Document:

Exhibit 10.5

 

RESTRICTED
STOCK AGREEMENT

 

This
RESTRICTED STOCK AGREEMENT (the “Agreement”),
dated as of May 1, 2008
(the “Date of Grant”), is entered into by and between GUESS?, INC., a
Delaware corporation (the “Company”), and  Nancy C.
Shachtman (the “Grantee”).

 

RECITALS

 

WHEREAS, the Company maintains the Guess?, Inc. 2004
Equity Incentive Plan, as it may be amended from time to time (the “Plan”).

 

WHEREAS, the Compensation Committee of the Company’s
Board of Directors (the “Committee”) has determined to grant a
restricted stock award (the “Award”) to the Grantee under the Plan in
order to increase Grantee’s participation in the success of the Company;

 

NOW, THEREFORE, the parties hereto agree
as follows:

 

1.                                       Definitions;
Incorporation of Plan Terms.  Capitalized terms used herein without
definition shall have the meanings assigned to them in the Plan.  The Award and all rights of the Grantee under
this Agreement are subject to, and the Grantee agrees to be bound by, all of
the terms and conditions of the Plan, incorporated herein by this
reference.  In the event of any conflict
or inconsistency between the Plan and this Award Agreement, the Plan shall
govern.

 

2.                                       Grant of
Restricted Stock.  The Grantee
shall be entitled to purchase 10,000
restricted shares of the Company’s common stock, par value $0.01 per share (the
“Common Stock”), pursuant to the terms and conditions of this Agreement
(the “Restricted Stock”).

 

3.                                       Purchase Price.  The Grantee shall pay to the Company, in
cash, an aggregate purchase price of $ 100.00
(the “Purchase Price”), which amount is equal to the aggregate amount of
the par value of the Restricted Stock. 
Such payment of the Purchase Price shall be made to the Company within
30 days after the date hereof.

 

4.                                       Vesting.  Subject to Section 10 below, the total
number of shares of the Restricted Stock subject to the Award shall vest and
restrictions shall lapse based on the level of achievement of the performance
goals and applicable targets set forth on Exhibit A, as previously communicated
verbally to the Grantee by the Company. 
Subject to Section 8 below, shares of Restricted Stock that have
not theretofore vested in accordance with Exhibit A or Section 10
shall be forfeited on the first business day following the filing of the Company’s
audited financial statements with the Securities and Exchange Commission for
the final year of the performance period (as set forth on Exhibit A)
applicable to the shares of Restricted Stock subject to the Award.

 

5.                                       Continued
Employment Required.  The vesting
schedule requires continued employment from the date hereof through each
applicable vesting date as a condition to the vesting of the applicable
installment of the Award.  Employment for
only a portion of the vesting period, even if a substantial portion, will not
entitle the Grantee to any proportionate vesting or avoid or mitigate a
termination of rights and benefits upon or following a termination of
employment as provided in Section 9 below or under the Plan.

 

 

6.                                       Rights of a
Stockholder.  From and
after the Date of Grant and for so long as the Restricted Stock is held by or
for the benefit of the Grantee, the Grantee shall have all the rights of a
stockholder of the Company with respect to the Restricted Stock, including but
not limited to the right to receive dividends, if applicable, and the right to
vote such shares.

 

7.                                       Adjustments Upon Specified Events.  Upon the occurrence of certain events
relating to the Company’s Common Stock contemplated by Section 16(b) of
the Plan, the Committee will make adjustments, if appropriate, in the number
and kind of securities subject to the Award. 
If any adjustment is made under Section 16(b) of the Plan, the
restrictions applicable to the shares of Restricted Stock shall continue in
effect with respect to any consideration or other securities (the “Restricted
Property” and, for the purposes of this Award Agreement, “Restricted Stock”
shall include “Restricted Property,” unless the context otherwise requires)
received in respect of such Restricted Stock. 
Such Restricted Property shall vest at such times in such proportion as
the shares of Restricted Stock to which the Restricted Property is
attributable.  To the extent that the
Restricted Property includes any cash (other than regular cash dividends provided
for in Section 6 hereof), such cash shall be invested, pursuant to
policies established by the Committee, in interest bearing, FDIC-insured
(subject to applicable insurance limits) deposits of a depository institution
selected by the Committee, the earnings on which shall be added to and become a
part of the Restricted Property.

 

8.                                       Effect of
Cessation of Employment. 
Unless the Committee determines otherwise in its sole discretion, if the
employment of the Grantee by the Company, a Parent or a Subsidiary shall
terminate for any reason, whether with or without cause, voluntarily or
involuntarily, any of the shares of the Restricted Stock that are not vested on
the date of the Grantee’s termination of employment shall be forfeited.

 

9.                                       Return of
Shares; Refund of Purchase Price.  Upon the occurrence of any forfeiture of
shares of Restricted Stock hereunder, such unvested, forfeited shares and
related Restricted Property shall be automatically transferred to the Company,
without any other action by the Grantee, or the Grantee’s beneficiary or
personal representative, as the case may be, and the Company shall refund the
Purchase Price to the Grantee (or the Grantee’s beneficiary or personal
representative); no additional consideration shall be paid by the Company with
respect to such transfer.  No interest
shall be credited with respect to nor shall any other adjustments be made to
the Purchase Price for fluctuations in the fair market value of the Common
Stock either before or after the transfer date. 
The Company may exercise its powers under Section 12(D) hereof
and take any other action necessary or advisable to evidence such
transfer.  The Grantee, or the Grantee’s
beneficiary or personal representative, as the case may be, shall deliver any
additional documents of transfer that the Company may request to confirm the
transfer of such unvested, forfeited shares and related Restricted Property to
the Company.

 

2

 

10.                                 Change in
Control.  As provided in Section 17
of the Plan, in the event of a Change in Control and except as the Committee
(as constituted immediately prior to such Change in Control) may otherwise
determine in its sole discretion, all of the shares of Restricted Stock then
outstanding and not otherwise vested shall thereon become fully vested.

 

11.                                 Restrictions on
Transfer.  Prior to
shares of Restricted Stock becoming vested, neither the Restricted Stock, nor
any interest therein, amount payable in respect thereof or Restricted Property
shall be sold, transferred, pledged, hypothecated or otherwise disposed of by
the Grantee; provided, however, that such transfer restrictions shall not apply
to (i) transfers to the Company or (ii) transfers by will or descent
and distribution.  Grantee agrees that
the Restricted Stock will not be sold or otherwise disposed of in any manner
that would constitute a violation of any applicable federal or state securities
laws.

 

12.                                 Stock
Certificates.

 

A.                                   Book
Entry Form.  The Company shall, in its discretion, issue the
shares of Restricted Stock subject to the Award either: (i) in certificate
form as provided in Section 12(B) below; or (ii) in book entry
form, registered in the name of the Grantee with notations regarding the
applicable restrictions on transfer imposed under this Agreement.

 

B.                                     Certificates
to be Held by Company; Legend.  Any certificates representing shares of Restricted Stock that may be
delivered to the Grantee by the Company prior to the lapse of restrictions
shall be immediately redelivered by the Grantee to the Company to be held by
the Company until the restrictions on such shares shall have lapsed and the
shares shall thereby have become vested or the shares represented thereby have
been forfeited hereunder.  Such
certificates shall bear the following legend:

 

“The ownership of this certificate and the shares of
stock evidenced hereby and any interest therein are subject to substantial
restrictions on transfer under an Agreement entered into between the registered
owner and Guess?, Inc.  A copy of
such Agreement is on file in the office of the Secretary of Guess?, Inc.”

 

C.                                     Delivery
of Shares Upon Lapse of Restricted Period.  Promptly after any shares of Restricted Stock
becoming vested pursuant to Section 4 or Section 10 and the
satisfaction of any and all related tax withholding obligations pursuant to Section 13,
the Company shall, as applicable, either remove the notations on any shares of
Restricted Stock issued in book entry form which have vested or deliver to the
Grantee a certificate or certificates evidencing the number of shares of
Restricted Stock which have vested (or, in either case, such lesser number of
shares as may be permitted pursuant to Section 13).  The Grantee (or the Beneficiary or Personal
Representative of the Grantee in the event of the Grantee’s death or
incapacity, as the case may be) shall deliver to the Company any
representations or other documents or assurances as the Company may deem
necessary or reasonably desirable to ensure compliance with all applicable
legal and regulatory requirements.  The
shares so delivered shall no longer be restricted shares hereunder.

 

3

 

D.                                    Stock
Power; Power of Attorney. 
Concurrent with the execution and delivery of this Agreement, the Grantee
shall deliver to the Company an executed stock power in the form attached
hereto as Exhibit B, in blank, with respect to the Restricted Stock.  The Grantee, by acceptance of the Award,
shall be deemed to appoint, and does so appoint by execution of this Agreement,
the Company and each of its authorized representatives as the Grantee’s
attorney(s) in fact to effect any transfer of unvested, forfeited shares
(or shares otherwise reacquired by the Company hereunder) to the Company as may
be required pursuant to the Plan or this Agreement and to execute such
documents as the Company or such representatives deem necessary or advisable in
connection with any such transfer.

 

E.                                      Postponement
of Issuance. 
Notwithstanding any other provisions of this Agreement, the issuance or
delivery of any shares of Common Stock (whether subject to restrictions or
unrestricted) may be postponed for such period as may be required to comply
with applicable requirements of any national securities exchange or any
requirements under any law or regulation applicable to the issuance or delivery
of such shares.  The Company shall not be
obligated to issue or deliver any shares of Stock if the issuance or delivery
thereof shall constitute a violation of any provision of any law or of any
regulation of any governmental authority or any national securities exchange.

 

13.                                 Withholding of
Tax.  The Company shall reasonably
determine the amount of any federal, state, local or other income, employment,
or other taxes which the Company or any of its affiliates may reasonably be
obligated to withhold with respect to the grant, vesting, making of an election
under Section 83(b) of the Internal Revenue Code of 1986, as amended
(the “Code”), or other event with respect to the Restricted Stock.  The Company may, in its sole discretion,
withhold and/or reacquire a sufficient number of shares of Restricted Stock in
connection with the vesting of such shares at their then Fair Market Value
(determined either as of the date of such withholding or as of the immediately
preceding trading day, as determined by the Company in its discretion) to
satisfy the amount of any such withholding obligations that arise with respect
to the vesting of such shares.  The
Company may take such action(s) without notice to the Grantee and shall
remit to the Grantee the balance of any proceeds from withholding and/or
reacquiring such shares in excess of the amount reasonably determined to be
necessary to satisfy such withholding obligations.  The Grantee shall have no discretion as to
the satisfaction of tax withholding obligations in such manner.  If, however, the Grantee makes an election
under Section 83(b) of the Code with respect to the Restricted Stock,
if any other withholding event occurs with respect to the Restricted Stock
other than the vesting of such stock, or if the Company for any reason does not
satisfy the withholding obligations with respect to the vesting of the
Restricted Stock as provided above in this Section 13, the Company shall
be entitled to require a cash payment by or on behalf of the Grantee and/or to
deduct from other compensation payable to the Grantee the amount of any such
withholding obligations.

 

4

 

14.                                 Compliance.  Grantee hereby agrees to cooperate with the
Company, regardless of Grantee’s employment status with the Company, to the
extent necessary for the Company to comply with applicable state and federal
laws and regulations relating to the Restricted Stock.

 

15.                                 Notices.  Any notice required or permitted under this
Agreement shall be deemed given when personally delivered, or when deposited in
a United States Post Office, postage prepaid, addressed, as appropriate, to the
Grantee either at the address on record with the Company or such other address
as may be designated by Grantee in writing to the Company; or to the Company,
Attention: Stock Plan Administration, 1444 South Alameda Street, Los Angeles,
California  90021, or such other address
as the Company may designate in writing to the Grantee.

 

16.                                 Failure to
Enforce Not a Waiver.  The failure
of the Company or the Grantee to enforce at any time any provision of this
Agreement shall in no way be construed to be a waiver of such provision or of
any other provision hereof.

 

17.                                 Governing Law.  This Agreement shall be governed by and
construed according to the laws of the State of Delaware, without regard to
Delaware or other laws that might cause other law to govern under applicable
principles of conflicts of law.  For purposes of litigating any dispute
that arises under this Agreement, the parties hereby submit to and consent to
the jurisdiction of the State of California, and agree that such litigation
shall be conducted in the courts of Los Angeles County, or the federal courts
for the United States for the  Central
District of California, and no other courts, where this Agreement is made
and/or to be performed.

 

18.                                 Electronic Delivery.  The
Company may, in its sole discretion, decide to deliver any documents related to
the Restricted Stock awarded under the Plan or future restricted stock that may
be awarded under the Plan by electronic means or request Grantee’s consent to
participate in the Plan by electronic means. 
Grantee hereby consents to receive such documents by electronic delivery
and agrees to participate in the Plan through an on-line or electronic system
established and maintained by the Company or another third party designated by
the Company.

 

19.                                 Severability.  The provisions of this Agreement are severable
and if any one or more provisions are determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions shall nevertheless
be binding and enforceable.

 

20.                                 Amendments.  This Agreement may be amended or modified at
any time by an instrument in writing signed by both parties.

 

21.                                 Agreement Not a
Contract of Employment. 
Neither the grant of the Restricted Stock, this Agreement nor any other
action taken in connection herewith shall constitute or be evidence of any
agreement or understanding, express or implied, that the Grantee is an employee
of the Company or any subsidiary of the Company.

 

5

 

22.                                 Committee’s
Powers.  No provision contained in this
Agreement shall in any way terminate, modify or alter, or be construed or
interpreted as terminating, modifying or altering any of the powers, rights or
authority vested in the Committee or, to the extent delegated, in its delegate
pursuant to the terms of the Plan or resolutions adopted in furtherance of the
Plan, including, without limitation, the right to make certain determinations
and elections with respect to the Restricted Stock.

 

23.                                 Section 83(b) Election.  The Grantee hereby acknowledges that, with
respect to the grant of the Restricted Stock, an election may be filed by the
Grantee with the Internal Revenue Service, within 30 days of the Date of
Grant, electing pursuant to Section 83(b) of the Code, to be taxed
currently on the fair market value of the Restricted Stock on the Date of
Grant.

 

THE GRANTEE HEREBY ACKNOWLEDGES THAT IT IS
THE GRANTEE’S SOLE RESPONSIBILITY AND NOT THE RESPONSIBILITY OF THE COMPANY TO
TIMELY FILE AN ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF THE
GRANTEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON THE
GRANTEE’S BEHALF.

 

24.                                 Termination of
this Agreement.  Upon
termination of this Agreement, all rights of the Grantee hereunder shall cease.

 

6

 

IN WITNESS WHEREOF, the Company has caused
this Agreement to be executed on its behalf by a duly authorized officer and
the Grantee has hereunto set his or her hand as of the date and year first
above written.

 

	
   

  	
  GUESS?, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Deborah Siegel

  
	
   

  	
   

  
	
   

  	
  Print
  Name: Deborah Siegel

  
	
   

  	
   

  
	
   

  	
  Its:
  Secretary

  
	
   

  	
   

  
	
   

  	
  GRANTEE

  
	
   

  	
   

  
	
   

  	
  /s/
  Nancy C. Shachtman

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Nancy C. Shachtman

  
	
   

  	
  Print Name

  
	
   

  	
   

  
	
   

  	
  02691

  
	
   

  	
  Employee ID

  

 

7

 

EXHIBIT A

 

PERFORMANCE GOALS AND TARGETS

 

20% of the total number of shares of Restricted
Stock subject to the Award are eligible to become vested on the first business
day following the filing of the Company’s audited financial statements with the
Securities and Exchange Commission for each of the fiscal years listed in the
table below based on the Company’s “Applicable
Operating Earnings” for such year. 
For purposes of this Award, “Applicable
Operating Earnings” shall mean the U.S. dollar value of the Company’s total
earnings from operations for its wholesale segment’s operations in the United
States, Canada and Mexico.  For purposes
of calculating the value of the “Applicable Operating Earnings,” earnings from
operations shall be calculated in the same manner as it is for purposes of the
Company’s internal management reporting and budgeting.

 

In order for any annual installment of the shares of
Restricted Stock to be become vested, the Company must achieve the “Applicable
Annual Goal” for the fiscal year listed in the table below.  If any annual installment does not become
vested because the Company fails to achieve the “Applicable Annual Goal” for
the fiscal year, the annual installment of the shares of Restricted Stock will
become vested if the Company achieves the “Applicable Cumulative Goal” for such
year or any subsequent fiscal year listed in the table below.  For example, if the Company does not achieve
the “Applicable Annual Goal” for fiscal 2009 but achieves the “Applicable
Cumulative Goal” for fiscal 2010, then 40% of the total number of shares of
Restricted Stock subject to the Award shall vest following the end of the 2010
fiscal year (20% attributable to the fiscal 2009 annual installment and 20%
attributable to the fiscal 2010 annual installment).  Any shares of Restricted Stock that are not
vested following the end of the 2013 fiscal year shall be forfeited on the
first business day following the filing of the Company’s audited financial
statements with the Securities and Exchange Commission for the 2013 fiscal
year.

