
assessed value of the Project resulting from the construction of an improvement
made to the Project after the Commencement Date that will not be for the
benefit of the Building (such as the construction of a parking garage in the
Project where Tenant will not have any right to use such parking garage), or
(c) any interest or penalties resulting from the late payment of “Real Property
Taxes” by Landlord.

 

8.4                                 Adjustments.  Notwithstanding the foregoing provisions,
Tenant’s Share as to certain expenses included in Common Operating Expenses may
be calculated differently to yield a higher percentage share for Tenant as to
those expenses if Landlord permits other tenants or occupants in the Project to
incur such expenses directly rather than have Landlord incur the expense in
common for the Project.  In such case,
Tenant’s Share of the applicable expense shall be calculated as having as its
denominator the sum of the gross leasable areas of all premises in the Project
less the gross leasable areas of tenants who have incurred such expense
directly.  Nothing herein shall imply
that Landlord will permit Tenant or any other tenant of the Project to incur
Common Area Costs.  Any such permission
shall be in the sole discretion of Landlord.

 

8.5                                 Inspection.  Tenant shall have the right at its own
expense to inspect the books and records of Landlord pertaining to Common
Operating Expenses once in any calendar year by any employee of Tenant or by a
certified public accountant reasonably approved by Tenant and Landlord
(provided such certified public accountant charges for its service on an hourly
basis and not based on a percentage of any recovery or similar incentive
method) at reasonable times, and upon reasonable written notice to Landlord as hereinafter
provided.  Within ninety (90) days after
receipt of Landlord’s annual reconciliation, Tenant shall have the right, after
at least thirty (30) days prior written notice to Landlord, to inspect at the
offices of Landlord or its property manager, the books and records of Landlord
pertaining solely to the Common Operating Expenses for the immediately
preceding calendar year covered in such annual reconciliation statement.  All expenses of the inspection shall be
borne by Tenant and must be completed within thirty (30) days after
commencement of the inspection.  If
Tenant’s inspection reveals a discrepancy in the comparative annual
reconciliation statement, Tenant shall deliver a copy of the inspection report
and supporting calculations to Landlord within thirty (30) days after
completion of the inspection.  If Tenant
and Landlord are unable to resolve the discrepancy within thirty (30) days
after Landlord’s receipt of the inspection report, either party may upon written
notice to the other have the matter decided by an inspection by an independent
certified public accounting firm approved by Tenant and Landlord (the “CPA Firm”), which approval shall not be
unreasonably withheld or delayed.  If
the inspection by the CPA Firm shows that the actual amount of Common Operating
Expenses payable by Tenant is greater than the amount previously paid by Tenant
for such accounting period, Tenant shall pay Landlord the difference within
thirty (30) days after such determination. 
If the inspection by the CPA Firm shows that the actual amount is less
than the amount paid by Tenant, then the difference shall be refunded to Tenant
within thirty (30) days after such determination.  Tenant shall pay for the cost of the inspection by the CPA Firm,
unless such inspection shows that Landlord overstated Common Operating Expenses
by more than five percent (5%), in which case Landlord shall pay for the cost
of the inspection by the CPA Firm.

 

ARTICLE 9 INSURANCE

 

9.1                                 Tenant’s
Insurance:  Tenant shall maintain
insurance complying with all of the following:

 

A.                                   Types.  Tenant shall procure, pay for and keep in
full force and effect the following:

 

21

 

(1)  Commercial
general liability insurance, including property damage, against liability for
personal injury, bodily injury, death and damage to property occurring in or
about, or resulting from an occurrence in or about, the Premises with combined
single limit coverage of not less than the amount of Tenant’s Liability
Insurance Minimum specified in Section P of the Summary, which insurance
shall contain a “contractual liability” endorsement insuring Tenant’s
performance of Tenant’s obligation to indemnify Landlord contained in Section
10.3;

 

(2)  Fire and
property damage insurance in so-called “all risk” form insuring Tenant’s Trade
Fixtures and Tenant’s Alterations for the full actual replacement cost thereof;

 

(3)  Business
interruption insurance with limits of liability representing at least
approximately six months of income, business auto liability covering owned,
non-owned and hired vehicles with a limit of not less than $1,000,000 per
accident, insurance protecting against liability under workers’ compensation
laws with limits at least as required by statute, insurance for all plate glass
in the Premises, and such other insurance that is reasonably required by
Landlord or any Lender and customarily carried by tenants of similar property
in similar businesses.

 

B.                                     Requirements.  Where applicable and required by Landlord,
each policy of insurance required to be carried by Tenant pursuant to this
Section 9.1: (i) shall name Landlord and such other parties in interest as
Landlord reasonably designates as additional insureds; (ii) shall be primary
insurance which provides that the insurer shall be liable for the full amount
of the loss up to and including the total amount of liability set forth in the
declarations without the right of contribution from any other insurance
coverage of Landlord; (iii) shall be in a form reasonably satisfactory to
Landlord; (iv) shall be carried with companies reasonably acceptable to
Landlord; (v) shall provide that such policy shall not be subject to
cancellation, lapse or change except after at least 30 days prior written
notice to Landlord so long as such provision of 30 days notice is reasonably
obtainable, but in any event not less than 10 days prior written notice; (vi)
shall not have a “deductible” in excess of such amount that is reasonably
approved by Landlord, except that the original party signing this Lease as
Tenant, and its affiliates, may elect to have deductible that is customarily
carried by Tenant at other comparably leased properties in comparable areas;
(vii) shall contain a cross liability endorsement; and (viii) shall contain a
“severability” clause.  If Tenant has in
full force and effect a blanket policy of liability insurance with the same
coverage for the Premises as described above, as well as other coverage of
other premises and properties of Tenant, or in which Tenant has some interest,
such blanket insurance shall satisfy the requirements of this Section 9.1.

 

C.                                     Evidence.  A certificate of the insurer, certifying
that such policy has been issued, providing the coverage required by this
Section 9.1, and containing the provisions specified herein, shall be delivered
to Landlord prior to the time Tenant or any of its Agents enters the Premises
and upon renewal of such policies, but not less than 5 days prior to the
expiration of the term of such coverage. 
Landlord may, at any time, and from time to time, inspect and/or copy
any and all insurance policies required to be procured by Tenant pursuant to
this Section 9.1 if a claim is filed against Landlord and the carrier has not
accepted coverage for Landlord.  If any
Lender or insurance advisor reasonably determines at any time that the amount
of coverage required for any policy of insurance Tenant is to obtain pursuant
to this Section 9.1 is not adequate, then Tenant shall, no more often than
every five (5) years during the Term, increase such coverage for such insurance
to such amount as such Lender or insurance advisor reasonably deems adequate,
not to exceed the level of coverage for such insurance commonly carried by
comparable businesses similarly situated.

 

9.2                                 Landlord’s
Insurance:  Landlord shall have the
following obligations and options regarding insurance:

 

A.                                   Property
Damage.  Landlord shall maintain a
policy or policies of fire and property damage insurance in so-called “all
risk” form insuring Landlord (and such others as Landlord may designate)

 

22

 

against loss of rents for a period of not less than 12 months and from
physical damage to the Project with coverage of not less than the full
replacement cost thereof.  Landlord may
so insure the Project separately, or may insure the Project with other property
owned by Landlord which Landlord elects to insure together under the same
policy or policies. Landlord shall have the right, but not the obligation, to
obtain insurance for such additional perils as Landlord deems appropriate in
its reasonable good faith judgment, including, without limitation, coverage for
damage by earthquake and/or flood.  As
of the date hereof, Landlord has earthquake and environmental insurance, but
Landlord does not make any commitment to continue such insurance in the
future.  All such coverage shall contain
“deductibles” which Landlord deems appropriate, which in the case of earthquake
and flood insurance, may be up to 10% of the replacement value of the property
insured or such higher amount as is then commercially reasonable.  Landlord shall not be required to cause such
insurance to cover any Trade Fixtures or Tenant’s Alterations of Tenant.

