Document:

Exhibit 10.1

 

OFFICE
LEASE

 

KILROY REALTY

 

KILROY AIRPORT
CENTER LONG BEACH – PHASE II

 

 

 

KILROY REALTY,
L.P.,

 

a
Delaware limited partnership,

 

as
Landlord,

 

and

 

OMP,
INC.,

 

a
Delaware corporation,

 

as
Tenant.

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  PREMISES, BUILDING, PROJECT, AND COMMON AREAS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  2

  	
  INITIAL LEASE TERM; OPTION TERM

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  BASE RENT

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  ADDITIONAL RENT

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  USE OF PREMISES

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  6

  	
  SERVICES AND UTILITIES

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  REPAIRS

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  8

  	
  ADDITIONS AND ALTERATIONS

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  9

  	
  COVENANT AGAINST LIENS

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
  INSURANCE

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  11

  	
  DAMAGE AND DESTRUCTION

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
  NONWAIVER

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 13

  	
  CONDEMNATION

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  14

  	
  ASSIGNMENT AND SUBLETTING

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  15

  	
  SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 16

  	
  HOLDING OVER

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  17

  	
  ESTOPPEL CERTIFICATES

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  18

  	
  MASTER GROUND LEASE; SUBORDINATION AND ATTORNMENT

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 19

  	
  DEFAULTS; REMEDIES

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  20

  	
  COVENANT OF QUIET ENJOYMENT

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 21

  	
  SECURITY DEPOSIT

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  22

  	
  SUBSTITUTION OF PREMISES

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 23

  	
  SIGNS

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 24

  	
  COMPLIANCE WITH LAW

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 25

  	
  LATE CHARGES

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  26

  	
  LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 27

  	
  ENTRY BY LANDLORD

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 28

  	
  TENANT PARKING

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  29

  	
  MISCELLANEOUS PROVISIONS

  	
   

  	
  44

  

 

i

 

EXHIBITS:

 

	
  Exhibit A

  	
  Outline of Premises

  
	
   

  	
   

  
	
  Exhibit A-1

  	
  Site Plan

  
	
   

  	
   

  
	
  Exhibit A-2

  	
  Location of Monument Sign

  
	
   

  	
   

  
	
  Exhibit B

  	
  Work Letter

  
	
   

  	
   

  
	
  Exhibit C

  	
  Notice of Lease
  Term Dates

  
	
   

  	
   

  
	
  Exhibit D

  	
  Rules and
  Regulations

  
	
   

  	
   

  
	
  Exhibit E

  	
  Form of
  Tenant’s Estoppel Certificate

  
	
   

  	
   

  
	
  Exhibit F

  	
  Recognition of
  Covenants, Conditions, and Restrictions

  
	
   

  	
   

  
	
  Exhibit G

  	
  Intentionally
  Omitted

  
	
   

  	
   

  
	
  Exhibit H

  	
  Intentionally
  Omitted

  
	
   

  	
   

  
	
  Exhibit I

  	
  Parking
  Rules and Regulations

  
	
   

  	
   

  
	
  Exhibit J

  	
  Non-Disturbance
  Agreement From the Master Lessor

  

 

ii

 

INDEX

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  AAA

  	
   

  	
  51

  
	
  Abated Monthly Base Rent

  	
   

  	
  6

  
	
  Abatement Event

  	
   

  	
  39

  
	
  Actual Cost

  	
   

  	
  18

  
	
  Additional Rent

  	
   

  	
  6

  
	
  Affiliate

  	
   

  	
  34

  
	
  Agreement

  	
   

  	
  1

  
	
  Alterations

  	
   

  	
  20

  
	
  Amortization Interest Rate

  	
   

  	
  7

  
	
  Applicable Laws

  	
   

  	
  42

  
	
  Arbitration Award

  	
   

  	
  52

  
	
  Arbitration Notice

  	
   

  	
  51

  
	
  Arbitrator

  	
   

  	
  51

  
	
  Bank Prime Loan

  	
   

  	
  43

  
	
  Base Building

  	
   

  	
  21

  
	
  Base Rent

  	
   

  	
  6

  
	
  Base Rent Abatement Period

  	
   

  	
  6

  
	
  Base Taxes

  	
   

  	
  13

  
	
  Base Year

  	
   

  	
  7

  
	
  Brokers

  	
   

  	
  48

  
	