 

	
  Fiscal
  Year

  	
   

  	
  Applicable

  Annual Goal 

  (amounts in millions)

  	
   

  	
  Applicable

  Cumulative Goal 

  (amounts in millions)

  
	
  2009

  	
   

  	
  Applicable
  Operating Earnings
  of $38

  	
   

  	
  Applicable
  Operating Earnings
  of $ 38

  
	
  2010

  	
   

  	
  Applicable
  Operating Earnings
  of $40

  	
   

  	
  Applicable
  Operating Earnings
  of $ 78

  
	
  2011

  	
   

  	
  Applicable
  Operating Earnings
  of $41

  	
   

  	
  Applicable
  Operating Earnings
  of $119

  
	
  2012

  	
   

  	
  Applicable
  Operating Earnings
  of $43

  	
   

  	
  Applicable
  Operating Earnings
  of $162

  
	
  2013

  	
   

  	
  Applicable
  Operating Earnings
  of $45

  	
   

  	
  Applicable
  Operating Earnings
  of $207

  

 

Whether and the extent to which any “Applicable
Annual Goal” or “Applicable Cumulative Goal” has been achieved will be
determined by the Committee (or, to the extent consistent with Section 162(m) of
the Code, its delegate), and no vesting shall be deemed to have occurred absent
such a determination by the Committee (or such a delegate as the case may
be).  The “Applicable Annual Goals” and “Applicable
Cumulative Goals” listed in the table above shall be proportionally adjusted by
the Committee (in its sole discretion) as may be necessary to mitigate the
unbudgeted impact of material, unusual or nonrecurring gains and losses,
accounting changes or other extraordinary events not foreseen at the time the “Applicable
Annual Goals” and “Applicable Cumulative Goals” were established.

 

8

 

EXHIBIT B

 

STOCK POWER

 

FOR VALUE RECEIVED and
pursuant to that certain Restricted Stock Agreement between Guess?, Inc.,
a Delaware corporation (the “Company”), and the individual named below (the “Individual”)
dated as of                           ,
              ,
the Individual hereby sells, assigns and transfers to the Company, an aggregate
                            
shares of Common Stock of the Company, standing in the Individual’s name on the
books of the Company and, if such shares are in certificate form, represented
by stock certificate number(s)                                                                                           
to which this instrument is attached, and hereby irrevocably constitutes and
appoints                                                                                     
as his or her lawful attorney in fact and agent to transfer such shares on the
books of the Company, with full power of substitution in the premises.

 

	
  Dated

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Nancy C. Shachtman

  
	
   

  	
  Signature

  
	
   

  	
  Nancy C. Shachtman

  
	
   

  	
  Print Name

  

 

(Instruction: Please do not fill in any blanks other than
the signature line.  The purpose of the
assignment is to enable the Company to exercise its rights set forth in the
Restricted Stock Agreement in connection with the forfeiture of any restricted
shares subject thereto without requiring additional signatures on the part of
the Individual.)Exhibit 10.6

 

FIRST AMENDMENT TO LEASE

 

THIS FIRST AMENDMENT TO LEASE effective as of July 30, 2008 (“First
Amendment”) between 1444 Partners, Ltd., a California limited partnership (“Landlord”)
and Guess ?, Inc., a Delaware corporation (“Tenant”) amends that certain
Lease dated July 29, 1992 between Landlord and Tenant (“Lease”).  Capitalized terms used but not otherwise
defined in this First Amendment shall have the respective meanings ascribed to
them in the Lease.

 

WHEREAS, Landlord and Tenant entered into the Lease for the property
commonly known as 1444 S. Alameda Street (the “Premises”); and

 

WHEREAS, Landlord and Tenant desire to extend the term of the Lease and
to otherwise amend the Lease on the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the covenants and agreements
contained in this First Amendment, and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged by the
execution of this First Amendment, the parties to this First Amendment agree as
follows:

 

1.             The Basic Lease
Provisions on page (i) of the Lease are hereby amended as follows:

 

(a)                                  Lease
Termination Date:  July 31, 2018;

 

(b)                                 Minimum
Rent:  Two Million Eight Hundred
Fifty-Two Thousand Six Hundred Sixty-Four and 36/100 Dollars ($2,852,664.36)
for the period of August 1, 2008 through July 31, 2009, subject to
annual increases based on the Index (as defined below);

 

(c)           Addresses for
Notices:  All references in the Lease to:

 

“1444 Partners, Ltd., a California limited partnership

c/o 1444 Alameda Street, Suite 100

Los Angeles, CA  90021”

 

are hereby deleted in their entirety and the following shall be
submitted in lieu thereof:

 

“1444 Partners, Ltd., a California limited partnership

144 S. Beverly Drive, Suite 600

Beverly Hills, CA  90212”

 

 

All references in the Lease
to:

 

“Stein & Kahan, a
law corporation

429 Santa Monica Boulevard, Fifth Floor

Santa Monica, CA  90401

Attn:  William E. Niles, Esq.”

 

are hereby deleted in their entirety and the following shall be submitted
in lieu thereof:

 

“Rutter Hobbs & Davidoff Incorporated

1901 Avenue of the Stars, Suite 1700

Los Angeles, CA 
90067

Attn:  Marc
E. Petas, Esq.”

 

All references in the Lease to:

 

“Skadden, Arps, Meagher & Flom

300 S. Grand Avenue, #3400

Los Angeles, CA  90071

Attn:  Rand S. April, Esq.”

 

are hereby deleted in their entirety.

 

2.             Section 2.01 (“Length of Term”) of the Lease is
hereby amended by extending the term of the Lease for an additional ten (10) years
and two (2) days; such extended term to commence on July 30, 2008 and
end on July 31, 2018 (“Renewal Term”).

 

3.             The first paragraph of Section 3.01 (“Minimum Rent”)
of the Lease is hereby deleted in its entirety and the following shall be
submitted in lieu thereof:

 

“For the period of July 30,
2008 through July 31, 2008, Tenant shall pay to Landlord an amount equal
to Fifteen Thousand Three Hundred Thirty-Six and 90/100 Dollars ($15,336.90) as
Minimum Rent.  The foregoing amount shall
be due and payable by Tenant on July 30, 2008.  Commencing August 1, 2008, Tenant shall
pay to Landlord an amount equal to Two Million Eight Hundred Fifty-Two Thousand
Six Hundred Sixty-Four and 36/100 Dollars ($2,852,664.36) as Minimum Rent for
the period of August 1, 2008 through July 31, 2009, in monthly
installments of Two Hundred Thirty-Seven Thousand Seven Hundred Twenty-Two and
03/100 Dollars ($237,722.03), in advance, on the first (1st) day of each month of said period.  The Minimum Rent shall be increased annually
on August 1 of each year of the Renewal Term, beginning with August 1,
2009 (each, an “Adjustment Date”). On each Adjustment Date, the Minimum Rent
(as previously adjusted and then in effect) shall be increased by a percentage
equal to the percentage increase, if any, in the Index published for the month of
May immediately preceding such Adjustment Date over the Index published
for the month of May immediately preceding (i) the Renewal Term
commencement date in the case of the first Adjustment Date, or (ii) the
prior Adjustment Date in the case of each subsequent Adjustment Date.  Notwithstanding any decrease in the Index,
the Minimum Rent payable as of any Adjustment Date shall in no event be less
than the Minimum Rent payable immediately prior to such Adjustment Date.  The term “Index” shall mean the Consumer
Price Index for All Urban Consumers, Los Angeles-Riverside-Orange County, CA,
subgroup “All Items”, (1982-84=100), published by the United States Department
of Labor, Bureau of Labor Statistics.  If
the compilation and/or publication of the Index shall be transferred to any
other governmental department or bureau or agency or shall be discontinued,
then the index most nearly the same as the Index shall be selected and used by
Landlord.  Notwithstanding the foregoing,
in no event shall Minimum Rent be increased by more than four percent (4%) for
any lease year.”

 

2

 

4.                                       The following paragraph shall be added to
the end of Section 6.06(c):

 

“Tenant shall immediately
repair all damage resulting from the removal of any such alterations,
improvements, remodeling, additions or fixtures and shall restore the Premises
to a tenantable condition as reasonably determined by Landlord.  If Tenant shall fail to remove those items
described above, Landlord may (but shall not be obligated to), at Tenant’s
expense, remove any of such property and store, sell or otherwise deal with
such property as permitted by law, at the risk of, expense of and for the
account of Tenant, and the proceeds of any sale shall be applied pursuant to
law.  Landlord shall in no event be
responsible for the value, preservation or safekeeping of any such
property.  Tenant hereby waives all
claims for damages that may be caused by Landlord’s removing or storing Tenant’s
personal property pursuant to this Section, and Tenant hereby indemnifies, and
agrees to defend, protect and hold harmless, Landlord from any and all loss,
claims, demands, actions, expenses, liability and cost (including reasonable
attorneys’ fees and expenses) arising out of or in any way related to such
removal or storage.”

 

5.             Section 15.03 of the Lease (“Refurbish and Upgrade”)
is hereby deleted in its entirety.

 

6.             Landlord hereby grants to Tenant the option (“Option”)
to extend the Renewal Term for one additional period of five (5) years (“Option
Term”).  Provided Tenant is not then in
default, Tenant shall have the right to exercise the Option no later than
twelve (12) months, but not more than fifteen (15) months, prior to the Renewal
Term expiration date.  Should Tenant fail
to timely deliver written notice of the exercise of the Option, then the rights
granted herein shall terminate and be of no further force or effect.  The Minimum Rent payable during the Option
Term shall be the Prevailing Rent, as defined below.

 

Within thirty (30) days
after Landlord receives written notice of Tenant’s exercise of the Option,
Landlord shall notify Tenant of the prevailing monthly rent for a Triple Net
Lease (as said term is defined in Section 17.01 of the Lease) for
non-sublease, non-expansion space in the city of Los Angeles for lease renewals
comparable in size, location and quality to the Premises (“Prevailing Rent”).  Said Prevailing Rent shall become the monthly
Minimum Rent for the first year of the Option Term and shall increase annually
by a percentage equal to the percentage increase, if any, in the Index (in the
manner set forth in Section 3.01 of the Master Lease, provided that in no
event shall Minimum Rent be increased by more than five percent (5%) for any
year in the Option Term).  However,
should Tenant object to the Prevailing Rent within fifteen (15) days of
Landlord’s delivery of notice thereof, Landlord and Tenant shall attempt, in
good faith, to agree upon the Prevailing Rent. 
Failure of Tenant to timely deliver to Landlord a written notice of
objection to the Prevailing Rent shall conclusively be deemed its approval of
Landlord’s proposed Prevailing Rent.  If
Landlord and Tenant fail to reach an agreement within fifteen (15) days following
the date of Tenant’s objection to the Prevailing Rent, then each party shall
set out its opinion of the Prevailing Rent and the matter of Prevailing Rent
for similar space in Los Angeles shall be submitted to arbitration as set forth
in paragraphs (a) through (g) below:

 

3

 

(a)           Landlord and Tenant shall each
appoint one arbitrator who shall by profession be a real estate broker who
shall have been active over the ten (10) year period ending on the date of
such appointment in the leasing of industrial/commercial properties in the Los
Angeles area.  Each such arbitrator shall
be appointed within fifteen (15) days after the parties’ failure to agree on
Prevailing Rent.

 

(b)           The two arbitrators so appointed
shall, within fifteen (15) days of the date the last arbitrator is appointed,
agree upon and appoint a third arbitrator who shall be an MAI appraiser,
associated with a nationally recognized appraisal company, but who otherwise
shall be qualified under the same criteria set forth hereinabove for
qualification of the initial two arbitrators.

 

(c)           Landlord and Tenant shall each submit
its computation of Prevailing Rent to the arbitrators together with evidence
supporting such computation. The three arbitrators shall, within thirty (30)
days of the appointment of the third arbitrator, reach a decision as to whether
the parties shall use Landlord’s or Tenant’s submitted computation of
Prevailing Rent and shall notify Landlord and Tenant of their decision. The
determination of the arbitrators shall be limited solely to the issue of
whether Landlord’s or Tenant’s submitted Prevailing Rent for the Premises is
the closest to the actual Prevailing Rent for the Premises (as determined by
the arbitrators), taking into account the terms of the respective submittals
and the requirements of this Section 6.

 

(d)           The decision of the majority of the
three arbitrators shall be binding upon Landlord and Tenant.

 

(e)           If either Landlord or Tenant fails to
timely appoint an arbitrator, the arbitrator appointed by the other one of them
shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator’s
decision shall be binding upon Landlord and Tenant.

 

(f)            If the two arbitrators fail to agree
upon and appoint a third arbitrator, then the appointment of the third
arbitrator shall be dismissed, and the matter to be decided shall be forthwith
submitted to arbitration under the provisions of the American Arbitration
Association, but subject to the instructions set forth in this Section 6.

 

(g)           The costs of arbitration shall be
paid by Landlord and Tenant equally.

 

7.             Tenant acknowledges that Tenant (i) has been, and
is, in possession of the Premises pursuant to the Lease and (ii) is fully
aware of the condition of the Premises. 
Therefore, Tenant shall continue to occupy the Premises as of the
Renewal Term commencement date in its then existing “As-Is” condition, and,
notwithstanding any provision to the contrary contained in the Lease, Landlord
shall not be obligated to provide or pay for any improvement work or services
related to the improvement of the Premises. 
Tenant also acknowledges that neither Landlord, nor any agent of
Landlord, has made any representation or warranty regarding the condition of
the Premises or the Buildings or with respect to the suitability of the same
for the conduct of Tenant’s business.

 

4

 

8.             Notwithstanding anything to the contrary contained in
the Lease, upon any default by Tenant, in addition to any other remedies
available to Landlord at law or in equity or under the Lease, Landlord shall
have the remedy described in California Civil Code Section 1951.4
(Landlord may continue the Lease in effect after Tenant’s breach and
abandonment and recover rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations). Accordingly, if
Landlord does not elect to terminate the Lease, Landlord may, from time to
time, enforce all of its rights and remedies under the Lease, including the
right to recover all rent as it becomes due. 
Such remedy may be exercised by Landlord without prejudice to its right
thereafter to terminate the Lease.

 

9.             Notwithstanding any provision to the contrary contained
in the Lease, Landlord and Tenant acknowledge and agree that the liability of
Landlord, for Landlord’s obligations under the Lease, shall be limited to
Landlord’s interest in the Buildings and Tenant shall not look to any other
property or assets of Landlord or the property or assets of any general or
limited partner, member, manager, shareholder, director, officer, trustee,
principal, employee or agent of Landlord (collectively, the “Landlord Parties”)
in seeking either to enforce Landlord’s obligations under the Lease, or to
satisfy a judgment for Landlord’s failure to perform such obligations; and none
of the Landlord Parties shall be personally liable for the performance of
Landlord’s obligations under the Lease. 
In no event shall Landlord be liable for, and Tenant, on behalf of
itself and all other subtenants or occupants of the Premises and their
respective agents, contractors, subcontractors, employees, invitees or
licensees, hereby waives any claim for, any indirect, consequential or punitive
damages, including loss of profits or business opportunity, arising under or in
connection with the Lease.

 

11.           If any lender of Landlord requires a
modification of any of the terms of the Lease, and such modifications will not
increase Tenant’s cost or expense or materially or adversely change Tenant’s
rights and obligations under the Lease, the Lease shall be so modified and
Tenant shall execute such documents as are reasonably required by Landlord’s
lender and shall deliver same to Landlord within ten (10) days after any
request therefor.

 

12.           Effective as of the
date hereof, all references in the Lease to “The Prudential Insurance Company
of America” or “Prudential,” and to all associated information, are hereby
deleted in their entirety and the following is hereby substituted in lieu
thereof:  “Landlord’s lender.”

 

13.           Each party
represents and warrants to the other that no broker, agent or finder negotiated
or was instrumental in negotiating or consummating this First Amendment.  Each party further agrees to defend,
indemnify and hold harmless the other party from and against any claim for
commission or finder’s fee by any entity who claims or alleges they are
entitled to a commission based on the acts of the indemnifying party.

 

5

 

14.           Each party
represents and warrants to the other that, as of the date of this First
Amendment, each is in full compliance with all terms, covenants and conditions
of the Lease and that there are no breaches or defaults under the Lease, and
that neither party knows of any events or circumstances which, given the
passage of time or notice or both, would constitute a default under the Lease.

 

15.           In any action to
enforce the terms of the Lease, including any suit by Landlord for the recovery
of rent or possession of the Premises, the losing party shall pay the
successful party a reasonable sum for attorneys’ fees and costs in such
suit.  Such attorneys’ fees and costs
shall be deemed to have accrued prior to the commencement of such action and
shall be paid whether or not such action is prosecuted to judgment.  Should Landlord, without fault on Landlord’s
part, be made a party to any litigation instituted by Tenant or by any third
party against Tenant, or by or against any person holding under or using the
Premises through Tenant, or for the foreclosure of any lien for labor or
material furnished to or for Tenant or any such other person or otherwise
arising out of or resulting from any act or transaction of Tenant or of any
such other person, Tenant covenants to save and hold Landlord harmless from any
judgment rendered against Landlord or the Premises, or any part thereof, and
from all costs and expenses, including reasonable attorneys’ fees and costs
incurred by Landlord in connection with such litigation.

 

16.           Except as expressly
modified by this First Amendment to Lease, the Lease is confirmed and shall
continue to be and remain in full force and effect in accordance with its
terms.  Any existing or future reference
to the Lease and any document or instrument delivered in connection with the Lease
shall be deemed to be a reference to the Lease as modified by this First
Amendment.  To the extent that anything
in this First Amendment is inconsistent with anything in the Lease, this First
Amendment shall control.