 

B.                                     Other.  Landlord shall maintain a policy or policies
of commercial general liability insurance insuring Landlord (and such others as
are designated by Landlord) against liability for personal injury, bodily
injury, death and damage to property occurring or resulting from an occurrence
in, on or about the Project, with combined single limit coverage in such amount
as Landlord from time to time determines is reasonably necessary for its
protection, but not less than the amount of liability insurance required of
Tenant under this Lease.

 

C.                                     Tenant’s
Obligation to Reimburse:  To the
extent Landlord’s insurance rates for the Building are increased at any time
during the Lease Term as a result of the nature of Tenant’s use of the
Premises, Tenant shall reimburse Landlord for the full amount of such increase
immediately upon receipt of a bill from Landlord therefor.

 

9.3                                 Release
and Waiver of Subrogation:  Landlord and Tenant each hereby waives on
behalf of itself and its property insurers (none of which shall ever be
assigned any such claim or be entitled thereto due to subrogation or otherwise)
any and all rights of recovery, claim, action, or cause of action against the
other and its officers, partners, shareholders, or employees (collectively, the
“Related
Parties”) for any loss or damage (other than rights of recovery,
claims, actions, and causes of action relating to damage to the roof of the
Building caused by Tenant) that may occur to or within the Premises or the
Building or any improvements thereto, or any personal property of such party
therein which is insured against under any property insurance policy actually
being maintained by the waiving party from time to time, even if not required
hereunder, or which would be insured against under the terms of any insurance
policy required to be carried or maintained by the waiving party hereunder,
whether or not such insurance coverage is actually being maintained, including,
in every instance, such loss or damage that may be caused by the negligence of
the other party hereto and/or its Related Parties.  Landlord and Tenant each agrees to cause appropriate clauses to
be included in its property insurance policies necessary to implement the
foregoing provisions to the extent necessary.

 

ARTICLE 10 LIMITATION ON
LANDLORD’S LIABILITY AND INDEMNITY

 

10.1                           Limitation
on Landlord’s Liability:  Landlord
shall not be liable to Tenant, nor shall Tenant be entitled to terminate this
Lease or to any abatement of rent (except as expressly provided otherwise
herein), for any injury to Tenant or Tenant’s Agents, damage to the property of
Tenant or Tenant’s Agents, or loss to Tenant’s business resulting from any: (i)
failure, interruption or installation of any HVAC or other utility system or
service; (ii) failure to furnish or delay in furnishing any utilities or
services when such failure or delay is caused by fire or other peril, the
elements, labor disturbances of any character, or any other accidents or other
conditions beyond the reasonable control of Landlord; (iii) limitation,
curtailment, rationing or restriction on the use of water or electricity, gas
or any other form of energy or any services or utility serving the Project;
(iv) vandalism or forcible entry by unauthorized persons or the criminal act of
any person; or (v) penetration of water into or onto any portion of the Premises
or the Building through roof leaks or otherwise.  Notwithstanding the foregoing but subject to Section 9.3,
Landlord shall be liable for any such injury, damage or loss for events under
clauses (i), (iii) and (v) above which is proximately caused by the acts or,
where there is a duty to act by

 

23

 

Landlord to Tenant at law or under this Lease, the omissions of
Landlord and Landlord’s Agents, or the negligence or willful misconduct of
Landlord or its Agents.

 

10.2                           Limitation
on Recourse:  If either party is a
corporation, limited liability company, trust, partnership, joint venture,
unincorporated association or other form of business entity: (i) the
obligations of such party shall not constitute personal obligations of the
officers, directors, trustees, partners, joint venturers, members, owners,
stockholders, or other principals or representatives of such business entity;
and (ii) the other party shall not have recourse to the assets of such
officers, directors, trustees, partners, joint venturers, members, owners,
stockholders, principals or representatives except to the extent of their
interest in the Project.  Tenant shall
have recourse only to the interest of Landlord in the Project for the
satisfaction of the obligations of Landlord and shall not have recourse to any
other assets of Landlord for the satisfaction of such obligations.

 

10.3                           Indemnification
of Landlord:  Subject to Section 9.3
above, Tenant shall hold harmless, indemnify and defend Landlord, and its
Agents from all liability, penalties, losses, damages, costs, expenses, causes
of action, claims and/or judgments arising by reason of any death, bodily
injury, personal injury or property damage resulting from (i) any cause or
causes whatsoever occurring in or resulting from an occurrence in the Premises
during the Lease Term, except to the extent due to the negligence of Landlord,
(ii) the negligence or willful misconduct of Tenant or its Agents, on or about
the Project the same may occur, or (iii) an Event of Tenant’s Default.  Subject to Section 9.3 above, Landlord shall
hold harmless, indemnify and defend Tenant or Tenant’s Agents from all
liability, penalties, losses, damages, costs, expenses, causes of action,
claims and/or judgments arising by reason of any death, bodily injury, personal
injury or property damage resulting from negligence or willful misconduct of
Landlord or Landlord’s Agents or default (after notice and the expiration of
the applicable cure period as provided in Section 13.6) by Landlord hereunder
in connection with the repair and maintenance of the Common Area.  The provisions of this Section 10.3 shall
survive the expiration or sooner termination of this Lease.

 

ARTICLE 11 DAMAGE TO PREMISES

 

11.1                           Landlord’s
Duty to Restore:  If the Premises
are damaged by any peril after the Effective Date, Landlord shall restore the
Premises unless the Lease is terminated by Landlord pursuant to Section 11.2 or
by Tenant pursuant to Section 11.3.  All
insurance proceeds available from the fire and property damage insurance
carried by Landlord pursuant to Section 9.2 shall be paid to and become the
property of Landlord.  If this Lease is
not so terminated, then upon receipt of the insurance proceeds (if the loss is
covered by insurance) and the issuance of all necessary governmental permits,
Landlord shall  commence and diligently
prosecute to completion the restoration of the Premises, to the extent then
allowed by Law, to substantially the same condition in which the Premises were
immediately prior to such damage. 
Landlord’s obligation to restore shall be limited to the Premises and
interior improvements constructed by Landlord as they existed as of the
Commencement Date, excluding any Tenant’s Alterations, Trade Fixtures and/or
personal property constructed or installed by Tenant in the Premises.  If this Lease is not terminated pursuant to
Section 11.2 or 11.3 below, Tenant shall forthwith replace or fully repair all
Tenant’s Alterations and Trade Fixtures installed by Tenant and existing at the
time of such damage or destruction, and all insurance proceeds received by
Tenant from the insurance carried by it pursuant to Section 9.1A(2) shall be
used for such purpose.

 

11.2                           Landlord’s
Right to Terminate:  Landlord shall
have the right to terminate this Lease in the event any of the following
occurs, which right may be exercised only by delivery to Tenant of a written
notice of election to terminate within 30 days after the date of such damage:

 

A.                                   Damage
From Insured Peril.  The Building is
damaged by an Insured Peril to such an extent that the estimated cost to
restore, after deducting the applicable deductible (except if the damage is due
to an earthquake), exceeds 50% of the then actual replacement cost thereof;

 

24

 

B.                                     Damage
From Uninsured Peril.  The Building
is damaged by an Uninsured Peril to such an extent that the estimated cost to
restore exceeds 10% of the then actual replacement cost thereof; provided,
however, that Landlord may not terminate this Lease pursuant to this Section
11.2B if one or more tenants of the Project agree in writing to pay the amount
by which the cost to restore the damage exceeds such amount and subsequently
deposit such amount with Landlord within 30 days after Landlord has notified
Tenant of its election to terminate this Lease;

 

C.                                     Damage
Near End of Term.  The Premises are
damaged by any peril within 12 months of the last day of the Lease Term to such
an extent that the estimated cost to restore equals or exceeds an amount equal
to six times the Base Monthly Rent then due; provided, however, that Landlord
may not terminate this Lease pursuant to this Section 11.2C if Tenant, at the
time of such damage, has a then valid express written option to extend the Lease
Term and Tenant, notwithstanding the provisions of Section 2.6 to the contrary,
exercises such option to extend the Lease Term within 15 days following the
date of such damage; or

 

D.                                    Restrictions
on Restoration.  The Building is
damaged by any peril and, because of the Laws then in force, (i) cannot be
restored at reasonable cost (after the application of insurance proceeds) to
substantially the same condition in which it was prior to such damage, or (ii)
cannot be used for the same use being made thereof before such damage if
restored as required by this Article.