 

17.           This First Amendment
may be executed in any number of counterparts, each of which, when taken
together, shall constitute but one and the same instrument.

 

18.           This First Amendment
shall be governed by and construed in accordance with the laws of the State of
California.

 

[SIGNATURES ON FOLLOWING PAGE]

 

6

 

IN WITNESS WHEREOF, the parties hereto have caused their respective
duly authorized representatives to execute this First Amendment as of the date
first above written.

 

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
  1444
  Partners, Ltd.

  	
   

  	
  Guess ?, Inc.

  
	
  a
  California limited partnership

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Alameda
  Associates, Inc.

  	
   

  	
   

  
	
   

  	
  a
  California corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
  General
  Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY:

  	
  /s/
  Paul Marciano

  	
   

  	
  BY:

  	
  /s/
  Deborah Siegel

  
	
   

  	
   

  	
   

  
	
  NAME:

  	
  Paul
  Marciano

  	
   

  	
  NAME:

  	
  Deborah
  Siegel

  
	
   

  	
   

  	
   

  
	
  ITS:

  	
  Member

  	
   

  	
  ITS:

  	
  Secretary

  
								

 

 

In
consideration of the rents and covenants hereinafter set forth, Landlord hereby
leases to Tenant, and Tenant hereby leases from Landlord the following
described premises upon the following terms and conditions.

 

BASIC LEASE PROVISIONS

 

Lease
Reference Date: July 29, 1992

 

Landlord: 1444
Partners, Ltd. a California limited partnership

 

Tenant: Guess?, Inc.,
a California corporation

 

Premises: 1444 South Alameda, Los Angeles, California

 

Use
of Premises: Any lawful purpose.

 

Lease
Term: Sixteen (16) Years

 

Lease
Commencement Date: July 29, 1992

 

Lease
Termination Date: July 29, 2008

 

Minimum Rent: Two Million Forty Three Thousand
Six Hundred Ninety-Nine Dollars and Eighty-Four Cents ($2,043,699.84) for the
first lease year subject to annual increases based on the consumer price index.

 

	
  Addresses
  for Notices:

  	
  (Section 13.10)

  
	
   

  	
   

  
	
  To
  Landlord:

  	
  To
  Tenant:

  
	
  1444
  Partners, Ltd., a California limited partnership

  	
  Guess?, Inc.

  
	
  c/o
  1444 Alameda St.

  	
  c/o
  1444  Alameda St.

  
	
  Suite 100

  	
  Suite 100

  
	
  Los
  Angeles, Ca 90021

  	
  Los
  Angeles, CA 90021

  
	
   

  	
   

  
	
  with
  a copy to:

  	
  with
  a copy to:

  
	
   

  	
   

  
	
  Stein &
  Kahan, a law corporation

  	
  Skadden,
  Arps, Meagher & Flom

  
	
  429
  Santa Monica Boulevard

  	
  300
  S. Grand Ave., #3400

  
	
  Fifth
  Floor

  	
  Los
  Angeles, CA 90071

  
	
  Santa
  Monica, CA 90401

  	
  Attn:
  Rand S. April, Esq.

  
	
  Attn:
  William E. Niles, Esq.

  	
   

  

 

The
Basic Lease Provisions are an integral part of this lease and each reference in
this lease to any of the Basic Lease Provisions shall be construed to
incorporate all of the terms provided under each such Basic Lease Provision. In
the event of any conflict between any Basic Lease Provisions and the balance of
the lease, the latter shall control. References to specific sections are for
convenience only and designate some of the sections where references to the
particular Basic Lease Provisions appear.

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
  1444
  Partners, Ltd., a

  	
   

  	
  Guess?, Inc.,
  a

  
	
  California
  Limited

  	
   

  	
  California
  corporation

  
	
  Partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Alameda
  Associates, Inc.,

  	
   

  	
  By:

  	
  /s/
  Paul Marciano

  
	
   

  	
  a
  California corporation

  	
   

  	
   

  	
  Its

  
	
   

  	
  Its
  General Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  [Signature]

  	
   

  	
   

  
	
   

  	
  Its President

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  [Signature]

  	
   

  	
   

  
	
   

  	
  Its Secretary

  	
   

  	
   

  
						

 

i

 

TABLE OF CONTENTS

 

	
  ARTICLE

  	
   

  	
  Section

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  I

  	
   

  	
   

  
	
   

  	
  PREMISES

  	
  1

  
	
  Section 1.01 - PREMISES DEFINED

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  II

  	
   

  	
   

  
	
   

  	
  TERM

  	
  1

  
	
  Section 2.01 - LENGTH OF TERM

  	
  1

  
	
  Section 2.02 - COMMENCEMENT DATE

  	
  1

  
	
  Section 2.03 - LEASE YEAR

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  III

  	
   

  	
   

  
	
   

  	
  RENT

  	
  1

  
	
  Section 3.01 - MINIMUM RENT

  	
  1

  
	
  Section 3.02 - RENT

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  	
   

  	
   

  
	
   

  	
  TAXES

  	
  2

  
	
  Section 4.01 - TAXES

  	
  2

  
	
  Section 4.02 - DEFINITIONS

  	
  2

  
	
  Section 4.03 - OTHER TAXES

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  V

  	
   

  	
   

  
	
   

  	
  CONDUCT OF BUSINESS BY TENANT

  	
  3

  
	
  Section 5.01 - USE OF PREMISES

  	
  3

  
	
  Section 5.02 - RESTRICTIONS ON USE

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI

  	
   

  	
   

  
	
   

  	
  MAINTENANCE, REPAIRS AND ALTERATIONS

  	
  3

  
	
  Section 6.01 - LANDLORD’S OBLIGATIONS

  	
  3

  
	
  Section 6.02 - TENANT’S OBLIGATIONS

  	
  4

  
	
  Section 6.03 - SURRENDER

  	
  4

  
	
  Section 6.04 - LANDLORD’S RIGHTS

  	
  4

  
	
  Section 6.05 - LANDLORD’S OBLIGATIONS

  	
  4

  
	
  Section 6.06 - ALTERATIONS AND ADDITIONS

  	
  4

  
	
  Section 6.07 - CLEANLINESS: WASTE AND
  NUISANCE

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  	
   

  	
   

  
	
   

  	
  INSURANCE AND INDEMNITY

  	
  5

  
	
  Section 7.01 - LIABILITY INSURANCE

  	
  5

  
	
  Section 7.02 - PROPERTY INSURANCE

  	
  6

  
	
  Section 7.03 - PROPERTY INSURANCE - LANDLORD

  	
  6

  
	
  Section 7.04 - INSURANCE POLICIES

  	
  6

  
	
  Section 7.05 - WAIVER OF SUBROGATION

  	
  7

  
	
  Section 7.06 - INDEMNITY

  	
  7

  
	
  Section 7.07 - EXEMPTION OF LANDLORD

  	
  7

  
	
  Section 7.08 - LANDLORD’S SECURITY

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII

  	
   

  	
   

  
	
   

  	
  REPAIRS AND RESTORATION

  	
  8

  
	
  Section 8.01 - INSURED
  OR MINOR DAMAGE

  	
  8

  
	
  Section 8.02 - SUBSTANTIAL DAMAGE

  	
  8

  
	
  Section 8.03 - DAMAGE NEAR END OF TERM

  	
  8

  
	
  Section 8.04 - ABATEMENT OF RENT; TENANT’S
  REMEDIES

  	
  9

  
	
  Section 8.05 - DEFINITIONS

  	
  9

  
	
  Section 8.05 - SALVAGE RIGHTS

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IX

  	
   

  	
   

  
	
   

  	
  ASSIGNMENT/SUBLETTING/RIGHT OF FIRST OFFER

  	
  9

  
	
  Section 9.01 - LANDLORD’S RIGHTS

  	
  9

  
	
  Section 9.02 - LANDLORD’S COSTS

  	
  11

  
	
  Section 9.03 - NO RELEASE OF TENANT

  	
  12

  
	
  Section 9.04 - TENANT’S RIGHT OF FIRST OFFER

  	
  12

  
	
  Section 9.05 - EXEMPT TRANSACTIONS FROM RIGHT  OF FIRST
  OFFER

  	
  12

  

 

ii

 

	
  ARTICLE

  	
   

  	
  Section

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  X

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EMINENT DOMAIN

  	
   

  	
  13

  
	
  Section 10.01
  - ENTIRE OR SUBSTANTIAL TAKING

  	
   

  	
  13

  
	
  Section 10.02
  - PARTIAL TAKING

  	
   

  	
  13

  
	
  Section 10.03
  - AWARDS

  	
   

  	
  13

  
	
  Section 10.04
  - SALE UNDER THREAT OF CONDEMNATION

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XI

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  UTILITY SERVICES

  	
   

  	
  13

  
	
  Section 11.01
  - UTILITY CHARGES

  	
   

  	
  13

  
	
  Section 11.02
  - INTERRUPTION OF SERVICE

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XII

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DEFAULTS AND REMEDIES

  	
   

  	
  14

  
	
  Section 12.01
  - DEFINITIONS

  	
   

  	
  14

  
	
  Section 12.02
  - REMEDIES

  	
   

  	
  14

  
	
  Section 12.03
  - DEFAULT BY LANDLORD

  	
   

  	
  16

  
	
  Section 12.04
  - EXPENSE OF LITIGATION

  	
   

  	
  16

  
	
  Section 12.05
  - HOLDING OVER

  	
   

  	
  16

  
	
  Section 12.06
  - LANDLORD RIGHTS

  	
   

  	
  17

  
	
  Section 12.07
  - TRIAL WITHOUT JURY

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XIII

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MISCELLANEOUS

  	
   

  	
  17

  
	
  Section 13.01
  - OFFSET STATEMENT

  	
   

  	
  17

  
	
  Section 13.02
  - LANDLORD’S RIGHT OF ACCESS

  	
   

  	
  18

  
	
  Section 13.03
  - TRANSFER OF LANDLORD’S INTEREST/ASSIGNMENT OF LEASE

  	
   

  	
  18

  
	
  Section 13.04
  - FLOOR AREA

  	
   

  	
  19

  
	
  Section 13.05
  - SEVERABILITY

  	
   

  	
  19

  
	
  Section 13.06
  - LATE PAYMENTS

  	
   

  	
  19

  
	
  Section 13.07
  - TIME OF ESSENCE

  	
   

  	
  19

  
	
  Section 13.08
  - HEADINGS

  	
   

  	
  19

  
	
  Section 13.09
  - INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS

  	
   

  	
  20

  
	
  Section 13.10
  - NOTICES

  	
   

  	
  20

  
	
  Section 13.11
  - BROKERS

  	
   

  	
  20

  
	
  Section 13.12
  - WAIVERS

  	
   

  	
  20

  
	
  Section 13.13
  - RECORDING

  	
   

  	
  20

  
	
  Section 13.14
  - LIENS

  	
   

  	
  20

  
	
  Section 13.15
  - SUBORDINATION

  	
   

  	
  21

  
	
  Section 13.16
  - FORCE MAJEURE

  	
   

  	
  21

  
	
  Section 13.17
  - YIELD UP PREMISES

  	
   

  	
  21

  
	
  Section 13.18
  - AUTHORITY

  	
   

  	
  22

  
	
  Section 13.19
  - SAFETY AND HEALTH

  	
   

  	
  22

  
	
  Section 13.20
  - INDEMNITIES

  	
   

  	
  22

  
	
  Section 13.21
  - DISCLOSURE

  	
   

  	
  22

  
	
  Section 13.22
  - GENDER; TENANTS

  	
   

  	
  22

  
	
  Section 13.23
  - QUIET ENJOYMENT

  	
   

  	
  23

  
	
  Section 13.24
  - ASSIGNS

  	
   

  	
  23

  
	
  Section 13.25
  - NO OPTION

  	
   

  	
  23

  
	
  Section 13.26
  - LANDLORD LIABILITY

  	
   

  	
  23

  
	
  Section 13.27
  - ACCOUNTS

  	
   

  	
  23

  
	
  Section 13.28
  - LEASEHOLD COLLATERAL

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XIV

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CONDITION OF PREMISES

  	
   

  	
  23

  
	
  Section 14.01
  - CONDITION OF PREMISES

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XV

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OPERATIONAL PROVISIONS

  	
   

  	
  24

  
	
  Section 15.01
  - PAYMENT PROVISIONS

  	
   

  	
  24

  
	
  Section 15.02
  - TERMINATION

  	
   

  	
  24

  
	
  Section 15.03
  - REFURBISH AND UPGRADE

  	
   

  	
  25

  

 

iii

 

	
  ARTICLE

  	
   

  	
  Section

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XVI

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HAZARDOUS WASTE

  	
   

  	
  25

  
	
  SECTION 16.01
  - HAZARDOUS WASTE

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XVII

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  NET LEASE

  	
   

  	
  26

  
	
  SECTION 17.01
  - EXPENSES

  	
   

  	
  26

  

 

iv

 

ARTICLE I

PREMISES

 

Section 1.01 - PREMISES DEFINED

 

Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord the property
commonly known as 1444 S. Alameda Street located in the City of Los Angeles,
State of California, together with all improvements, fixtures, equipment,
located thereon, including four buildings with an aggregate of approximately
354,809 square feet, a parking area and all rights of way and easements appurtenant
thereto (collectively the “Premises”), for the term, at the rental, and upon
all of the conditions and agreements set forth herein. A more particular
description of the Premises is attached hereto as Exhibit “A” and by this
reference made a part hereof.

 

ARTICLE II

TERM

 

Section 2.01 -  LENGTH OF TERM

 

The term of this lease shall be for sixteen (16) years commencing on
the Lease Commencement Date, and ending on July      ,
2008.

 

Section 2.02 -  COMMENCEMENT DATE

 

a.        This lease shall
commence on July    , 1992 (the “Lease Commencement Date”).

 

Section 2.03 -  LEASE YEAR

 

A
lease year is a period of twelve (12) full calendar months commencing on the
Lease Commencement Date and expiring on the last day of the twelfth (12) month
thereafter.

 

ARTICLE III

RENT

 

Section 3.01 - MINIMUM RENT

 

Tenant
shall pay to Landlord Two Million Forty Three Thousand Six Hundred Ninety-Nine
Dollars and Eighty-Four Cents ($2,043,699.84) for the first lease year, in
monthly installments of One Hundred Seventy Thousand Three Hundred Eight
Dollars and Thirty-Two Cents ($170,308.32), in advance, on the first (1st) day
of each month of said lease year. The Minimum Rent shall thereafter be
increased annually by the percentage increase, (if any,) in the Bureau of Labor
Statistics Consumer Price Index, “All Urban Consumers” (the “Index”), as
published by the United States Department of Labor for the Los Angeles/Long
Beach/Anaheim metropolitan area (all items). The first increase in the Minimum
Rent shall be based on the percentage increase of the Index during the initial
lease year, and each lease year thereafter for subsequent annual adjustments.
The first such increase shall become effective on the first day of the second
lease year and every twelve (12) months thereafter. In no event shall any
percentage increase exceed five percent (5%) for any one lease year.

 

Minimum
Rent shall be payable in advance upon the first day of each calendar month
without any deduction or offset and without notice or demand at Landlord’s
address as set forth in the applicable Basic Lease Provisions or to such other
person or at such other place as Landlord may designate by written notice to
Tenant. The Minimum Rent for any fractional part of a calendar month at the
beginning or end of the lease term shall be a proportionate part of the Minimum
Rent for a full calendar month. All rent and additional rent shall be paid in
lawful money of the United States which shall be legal tender at the time of
payment.

 

1

 

Section 3.02 - RENT

 

As
used in this lease, the term “rent” shall mean Minimum Rent, and additional
rent, and the term “additional rent” shall mean all amounts payable by Tenant
pursuant to this lease other than Minimum Rent.

 

ARTICLE IV

TAXES

 

Section 4.01 - TAXES

 

Tenant
shall pay directly to the appropriate taxing authority all taxes, as defined
below, with respect to the Premises that accrue on or after the Lease
Commencement Date. Landlord agrees to deliver to Tenant, upon its own receipt
thereof, any tax statement or other notice or official evidence of payment due.
If Tenant has paid such taxes, prior to delinquency, Tenant may with Landlord’s
prior written consent (which shall not be unreasonably withheld), petition any
applicable governmental authority for a reduction in the real property taxes
assessed against the real property and the improvements located thereon. Tenant
shall also have the right to contest taxes before payment thereof provided that
Tenant obtains Landlord’s prior written consent and shall procure and maintain
a stay of all proceedings to enforce any collection thereof and provide
Landlord with collateral (which is acceptable to Landlord in Landlord’s sole
discretion) to secure the payment of the taxes in dispute and any potential
penalties and fees related thereto. Tenant shall pay for all expenses related
to any such petition and shall indemnify, defend and hold Landlord harmless
from and against any expenses or liability arising from Tenant’s actions.