 

E.                                      Defined
Terms.  As used herein, the
following terms shall have the following meanings: (i) the term “Insured Peril” shall mean a peril actually
insured against or required to be insured against for which the insurance
proceeds actually received by Landlord are sufficient (except for any
“deductible” amount specified by such insurance and any and all costs and
expenses, including adjusters and attorney’s fees, of obtaining such insurance
proceeds) to restore the Project under then existing building codes to the
condition existing immediately prior to the damage; and (ii) the term “Uninsured Peril” shall mean any peril which
is not an Insured Peril. 
Notwithstanding the foregoing, if the “deductible” for earthquake or
flood insurance exceeds 2% of the replacement cost of the improvements insured,
such peril shall be deemed an “Uninsured Peril”.

 

11.3                           Tenant’s
Right to Terminate:  If the Premises
are damaged by any peril and Landlord does not elect to terminate this Lease or
is not entitled to terminate this Lease pursuant to Section 11.2, then as soon
as reasonably practicable, Landlord shall furnish Tenant with the written
opinion of Landlord’s architect or construction consultant as to when the restoration
work required of Landlord may be completed. 
Tenant shall have the right to terminate this Lease in the event any of
the following occurs, which right may be exercised only by delivery to Landlord
of a written notice of election to terminate within 30 days after Tenant
receives from Landlord the estimate of the time needed to complete such
restoration.

 

A.                                   Major
Damage.  The Premises are damaged by
any peril and, in the reasonable opinion of Landlord’s architect or
construction consultant, the restoration of the Premises cannot be
substantially completed within 270 days after the date of such damage; or after
commencement of such restoration where the parties have not otherwise elected
to terminate as provided in this Article 11, if Landlord notifies Tenant that
the restoration will be delayed (other than due to a delay caused by Tenant or
its Agents) beyond said 270-day period and Tenant notifies Landlord in writing
within 10 days after receipt of such notice of delay from Landlord of Tenant’s
election to terminate; or

 

B.                                     Damage
Near End of Term.  The Premises are
damaged by any peril within 12 months of the last day of the Lease Term and, in
the reasonable opinion of Landlord’s architect or construction consultant, the
restoration of the Premises cannot be substantially completed within 90 days
after the date of such damage or such damage renders unusable more than 30% of
the Premises.

 

11.4                           Abatement
of Rent:  In the event of damage to
the Premises, the Base Monthly Rent and the Additional Rent shall be
temporarily abated during the period of restoration in proportion to the degree
to

 

25

 

which Tenant’s use of the Premises is impaired by such damage.  Tenant shall not be entitled to any
compensation or damages from Landlord for loss of Tenant’s business or property
or for any inconvenience or annoyance caused by such damage or
restoration.  Tenant hereby waives the
provisions of California Civil Code Sections 1932(2) and 1933(4) and the
provisions of any similar law hereinafter enacted.

 

ARTICLE 12 CONDEMNATION

 

12.1                           INTENTIONALLY
OMITTED.

 

12.2                           Tenant’s
Termination Right:  Tenant shall
have the right to terminate this Lease if, as a result of any taking by means
of the exercise of the power of eminent domain (including any voluntary sale or
transfer by Landlord to any condemnor under threat of condemnation), (i) 10% or
more of the Premises is so taken and that part of the Premises that remains
cannot be restored within a reasonable period of time and thereby made
reasonably suitable, in Tenant’s reasonable judgment, for the continued
operation of the Tenant’s business, or (ii) there is a taking affecting the
Common Area and, as a result of such taking, Landlord cannot provide parking
spaces within reasonable walking distance of the Premises equal in number to at
least 100% of the number of spaces allocated to Tenant by Section 2.1, whether
by rearrangement of the remaining parking areas in the Common Area (including
construction of multi-deck parking structures or re-striping for compact cars
where permitted by Law) or by alternative parking facilities on other
land.  Tenant must exercise such right
within a reasonable period of time, to be effective on the date that possession
of that portion of the Premises or Common Area that is condemned is taken by
the condemnor.

 

12.3                           Restoration
and Abatement of Rent:  If any part
of the Premises or the Common Area is taken by condemnation and this Lease is
not terminated, then Landlord shall restore the remaining portion of the
Premises and Common Area and interior improvements constructed by Landlord as
they existed as of the Commencement Date, excluding any Tenant’s Alterations,
Trade Fixtures and/or personal property constructed or installed by Tenant.  Thereafter, except in the case of a
temporary taking, as of the date possession is taken the rent (as defined in
Section 3.3 above) shall be reduced in the same proportion that the floor area
of that part of the Premises so taken (less any addition thereto by reason of
any reconstruction) bears to the original floor area of the Premises.

 

12.4                           Temporary
Taking:  If any portion of the
Premises is temporarily taken for ninety (90) days or less, this Lease shall
remain in effect.  If any portion of the
Premises is temporarily taken by condemnation for a period which exceeds ninety
(90) days or which extends beyond the natural expiration of the Lease Term, and
such taking materially and adversely affects Tenant’s ability to use the
Premises for the Permitted Use in Tenant’s reasonable judgment, then Tenant
shall have the right to terminate this Lease, effective on the date possession
is taken by the condemnor.

 

12.5                           Division
of Condemnation Award:  Any award
made as a result of any condemnation of the Premises or the Common Area shall
belong to and be paid to Landlord, and Tenant hereby assigns to Landlord all of
its right, title and interest in any such award; provided, however, that Tenant
shall be entitled to receive any condemnation award that is made directly to Tenant
for the following: (i) for the taking of personal property or Trade Fixtures
belonging to Tenant, (ii) for the interruption of Tenant’s business and its
moving costs, (iii) for loss of Tenant’s goodwill; and (iv) for any temporary
taking where this Lease is not terminated as a result of such taking.  The rights of Landlord and Tenant regarding
any condemnation shall be determined as provided in this Article, and each
party hereby waives the provisions of California Code of Civil Procedure
Section 1265.130 and the provisions of any similar law hereinafter enacted
allowing either party to petition the Superior Court to terminate this Lease in
the event of a partial taking of the Premises.

 

26

 

ARTICLE 13 DEFAULT AND REMEDIES

 

13.1                           Events
of Tenant’s Default:  Tenant shall
be in default of its obligations under this Lease if any of the following
events occurs (an “Event of Tenant’s Default”):

 

A.                                   Payment.  Tenant shall have failed to pay Base Monthly
Rent or Additional Rent when due, and such failure is not cured within 5 days
after delivery of written notice from Landlord specifying such failure to pay;
or

 

B.                                     General
Covenant.  Tenant shall have failed
to perform any term, covenant, or condition of this Lease other than those
referred to in any other subsection of this Section 13.1, and Tenant shall have
failed to cure such breach within 30 days after written notice from Landlord
specifying the nature of such breach where such breach could reasonably be cured
within said 30 day period, or if such breach could not be reasonably cured
within said 30 day period, Tenant shall have failed to commence such cure
within said 30 day period and thereafter continue with due diligence to
prosecute such cure to completion within such time period as is reasonably
needed; or

 

C.                                     Transfer.  Tenant shall have sublet the Premises or
assigned its interest in the Lease in violation of the provisions contained in
Article 14 and such sublease or assignment is not terminated or rescinded
within ten (10) days after receipt of notice from Landlord; or

 

D.                                    INTENTIONALLY
OMITTED; or

 

E.                                      Insolvency.  The occurrence of the following: (i) the
making by Tenant of any general arrangements or assignments for the benefit of
creditors; (ii) Tenant becomes a “debtor” as defined in 11 USC §101 or any
successor statute thereto (unless, in the case of a petition filed against
Tenant, the same is dismissed within 90 days); (iii) the appointment of a
trustee or receiver to take possession of substantially all of Tenant’s assets
located at the Premises or of Tenant’s interest in this Lease, where possession
is not restored to Tenant within 90 days; or (iv) 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 90 days; provided, however, in the event that any provision
of this Section 13.1E is contrary to any applicable Law, such provision shall
be of no force or effect; or

 

F.                                      Required
Documents.  Tenant shall have failed
to deliver documents required of it pursuant to Section 15.4 or Section 15.6
within the time periods specified therein and such failure continues for ten
(10) business days after notice of such failure.

 

13.2                           Landlord’s
Remedies:  If an Event of Tenant’s
Default occurs, Landlord shall have the following remedies, in addition to all
other rights and remedies provided by any Law or otherwise provided in this
Lease, to which Landlord may resort cumulatively or in the alternative:

 

A.                                   Continue.  Landlord may keep this Lease in effect and
enforce by an action at law or in equity all of its rights and remedies under
this Lease, including (i) the right to recover the rent and other sums as they
become due by appropriate legal action, (ii) the right to make payments
required of Tenant or perform Tenant’s obligations and be reimbursed by Tenant
for the reasonable cost thereof with interest at the Agreed Interest Rate from
the date the sum is paid by Landlord until Landlord is reimbursed by Tenant,
and (iii) the remedies of injunctive relief and specific performance to compel
Tenant to perform its obligations under this Lease.  Notwithstanding anything contained in this Lease, in the event of
a breach of an obligation by Tenant which results in a condition which poses an
imminent danger to safety of persons or damage to property, an unsightly
condition visible from the exterior of the Building, or a threat to insurance
coverage, then if Tenant does not commence to cure such breach within 3 days
after delivery to it of written notice from Landlord identifying the breach,
and diligently pursue the completion of such cure thereafter, Landlord may cure
the breach of Tenant and be reimbursed by Tenant for the reasonable cost
thereof with interest at the Agreed Interest Rate from the date the sum is paid
by Landlord until Landlord is reimbursed by Tenant. Should 

 

27

 

Landlord not terminate this Lease by giving Tenant written notice,
Landlord may enforce all its rights and remedies under this Lease, including
the right to recover the rent as it becomes due under the Lease as provided in
California Civil Code Section 1951.4.

 

B.                                     Enter
and Relet.  Landlord may enter the
Premises and release them to third parties for Tenant’s account for any period,
whether shorter or longer than the remaining Lease Term.  Tenant shall be liable immediately to
Landlord for all reasonable costs Landlord incurs in releasing the Premises,
including brokers’ commissions, and expenses of altering and preparing the
Premises required by the releasing. 
Tenant shall pay to Landlord the rent and other sums due under this
Lease on the date the rent is due, less the rent and other sums Landlord
received from any releasing.  No act by
Landlord allowed by this Section 13.2B shall terminate this Lease unless
Landlord notifies Tenant in writing that Landlord elects to terminate this
Lease.  Notwithstanding any releasing
without termination, Landlord may later elect to terminate this Lease because
of the default by Tenant.

 

C.                                     Terminate.  Landlord may terminate this Lease by giving
Tenant written notice of termination, in which event this Lease shall terminate
on the date set forth for termination in such notice.  Any termination under this Section 13.2C shall not relieve Tenant
from its obligation to pay sums then due Landlord or from any claim against
Tenant for damages or rent previously accrued or then accruing.  In no event shall any one or more of the
following actions  by Landlord, in the
absence of a written election by Landlord to terminate this Lease, constitute a
termination of this Lease: (i) appointment of a receiver or keeper in order to
protect Landlord’s interest hereunder; (ii) consent to any subletting of the
Premises or assignment of this Lease by Tenant, whether pursuant to the
provisions hereof or otherwise; or (iii) any other action by Landlord or
Landlord’s Agents intended to mitigate the adverse effects of any breach of
this Lease by Tenant, including without limitation any action taken to maintain
and preserve the Premises or any action taken to relet the Premises or any
portions thereof to the extent such actions do not affect a termination of
Tenant’s right to possession of the Premises.

 

D.                                    No
Deemed Termination.  In the event
Tenant breaches this Lease and abandons the Premises, this Lease shall not
terminate unless Landlord gives Tenant written notice of its election to so
terminate this Lease.  No act by or on
behalf of Landlord intended to mitigate the adverse effect of such breach,
including those described by Section 13.C, shall constitute a termination of
Tenant’s right to possession unless Landlord gives Tenant written notice of
termination.

 

E.                                      Damages.  Landlord shall use reasonable  efforts
to mitigate any damages hereunder following any termination of this Lease or
any termination of Tenant’s possession of the Premises.  In the event Landlord terminates this Lease,
Landlord shall be entitled, at Landlord’s election, to damages in an amount as
set forth in California Civil Code Section 1951.2 as in effect on the Effective
Date.  For purposes of computing damages
pursuant to California Civil Code Section 1951.2, (i) an interest rate equal to
the Agreed Interest Rate shall be used where permitted, and (ii) the term
“rent” includes Base Monthly Rent and Additional Rent.  Such damages shall include:

 

(1)                                  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 Tenant proves could be reasonably avoided, 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%); and

 

(2)                                  Any
other amount reasonably necessary to compensate Landlord for all detriment
proximately caused by Tenant’s failure to perform Tenant’s obligations under
this Lease, or which in the ordinary course of things would be likely to result
therefrom, including the following: (i) reasonable expenses for cleaning,
repairing or restoring the Premises; (ii) reasonable expenses for altering,
remodeling or otherwise improving the Premises for the purpose of reletting,
including installation of leasehold improvements (whether such installation be
funded by a reduction of rent, direct payment or allowance to a new tenant, or

 

28

 

otherwise); (iii) reasonable broker’s fees, advertising costs and other
reasonable expenses of reletting the Premises; (iv) reasonable costs of
carrying the Premises, such as taxes, insurance premiums, utilities and
security precautions; (v) reasonable expenses in retaking possession of the
Premises; and (vi) reasonable attorneys’ fees and court costs incurred by
Landlord in retaking possession of the Premises and in releasing the Premises
or otherwise incurred as a result of Tenant’s default.

 

F.                                      Non
Exclusive Remedies.  Nothing in this
Section 13.2 shall limit Landlord’s right to indemnification from Tenant as
provided in Section 7.2 and Section 10.3. 
Any notice given by Landlord in order to satisfy the requirements of
Section 13.1A or Section 13.1B above shall also satisfy the notice requirements
of California Code of Civil Procedure Section 1161 regarding unlawful detainer
proceedings.

 

13.3                           Waiver:  One party’s consent to or approval of any
act by the other party requiring the first party’s consent or approval shall
not be deemed to waive or render unnecessary the first party’s consent to or
approval of any subsequent similar act by the other party.  The receipt by Landlord of any rent or
payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach unless such waiver is in
writing and signed by Landlord.  No delay
or omission in the exercise of any right or remedy accruing to either party
upon any breach by the other party under this Lease shall impair such right or
remedy or be construed as a waiver of any such breach theretofore or thereafter
occurring.  The waiver by either party
of any breach of any provision of this Lease shall not be deemed to be a waiver
of any subsequent breach of the same or of any other provisions herein
contained.

 

13.4                           Limitation
On Exercise of Rights:  At any time
that an Event of Tenant’s Default has occurred and remains uncured, (i) it
shall not be unreasonable for Landlord to deny or withhold any consent or
approval requested of it by Tenant which Landlord would otherwise be obligated
to give, and (ii) Tenant may not exercise any option to extend, right to
terminate this Lease, or other right granted to it by this Lease which would
otherwise be available to it.

 

13.5                           Waiver
by Tenant of Certain Remedies: 
Tenant waives the provisions of Sections 1932(1), 1941 and 1942 of the
California Civil Code and any similar or successor law regarding Tenant’s right
to terminate this Lease or to make repairs and deduct the expenses of such
repairs from the rent due under this Lease. 
Tenant hereby waives any right of redemption or relief from forfeiture
under the laws of the State of California, or under any other present or future
law, including the provisions of Sections 1174 and 1179 of the California Code
of Civil Procedure.