 

Section 4.02 -  DEFINITIONS

 

(a)       The term “taxes” shall
include without limitation:

 

(i)         All taxes, assessments
and governmental charges and surcharges levied upon or with respect to the
Premises;

 

(ii)        All other taxes,
assessments and governmental charges and surcharges levied upon or with respect
to the fixtures, equipment and other property of Landlord in or about the
Premises whether real or personal;

 

(iii)       Fees and assessments
for any governmental service(s) to the Premises, including service
payments in lieu of taxes;

 

(iv)       Dues and assessments
payable to any property owners’ association due to Landlord ownership or
operation of the Premises;

 

(v)        Any and all taxes
payable by Landlord: (A) upon, allocable to, or measured by or on the
gross or net rent payable hereunder, including without limitation any gross
receipts or revenues, sales tax or excise tax levied by the State, any
political subdivision thereof, or the Federal Government with respect to the
receipt of such rent; (B) upon or with respect to the possession, leasing,
operation, management, maintenance, alteration, repair, use or occupancy of the
Premises or any portion thereof, including any sales, use or service tax
imposed as a result thereof; (C) upon or measured by Tenant’s gross
receipts or payroll or the value of Tenant’s equipment, furniture, fixtures,
and other personal property of Tenant or leasehold improvements, alterations or
additions located in the Premises; or (D) upon this transaction or any
document to which Tenant is a party creating or transferring an interest or an
estate in the Premises;

 

2

 

(vi)       All expenses reasonably
incurred in seeking reduction by the taxing authorities of the taxes described
in clauses (i) through (v) above. Provided, however, that the term “taxes”
shall not include any capital gain, franchise, estate, inheritance, succession,
capital levy, net income or excess profits taxes imposed upon Landlord except
that in the event that real property taxes are withdrawn in whole or in part
and any substitute tax is made therefor, such tax shall in any event for the
purpose of this lease be considered a tax included in “taxes” pursuant to this Section 4.02
regardless of how denominated or the source from which it is collected.

 

(b)      Taxes shall include all
items identified or described as included in taxes in subsection (a) above,
whether or not such items are customary and whether or not such items are
within the contemplation of the parties on the date of execution of this lease.

 

Section 4.03 - OTHER TAXES

 

Tenant
shall be responsible for and shall pay before delinquency all municipal, county
or state taxes, levies and fees of every kind and nature, including but not
limited to general or special assessments, assessed during the term of this lease
against any leasehold interest, leasehold improvements or personal property of
any kind, owned by or placed in, upon or about the Premises by Tenant.

 

ARTICLE V

CONDUCT OF BUSINESS BY TENANT

 

Section 5.01 - USE OF PREMISES

 

(a)       Tenant shall use the
Premises for the purposes specified in the applicable Basic Lease Provision.

 

Section 5.02 - RESTRICTIONS ON USE

 

Tenant
shall, at Tenant’s sole cost and expense, promptly comply with all applicable
statutes, ordinances, rules, regulations, orders and requirements, in effect
prior to the date of this lease or promulgated thereafter, affecting the
Premises or regulating the use by Tenant of the Premises and all requirements
of all insurance carriers or underwriters providing coverage on the Premises or
the contents thereof. Tenant shall not use or permit the use of the Premises in
any manner that will tend to create a nuisance or tend to injure the reputation
of the Premises or which will invalidate any property damage or liability
insurance maintained on the Premises. No auction, fire sale, bankruptcy sale,
sidewalk sale, end of lease sale, or going out of business sale may be
conducted from the Premises without the written consent of Landlord, which may
be withheld in Landlord’s sole discretion.

 

ARTICLE VI

MAINTENANCE, REPAIRS AND ALTERATIONS

 

Section 6.01 - LANDLORD’S OBLIGATIONS

 

(a)       Except for the
obligations of Landlord under Section 8 (relating to destruction of the
Premises) and under Section 10 (relating to condemnation of the Premises),
it is intended by the parties hereto that Landlord shall have no obligation, in
any manner whatsoever, to repair and maintain the Premises nor any building or
improvement located thereon nor any equipment, whether structural or
nonstructural, all of which obligations are intended to be that of the Tenant
under this Article 6. Tenant expressly waives the benefit of any statute
now or hereinafter in effect which would otherwise afford Tenant the right to
make repairs at Landlord’s expense or to terminate this lease because of
Landlord’s failure to keep the Premises in good order, condition and repair.

 

3

 

(b)      Tenant hereby accepts the
Premises in their condition existing as of the Lease Commencement Date or the
date that Tenant takes possession of the Premises, whichever is earlier,
subject to all applicable zoning, municipal, county and state laws, ordinances
and regulations governing and regulating the use of the Premises, and any
covenants, easements, restrictions or other matters of record, and accepts this
lease subject thereto and to all matters disclosed thereby and by any exhibits
attached hereto. Tenant acknowledges that neither Landlord nor Landlord’s agent
has made any representation or warranty as to the present or future’s
suitability of the Premises for the conduct of Tenant’s business.

 

Section 6.02 -  TENANT’S OBLIGATIONS

 

Tenant
shall keep in good order, condition and repair the Premises and every
part thereof, structural and nonstructural (whether or not such portion of the
Premises requiring repair, or the means of repairing the same are reasonably or
readily accessible to Tenant, and whether or not the need for such repairs
occurs as a result of Tenant’s use, any prior use, the elements or the age of
such portion of the Premises), including, without limiting the generality of
the foregoing, all plumbing, heating, air conditioning (Tenant shall procure
and maintain, at Tenant’s expense, an air conditioning system maintenance
contract), ventilating, electrical, lighting facilities and equipment within
the Premises, fixtures, walls (interior and exterior) foundations, ceilings,
roofs (interior and exterior), floors, windows, doors, plate glass and
skylights and all landscaping, driveways, parking lots, fences and signs located
on the Premises and sidewalks and parkways adjacent to the Premises.

 

Section 6.03 - SURRENDER

 

See
Section 13.17.

 

Section 6.04 -  LANDLORD’S RIGHTS

 

See
Section 12.06.

 

Section 6.05 -  LANDLORD’S OBLIGATIONS

 

See
Section 6.01.

 

Section 6.06 -  ALTERATIONS AND ADDITIONS

 

(a)       Tenant shall not,
without the prior written consent of Landlord, which consent may be withheld in
Landlord’s reasonable discretion, make any material alterations, improvements,
remodeling or additions to the Premises. The term “material” shall mean any
alteration, improvement, remodeling, or additions, the cost of which exceed
Twenty-five Thousand Dollars ($25,000.00). Landlord may condition any approval
upon such requirements as Landlord reasonably deems appropriate, including requirements
as to the manner in which, the time at which and the contractor(s) by whom
such work shall be done.

 

(b)      If Landlord delivers
written notice to Tenant to remove from record any lien related to work or
materials furnished to or obligations incurred on behalf of Tenant, then
within twenty (20) days after delivery of such notice, Tenant shall remove from
record, by bonding or otherwise, such lien. Tenant shall discharge any such
lien of record immediately upon its filing. Landlord may keep posted on the
Premises any notices it deems necessary for protection from such liens. If any
lien is not removed from record, by bonding or otherwise, within the
twenty (20) day period specified in the first sentence of this Section 6.06(b),
Landlord may cause such liens to be released by any means it deems proper,
including payment, at Tenant’s expense and without affecting Landlord’s rights.

 

4

 

(c)       All alterations,
improvements, remodeling, additions or fixtures, other than trade fixtures not
permanently affixed to the Premises, which may be made or installed in the
Premises and which are attached to the floor, walls or ceiling of the Premises
and any floor covering which is cemented or otherwise affixed to the floor of
the Premises shall be the property of Landlord and shall remain upon and be
surrendered with the Premises at the termination of this lease, unless Landlord
shall direct Tenant to remove such items, or some of them, by written notice
given to Tenant not less than thirty (30) days prior to the expiration of this
lease or within ten (10) days after the earlier termination hereof. Tenant
shall remove any such items, at Tenant’s cost, prior to the expiration of this
lease, or in the event of an early termination, within ten (10) days after
Landlord’s notice.

 

Section 6.07 -  CLEANLINESS: WASTE AND NUISANCE

 

Tenant
shall keep the Premises at all times in a neat, clean and sanitary
condition, shall neither commit nor permit any waste or nuisance thereon, and
shall keep the walks adjacent thereto and the parking lot free from Tenant’s
waste or debris. Without limiting the foregoing, Tenant shall keep the Premises
free of all graffiti.

 

ARTICLE VII

INSURANCE AND INDEMNITY

 

Section 7.01 - LIABILITY INSURANCE

 

Tenant
shall at all times during the term hereof and at Tenant’s sole cost and
expense, for the protection of Tenant and Landlord, as their interest may
appear, maintain in full force and effect a policy or policies of insurance
which afford the following coverages:

 

(a)            Worker’s
Compensation in the statutorily required amount, together with employer’s
liability coverage with a liability amount not less than One Million Dollars
($1,000,000).

 

(b)            Comprehensive
General Liability Insurance with a liability amount not less than Two Million
Dollars ($2,000,000) combined single limit for both bodily injury and property
damage, personal injury, completed operations, products liability, liquor
liability, and owned and non-owned automobile coverage. Tenant shall also maintain
umbrella liability coverage in an amount not less than Five Million Dollars
($5,000,000) and excess liability insurance in an amount not less than Twenty
Million Dollars ($20,000,000).

 

(c)            The minimum limit
of the coverage provided in subsection (b) above may be adjusted upward at
the expiration of each third (3rd) lease year as follows: Not less than sixty
(60) days prior to the relevant adjustment date, Landlord may designate
[                                                    ]
or select an insurance brokerage firm, the identity of which shall reasonably
acceptable to Tenant (the “Reviewing Broker”), to review Tenant’s then existing
liability insurance coverage, to review the then use of the Premises and the
claims history with respect thereto and to recommend, in writing, the amount of
coverage to be carried by Tenant pursuant to subsection (b). Such
recommendation shall be based upon the then use of the Premises and the
liability claims history with respect to the Premises and shall be consistent with
amounts of coverage generally recommended by such Reviewing Broker for similar
types of tenants or users of property with uses similar to that of the Premises
in the geographical area which includes the Premises. If the Reviewing Broker
shall recommend an increase(s) in the amount of coverage then provided by
Tenant under subsection (b), Tenant shall promptly increase its coverage to the
recommended amount(s). In no event shall there by any reduction in the amount
of coverage provided by Tenant under subsection (b) below the initial
amount set forth herein, notwithstanding any recommendation by the Reviewing
Broker.

 

5

 

(d)            Landlord, each of
its general partners, and any other persons designated by Landlord and having
an insurable interest in the Premises, shall be added as additional insureds
pursuant to such policies (although they shall not have any obligations of “named”
insureds therein). The insurance required by this Section Article VII
shall be the primary insurance as respects Landlord (and any other additional
insureds designated by Landlord) and not contributory with any other available
insurance. The policy or policies providing the coverage required by subsection
(b) above shall contain an endorsement providing, in substance, that “such
insurance as afforded hereby for the benefit of the additional insureds shall
be primary and any insurance carried by the additional insureds shall be excess
and not contributory.” In no event shall the limits of any coverage maintained
by Tenant pursuant to this Article VII be considered as
limiting the liability of Tenant pursuant to this lease.

 

Section 7.02 -  PROPERTY INSURANCE

 

(a)            Tenant shall at all
times during the term hereof, and at its cost and expense, maintain in effect
policies of insurance covering (i) all improvements in or to the Premises,
providing protection against any item included within the classification “All
Risk,” including but not limited to insurance against sprinkler leakage,
vandalism and malicious mischief, such insurance to be in an amount no less
than the full replacement value of such improvements, which shall be determined
at the time the policy is initially obtained, and not less frequently than once
every three (3) years thereafter, and such other insurance as may be
required by Landlord’s lender, if any, (ii) all personal property of
Tenant located in or on the Premises, including but not limited to fixtures,
furnishings, equipment, furniture, inventory and stock in trade, in an amount
not less than their full replacement value, providing protection against any
peril included within the classification “All Risk,” including but not limited
to insurance against sprinkler leakage, vandalism and malicious mischief; and (iii) all
plate glass on the Premises.

 

(b)            The proceeds of
such insurance, so long as this lease remains in effect, shall be held in trust
by the insurance carriers and used to repair or replace the parts of the
Premises, any improvements thereto and personal property so insured. Upon any
termination of this lease pursuant to Sections 8.02 or 8.03, Landlord may keep
or apply the proceeds of the insurance required pursuant to clauses (i) and
(iii) of Subsection 7.02(a) above, at its discretion; the remaining
proceeds shall be the property of Tenant.

 

(c)            Tenant shall at its
cost maintain business interruption insurance assuring that the rent payable
hereunder will be paid to Landlord for a period of not less than twelve (12)
months if the Premises are destroyed or rendered inaccessible.

 

Section 7.03 -  PROPERTY INSURANCE -  LANDLORD

 

Landlord
may, but shall not be required to, maintain earthquake and flood insurance
insuring the Premises against damage arising from such events. The cost of
maintaining all such insurance including any deductible shall be paid for by
Tenant, as additional rent.

 

Section 7.04 -  INSURANCE POLICIES

 

All
insurance required to be carried by Tenant hereunder shall be with companies
rated A:XIII, or better, in the then most recent version of Best’s Insurance
Guide. Tenant shall deliver to Landlord at least five (5) days prior to
the time such insurance is first required to be carried by Tenant, and  thereafter at
least thirty (30) days prior to the expiration or renewal date of any policy
maintained by Tenant, copies of the policies or certificates evidencing such
insurance. All policies and certificates delivered pursuant to this Section shall
contain liability limits not less than those set forth in Sections 7.01 and
7.02, shall list the additional insureds and shall specify all endorsements and
special coverages required by such Sections. Each such policy shall contain a
provision (by endorsement or otherwise) requiring not less than thirty (30)
days written notice to Landlord prior to any cancellation, non-renewal or
material amendment thereof. For the purposes of this Article VII, the
phrase “term of this lease” shall mean the period from the Lease Commencement
Date through the later of the expiration or termination of the lease term. Any
insurance required pursuant to this lease may be provided by means of a
so-called “blanket” policy, so long as the Premises are specifically covered
(by rider, endorsement or otherwise) and the policy otherwise complies with the
provisions of this lease. The cost of all insurance provided for in this Article VII
shall be paid by Tenant directly to the, companies providing the
respective policies of insurance.

 

6

 

Section 7.05 -  WAIVER OF SUBROGATION

 

Notwithstanding
anything to the contrary contained in this lease, Landlord and Tenant each
hereby waive any and all rights of recovery against the other, and against any
other tenant or occupant of the Premises and against the officers, employees,
agents, representatives, customers and business visitors of such other party
and of such other tenant or occupant of the Premises, for loss of or damage to
such waiving party or its property or property of others under its control,
arising from any cause insured against under any policy of insurance required
to be carried by such waiving party pursuant to the provisions of this lease
(or any other policy of insurance carried by such waiving party in lieu
thereof) at the time of such loss or damage. Landlord and Tenant shall, upon
obtaining the policies of insurance which they are required to maintain
hereunder, give notice to their respective insurance carrier or carriers that
the foregoing mutual waiver of subrogation is contained in this lease. Landlord’s
notice hereunder may be a general notice with respect to all leases, including
this lease, then or thereafter in effect at the Premises.

 

Section 7.06 - INDEMNITY

 

To
the fullest extent permitted by law, Tenant shall indemnify, defend and hold
Landlord harmless from and against any liability or expense (including
attorneys’ fees and costs of defense) for any damage or injury to persons or
property in or about the Premises which may result from the use or occupation
of the Premises by Tenant, its agents, employees, invitees, licensees,
concessionaires or other persons claiming under Tenant or from any breach or
default by Tenant in its obligations pursuant to this lease. It is understood
and agreed that payment shall not be a condition precedent to enforcement of
the foregoing indemnity. If any action or proceeding is brought against
Landlord by reason of any such claim, Tenant, upon Landlord’s request, shall
defend the same by counsel reasonably satisfactory to Landlord and at Tenant’s
expense. The foregoing indemnification shall not extend to damage or injury
which is proximately caused and due solely to the gross negligence or
intentional misconduct or intentional acts of Landlord, its agents, employees
and contractors.

 

Section 7.07 -  EXEMPTION OF LANDLORD

 

Landlord
shall not be liable for injury or damage which may be sustained by the person,
goods, wares, merchandise or property of Tenant, Tenant’s employees, invitees
or customers or any other person in or about the Premises caused by or
resulting from any peril which may affect the Premises, including but not
limited to fire, theft, steam, electricity, gas, water or rain, which may  leak or flow
from or into any part of the Premises, or from the breakage, leakage,
obstruction or other defects of the pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures of the same, whether such
damage or injury results from conditions arising upon or from the Premises or
upon or from adjacent parcels, or from any other source(s). Landlord shall not
be liable for any damages arising from any act or neglect of any other tenant
of the Premises, if any, or any of their officers, employees, agents,
representatives, customers, business visitors or invitees. Provided, however,
that the foregoing shall not apply to any damage or injury which Tenant
establishes in a court of competent jurisdiction was proximately caused by and
due solely to the gross negligence or intentional misconduct of Landlord, its
agents or employees.

 

7

 

Section 7.08 - LANDLORD’S SECURITY

 

Tenant
acknowledges and agrees that Landlord shall have no responsibility, duty or
obligation to provide security for the Premises and the persons therein. Under
no circumstances shall Landlord be liable to Tenant or to any other person by
reason of any theft, burglary, robbery, assault, trespass, unauthorized entry,
vandalism, or any other act of any third person occurring in or about the Premises,
and Tenant shall indemnify, defend and hold Landlord harmless from and against
any and all losses, liabilities, judgments costs or expenses (including
reasonable attorneys’ fees and other costs of investigation or defense) which
Landlord may suffer by reason of any claim asserted by any person arising out
of, or related to, any of the foregoing.