 

13.6                           Landlord
Default.  Landlord shall not be in default of this Lease unless Landlord fails to
perform obligations required of Landlord within thirty (30) days after
Landlord’s receipt of written notice from Tenant to Landlord specifying where
Landlord has failed to perform such obligation; provided, however, if the nature
of Landlord’s obligation is such that more than thirty (30) days are required
for performance, Landlord shall not be in default if Landlord commences
performance within such thirty (30) day period and thereafter diligently
pursues the same to completion.  If
Landlord defaults in the performance of any repair or maintenance obligations
required of Landlord under this Lease within a reasonable time after receipt of
written notice from Tenant (but in no event later than thirty (30) days after
receipt of written notice by Tenant to Landlord specifying how Landlord has
failed to perform such obligation, unless the nature of the repair or
maintenance is such that more than thirty (30) days are required for
performance and Landlord has commenced and is proceeding with due diligence to
complete such work), then Tenant may perform such work and bill Landlord for
the reasonable cost thereof, which Landlord will pay within thirty (30) days
after receipt of written notice from Tenant together with reasonable supporting
documentation.

 

29

 

ARTICLE 14 ASSIGNMENT AND
SUBLETTING

 

14.1                           Transfer
By Tenant:  The following provisions
shall apply to any assignment, subletting or other transfer by Tenant or any
subtenant or assignee or other successor in interest of the original Tenant
(collectively referred to in this Section 14.1 as “Tenant”):

 

A.                                   Transfer.  Except as otherwise set forth herein, Tenant
shall not do any of the following (collectively referred to herein as a “Transfer”), whether voluntarily,
involuntarily or by operation of law, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed: (i) sublet all or any part of the Premises or allow it to be sublet,
occupied or used by any person or entity other than Tenant; (ii) assign its
interest in this Lease; (iii) mortgage or encumber the Lease (or otherwise use
the Lease as a security device) in any manner; or (iv) materially amend or
modify an assignment, sublease or other transfer that has been previously
approved by Landlord.  Tenant shall
reimburse Landlord for up to $2,500 of all reasonable costs and attorneys’ fees
incurred by Landlord in connection with the evaluation, processing, and/or
documentation of any requested Transfer, whether or not Landlord’s consent is
granted.  Landlord’s reasonable costs
shall include the cost of any review or investigation performed by Landlord or
consultant acting on Landlord’s behalf of (i) Hazardous Materials used, stored,
released, or disposed of by the potential subtenant or assignee, and/or (ii)
violations of Hazardous Materials Law by the Tenant or the proposed subtenant
or assignee.  Any Transfer so approved
by Landlord shall not be effective until Tenant has delivered to Landlord an
executed counterpart of the document evidencing the Transfer which (i) is in a
form reasonably approved by Landlord, (ii) contains the same terms and
conditions as stated in Tenant’s notice given to Landlord pursuant to Section
14.1B, and (iii) in the case of an assignment of the Lease, contains the
agreement of the proposed transferee to assume all obligations of Tenant under
this Lease arising after the effective date of such Transfer and to remain
jointly and severally liable therefor with Tenant.  Any attempted Transfer without Landlord’s consent, to the extent
required hereunder, shall be voidable at Landlord’s option.  Landlord’s consent to any one Transfer shall
not constitute a waiver of the provisions of this Section 14.1 as to any
subsequent Transfer or a consent to any subsequent Transfer.  No Transfer, even with the consent of
Landlord, shall relieve Tenant of its personal and primary obligation to pay
the rent and to perform all of the other obligations to be performed by Tenant
hereunder.  The acceptance of rent by
Landlord from any person shall not be deemed to be a waiver by Landlord of any
provision of this Lease nor to be a consent to any Transfer.

 

B.                                     Procedure.  At least 30 days before a proposed Transfer
is to become effective,  Tenant shall give Landlord written
notice of the proposed terms of such Transfer and request Landlord’s approval,
which notice shall include the following: (i) the name and legal composition of
the proposed transferee; (ii) a current financial statement of the transferee,
financial statements of the transferee covering the preceding three years if
the same exist, and (if available) an audited financial statement of the
transferee for a period ending not more than one year prior to the proposed effective
date of the Transfer, all of which statements are prepared in accordance with
generally accepted accounting principles, except as noted therein; (iii) the
nature of the proposed transferee’s business to be carried on in the Premises;
(iv) all consideration to be given on account of the Transfer; (v) a current
financial statement of Tenant (either in writing or by reference to a URL
address or other publicly available source; and (vi) an accurately filled out
response to Landlord’s standard hazardous materials questionnaire by the
transferee.  Tenant shall provide to
Landlord such other information as may be reasonably requested by Landlord
within seven days after Landlord’s receipt of such notice from Tenant.  Landlord shall respond in writing to Tenant’s
request for Landlord’s consent to a Transfer within the later of (i) 20 days of
receipt of such request together with the required accompanying documentation,
or (ii) 7 days after Landlord’s receipt of all information which  Landlord
reasonably requests within seven days after it receives Tenant’s first notice
regarding the Transfer in question.  If
Landlord fails to respond in writing within said period, then Tenant shall
provide a second written notice to Landlord requesting such consent and if
Landlord fails to respond within 10 days after receipt of such second notice,
then Landlord will be deemed to have consented to such Transfer.  Tenant shall immediately notify Landlord of
any material modification to the proposed terms of such Transfer, which shall
also be subject Landlord’s consent in accordance with the same process for
obtaining Landlord’s initial consent to such Transfer.

 

30

 

C.                                     Recapture.  If Tenant seeks to make a Transfer after the
fourth year following the Commencement Date, Landlord shall have the right to
terminate this Lease or, in the case of a sublease of less than all of the
Premises, terminate this Lease as to that part of the Premises proposed to be
so sublet, either (i) on the condition that the proposed transferee immediately
enter into a direct lease of the Premises with Landlord (or, in the case of a
partial sublease, a lease for the portion proposed to be so sublet) on the same
terms and conditions contained in Tenant’s notice, or (ii) so that Landlord is
thereafter free to lease the Premises (or, in the case of a partial sublease,
the portion proposed to be so sublet) to whomever it pleases on whatever terms
are acceptable to Landlord.  In the
event Landlord elects to so terminate this Lease, then (i) if such termination
is conditioned upon the execution of a lease between Landlord and the proposed
transferee, Tenant’s obligations under this Lease shall not be terminated until
such transferee executes a new lease with Landlord, enters into possession and
commences the payment of rent, and (ii) if Landlord elects simply to terminate
this Lease (or, in the case of a partial sublease, terminate this Lease as to
the portion to be so sublet), the Lease shall so terminate in its entirety (or
as to the space to be so sublet) fifteen (15) days after Landlord has notified
Tenant in writing of such election. 
Upon such termination, Tenant shall be released from any further
obligation under this Lease if it is terminated in its entirety, or shall be
released from any further obligation under the Lease with respect to the space
proposed to be sublet in the case of a proposed partial sublease.  In the case of a partial termination of the
Lease, the Base Monthly Rent and Tenant’s Share shall be reduced to an amount
which bears the same relationship to the original amount thereof as the area of
that part of the Premises which remains subject to the Lease bears to the
original area of the Premises.  Landlord
and Tenant shall execute a cancellation and release with respect to the Lease
to effect such termination.

 

Notwithstanding the foregoing provisions of Section
14.1C, Landlord’s right to recapture under this Section shall not be applicable
to (i) any Permitted Transfer, or (b) any other Transfer involving the sale or
transfer of Tenant’s business at the Premises where the transferee will
continue to conduct the same or substantially similar business as Tenant at the
Premises.

 

D.                                    Other
Requirements.  If Landlord consents
to a Transfer proposed by Tenant, Tenant may enter into such Transfer, and if
Tenant does so, the following shall apply:

 

(1)                                  Tenant
shall not be released of its liability for the performance of all of its
obligations under the Lease.

 

(2)                                  If
Tenant assigns its interest in this Lease, then Tenant shall pay to Landlord
62.5% of all Subrent (as defined in Section 14.1D(5)) received by Tenant.  In the case of assignment, the amount of
Subrent owed to Landlord shall be paid to Landlord on the same basis, whether
periodic or in lump sum, that such Subrent is paid to Tenant by the assignee.