 

ARTICLE VIII

REPAIRS AND RESTORATION

 

Section 8.01 - INSURED OR MINOR DAMAGE

 

Subject
to the provisions of Section 8.03 and 8.04, if at any time during the term
hereof the Premises are destroyed or damaged and either (a) such
damage is not “substantial” as that term is hereafter defined, or (b) such
damage was caused by a casualty required to be insured against under Section 7.02,
then Landlord shall promptly repair such damage at Tenant’s expense and
this lease shall continue in full force and effect. Any such repairs shall be
performed in accordance with all applicable laws.

 

Section 8.02 - SUBSTANTIAL DAMAGE

 

Subject
to the provisions of Section 8.03 and 8.04, if at any time during the term
hereof the Premises are destroyed or damaged and if such damage is “substantial”
as that term is hereinafter defined, and if such damage was caused by a
casualty not required to be insured against under Section 7.02, then
Landlord may at its option either (a) promptly repair such damage at
Landlord’s expense, in which event this lease shall continue in full force and
effect, or (b) cancel and terminate this lease as of the date of the
occurrence of such damage, by giving Tenant written notice of its election to
do so within thirty (30) days after the date of the occurrence of such damage.

 

Section 8.03 - DAMAGE NEAR END OF TERM

 

If
the Premises are destroyed or damaged during the last twelve (12) months of the
term of this lease and the estimated cost of repair exceeds twenty-five percent
(25%) of the Minimum Rent then remaining to be paid by Tenant for the balance
of the term, Landlord may at its option cancel and terminate this lease as of
the date of occurrence of such damage by giving written notice to Tenant of its
election to so terminate within thirty (30) days after the date Landlord
received notice of the occurrence of such damage. If Landlord shall not so
elect to terminate this lease, the repair of such damage shall be governed by Section 8.01
or 8.02, as the case may be.

 

8

 

Section 8.04 -
ABATEMENT OF RENT; TENANT’S REMEDIES

 

(a)            If the Premises are
destroyed or damaged and Landlord repairs or restores the Premises pursuant to
the provisions of this Article, Tenant shall continue the operation of its
business in the Premises to the extent reasonably practicable from the
standpoint of prudent business management, and the Minimum Rent payable
hereunder for the period during which such damage, repair or restoration
continues shall be abated in proportion to the degree to which Tenant’s use of
the Premises is impaired. There shall be no abatement of any additional rent
payable hereunder, and Tenant shall have no claim against Landlord for any
damage suffered by Tenant by reason of any such damage, destruction,
repair or restoration. Tenant waives the provision of Civil Code Sections 1932(2) and
1933(4) and any present or future laws or case decisions to the same
effect.

 

(b)            If Landlord shall
be obligated to repair or restore the Premises under the provisions of this Article and
shall not commence such repair or restoration within thirty (30) days after
such obligation shall accrue (as described below), Tenant may at its option
cancel and terminate this lease as of the date of
occurrence of such damage by giving Landlord written notice of its election to
do so at any time prior to the commencement of such repair or restoration.
Notwithstanding the foregoing, this lease shall not terminate if, within ten (10) days
following receipt of Tenant’s written notice to terminate the lease Landlord
commences repair or restoration of the Premises. Landlord’s obligation to
commence repairs or restoration shall be deemed to accrue on the later of (i) receipt
by Landlord of any governmental permit or approval necessary to
commence such work or (ii) settlement of any insurance claim with respect
to such casualty.

 

Section 8.05 - DEFINITIONS

 

(a)            For the purpose of
this Article, “substantial” damage to the Premises shall be deemed to be damage
to the buildings located on the real property, the estimated cost or repair of
which exceeds one fifth (1/5) of the then estimated replacement cost of such
improvements.

 

(b)            The determination
in good faith by Landlord of the estimated cost of repair of any damage and/or
of the estimated replacement cost of any building shall be conclusive for the
purpose of this Article.

 

Section 8.05 - SALVAGE RIGHTS

 

If
the Premises are destroyed or damaged, Landlord shall have the sole and
exclusive right to salvage any and all materials (except for Tenant’s personal
property) located on the Premises and the sole and exclusive right to any
proceeds derived from the sale of any such items.

 

ARTICLE IX

ASSIGNMENT/SUBLETTING/RIGHT OF FIRST OFFER

 

Section 9.01 - LANDLORD’S RIGHTS

 

(a)  Tenant
shall not, either voluntarily or by operation of law, assign, sell, encumber,
pledge or otherwise transfer all or any part of Tenant’s leasehold estate
hereunder, or permit the Premises to be occupied by anyone other than Tenant or
Tenant’s employees or sublet the Premises or any portion thereof, without
Landlord’s prior written consent in each instance. In exercising such right of
consent Landlord’s consent shall not be unreasonably withheld and, in
exercising such right of consent, Landlord shall be entitled to take into
account any fact or factor which Landlord deems relevant to such decision
including but not necessarily limited to any or all of the following:

 

9

 

(i)            The financial strength of the proposed assignee or
subtenant.

 

(ii)           The experience of the proposed assignee or subtenant with
respect to business of the type and size which such assignee or subtenant
proposes to conduct in the Premises.

 

(iv)          Whether there then exists any default by Tenant pursuant to
this lease or any non-payment or non-performance by Tenant under this lease
which, with the passage of time and/or the giving of notice would constitute a
default under this lease.

 

The
foregoing restrictions shall be binding upon any assignee or subtenant to which
Landlord has consented, and consent by Landlord to one or more assignments of
this lease or to one or more subletting of the Premises shall not operate to
exhaust Landlord’s rights under this paragraph. The voluntary or other
surrender of this lease by Tenant or a mutual cancellation hereof shall not
work a merger, and shall at the option of Landlord, terminate all or any
existing subleases or subtenancies or shall operate as an assignment to
Landlord of such subleases or subtenancies. If Tenant is a corporation which is
not deemed a public corporation, or is an unincorporated association or
partnership, the transfer, assignment or hypothecation of any stock or interest
in such corporation, association or partnership in the aggregate excess of
fifty percent (50%) shall be deemed an assignment within the meaning and
provisions of this Article.

 

(b)  In
the event Tenant desires to sublet the Premises, or any portion thereof, or
assign its interest in this lease, Tenant shall give written notice thereof to
Landlord with a copy to The Prudential Insurance Company of America (“Prudential”)
at 2029 Century Park East, Suite 3600, Los Angeles, California 90067,
Attn: Carol Weiss, at least sixty (60) days but not more than ninety (90) days
prior to the proposed effective date of such subletting or assignment, which
notice shall set forth or be accompanied by the name of the proposed subtenant
or assignee, the relevant terms of any sublease or assignment, the proposed
effective date thereof, the nature of the proposed subtenant’s or assignee’s
business to be carried on in the Premises and such reasonable financial
information as Landlord may request concerning the proposed subtenant or
assignee, including but not limited to a balance sheet of the proposed
subtenant or assignee for the two year period preceding the request for
Landlord’s consent and a written statement in reasonable detail as to the
business and experience of the proposed subtenant or assignee during the five
years preceding the request for Landlord’s consent.

 

(c) (i)       At any time
within thirty (30) days after Landlord’s receipt of the information specified
in Section 9.01(b), Landlord may by written notice to Tenant elect to (i) consent
to the subletting or assignment upon the terms and to the subtenant or assignee
proposed; (ii) refuse to  give its consent, specifying
in reasonable detail the reason(s) therefor; or (iii) sublet from
Tenant that portion of the Premises which is the subject of the assignment or
sublease sought by Tenant at the rental and on the other terms proposed by
Tenant.

 

(c) (ii)      Notwithstanding
the consent of Landlord pursuant to 9.01(c)(i) above, Tenant’s right to
sublet the Premises or assign the lease on the terms specified in its notice to
Landlord pursuant to 9.01(b), will be terminated, and Tenant shall have no
right to assign the lease or sublet the Premises upon such terms, if Prudential
delivers written notice to Landlord at any time within thirty (30) days after
Landlord’s receipt of the information specified in Section 9.01(b). Such
notice must provide that Prudential has elected to refuse to give its consent
to such assignment or sublease, specifying in reasonable detail the reasons
thereof. If Prudential does not deliver such notice within said thirty (30) day
period, its consent shall be deemed  given. Prudential’s
objection to any assignment or sublease must not be arbitrary and must be based
on reasonable and material considerations which, in Prudential’s reasonable
judgment, may adversely affect Prudential’s interest in the Premises.
Prudential shall only have the right to prohibit a sublease or assignment so
long as Prudential is a beneficiary under a duly recorded and valid deed of trust
encumbering the Premises.

 

10

 

(d)           Any sale,
assignment, mortgage, transfer of this lease or subletting which does not
comply with the provisions of this Article shall be void.

 

(e)           As a condition to
Landlord’s consent to any assignment or subletting, Landlord shall be entitled
to receive, fifty percent (50%) of all “consideration” paid, directly or
indirectly (however denominated and paid) by the subtenant or assignee to
Tenant in excess of the rent payable by Tenant to Landlord pursuant to this
lease. The term “consideration” shall mean and include money, services,
property or any other thing of value such as payment of costs, cancellation of
indebtedness, discounts, rebates and the like less any brokerage commissions,
tenant improvements, free rent concessions or any other monetary concession
granted by Tenant to the respective subtenant or assignee as an inducement to
assign or sublet the Premises (collectively the “Concessions”). All such
Concessions shall be reasonably approved by Landlord prior to granting same to
the prospective subtenant or assignee as the case may be. Any rent or other
consideration which is to be passed through to Landlord by Tenant pursuant to
this subsection shall be paid to Landlord promptly upon receipt by Tenant and
shall be paid in cash or check, irrespective of the form in which received by
Tenant from any subtenant or assignee. In the event that any rent or other
consideration received by Tenant from a subtenant or assignee is in a form
other than cash, Tenant shall pay to Landlord in cash the fair value of such
consideration.

 

(f)            If Landlord
consents to such assignment or subletting or does not exercise any option set
forth in this Section 9.01 within said thirty (30) day period, Tenant may
thereafter within sixty (60) days after the expiration of said period enter
into a valid assignment or sublease of the Premises or portion thereof, upon
terms and conditions consistent with the terms and conditions described in the
information required to be furnished by Tenant to Landlord pursuant to
subsection (b), or upon other terms not less favorable to Tenant; provided,
however that any material change in such terms shall be subject to Landlord’s
consent as provided in this Section and provided further, that any amount
to be paid to Landlord by Tenant in connection therewith pursuant to subsection
(e) above shall be paid to Landlord upon the later of consummation of such
transaction or receipt by Tenant of such consideration.

 

(g)           Provided Landlord
receives the notice provided in Section 9.01(b) and subject to the
consent of Prudential as provided for in Section 9.01(c), the Landlord
hereby consents to the assignment of the Tenant’s leasehold estate to an
affiliate of Tenant provided that there will be no substantial change in the
nature and quality of the business conducted on the Premises and such affiliate
executes and delivers to Landlord a written assumption of the obligations of
Tenant pursuant to this lease in form and substance reasonably acceptable to
Landlord. The term “affiliate” shall mean any entity or individual (“Parent”)
which directly or indirectly controls the right to elect a majority of the
members of Tenant’s board of directors or any entity (“Subsidiary”) which is controlled
by Tenant or under the control of Tenant’s Parent (i.e., Tenant or
Tenant’s Parent has the right, directly or indirectly, to elect a majority of
the Subsidiary’s board of directors).

 

Section 9.02 - LANDLORD’S COSTS

 

Tenant
shall pay to Landlord on demand a sum equal to all of Landlord’s reasonable
costs, including attorney’s and  accountant’s fees, incurred
in connection with processing, reviewing and documenting any proposed
assignment or sublease.

 

11

 

Section 9.03 - NO RELEASE OF TENANT

 

Notwithstanding
any assignment or subletting (including any assignment or subletting to an
affiliate), even with the consent of Landlord, Tenant shall at all times remain
directly and primarily responsible and liable for the payment of the rent
herein specified and for compliance with all of its other obligations under
this lease. Upon the occurrence of an “event of default” (as hereinafter
defined), if the Premises or any part thereof are then sublet, Landlord, in
addition to any other remedies provided herein or by law, may collect directly
from any subtenant all rents due and becoming due to Tenant under such sublease
and apply such rent against any sums due to Landlord from Tenant hereunder. No
such collection directly from an assignee or subtenant shall be construed to
constitute a novation or a release of Tenant from the further performance of
Tenant’s obligations hereunder. The acceptance by Landlord of any payment due
hereunder from any other person shall not be deemed to be a waiver by Landlord
of any provision of this lease or to be a consent to any assignment or
subletting.

 

Section 9.04 - TENANT’S RIGHT OF FIRST OFFER

 

If,
at any time during the term of this lease, Landlord desires to sell all or any
portion of its interest in the Premises (“Landlord’s Interest”), Landlord shall
deliver a written notice thereof to Tenant, which notice shall indicate the
sale price and the other terms and conditions upon which Landlord is willing to
sell Landlord’s Interest (the “Sale Notice”). The Sale Notice shall constitute
an offer to sell Landlord’s Interest to Tenant at the price and upon the terms
and conditions contained therein. Tenant shall have thirty (30) calendar days
after its receipt of the Sale Notice within which to deliver an executed
counterpart of the Sale Notice to Landlord, which shall then constitute the
purchase and sale agreement between the parties. If Tenant fails to deliver an
executed Sale Notice to Landlord as provided herein or fails to close the
purchase of Landlord’s Interest in accordance with the terms and conditions set
forth in the Sale Notice, then Landlord shall be relieved of its obligations
under this Section 9.04 and may freely sell Landlord’s Interest to any
person or entity, provided that (i) such sale is consummated within eight (8) months
following the date the Sale Notice was delivered to Tenant, (ii) the
purchase price for such sale is not less than ninety-five percent (95%) of the
price set forth in the Sale Notice and (iii) the material terms of such
sale are substantially the same as the terms set forth in the Sale Notice.
After the consummation of such sale or if Tenant fails to close the purchase of
Landlord’s Interest in accordance with the terms and conditions set forth in the
Sale Notice, Landlord’s Interest shall no longer be subject to this Article 9.04.

 

Section 9.05 - EXEMPT TRANSACTIONS FROM RIGHT OF FIRST OFFER

 

Nothing
contained in this Article IX shall require any notice by Landlord or give
Tenant any right in the event of (i) a sale to an “affiliate” of Landlord
(as such term is defined in Section 9.01(g)), (ii) any transaction by
which Landlord borrows any funds or obtains any credit or allowance, the
repayment of which is secured by Landlord’s Interest or this lease or (iii) a
judicial foreclosure, foreclosure through the exercise of a power of sale or a
deed given in lieu of foreclosure.

 

12

 

ARTICLE X

EMINENT DOMAIN

 

Section 10.01 - ENTIRE OR SUBSTANTIAL TAKING

 

If
the entire Premises, or so much thereof as to make the balance not reasonably
adequate for the conduct of Tenant’s business notwithstanding restoration by
Landlord as hereinafter provided, shall be taken permanently, or temporarily
for not less than six (6) months, under the power of eminent domain, this lease
shall automatically terminate as of the date on which the condemning authority
takes possession.

 

Section 10.02 -  PARTIAL
TAKING

 

In
the event of any taking under the power of eminent domain which does not so
result in a termination of this lease, the Minimum Rent and all additional rent
payable hereunder shall be reduced, effective as of the date on
which the condemning authority takes possession, equitably and proportionately
in relation to the amount of the Premises taken.

 

Section 10.03 - AWARDS

 

Any
award for any taking of all or any part of the Premises under the power of
eminent domain shall be the property of Landlord, whether such award shall be
made as compensation for diminution in value of the leasehold or for taking of
the fee. Nothing contained herein, however, shall be deemed to preclude Tenant
from obtaining, or to give Landlord any interest in, any award to Tenant for
loss of or damage to Tenant’s trade fixtures and removable personal property or
for damages for cessation or interruption of Tenant’s business.

 

Section 10.04 - SALE UNDER THREAT OF
CONDEMNATION

 

A
sale by Landlord to any authority having the power of eminent domain, either
under threat of condemnation or while condemnation proceedings are pending,
shall be deemed a taking under the power of eminent domain for all purposes
under this Article. In such event, Tenant shall not be entitled to any portion
of the sale proceeds.

 

ARTICLE XI

UTILITY SERVICES

 

Section 11.01 - UTILITY CHARGES

 

Tenant
shall pay all charges for gas, water, sewer, electricity, telephone and other
utility services used in the Premises during the lease term. If any such
charges are not paid when due Landlord may pay the same, after providing Tenant
with five days prior written notice, and any amount so paid by Landlord shall
thereupon become due to Landlord from Tenant as additional rent. As to any
utility services not separately metered to the Premises at the Commencement
Date of this lease, Landlord reserves the right to require Tenant, at Tenant’s
cost, to install a separate meter or submeter to monitor the usage of such
utility service in the Premises. The foregoing provisions shall also apply to
any utility service used by Tenant to operate the heating, ventilating and air
conditioning unit serving the Premises.

 

Section 11.02 - INTERRUPTION OF SERVICE

 

Except
as otherwise expressly provided for herein, Landlord shall not be liable
in damages or otherwise for any failure or interruption of any utility service
being furnished to the Premises and no such failure or interruption shall
entitle Tenant to terminate this lease, or to an abatement of the Minimum
Rent, additional rent or other charges due hereunder.

 

13

 

ARTICLE XII

DEFAULTS AND REMEDIES

 

Section 12.01 - DEFINITIONS

 

The
occurrence of any one or more of the following events shall constitute a
default hereunder by Tenant:

 

(a)          The abandonment of the Premises by
Tenant. Abandonment is herein defined to include, but is not limited to, any
absence by Tenant from the Premises for twenty (20) successive days or longer
while in default of any provision of this lease.

 

(b)         The failure by Tenant to make any
payment of rent or additional rent required to be made by Tenant hereunder, as
and when due, where such failure shall continue for a period of ten (10) days
after written notice thereof from Landlord to Tenant; provided, however, that
any such notice shall be in lieu of, and not in addition to, any notice required
under California Code of Civil Procedure Section 1161 et  seq., as amended.

 

(c)          The failure by Tenant to observe or
perform any of the express or implied covenants or provisions of this lease to
be observed or performed by Tenant, other than as specified in (a) or (b) above,
where such failure shall continue for a period of fifteen (15) days after
written notice thereof from Landlord to Tenant; provided, however, that any
such notice shall be in lieu of, and not in addition to, any notice required
under California Code of Civil Procedure Section 1161 et  seq., as amended,
and provided further, that if the nature of Tenant’s default is such that more
than fifteen (15) days are reasonably required for its cure then Tenant shall
not be deemed to be in default if Tenant shall commence such cure within said
fifteen (15) day period and thereafter diligently prosecute such cure to
completion.

 

(d)         (i)          The making by Tenant of any general
assignment for the benefit of creditors; (ii) the filing by or against
Tenant of a petition to have Tenant adjudged a debtor in any proceeding under
the Federal Bankruptcy Code or a petition for reorganization or arrangement
under any law relating to bankruptcy (unless, in the case of a petition filed
against Tenant, the same is dismissed within thirty (30) 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 thirty (30) days; (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 thirty (30) days; or (v) Tenant’s
convening of a meeting of its creditors or any class thereof for the purpose of
effecting a moratorium upon or composition of its debts, or any class thereof.

 

Section 12.02 - REMEDIES

 

(a)          In the event of any default by Tenant
as defined herein, Landlord may exercise the following remedies:

 

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

 

(i)               The worth at the time of award of the unpaid rent and
additional rent which had been earned at the time of termination;

 

(ii)              The worth at the time of award of the amount by which
the unpaid rent and additional rent which would have been earned after
termination until the time of award  exceeds the amount of such
loss that Tenant proves could have been reasonably avoided;

 

14

 

(iii)             The worth at the time of award of the amount by which
the unpaid rent and additional rent for the balance of the term after the time
of award exceeds the amount of such loss that Tenant proves could be reasonably
avoided; and

 

(iv)             Any other amount necessary to compensate Landlord for all
the detriment related to Tenant’s failure to perform it obligations under this
lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, the cost of recovering possession of
the Premises, expenses of reletting, including necessary repair, renovation and
alteration of the Premises, brokers’ commissions, attorneys’ fees, and any
other costs.

 

The
“worth at the time of award” of the amounts referred to in subparagraphs (i) and
(ii) above shall be computed by allowing interest at the rate per annum
determined pursuant to Section 13.06 from the date such amounts accrue to
Landlord. The worth at the time of award of the amount referred to in
subparagraph (iii) above shall be computed by discounting such amount at
one (1) percentage point above the discount rate of the Federal Reserve Bank of
San Francisco at the time of award.

 

(2)          Without terminating or effecting a
forfeiture of this lease or otherwise relieving Tenant of any obligation
hereunder in the absence of express written notice of Landlord’s election to do
so, Landlord may, but need not, relet the Premises or any portion thereof at
any time or from time to time and for such terms and upon such conditions and
rental as Landlord in its sole discretion may deem proper. Whether or not the
Premises are relet Tenant shall pay to Landlord all amounts required by Tenant
hereunder up to the date that Landlord terminates Tenant’s right to possession
of the Premises. Such payments by Tenant shall be due at the times provided in
this lease, and Landlord need not wait until the termination of the lease to
recover them by legal action or in any other manner. If Landlord relets the
Premises or any portion thereof, such reletting shall not relieve Tenant of any
obligation hereunder, except that Landlord shall apply the rent or other
proceeds actually collected by it for such reletting against amounts due from
Tenant hereunder to the extent such proceeds compensate Landlord for
non-performance of any obligation of Tenant hereunder. Landlord may execute any
lease made pursuant hereto in its own name, and the lessee thereunder shall be
under no obligation to see to the application by Landlord of any proceeds to
Landlord, nor shall Tenant have any right to collect any such proceeds.
Landlord shall not by any re-entry or other act be deemed to have accepted any
surrender by Tenant of the Premises or Tenant’s interest therein, or be deemed
to have terminated this lease, or to have relieved Tenant of any obligation
hereunder, unless Landlord shall have given Tenant express written notice of
Landlord’s election to do so as set forth herein.

 

(3)          Landlord may terminate this lease by
express written notice to Tenant of its election to do so. Such termination
shall not relieve Tenant of any obligation hereunder which has accrued prior to
the date of such termination. In the event of such termination, Landlord shall
be entitled to recover from Tenant the amounts determined pursuant to paragraph
(1) above.

 

(b)         Landlord shall be under no obligation
to observe or perform any covenant of this lease on its part to be observed or
performed which accrues after the date of any default by Tenant hereunder.

 

(c)          In any action for unlawful detainer
commenced by Landlord against Tenant by reason of any default hereunder, the
reasonable rental value of the Premises for the period of the unlawful detainer
shall be deemed to be the amount of rent and additional rent reserved in this
lease for such period, unless  Landlord or Tenant shall
prove to the contrary by competent evidence.

 

15

 

(d)         The rights and remedies reserved to
Landlord herein, including those not specifically described, shall be
cumulative, and, except as provided by California statutory law in effect at
the time, Landlord may pursue any or all of such rights and remedies, at the
same time or otherwise.

 

(e)          No delay or omission of Landlord to
exercise any right or remedy shall be construed as a waiver of any such right
or remedy or of any default by Tenant hereunder. The acceptance by Landlord of
any rent hereunder shall not be a waiver of any preceding breach or default by
Tenant of any provision hereof other than the failure of Tenant to pay the
particular rent accepted, regardless of Landlord’s knowledge of such preceding
breach or default at the time of acceptance of such rent, or a waiver of
Landlord’s right to exercise any remedy available to Landlord by virtue of such
breach or default. The acceptance of any payment from a debtor in possession, a
trustee, a receiver or any other person acting on behalf of Tenant or Tenant’s
estate shall not waive or cure a default under Section 12.01(d).

 

(f)          Tenant hereby waives any right of
redemption or relief from forfeiture under Code of Civil Procedure Sections
1174 and 1179, and under any present or future statutes or case decisions to
the same effect, in the event Tenant is evicted or Landlord takes possession of
the Premises by reason of any default by Tenant hereunder.

 

Section 12.03 - DEFAULT BY LANDLORD

 

Except
as otherwise provided for hereunder, Landlord shall not be deemed to be in
default in the performance of any obligation required to be performed by it
hereunder unless and until it has failed to perform such obligation within
twenty (20) days after written notice by Tenant to Landlord specifying wherein
Landlord has failed to perform such obligation; provided, however, that if the
nature of Landlord’s obligation is such that more than twenty (20) days are
required for its performance then Landlord shall not be deemed to be in default
if it shall commence such performance within such twenty (20) day period and
thereafter diligently prosecute the same to completion. Tenant’s remedies for
Landlord’s default shall be limited to suit or action and shall not extend to
withholding or offsetting rent.

 

Section 12.04 - EXPENSE OF LITIGATION

 

If
either party incurs any expense, including attorneys’ fees, in connection with
any action or proceeding instituted by either party by reason of any default or
alleged default of the other party hereunder, the party prevailing in such
action or proceeding shall be entitled to recover its expenses, costs, fees,
and disbursements, including attorneys fees, from the other party.

 

Section 12.05 - HOLDING OVER

 

If
Tenant or anyone claiming under Tenant shall remain in possession of the
Premises or any part thereof after expiration of the lease term or earlier
termination thereof without any agreement in writing between Landlord and
Tenant with respect thereto, Tenant shall (a) occupy upon all of the terms
and conditions of this lease except that the monthly Minimum Rent due from
Tenant shall be one hundred fifty percent (150%) of the monthly Minimum Rent in
effect at the end of the lease term, (b) pay all damages sustained by
Landlord by reason of such retention and (c) indemnify, defend, and hold
Landlord harmless from and against any loss or liability resulting from such
holding over. Landlord’s acceptance of rent shall create only a month-to-month
tenancy, in either case upon the terms set forth in this Section. Any such
month-to-month tenancy shall be terminable at the end of any calendar month by
either party by written notice to the other  party given not less than
thirty (30) days prior to the end of such month. Nothing contained in this Section shall
be deemed or construed to waive Landlord’s right of re-entry or any other right
of Landlord hereunder or at law.

 

16

 

Section 12.06 -  LANDLORD RIGHTS

 

All
covenants and agreements to be performed by Tenant under this lease shall be
performed by Tenant at Tenant’s sole cost and expense and without any abatement
of rent. If Tenant fails to pay any sum of money, other than rent, required to
be paid by it or fails to perform any other act on its part to be performed,
and such failure continues beyond any applicable grace period set forth in this
Article, then in addition to any other remedies provided herein Landlord may,
but shall not be obligated so to do, without waiving or releasing Tenant from
any obligations of Tenant, make any such payment or perform any such other act
on Tenant’s part. Landlord’s election to make any such payment or perform any
such act on Tenant’s part shall not give rise to any responsibility of Landlord
to continue making the same or similar payments or performing the same or
similar acts. Tenant shall, within ten (10) days after written demand
therefor by Landlord, reimburse Landlord for all sums paid by Landlord and all
necessary incidental costs, together with interest thereon at the rate
determined under Section 13.06, accruing from the date of such payment by
Landlord; and Landlord shall have the same rights and remedies in the event of
failure by Tenant to pay such amounts as Landlord would have in the event of a
default by Tenant in payment of rent.

 

Section 12.07 - TRIAL WITHOUT JURY

 

LANDLORD AND TENANT EACH ACKNOWLEDGES THAT IT HAS HAD THE ADVICE OF
COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY UNDER THE
CONSTITUTIONS OF THE UNITED STATES AND THE STATE OF CALIFORNIA. EACH PARTY
EXPRESSLY AND KNOWINGLY WAIVES AND RELEASES ALL SUCH RIGHTS TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE
OTHER ON ANY MATTERS ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS EASE,
TENANT’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR
DAMAGE.

 

	
   

  	
  /s/ [Initials]

  	
   

  	
  /s/ [Initials]

  	
   

  
	
   

  	
  Landlord’s Initials

  	
   

  	
  Tenant’s Initials

  	
   

  

 

ARTICLE XIII

MISCELLANEOUS

 

Section 13.01 - OFFSET STATEMENT

 

(a)                Tenant shall at
any time and from time to time upon not less than ten (10) days prior
written notice from Landlord execute, acknowledge and deliver to Landlord a
statement in writing (i) certifying that this lease is unmodified and in
full force and effect (or, if modified, stating the nature of such modification
and certifying that this lease, as so modified, is in full force and effect)
and the dates to which the Minimum Rent and additional rent are paid in
advance, if any, (ii) indicating whether there are to Tenant’s knowledge,
any uncured defaults on the part of Landlord hereunder, or specifying such
defaults if any are claimed and (iii) indicating whether such other facts as
are included in such statement by Landlord are accurate. Any such statement may
be relied upon by any prospective purchaser or encumbrancer of the Premises or
of all or any portion of the Premises.

 

(b)                Tenant’s
failure to deliver such statement within such time shall be conclusive upon
Tenant (i) that this lease is in full force and effect, without
modification except as may be  represented by Landlord, (ii) that
there are no uncured defaults in Landlord’s performance, (iii) that not
more than one month’s Minimum Rent has been paid in advance and (iv) that
any other  statements of fact included by Landlord in the statement are correct.

 

17

 

(c)             Tenant shall be
liable for all loss, cost or expense resulting from the failure of any sale or
funding of any loan caused by any intentional material misstatement contained
in any estoppel certificate supplied by Tenant. Tenant irrevocably appoints
Landlord as attorney-in-fact for Tenant with full power and authority to
execute and deliver in the name of Tenant an estoppel certificate if Tenant
fails to deliver the same within such ten (10) day period, and such
certificate as signed by Landlord, shall be binding on Tenant.

 

(d)              In the event this
lease will be used as collateral for a loan made to Tenant, Landlord shall upon
not less than ten (10) days prior written notice from Tenant execute,
acknowledge and deliver to Tenant a statement in writing (1) certifying
that this lease is unmodified and in full force and effect (or, is modified,
stating the nature of such modification and certifying that this lease, as so
modified, is in full force and effect) and the dates to which the Minimum Rent
and additional rent have been paid in advance, if any, (ii) indicating
whether there are to Landlord’s knowledge, any uncured defaults on the part of
Tenant hereunder, or specifying such defaults, if any, are claimed and (iii) indicating
whether such other facts as are included in such statement by Tenant are
accurate.

 

Section 13.02 - LANDLORD’S RIGHT OF ACCESS

 

Landlord
and its agents shall have the right, after providing Tenant with twenty-four
(24) hours advance notice, to (a) enter the Premises at all reasonable
times for the purpose of examining or inspecting the same to ascertain if they
are in good repair, making such alterations, repairs, improvements or additions
to the Premises as Landlord may be permitted to make hereunder, exhibiting the
same to prospective purchasers and posting notices which Landlord may deem
necessary for its protection and (b) at any time in an emergency. During
the six (6) months prior to the end of the term of this lease (and during
any period during which Tenant is holding over with or without the consent of
Landlord), Landlord may post the usual “for rent” or “for lease” signs provided
that the placement of such signs does not interfere with Tenant’s reasonable
use of the Premises. Tenant shall not disturb such signs and shall cooperate
with Landlord in exhibiting the Premises to prospective tenants. Access by
Landlord hereunder shall not, under the circumstances, unreasonably interfere
with Tenant’s use and enjoyment of the Premises and Tenant waives any claim for
damages for any injury or inconvenience to or interference with Tenant’s
business, occupancy or quiet enjoyment arising out of any permitted entry by
Landlord. Tenant acknowledges that Landlord may retain a key to the Premises
and may, in any emergency, enter the Premises in any manner which Landlord
reasonably determines to be necessary, without liability therefor to Tenant. No
entry by Landlord pursuant to the Section shall be deemed to constitute an
eviction of Tenant or a forcible detainer of the Premises.

 

Section 13.03 -
TRANSFER OF LANDLORD’S INTEREST/ ASSIGNMENT OF LEASE

 

In
the event of any transfer or transfers of Landlord’s interest in the Premises,
the transferor shall be automatically relieved of any and all obligations
arising under this lease (as may be amended), accruing from and after the date
of such transfer. Notwithstanding anything to the contrary set forth herein,
Landlord may, without the consent of Tenant, assign all of its rights,
liabilities and obligations under this lease and Tenant hereby agrees to attorn
to any such assignee. Any transfer of Landlord’s interest hereunder shall be
evidenced by written notice delivered to Tenant.

 

18

 

Section 13.04 - FLOOR AREA

 

“Floor
area” as used in this lease means, with respect to the Premises, the number of
square feet set forth in the Basic Lease Provisions.

 

Section 13.05 - SEVERABILITY

 

Any
provision of this lease which shall prove to be invalid, void or illegal shall
in no way affect, impair or invalidate any other provision hereof, and such
remaining provisions shall remain in full force and effect.

 

Section 13.06 - LATE PAYMENTS

 

(a)                                     Any amount due
from Tenant to Landlord hereunder which is not paid to Landlord when due shall
bear interest at the maximum rate of interest then permitted by the applicable
usury law, accruing from the date due until the same is fully paid. Payment of
such interest shall not excuse or cure any default by Tenant pursuant to this
lease.

 

(b)                                     TENANT
ACKNOWLEDGES THAT THE LATE PAYMENT BY TENANT TO LANDLORD OF RENT AND OTHER SUMS
DUE HEREUNDER WILL CAUSE LANDLORD TO INCUR COSTS NOT CONTEMPLATED BY THIS
LEASE, THE EXACT AMOUNT OF WHICH WILL BE EXTREMELY DIFFICULT TO ASCERTAIN. SUCH
COSTS MAY INCLUDE, BUT ARE NOT LIMITED TO, ADMINISTRATIVE, PROCESSING AND
ACCOUNTING CHARGES, AND LATE CHARGES WHICH MAY BE IMPOSED ON LANDLORD BY
THE TERMS OF ANY ENCUMBRANCE COVERING THE PREMISES. ACCORDINGLY, IF ANY SUM DUE
FROM TENANT SHALL NOT BE RECEIVED BY LANDLORD OR LANDLORD’S DESIGNEE WITHIN TEN
(10) DAYS AFTER THE DATE DUE, TENANT SHALL PAY TO LANDLORD, IN ADDITION TO
THE INTEREST PROVIDED ABOVE, A LATE CHARGE IN THE AMOUNT OF FIVE PERCENT (5%)
OF THE DELINQUENT AMOUNT, AS LIQUIDATED DAMAGES. THE PARTIES AGREE THAT SUCH
LATE CHARGE REPRESENTS A FAIR AND REASONABLE ESTIMATE OF THE COST LANDLORD WILL
INCUR BY REASON OF THE LATE PAYMENT BY TENANT. ACCEPTANCE OF SUCH LATE CHARGE
SHALL NOT CONSTITUTE A WAIVER OF TENANT’S DEFAULT WITH RESPECT TO SUCH OVERDUE
AMOUNT, NOR PREVENT LANDLORD FROM EXERCISING ANY OTHER RIGHTS AND REMEDIES
GRANTED HEREUNDER OR BY LAW TO LANDLORD.