 

(3)                                  If
Tenant sublets any part of the Premises, then with respect to the space so
subleased, Tenant shall pay to Landlord 62.5% of the positive difference, if
any, between (i) all  Subrent paid by the subtenant to
Tenant, less (ii) the sum of all Base Monthly Rent and Additional Rent
allocable to the space sublet.  Such
amount shall be paid to Landlord on the same basis, whether periodic or in lump
sum, that such Subrent is paid to Tenant by its subtenant.

 

(4)                                  Tenant’s
obligations under this Section 14.1D shall survive any Transfer.  At the time Tenant makes any payment to
Landlord required by this Section 14.1D, Tenant shall deliver an itemized
statement of the method by which the amount to which Landlord is entitled was
calculated, certified by Tenant as true and correct.  Landlord shall have the right at reasonable intervals to inspect
Tenant’s books and records relating to the payments due hereunder.  Upon request therefor, Tenant shall deliver
to Landlord copies of all bills, invoices or other documents upon which its
calculations are based.  Landlord may
condition its approval of any Transfer upon obtaining a certification from both
Tenant and the proposed transferee of all Subrent and other amounts that are to
be paid to Tenant in connection with such Transfer.

 

31

 

(5)                                  As
used in this Section 14.1D, the term “Subrent”
shall mean any consideration of any kind received, or to be received, by Tenant
as a result of the Transfer, to the extent such sums are related to Tenant’s
interest in this Lease or in the Premises, including payments from or on behalf
of the transferee (in excess of the book value thereof) for Tenant’s assets,
fixtures, leasehold improvements, inventory, accounts, goodwill, equipment,
furniture, and general intangibles, after deducting (i) reasonable actual
out-of-pocket legal and brokerage expenses incurred and paid by Tenant to
unaffiliated third parties in connection therewith, and (ii) the depreciated
value (in accordance with generally accepted accounting principles) of the cost
of alterations and improvements affixed and made a part of the Premises which
were required to be performed for such Transfer at Tenant’s expense, which, in
the event of a sublease, shall only be applicable to the alterations and
improvements in the sublet premises.

 

E.                                      Deemed
Transfers.  If Tenant is a
corporation, the following shall be deemed a voluntary assignment of Tenant’s
interest in this Lease: (i) any dissolution, merger, consolidation, or other
reorganization of or affecting Tenant, whether or not Tenant is the surviving
corporation; and (ii) if the capital stock of Tenant is not publicly traded,
the sale or transfer to one person or entity (or to any group of related
persons or entities) stock possessing more than 50% of the total combined
voting power of all classes of Tenant’s capital stock issued, outstanding and
entitled to vote for the election of directors.  If Tenant is a partnership, limited liability company or other
entity any withdrawal or substitution (whether voluntary, involuntary or by
operation of law, and whether occurring at one time or over a period of time)
of any partner, member or other party owning 50% or more (cumulatively) of any
interest in the capital or profits of the partnership, limited liability
company or other entity or the dissolution of the partnership, limited
liability company or other entity, shall be deemed a voluntary assignment of
Tenant’s interest in this Lease.

 

F.                                      Permitted
Transfers.  Notwithstanding anything
contained in Section 14.1, Tenant may sublease all or part of the Premises or
assign its interest in this Lease to any entity (a) which controls, is
controlled by, or is under common control with Tenant by means of an ownership
interest of more than 50%, and/or (b) into or with which Tenant is merged or
with which Tenant is consolidated or which acquires all or substantially all of
Tenant’s stock or assets as a going concern, provided that the successor has a
tangible net worth equal to or greater than Tenant’s at the time of such
Transfer and has other financial indicators sufficient to met Tenant’s
obligations under this Lease (all of the foregoing, a “Permitted Transfer”) without Landlord’s
prior written consent but after providing at least 20 days prior written
notice.  Landlord shall not be entitled
to terminate the Lease pursuant to Section 14.1C or to receive any part of any
Subrent resulting therefrom that would otherwise be due it pursuant to Section
14.1D in connection with a Permitted Transfer.

 

G.                                     Reasonable
Standards.  The consent of Landlord
to a Transfer may not be unreasonably withheld, conditioned or delayed provided
that it is agreed to be reasonable for Landlord to consider any of the following
reasons, which list is not exclusive, in electing to deny consent:

 

(1)                                  The
character and business or professional standing of the proposed transferee at
the time of the proposed Transfer is not at least equal to that of Tenant at
the time of execution of this Lease, or if the proposed transferee does not
have a tangible net worth and other financial indicators sufficient to meet Tenant’s
obligations hereunder with respect to the portion of the Premises affected by
such Transfer;

 

(2)                                  A
proposed transferee whose occupation of the Premises would cause a diminution
in the value of the Building or Project;

 

(3)                                  A
proposed transferee whose impact or affect on the common facilities or the
utility, efficiency or effectiveness of any utility or telecommunication system
serving the Building or the Project or the other occupants of the Project would
be adverse, disadvantageous or require improvements or changes in any utility
or telecommunication capacity currently serving the Building or the Project;

 

32

 

(4)                                  A
proposed transferee whose occupancy will require a variation in the terms of
this Lease (including, without limitation, a variation in the use clause) or
which otherwise adversely affects any interest of Landlord;

 

(5)                                  The
existence of any material default under any provision of this Lease that is not
cured at the time of the request for consent to a Transfer;

 

(6)                                  A
proposed transferee who is or is likely to be, or whose business is or is
likely to be, subject to compliance with additional laws or other governmental
requirements beyond those to which Tenant or Tenant’s business is subject;

 

(7)                                  Either
the proposed transferee, or any person or entity which directly or indirectly,
controls, is controlled by, or is under common control with, the proposed
transferee or an affiliate of the proposed transferee is negotiating with
Landlord to lease space in the Building or in the Project at such time;

 

(8)                                  the
proposed Transferee is a governmental agency or unit, or an existing tenant in
the Project unless such existing tenant is seeking expansion space and Landlord
cannot supply such space within the Project;

 

(9)                                  Landlord
otherwise determines that the proposed Transfer would have the effect of
decreasing the value of the Building or the Project, or increasing the expenses
associated with operating, maintaining and repairing the Building or the
Project; or

 

(10)                            the
proposed Transferee will use, store or handle Hazardous Materials (defined
above) in or about the Premises of a type, nature or quantity not then in use
by Tenant.

 

H.                                    Reasonable
Restriction. The restrictions on Transfer described in this Lease are
acknowledged by Tenant to be reasonable for all purposes, including, without
limitation, the provisions of California Civil Code (the “Code”) Section 1951.4(b)(2). Tenant
expressly waives any rights which it might otherwise be deemed to possess
pursuant to applicable law, including, without limitation, Section 1997.040 of
the Code, to limit any remedy of Landlord pursuant to Section 1951.2 or 1951.4
of the Code by means of proof that enforcement of a restriction on use of the
Premises would be unreasonable.

 

14.2                           Transfer
By Landlord:  Landlord and its
successors in interest shall have the right to transfer their interest in this
Lease and the Project at any time and to any person or entity.  In the event of any such transfer, the
Landlord originally named herein (and, in the case of any subsequent transfer,
the transferor) from the date of such transfer, shall be automatically
relieved, without any further act by any person or entity, of all liability for
the performance of the obligations of the Landlord hereunder which may accrue
after the date of such transfer only to the extent assumed in writing by such
transferee.  After the date of any such
transfer, the term “Landlord” as used herein shall mean the transferee of such
interest in the Premises.

 

ARTICLE 15 GENERAL PROVISIONS

 

15.1                           Landlord’s
Right to Enter:  Landlord and its
agents may enter the Premises at any reasonable time after giving at least two
(2) business days’ prior written notice to Tenant (and immediately in the case
of emergency) for the purpose of: (i) inspecting the same; (ii) posting notices
of non-responsibility; (iii) supplying any service to be provided by Landlord
to Tenant; (iv) showing the Premises to prospective purchasers, mortgagees or,
during the last six (6) months of the Term, prospective tenants; (v) making
necessary alterations, additions or repairs; (vi) performing Tenant’s obligations
upon an Event of Tenant’s Default; (vii) placing upon the Premises ordinary
“for sale” signs or, during the last six (6) months of the Term, “for lease”
signs; and (viii) responding to an emergency. 
Landlord shall have the right to use any and all means Landlord may deem

 

33

 

reasonably necessary and proper to enter the Premises in an
emergency.  Any entry into the Premises
obtained by Landlord in accordance with this Section 15.1 shall not be a
forcible or unlawful entry into, or a detainer of, the Premises, or an
eviction, actual or constructive, of Tenant from the Premises. Landlord shall
use commercially reasonable efforts to minimize any unreasonable interference
with Tenant’s business operations and use and occupancy of the Premises in
connection with the exercise any of the foregoing rights under this Section
15.1.