 

	
   

  	
  /s/ [Initials]

  	
   

  	
  /s/ [Initials]

  	
   

  
	
   

  	
  Landlord’s Initials

  	
   

  	
  Tenant’s Initials

  	
   

  

 

(c)                                      If Tenant
shall, during any six (6) month period, be more than ten (10) days
delinquent in the payment of any rent or other amount payable by Tenant
hereunder on three (3) or more occasions then, notwithstanding anything
herein to the contrary, Landlord may, by written notice to Tenant, elect to
require Tenant to pay all Minimum Rent and additional rent payable hereunder
quarterly in advance during the remaining term of the applicable lease year and
during the next full lease year. Such right of Landlord shall be in addition to
and not in lieu of any other right or remedy available to Landlord hereunder or
at law on account of Tenant’s default hereunder.

 

Section 13.07 - TIME OF ESSENCE

 

Time
is of the essence with respect to the performance of every provision of this
lease in which time of performance is a factor.

 

Section 13.08 - HEADINGS

 

The article and section captions
contained in this lease are for convenience only and shall not be considered in
the construction or interpretation of any provision hereof.

 

19

 

Section 13.09 - INCORPORATION OF PRIOR
AGREEMENTS; AMENDMENTS

 

This
lease and the exhibits hereto cover in full each and every agreement of every
kind or nature whatsoever between the parties hereto concerning the Premises,
and all preliminary negotiations and agreements of whatsoever kind with respect
to the Premises, except those contained herein, are superseded and of no
further force or effect. No person, firm or corporation has at any time had any
authority from Landlord to make any representations or promises on behalf of
Landlord, and Tenant expressly agrees that if any such representations or
promises have been made by Landlord or others, Tenant hereby waives all right
to rely thereon. No verbal agreement or implied covenant shall be held to vary
the provisions hereof, any statute, law, or custom to the contrary
notwithstanding. No provision of this lease may be amended or added to except
by an agreement in writing signed by the parties hereto or their respective
successors in interest.

 

Section 13.10 - NOTICES

 

Any
notice, consent or approval (“notice”) required or permitted to be given
hereunder shall be in writing and may be served personally or by mail; if
served by mail it shall be addressed as specified in the applicable Basic Lease
Provision. Any notice to Tenant may, after Tenant opens the Premises for
business be sent instead to Tenant at the Premises. Any notice which is
personally served shall be effective upon service, any notice given by mail
shall be deemed effectively given three (3) days after deposit in the
United States mail, registered or certified, postage prepaid and addressed to
the Premises (for Tenant) or as specified in the applicable Basic Lease
Provision. Either party may by written notice to the other from time to time
specify a different address for notice purposes.

 

Section 13.11 - BROKERS

 

With
the exception of the Broker referenced in the Basic Lease Provisions, if any,
Tenant and Landlord, each for themselves, warrants to the other that it has had
no dealings with any real estate broker or agent in connection with the
negotiation of this lease, except as specifically stated to the contrary in the
applicable Basic Lease Provision, and each expressly agrees and
covenants to hold the other harmless and to defend the other from any claims,
threatened or asserted, by any broker, finder or agent claiming under or
through the respective party in connection with the negotiations and execution of
this lease.

 

Section 13.12 - WAIVERS

 

No
waiver of any provision hereof shall be deemed a waiver of any other provision
hereof. Consent or approval of any act by one of the parties hereto shall not
be deemed to render unnecessary the obtaining of such party’s consent to or
approval of any subsequent act.

 

Section 13.13 -  RECORDING

 

Tenant
shall not record this lease without the prior written consent of Landlord.
Tenant, upon the request of Landlord, shall execute and acknowledge a “short
form” memorandum of this lease for recording purposes.

 

Section 13.14 - LIENS

 

Notwithstanding
Section 6.06 (b), Tenant shall do all things necessary to prevent the
filing of any mechanics’ or other liens against the Premises or any part
thereof by reason of work, labor, services or materials supplied or claimed to
have been supplied to Tenant, or anyone holding the Premises, or any
part thereof, through or under Tenant.

 

20

 

Section 13.15 - SUBORDINATION

 

This
lease and all rights of Tenant under this lease are subject and subordinate to
any of the following, and any modifications thereof, which may now or hereafter
affect any portion of the Premises: (a) any mortgage, or any ground or
underlying lease covering any part of the Premises, provided that a condition
of this subordination for any future mortgage holder or ground lessor shall be
the delivery to Tenant of a commercially reasonable non-disturbance and
attornment agreement which shall indicate that Tenant’s peaceable possession of
the Premises will not be disturbed as a result of such subordination, (b) any
applicable laws, rules, statutes and ordinances of any governmental authority
having jurisdiction, and (c) all utility easements and agreements. On sale
by foreclosure of a mortgage or sale in lieu of foreclosure, Tenant will attorn
to the purchaser if requested by such purchaser, and recognize the purchaser as
the Landlord under this lease provided Tenant has received a commercially
reasonable non-disturbance and attornment agreement indicating that Tenant’s
(or its Affiliate) peaceful possession of the Premises will not be
disturbed. These provisions are self-operative and except as provided above no
further instrument is required to effect them; however, upon demand from time
to time, Tenant shall execute, acknowledge and deliver to Landlord any
instruments and certificates necessary or proper to evidence such subordination
and/or attornment or, if Landlord so elects, to render any of the foregoing
subordinate to this Lease or to any or all rights of Tenant hereunder. Tenant
further waives the provisions of any current or future statutes, rule or
law which may give or purport to give Tenant any right or election to terminate
or otherwise adversely affect this lease and the obligations of Tenant
hereunder in the event of any such foreclosure proceeding or sale, and agrees
that this Lease shall not be affected in any way whatsoever by any such
proceeding or sale unless the mortgagee, or the purchaser, shall declare
otherwise.

 

Section 13.16 - FORCE MAJEURE

 

In
the event that either Landlord or Tenant is delayed in performing any
obligation of Landlord or Tenant pursuant to this lease by any cause beyond the
reasonable control of the party required to perform such obligation, the time
period for performing such obligation shall be extended by a period of time
equal to the period of the delay. For the purpose of this Section:

 

(a)         A cause shall be beyond the
reasonable control of a party to this lease when such cause would affect any
person similarly situated (such as power outage, labor strike or truckers’
strike) but shall not be beyond the reasonable control of such party when
peculiar to such party (such as financial inability or ordering long lead time
materials).

 

(b)         This Section shall not
apply to any obligation to pay money or delay the Lease Commencement Date.

 

(c)          In the event of any
occurrence which a party believes constitutes a cause beyond the reasonable
control of such party and which will delay any performance by such party
hereunder, such party shall promptly in writing notify the other party of the
occurrence and nature of such cause, the anticipated period of delay and the
steps being taken by such party to mitigate the effects of such delay.

 

Section 13.17 - YIELD UP PREMISES

 

At
the expiration or earlier termination of this lease, Tenant shall peaceably
yield up the Premises to Landlord in the same condition as when received,
ordinary wear and tear excepted, and all additions made upon the same to
Landlord, in first class condition (free and clear of debris) and shall execute,
acknowledge and deliver to Landlord, within five (5) days after written
demand from Landlord to Tenant, any quitclaim deed or other document, in
recordable form, which may be reasonably requested by any reputable title
company to remove the lease as a matter affecting title to the Premises.

 

21

 

Notwithstanding
anything to the contrary otherwise stated in this lease, Tenant shall leave the
air lines, power panels, electrical distribution systems, lighting fixtures,
air conditioning, plumbing and fencing on the Premises in good operating
condition and shall repair any damage to the Premises occasioned by the removal
of any personal property.

 

Section 13.18 - AUTHORITY

 

Each
individual executing this lease on behalf of the respective parties hereto
represents and warrants that the execution and delivery of this lease on behalf
of the party executing this lease is duly authorized and that he or she is
authorized to execute and deliver this lease on behalf of the respective party.
If Tenant is a corporation, Tenant shall, concurrently with the execution of
this lease, deliver to Landlord a certified copy of a resolution of Tenant’s
board of directors authorizing or ratifying the execution of this lease.

 

Section 13.19 -  SAFETY AND HEALTH

 

Tenant
covenants at all times during the term of this lease to comply with the
requirements of the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651
et  seq. and any analogous legislation in California (collectively
the “Act”), to the extent that the Act applies to the Premises and any
activities therein. Without limiting the generality of the foregoing, Tenant
covenants to maintain all working areas, all machinery, structures, electrical
facilities and the like upon the Premises in a condition that fully complies
with the requirements of the Act, including such requirements as would be
applicable with respect to agents, employees or contractors of Landlord who may
from time to time be present upon the Premises, and Tenant agrees to indemnify
and hold harmless Landlord from any liabilities, claims or damages arising as a
result of a breach of the foregoing covenant and from all costs, expenses and
charges arising therefrom including, without limitation, attorneys’ fees and
court costs incurred by Landlord in connection therewith.

 

Section 13.20 -  INDEMNITIES

 

The
obligations of the indemnifying party under each and every indemnification and
hold harmless provision contained in this lease shall survive the expiration or
earlier termination of this lease to and until the
last to occur of (a) the last date permitted by law for the bringing of
any claim or action with respect to which indemnification may be claimed by the
indemnified party against the indemnifying party under such provision or (b) the
date on which any claim or action for which indemnification may be claimed
under such provision is fully and finally resolved and, if applicable, any
compromise thereof or judgment or award thereon is paid in full by the indemnifying
party and the indemnified party is reimbursed by the indemnifying party for any
amounts paid by the indemnified party in compromise thereof or upon judgment or
award thereon and in defense of such action or claim, including reasonable
attorneys’ fees incurred.

 

Section 13.21 - DISCLOSURE

 

Landlord
and Tenant agree that the terms of this lease are not confidential.

 

Section 13.22 - GENDER; TENANTS

 

The
use of the masculine pronoun includes the feminine and neuter genders; the use
of the singular form of a pronoun includes the plural and vice-versa. If there
be more than one person or entity indicated as Tenant herein, each person or
entity subscribing as Tenant shall be jointly and severally liable for all
obligations of Tenant hereunder.

 

22

 

Section 13.23 - QUIET ENJOYMENT

 

Landlord
represents and warrants that it has full right and authority to enter into this
lease and that Tenant, so long as it pays the rent and performs its other
covenants and agreements herein set forth, shall peaceably and quietly have,
hold and enjoy the Premises for the term without hindrance or molestation from
Landlord. Landlord shall not be liable for any interference or disturbance of
other tenants, if any, or third persons, nor shall Tenant be released from any
of its obligations under this lease because of such interference or
disturbance.

 

Section 13.24 -  ASSIGNS

 

Subject
to the provisions of Article IX, the terms, covenants and conditions
contained herein shall be binding upon and inure to the benefit of the heirs,
successors, executors, administrators, marital communities, if any, and assigns
of the parties hereto.

 

Section 13.25 -  NO OPTION

 

Submission
of this lease shall not be deemed to be a reservation of the Premises. Landlord
shall not be bound hereby until its delivery to Tenant of an executed copy
hereof signed by Landlord, already having been signed by Tenant, and until such
delivery Landlord reserves the right to exhibit the Premises to other
prospective tenants.

 

Section 13.26 -  LANDLORD LIABILITY

 

The
obligations of Landlord herein are intended to be binding only on the Premises
of the entity acting as Landlord and shall not be personally binding, nor shall
any resort be had to the private properties of, any of its trustees, general
partners, limited partners, or board of directors and officers, as the case may
be, or any employees or agents of Landlord.

 

Section 13.27 -  ACCOUNTS

 

Tenant’s
failure to object to any statement, invoice or billing by Landlord within sixty
(60) days after receipt thereof shall constitute Tenant’s acquiescence with
respect thereto and shall conclusively establish such statement, invoice or
billing as an account stated between Landlord and Tenant.

 

ARTICLE XIV

CONDITION OF PREMISES

 

Section 14.01 - CONDITION OF PREMISES

 

Tenant
accepts the Premises “as is” and after inspection by Tenant. Tenant
acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the Premises or the
suitability of either for the conduct of Tenant’s business except as may be
expressly provided for hereunder.

 

23

 

ARTICLE XV

OPERATIONAL PROVISIONS

 

Section 15.01 - PAYMENT PROVISIONS

 

Tenant
agrees to pay all amounts due under this lease including, without limitation,
taxes, utilities, rent, insurance premiums, etc., prior to delinquency and,
upon Landlord’s request, to furnish Landlord with satisfactory written evidence
of such payment. Notwithstanding the foregoing, any amount payable by Tenant
pursuant to this lease shall be due and payable within ten (10) days after
the date of Landlord’s invoice therefor unless a different time for payment
thereof is elsewhere provided in this lease.

 

Section 15.02 - TERMINATION

 

If
this lease is terminated by Landlord under any provision hereof, and upon the
expiration of the term of this lease (collectively, the “termination date”),
the following shall pertain:

 

(a)                 Tenant shall, within ten (10) days
after the date of termination, remove from the Premises all merchandise,
furniture, furnishings, equipment and movable trade fixtures and shall
surrender the Premises to Landlord in the condition required by Section 13.17.
Tenant shall, at Tenant’s cost, repair any damage to the Premises caused by
such removal. Any items which Tenant is permitted to remove but fails to remove
prior to the surrender of the Premises to Landlord shall be deemed abandoned by
Tenant, and Landlord may retain or dispose of the same as Landlord sees fit
without claim by Tenant thereto or to any proceeds thereof. Tenant shall pay
all amounts payable by it through the date of termination, each of the parties
shall bear their own costs and fees incurred (including all costs incurred in
performing their respective obligations hereunder) through the termination date
and from and after the termination date neither party shall have any further
obligations to the other, except for those obligations set forth in this
subsection, in Section 13.17, and in subsection (b) below.

 

(b)                 Notwithstanding the
provisions of subsection (a), upon any such termination or expiration the
following shall pertain:

 

(i)                   Landlord agrees to defend,
indemnify and hold harmless Tenant from and against any and all claims, costs,
expenses, losses, damages, actions and causes of action for which Landlord is
responsible under this lease and which accrue on or before the termination
date.

 

(ii)                Tenant agrees to defend,
indemnify and hold harmless Landlord from and against any and all claims,
costs, losses, expenses, damages, actions and causes of action for which Tenant
is responsible under this lease and which accrue on or before the termination
date.

 

(iii)             Tenant shall remain liable
for the cost of all utilities used in or at the Premises through the
termination date accrued and unpaid, whether or not then billed, as of the
termination date until full payment thereof by Tenant. Tenant shall attempt to
obtain directly from the companies providing such services closing statements
for all services rendered through the termination date and shall promptly pay
the same. In the event that any utility statement with respect to the Premises
includes charges for a period partially prior to and partially subsequent to
the termination date, such charges shall be prorated as between Landlord and
Tenant, with Tenant responsible for the portion thereof (based upon a fraction
whose numerator is the number of days of service on such statement through the
termination date and whose denominator is the total number of days of service
on such statement) through the termination date and Landlord shall be
responsible for the balance. The party receiving any such statement which
requires proration hereunder shall promptly pay such statement and the other
party shall, within ten (10) days after receipt of a copy of such
statement, remit to the party paying the statement any amount for which such
other party is responsible hereunder.

 

24

 

(iv)            Tenant shall remain
responsible for all accrued taxes of the type described in Article IV and
assessed against the Premises and the personal property located therein or
thereon with a lien date prior to the termination date, irrespective of the
date of the billing therefor, and shall indemnify and hold Landlord harmless
with respect to any claims for such taxes or resulting form non-payment
thereof.

 

Section 15.03 - REFURBISH AND UPGRADE

 

Tenant
shall at Tenant’s sole cost and expense, renovate and refurbish the Premises,
from time to time, as may be reasonably necessary to maintain the Premises in
good order and condition. Failure of Tenant to perform its obligations pursuant
to this Section shall be a default pursuant to this lease entitling
Landlord to exercise all remedies available to a landlord against a defaulting
tenant.

 

ARTICLE XVI

HAZARDOUS WASTE

 

SECTION 16.01 - HAZARDOUS WASTE

 

(a)                 Tenant agrees that Tenant,
its agents and contractors, licensees, or invitees shall not handle, use,
manufacture, store or dispose of any flammables, explosives, radioactive
materials, or other similar substances, petroleum products or derivatives
(collectively “Hazardous Materials”) on, under, or about the Premises, without Landlord’s
prior written consent (which consent may be given or withheld in
Landlord’s sole discretion), provided that Tenant may handle, store, use or
dispose of products containing small quantities of Hazardous Materials, which
products are of a type customarily found in offices and households (such as
aerosol cans containing insecticides, toner for copies, paints, paint remover,
and the like), provided further that Tenant shall handle, store, use and
dispose of any such Hazardous Materials in a safe and lawful manner and shall
not allow such Hazardous Materials to contaminate the Premises or the
environment.