 

15.2                           Surrender
of the Premises:  Upon the
expiration or sooner termination of this Lease, Tenant shall vacate and
surrender the Premises to Landlord in the same condition as existed at the
Commencement Date, together with any Tenant Alterations which Landlord did not
specify for removal pursuant to Section 5.2C hereof, except for (i) reasonable
wear and tear, (ii) damage caused by any peril or condemnation, and (iii)
contamination by Hazardous Materials for which Tenant is not responsible
pursuant to Section 7.2A or Section 7.2B. 
In this regard, normal wear and tear shall be construed to mean wear and
tear caused to the Premises by the natural aging process which occurs in spite
of prudent application of commercially reasonable standards for maintenance,
repair and janitorial practices, and does not include items of neglected or
deferred maintenance which are the responsibility of Tenant hereunder.  In any event, Tenant shall cause the
following to be done prior to the expiration or the sooner termination of this
Lease: (i) all broken, marred, stained or nonconforming acoustical ceiling
tiles shall be replaced; (ii) the plumbing and electrical systems and lighting
shall be placed in good order and repair (including replacement of any burned
out, discolored or broken light bulbs, ballasts, or lenses).  If Landlord so requests, Tenant shall, prior
to the expiration or sooner termination of this Lease, (i) remove any Tenant’s
Alterations which Tenant is required to remove pursuant to Section 5.2 and
repair all damage caused by such removal, and (ii) return the Premises or any
part thereof to its original configuration existing as of the time the Premises
were delivered to Tenant except for Alterations made by Tenant and not
specified by Landlord for removal pursuant to Section 5.2C hereof.  If the Premises are not so surrendered at
the termination of this Lease, Tenant shall be liable to Landlord for all
reasonable costs incurred by Landlord in returning the Premises to the required
condition, plus interest on all such costs incurred at the Agreed Interest
Rate.  Tenant shall indemnify Landlord
against loss or liability resulting from delay by Tenant in so surrendering the
Premises, including, without limitation, any claims made by any succeeding
tenant or losses to Landlord due to lost opportunities to lease to succeeding
tenants and losses and damages suffered by Landlord due to lost opportunities
to lease any portion of the Premises to any such succeeding tenant or
prospective tenant, together with, in each case, actual attorneys’ fees and
costs.

 

15.3                           Holding
Over:  This Lease shall terminate
without further notice at the expiration of the Lease Term.  Any holding over by Tenant after expiration
of the Lease Term shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the Premises except as expressly provided in
this Lease.  Any holding over after such
expiration with the written consent of Landlord shall be construed to be a
tenancy from month to month on the same terms and conditions herein specified
insofar as applicable except that Base Monthly Rent shall be increased to an
amount equal to 150% of the greater of (a) the Base Monthly Rent payable during
the last full calendar month of the Lease Term, or (b) the then prevailing fair
market rent.

 

15.4                           Subordination:  The following provisions shall govern the
relationship of this Lease to any Security Instrument:

 

A.                                   Existing
Security Instruments.  The Lease is
subject and subordinate to all Security Instruments existing as of the
Effective Date.  However, if any Lender
so requires, this Lease shall become prior and superior to any such Security
Instrument.

 

B.                                     New
Security Instruments.  At Landlord’s
election, this Lease shall become subject and subordinate to any Security
Instrument created after the Effective Date. 
Notwithstanding such subordination, Tenant’s right to quiet possession
of the Premises shall not be disturbed so long as Tenant is not in default and
performs all of its obligations under this Lease beyond the expiration of all
applicable notice and grace periods, unless this Lease is otherwise terminated
pursuant to its terms.

 

34

 

C.                                     Documents.  Tenant shall upon request execute any
document or instrument in commercially reasonable form which may be required by
any Lender to make this Lease either prior or subordinate to a Security
Instrument, which may include such other matters as the Lender customarily and
reasonably requires in connection with such agreements, including provisions
that the Lender not be liable for (i) the return of any security deposit unless
the Lender receives it from Landlord, and (ii) any defaults on the part of
Landlord occurring prior to the time the Lender takes possession of the Project
in connection with the enforcement of its Security Instrument.  Tenant’s failure to execute any such
document or instrument within 15 business days after written demand therefor
shall constitute an Event of Tenant’s Default.

 

15.5                           Mortgagee
Protection and Attornment:  In the
event of any default on the part of the Landlord, Tenant will use reasonable
efforts to give notice by registered mail to any Lender whose name has been
provided to Tenant and shall offer such Lender a reasonable opportunity to cure
the default, including time to obtain possession of the Premises by power of
sale or judicial foreclosure or other appropriate legal proceedings, if such
should prove necessary to effect a cure. 
Tenant shall attorn to any purchaser of the Premises at any foreclosure
sale or private sale conducted pursuant to any Security Instrument encumbering
the Premises, or to any grantee or transferee designated in any deed given in
lieu of foreclosure.

 

15.6                           Estoppel
Certificates and Financial Statements: 
At all times during the Lease Term, each party agrees, following any
request by the other party, promptly to execute and deliver to the requesting
party within 15 business days following delivery of such request an estoppel
certificate: (i) certifying that this Lease is unmodified and in full force and
effect or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect, (ii) stating the
date to which the rent and other charges are paid in advance, if any, (iii)
acknowledging that there are not, to the certifying party’s knowledge, any
uncured defaults on the part of any party hereunder or, if there are uncured
defaults, specifying the nature of such defaults, and (iv) certifying such
other information about the Lease as may be reasonably required by the
requesting party.  A failure to deliver
an estoppel certificate within 15 business days after delivery of a request
therefor shall be a conclusive admission that, as of the date of the request
for such statement: (i) this Lease is unmodified except as may be represented
by the requesting party in said request and is in full force and effect, (ii)
there are no uncured defaults in the requesting party’s performance, and (iii)
no rent has been paid more than 30 days in advance.  At any time during the Lease Term Tenant shall, upon 15 days’
prior written notice from Landlord, provide (in writing or by reference to a
URL address or other publicly available source) Tenant’s most recent financial
statement and financial statements covering the 24 month period prior to the
date of such most recent financial statement to any existing Lender or to any
potential Lender or buyer of the Premises. 
Such statements shall be prepared in accordance with generally accepted
accounting principles and, if such is the normal practice of Tenant, shall be
audited by an independent certified public accountant.

 

15.7                           Consent:  Whenever Landlord’s approval or consent is
required by this Lease, such approval or consent shall not be unreasonably
withheld, conditioned or delayed, unless a different standard has been
expressly provided in this Lease for the particular matter requiring Landlord’s
consent or approval.

 

15.8                           Notices:  Any notice required or desired to be given
regarding this Lease shall be in writing and shall be given by personal
delivery or nationally recognized overnight courier service, in either event
with evidence of delivery or refusal thereof, addressed to the party to be
served at its Address for Notices specified in Section Q or Section R
of the Summary (as applicable.  A notice
shall be deemed to have been given upon
the date of receipt or refusal thereof.  Either party may change its address by giving notice of the same
in accordance with this Section 15.8.

 

15.9                           Attorneys’
Fees:  In the event either Landlord
or Tenant shall bring any action or legal proceeding for an alleged breach of
any provision of this Lease, to recover rent, to terminate this Lease or
otherwise to enforce, protect or establish any term or covenant of this Lease,
the prevailing party shall be

 

35

 

entitled to recover as a part of such action or proceeding, or in a
separate action brought for that purpose, reasonable attorneys’ fees, court
costs, and experts’ fees as may be fixed by the court.  The “prevailing party” shall be the party
which by law is entitled to recover its costs of suit, whether or not the
action proceeds to final judgment.