 

(b)                 Without limiting the above,
Tenant shall reimburse, defend, indemnify and hold Landlord harmless from and
against any and all claims, losses, liabilities, damages, costs and expenses,
including without limitation, loss of rental income, loss due to business
interruption, and attorneys fees and costs, arising out of or in any way
connected with the use, manufacture, storage, or disposal of Hazardous
Materials by Tenant, its agents or contractors on, under or about the Premises
including, without limitation, the costs of any required or necessary
investigation, repair, cleanup or detoxification and the preparation of any
closure or other required plans in connection herewith, whether voluntary or
compelled by governmental authority. The indemnity obligations of Tenant under
this clause shall survive any termination of the lease.

 

(c)                  Notwithstanding anything set
forth in this lease, Tenant shall only be responsible for contamination of
Hazardous Materials or any cleanup resulting directly therefrom, resulting
directly from matters occurring or Hazardous Materials deposited (other than by
contractors, agents or representatives controlled by Landlord) during the lease
term, and any other period of time during which Tenant is in actual or
constructive occupancy of the Premises. Tenant shall take
reasonable precautions to prevent the contamination of the Premises with
Hazardous Materials by third parties.

 

25

 

(d)                 It shall not be unreasonable
for Landlord to withhold its consent to any proposed Assignment or Sublease if (i) the
proposed Assignee’s or Sublessee’s anticipated use of the Premises involves the
generation, storage, use, treatment or disposal of Hazardous Materials; (ii) the
proposed Assignee or Sublessee has been required by any prior landlord, lender,
or governmental authority to take remedial action in connection with Hazardous
Materials contaminating a property if the contamination resulted from such
Assignee’s or Sublessee’s actions or use of the property in question; or (iii) the
proposed Assignee or Sublessee is subject to an enforcement order issued by any
governmental authority in connection with the use, disposal, or storage of a
hazardous material.

 

ARTICLE XVII

NET LEASE

 

SECTION 17.01 - EXPENSES

 

Without
limiting the Tenant’s obligations under this lease, Tenant hereby acknowledges
that this is a “Triple Net Lease” (as such term is commonly used). Without
limiting Tenant’s obligation to pay all taxes, insurance, maintenance charges,
and any other amount due under the lease, Tenant shall pay all “Operating
Expenses” related to the Premises. The term “Operating Expenses” shall mean any
and all costs, expenses and disbursements of every kind and character which
Landlord incurs, pays or becomes obligated to pay in connection with the
operation, maintenance, management, repair, replacement, and security of the
Premises. Operating Expenses include, without limitation, any and all water and
sewer charges; accounting, legal and other consulting fees; the net cost and
expense of insurance, including loss of rents coverage, (including losses borne by
Landlord as a result of deductibles carried by Landlord under any insurance
policy); utilities; labor; parking charges; utilities surcharges, or any other
costs levied, assessed or imposed by, or at the direction of, or resulting from
statutes or regulations or interpretations thereof, promulgated by any federal,
state, regional, municipal or local government authority in connection with the
use or occupancy of the Premises or the parking facilities serving it
(if any); the cost of any equipment used to operate the improvements located on
the Premises, and the cost of any capital improvements that may be incurred
or which are made or installed in order to comply with any statutes, rules,
regulations or directives hereafter promulgated by any governmental authority;
air conditioning; waste disposal; heating, ventilating, supplies; materials;
equipment; tools; repair and maintenance of the Premises, including the
structural portion of the improvements located on the Premises, and the
plumbing, heating, ventilating, air conditioning, and electrical; maintenance
costs, including utilities, rental of personal property used in maintenance,
and all other upkeep of all parking areas; costs and expenses of gardening and
landscaping, maintenance of signs; reasonable audit or verification fees; costs
and expenses of repairs, resurfacing, repairing, maintenance, painting,
lighting, cleaning, refuse removal, and similar items for the Premises; and
costs reasonably incurred to reduce or contest taxes and other Operating
Expenses.

 

Operating Expenses shall not include any of
the items described below:

 

a)                               Brokerage
commissions and fees and advertisements for rentals;

 

b)                               Debt service
points on any mortgages or deeds of trust or any rent payable under the terms
of a ground lease;

 

26

 

c)                                Tax penalties
incurred as a result of Landlord’s failure to make payments when due as a
result of Landlord’s negligence;

 

IN WITNESS WHEREOF,
this Agreement has been entered into by the parties as of the day and
year first above written.

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  	
   

  
	
  1444 Partners, Ltd., a California

  	
   

  	
  Guess?
  Inc., a

  
	
  Limited Partnership

  	
   

  	
  California
  corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  Alameda
  Associates, Inc.,

  	
   

  	
  By:

  	
  /s/ Paul Marciano

  
	
   

  	
  a
  California Corporation

  	
   

  	
   

  	
  Its

  
	
  Its:

  	
  General
  Partner

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ [SIGNATURE]

  	
   

  	
   

  	
   

  
	
   

  	
  Its
  President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ [SIGNATURE]

  	
   

  	
   

  	
   

  
	
   

  	
  Its
  Secretary

  	
   

  	
   

  	
   

  

 

27

 

Exhibit “A”

Order No: 9201570

DESCRIPTION

 

PARCEL
1:

 

THOSE
PORTIONS OF LOTS “A” AND “B” OF THE HUGHES MANUFACTURING CO’S TRACT, IN THE
CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP
RECORDED IN BOOK 7 PAGE 105 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY, DESCRIBED AS FOLLOWS:

 

BEGINNING
AT THE SOUTHWEST CORNER OF SAID LOT “A”; THENCE ALONG THE WEST LINE OF SAID
LOT, NORTH 2 DEGREES 49 MINUTES 00 SECONDS EAST 408.19 FEET TO THE NORTHWEST
CORNER OF SAID LOT; THENCE ALONG THE NORTHEASTERLY LINE OF SAID LOTS “A” AND
“B” SOUTH 72 DEGREES 28 MINUTES 30 SECONDS EAST 1137.08 FEET TO AN ANGLE POINT
IN THE NORTHEASTERLY LINE OF SAID LOT “B”; THENCE NORTH 2 DEGREES 35 MINUTES 30
SECONDS EAST 3.17 FEET; THENCE SOUTH 72 DEGREES 13 MINUTES 20 SECONDS EAST
ALONG THE NORTHEASTERLY LINE OF SAID LOT “B”, 190.75 FEET TO THE EAST LINE OF
WILSON STREET, 60 FEET WIDE, AS SHOWN ON MAP OF LONG AND STEDMAN TRACT,
RECORDED IN BOOK 21 PAGE 59 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY; THENCE ALONG THE SOUTHERLY PROLONGATION OF THE
EAST LINE OF WILSON STREET, SOUTH 3 DEGREES 31 MINUTES 55 SECONDS WEST 205.09
FEET TO A POINT IN A LINE THAT IS PARALLEL WITH AND DISTANT 172.00 FEET FROM
THE NORTHERLY LINE OF FIFTEENTH STREET, AS DESCRIBED IN DECREE OF CONDEMNATION
IN SUPERIOR COURT CASE NO. 95612; THENCE ALONG SAID PARALLEL LINE NORTH 72
DEGREES 17 MINUTES 50 SECONDS WEST 260.02 FEET TO A LINE THAT IS PERPENDICULAR
TO THE NORTH LINE OF FIFTEENTH STREET AND DISTANT WESTERLY THEREON 80.94 FEET
FROM THE EAST LINE OF SAID LOT “A”; THENCE ALONG SAID LINE SOUTH 17 DEGREES 42
MINUTES 10 SECONDS WEST 202.00 FEET TO THE SOUTHERLY LINE OF SAID LOT “A”, SAID
SOUTHERLY LINE BEING THE CENTER LINE OF FIFTEENTH STREET, 60 FEET  WIDE; THENCE ALONG SAID
SOUTHERLY LINE NORTH 72
DEGREES 17 MINUTES 50 SECONDS WEST
1012.33 FEET TO THE POINT OF BEGINNING.

 

EXCEPT
THEREFROM THE WATERS OF THE LOS ANGELES RIVER, AS OWNED BY THE CITY OF LOS
ANGELES.

 

ALSO
EXCEPT THEREFROM THAT PORTION THEREOF, DESCRIBED AS FOLLOWS:

 

BEGINNING
AT THE NORTHWESTERLY CORNER OF SAID LOT “A”; THENCE SOUTHERLY ALONG THE
WESTERLY LINE OF SAID LOT, 100.00 FEET; THENCE NORTHEASTERLY IN A DIRECT LINE
TO THE INTERSECTION OF THE NORTHERLY LINE OF SAID LOT WITH THE WESTERLY
LINE OF THE ALLEY SHOWN ON SAID MAP AS BEING DISTANT ALONG SAID NORTHERLY LINE,
129.84 FEET EASTERLY FROM THE NORTHWESTERLY CORNER OF SAID LOT “A”; THENCE
WESTERLY ALONG SAID NORTHERLY LINE 129.84 FEET TO THE SAID POINT OF BEGINNING.

 

PARCEL
2:

 

THOSE
PORTIONS OF LOTS “A” AND “B” OF THE HUGHES MANUFACTURING COMPANY’S TRACT, IN
THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP
RECORDED IN BOOK 7 PAGE 105 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY, DESCRIBED AS A WHOLE AS FOLLOWS:

 

BEGINNING
AT A POINT IN THE NORTHERLY LINE OF FIFTEENTH STREET, AS ESTABLISHED BY DECREE
ENTERED IN CASE NO. 95612 OF THE SUPERIOR COURT OF SAID COUNTY, DISTANT
WESTERLY THEREON 506.425 FEET FROM THE INTERSECTION OF SAID NORTHERLY LINE
WITH THE EASTERLY LINE OF THE LAND DESCRIBED IN THE DEED TO W. E. COOPER LUMBER
COMPANY, RECORDED IN BOOK 7365 PAGE 189, OFFICIAL RECORDS OF SAID COUNTY;
THENCE NORTH 72 DEGREES 17 MINUTES WEST ALONG SAID NORTHERLY LINE OF FIFTEENTH
STREET 226.425 FEET, MORE OR LESS, TO A POINT IN SAID NORTHERLY LINE, DISTANT
WESTERLY THEREON 80.94 FEET FROM ITS INTERSECTION WITH THE EASTERLY LINE
OF SAID LOT “A”; THENCE AT RIGHT ANGLES WITH SAID NORTHERLY LINE OF FIFTEENTH
STREET, NORTH 17 DEGREES 43 MINUTES EAST 155.0 FEET; THENCE PARALLEL WITH SAID
NORTHERLY LINE, SOUTH 72 DEGREES 17 MINUTES EAST 226.425 FEET, MORE OR LESS, TO
A LINE EXTENDING NORTHERLY AT RIGHT ANGLES, WITH SAID NORTHERLY LINE OF
FIFTEENTH STREET FROM THE POINT OF BEGINNING; THENCE SOUTH 17 DEGREES 43
MINUTES WEST 155.00 FEET TO THE POINT OF BEGINNING.

 

1

 

EXCEPTING
THEREFROM ALL RIGHT, TITLE AND INTEREST IN AND TO ALL OIL, GAS AND/OR OTHER
MINERALS LYING BELOW A DEPTH OF 100 FEET FROM THE SURFACE OF SAID LAND, AS
RESERVED BY ROBERT LINN GARRISON, ANNE GARRISON GOULD, AND JOHN F. COGAN, JR., AS
ORIGINAL TRUSTEES OF THE “CATHERINE E. GARRISON REVOCABLE TRUST”, DATED OCTOBER
13, 1966, IN THE DEED RECORDED DECEMBER 15, 1971 AS INSTRUMENT NO. 343.

 

PARCEL
3:

 

THOSE
PORTIONS OF LOTS “A” AND “B” OF HUGHES MANUFACTURING COMPANY’S TRACT, IN THE
CITY OF AND COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN
BOOK 7 PAGE 105 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY,
DESCRIBED AS FOLLOWS:

 

BEGINNING
AT A POINT IN THE EASTERLY LINE OF THE LAND LAST DESCRIBED IN PARCEL 1 OF DEED
TO THE PACIFIC MUTUAL LIFE INSURANCE COMPANY OF CALIFORNIA, RECORDED IN BOOK
13187 PAGE 283, OFFICIAL RECORDS OF SAID COUNTY, DISTANT NORTHERLY 155.0 FEET MEASURED
AT RIGHT ANGLES FROM THE NORTHERLY LINE OF 15TH STREET, AS ESTABLISHED BY
DECREE ENTERED IN CASE NO. 95612, SUPERIOR COURT OF SAID COUNTY; THENCE
PARALLEL WITH THE NORTHERLY LINE OF 15TH STREET NORTH 72 DEGREES 17 MINUTES
WEST 273.76 FEET; THENCE NORTH 17 DEGREES 43 MINUTES EAST 17 FEET; THENCE SOUTH
72 DEGREES 17 MINUTES EAST 269.24 FEET TO A POINT IN THE EASTERLY LINE OF SAID
LAND CONVEYED BY SAID DEED; THENCE SOUTH 2 DEGREES 49 MINUTES EAST 17.59 FEET
TO THE POINT OF BEGINNING.

 

EXCEPT
THEREFROM AN UNDIVIDED ONE-THIRD INTEREST IN AND TO ALL MINERALS AND ALL
MINERAL RIGHTS OF EVERY KIND AND CHARACTER NOW KNOWN TO EXIST OR HEREAFTER
DISCOVERED IN AND UNDERLYING SAID LAND, INCLUDING, WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, OIL AND GAS AND RIGHT THERETO, TOGETHER WITH THE
SOLE, EXCLUSIVE AND PERPETUAL RIGHT TO EXPLORE FOR, REMOVE AND DISPOSE OF, SAID
MINERALS BY ANY MEANS OR METHODS SUITABLE TO GRANTEE, ITS SUCCESSORS AND
ASSIGNS, BUT WITHOUT ENTERING UPON OR USING THE SURFACE OF SAID LANDS, AND IN
SUCH MANNER AS NOT TO DAMAGE THE SURFACE OF SAID LANDS OR TO INTERFERE WITH THE
USE THEREOF BY GRANTOR, ITS SUCCESSORS AND ASSIGNS, AS DESCRIBED IN THE DEED
FROM UNION PACIFIC RAILROAD COMPANY, A UTAH CORPORATION, TO UNION PACIFIC LAND
RESOURCES CORPORATION, A NEBRASKA CORPORATION, RECORDED APRIL 23, 1990 AS
INSTRUMENT NO. 90-745921, OFFICIAL RECORDS.

 

2

 

ALSO
EXCEPT THEREFROM AN UNDIVIDED ONE-THIRD INTEREST IN AND TO ALL MINERALS
CONTAINED IN THE ABOVE-DESCRIBED LAND, INCLUDING, WITHOUT LIMITING THE
GENERALITY THEREOF, OIL GAS AND OTHER HYDROCARBON SUBSTANCES, AS WELL AS
METALLIC OR OTHER SOLID MINERALS, LYING NOT LESS THAN FIVE HUNDRED (500) FEET
BELOW THE SURFACE THEREOF, WITHOUT THE RIGHT TO GO UPON OR USE THE SURFACE OF
SAID LAND, OR ANY PART THEREOF, FOR THE PURPOSE OF DRILLING FOR, MINING,
OR OTHERWISE REMOVING, ANY OF SAID MINERALS. SANTA FE  MAY, HOWEVER, AND HEREBY RESERVES THE RIGHT
TO, REMOVE ANY OF SAID MINERALS FROM SAID LAND BY MEANS OF WELLS, SHAFTS,
TUNNELS, OR OTHER, MEANS OF ACCESS TO SAID MINERALS WHICH MAY BE
CONSTRUCTED, DRILLED OR DUG FROM OTHER LAND, PROVIDED THAT THE EXERCISE OF SAID
RIGHTS BY SANTA FE SHALL IN NO WAY INTERFERE WITH OR IMPAIR THE USE OF THE
SURFACE OF THE LAND HEREBY CONVEYED OR OF ANY
IMPROVEMENTS THEREON, AS RESERVED BY THE ATCHISON, TOPEKA AND SANTA FE RAILWAY
COMPANY, A DELAWARE CORPORATION, IN DEED RECORDED NOVEMBER 21, 1989 AS
INSTRUMENT NO. 89-1879325, OFFICIAL RECORDS.

 

ALSO
EXCEPT THEREFROM AN UNDIVIDED ONE-THIRD INTEREST IN AND TO ALL MINERALS AND
MINERAL RIGHTS, INTERESTS, AND ROYALTIES, INCLUDING WITHOUT LIMITING THE
GENERALITY THEREOF, OIL, GAS  AND OTHER
HYDROCARBON SUBSTANCES, AS WELL AS METALLIC OR OTHER SOLID MINERALS, IN AND
UNDER SAID LAND WITHOUT THE RIGHT FOR ANY PURPOSE WHATSOEVER TO ENTER UPON,
INTO OR THROUGH THE SURFACE OF SAID LAND IN CONNECTION THEREWITH, AS RESERVED
BY SOUTHERN PACIFIC TRANSPORTATION COMPANY, A DELAWARE CORPORATION, IN DEED
RECORDED NOVEMBER 21, 1989 AS INSTRUMENT NO. 89-1879326, OFFICIAL RECORDS.

 

3

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