 

15.10                     Corporate Authority:  Each individual executing this Lease on
behalf of each party represents and warrants that he/she is duly authorized to
execute and deliver this Lease on behalf of such party and that this Lease is
binding upon such party in accordance with its terms.  Each of the persons executing this Lease on behalf of each party
does hereby covenant and warrant that the party for whom it is executing this
Lease is duly authorized and existing, that it is qualified to do business in
California, and has full right and authority to enter into this Lease.

 

15.11                     Miscellaneous:  Should any provision of this Lease prove to
be invalid or illegal, such invalidity or illegality shall in no way affect,
impair or invalidate any other provision hereof, and such remaining provisions
shall remain in full force and effect. 
Time is of the essence with respect to the performance of every
provision of this Lease in which time of performance is a factor.  The captions used in this Lease are for
convenience only and shall not be considered in the construction or
interpretation of any provision hereof. 
Any executed copy of this Lease shall be deemed an original for all
purposes.  This Lease shall, subject to
the provisions regarding assignment, apply to and bind the respective heirs,
successors, executors, administrators and assigns of Landlord and Tenant.  “Party”
shall mean Landlord or Tenant, as the context implies.  If Tenant consists of more than one person
or entity, then all members of Tenant shall be jointly and severally liable
hereunder.  This Lease shall be
construed and enforced in accordance with the laws of the State of California.  The language in all parts of this Lease
shall in all cases be construed as a whole according to its fair meaning, and
not strictly for or against either Landlord or Tenant.  When the context of this Lease requires, the
neuter gender includes the masculine, the feminine, a partnership or
corporation or joint venture, and the singular includes the plural.  The terms “shall”, “will” and “agree” are
mandatory.  The term “may” is
permissive.  When a party is required to
do something by this Lease, it shall do so at its sole cost and expense without
right of reimbursement from the other party unless a provision of this Lease
expressly requires reimbursement. 
Landlord and Tenant agree that (i) the gross leasable area of the
Premises includes any atriums, depressed loading docks, covered entrances or
egresses, and covered loading areas, (ii) each has had an opportunity to
determine to its satisfaction the actual area of the Project and the Premises,
(iii) all measurements of area contained in this Lease are conclusively agreed
to be correct and binding upon the parties, even if a subsequent measurement of
any one of these areas determines that it is more or less than the amount of
area reflected in this Lease, and (iv) any such subsequent determination that
the area is more or less than shown in this Lease shall not result in a change
in any of the computations of rent, improvement allowances, or other matters
described in this Lease where area is a factor.  Where a party hereto is obligated not to perform any act, such
party is also obligated to restrain any others within its control from
performing said act, including the Agents of such party.  Landlord shall not become or be deemed a
partner or a joint venturer with Tenant by reason of the provisions of this
Lease.

 

15.12                     Termination by Exercise of
Right:  If this Lease is terminated
pursuant to its terms by the proper exercise of a right to terminate
specifically granted to Landlord or Tenant by this Lease, then this Lease
shall, unless otherwise set forth herein, terminate 30 days after the date the
right to terminate is properly exercised (unless another date is specified in
that part of the Lease creating the right, in which event the date so specified
for termination shall prevail), the rent and all other charges due hereunder
shall be prorated as of the date of termination, and neither Landlord nor
Tenant shall have any further rights or obligations under this Lease except for
those that have accrued prior to the date of termination or those obligations
which this Lease specifically provides are to survive termination.  This Section 15.12 does not apply to a
termination of this Lease by Landlord as a result of an Event of Tenant’s
Default.

 

15.13                     Brokerage Commissions:  Each party hereto (i) represents and
warrants to the other that it has not had any dealings with any real estate
brokers, leasing agents or salesmen, or incurred any obligations for the

 

36

 

payment of real estate brokerage commissions or finder’s fees which
would be earned or due and payable by reason of the execution of this Lease,
other than to the Retained Real Estate Brokers described in Section S of
the Summary, and (ii) agrees to indemnify, defend, and hold harmless the other
party from any claim for any such commission or fees which result from the
actions of the indemnifying party. 
Landlord shall be responsible for the payment of any commission owed to
the Retained Real Estate Brokers pursuant to a separate agreement between
Landlord and Colliers International, the Retained Real Estate Broker representing
Landlord. .

 

15.14                     Force Majeure:  Any prevention, delay or stoppage due to
strikes, lock-outs, inclement weather, labor disputes, inability to obtain
labor, materials, fuels or reasonable substitutes therefor, governmental
restrictions, regulations, controls, action or inaction, civil commotion, fire
or other acts of God, and other causes beyond the reasonable control of either
party (except financial inability) shall excuse the performance by such party,
for a period equal to the period of any said prevention, delay or stoppage, of
any obligation hereunder. The provisions of this Section will not be applicable
in connection with any obligation to pay Base Monthly Rent, Additional Rent or
any other sum.  A party claiming a force
majeure delay under this Section shall notify the other party of the delay
promptly following the event that is causing the delay.

 

15.15                     Entire Agreement:  This Lease constitutes the entire agreement
between the parties, and there are no binding agreements or representations
between the parties except as expressed herein.  Tenant acknowledges that neither Landlord nor Landlord’s Agents
has made any legally binding representation or warranty as to any matter except
those expressly set forth herein, including any warranty as to (i) whether the
Premises may be used for Tenant’s intended use under existing Law, (ii) the
suitability of the Premises or the Project for the conduct of Tenant’s
business, or (iii) the condition of any improvements.  There are no oral agreements between Landlord and Tenant
affecting this Lease, and this Lease supersedes and cancels any and all
previous negotiations, arrangements, brochures, agreements and understandings,
if any, between Landlord and Tenant or displayed by Landlord to Tenant with
respect to the subject matter of this Lease. 
This instrument shall not be legally binding until it is executed by
both Landlord and Tenant.  No subsequent
change or addition to this Lease shall be binding unless in writing and signed
by Landlord and Tenant.

 

15.16                     Quiet Enjoyment:  Notwithstanding anything herein to the
contrary, Landlord covenants that so long as Tenant keeps and performs each and
every covenant, agreement, term, provision and condition herein contained on
the part and on behalf of Tenant to be kept and performed, Tenant shall
peaceably and quietly hold, occupy and enjoy the Premises during the Term
hereof, subject to the terms and provisions of this Lease.

 

15.17                     Waiver of Landlord’s Lien.  Landlord hereby waives any right it may now
or hereafter have under the laws of the State of California to any lien or
other security interest in any of Tenant’s Trade Fixtures or other equipment of
Tenant on the Premises, and hereby releases Tenant and Tenant’s Trade Fixtures
and such equipment from any such lien or security interest.  To the extent this waiver is not sufficient,
after request by Tenant, Landlord agrees to 
execute a waiver and consent form whereby Landlord subordinates any
right to equipment installed by Tenant in the Premises which constitutes collateral
under a loan agreement to which Tenant is a party, provided that such
subordination and consent form (a) requires that prior written notice be given
to Landlord before entry to the Premises by such lender, (b) does not permit
any auction for the sale or other disposition of such equipment at or about the
Premises, (c) requires such lender to indemnify, defend and hold harmless
Landlord for any damage to property or injury to any person caused by such
lender or its representatives or agents, (d) does not permit such lender to
occupy the Premises beyond the expiration or earlier termination of this Lease
or require Landlord to provide notice of any default by Tenant under this
Lease, and (e) is otherwise in a form reasonably approved by Landlord.

 

[SIGNATURES ON FOLLOWING
PAGE]

 

37

 

IN WITNESS WHEREOF, Landlord and Tenant have executed
this Lease with the intent to be legally bound thereby, to be effective as of
the Effective Date.

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
  SHORELINE PARK, LLC,

  a Delaware limited liability company

  	
   

  	
  AMERICAN SCIENCE AND
  ENGINEERING, INC.,

  a Massachusetts corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Divco West Group, LLC,

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  a Delaware limited
  liability company

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Its Agent

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  	
  Dated:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dated:

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