  BS/BS Exception

  	
   

  	
  20

  
	
  Builder’s All Risk

  	
   

  	
  22

  
	
  Building Common Areas

  	
   

  	
  1

  
	
  Building Hours

  	
   

  	
  17

  
	
  Building Structure

  	
   

  	
  19

  
	
  Building Systems

  	
   

  	
  20

  
	
  CC&Rs

  	
   

  	
  16

  
	
  Common Areas

  	
   

  	
  1

  
	
  Comparable Buildings

  	
   

  	
  2

  
	
  Contemplated Effective Date

  	
   

  	
  32

  
	
  Contemplated Transfer Space

  	
   

  	
  32

  
	
  Control

  	
   

  	
  34

  
	
  Cosmetic Alterations

  	
   

  	
  21

  
	
  Cost Pools

  	
   

  	
  14

  
	
  Damage Termination Date

  	
   

  	
  28

  
	
  Damage Termination Notice

  	
   

  	
  28

  
	
  Developer

  	
   

  	
  36

  
	
  Direct Expenses

  	
   

  	
  7

  
	
  Eligibility Period

  	
   

  	
  39

  
	
  Environmental Laws

  	
   

  	
  53

  
	
  Estimate

  	
   

  	
  14

  
	
  Estimate Statement

  	
   

  	
  14

  
	
  Estimated Excess

  	
   

  	
  14

  
	
  Excess

  	
   

  	
  14

  
	
  Existing Leases

  	
   

  	
  2

  
	
  Expansion Rent

  	
   

  	
  3

  
	
  Expansion Space

  	
   

  	
  2

  
	
  Expansion Space Commencement Date

  	
   

  	
  3

  
	
  Expense Year

  	
   

  	
  7

  
	
  Fair Market Rent Rate

  	
   

  	
  4

  
	
  First Offer Notice

  	
   

  	
  2

  
	
  Force Majeure

  	
   

  	
  47

  
	
  hazardous materials

  	
   

  	
  52

  
	
  hazardous substances

  	
   

  	
  52

  
	
  Holidays

  	
   

  	
  17

  
	
  HVAC

  	
   

  	
  17

  
	
  Intention to Transfer Notice

  	
   

  	
  32

  
	
  JAMS

  	
   

  	
  51

  
	
  Kilroy Airport Center Long Beach

  	
   

  	
  1

  

 

i

 

	
  Landlord

  	
   

  	
  1

  
	
  Landlord Parties

  	
   

  	
  24

  
	
  Landlord Repair Notice

  	
   

  	
  27

  
	
  Lease

  	
   

  	
  1

  
	
  Lease Commencement Date

  	
   

  	
  3

  
	
  Lease Expiration Date

  	
   

  	
  3

  
	
  Lease Term

  	
   

  	
  3

  
	
  Lease Year

  	
   

  	
  3

  
	
  Lines

  	
   

  	
  50

  
	
  Mail

  	
   

  	
  47

  
	
  Maintenance Items

  	
   

  	
  20

  
	
  Master Ground Lease

  	
   

  	
  36

  
	
  Master Lessor

  	
   

  	
  36

  
	
  Nine Month Period

  	
   

  	
  33

  
	
  Notices

  	
   

  	
  47

  
	
  Objectionable Name

  	
   

  	
  41

  
	
  Operating Expenses

  	
   

  	
  7

  
	
  Option Rent

  	
   

  	
  4

  
	
  Option Rent Notice

  	
   

  	
  5

  
	
  Option Term

  	
   

  	
  4

  
	
  Option Term TI Allowance

  	
   

  	
  5

  
	
  Original Improvements

  	
   

  	
  26

  
	
  Original Tenant

  	
   

  	
  2

  
	
  Other Improvements

  	
   

  	
  50

  
	
  Outside Agreement Date

  	
   

  	
  5

  
	
  Permitted Chemicals

  	
   

  	
  53

  
	
  Permitted Transferee

  	
   

  	
  34

  
	
  Premises

  	
   

  	
  1

  
	
  Prevailing Party

  	
   

  	
  52

  
	
  Project

  	
   

  	
  1

  
	
  Project Common Areas

  	
   

  	
  1

  
	
  Proposition 13

  	
   

  	
  12

  
	
  Provider

  	
   

  	
  52

  
	
  Recapture Notice

  	
   

  	
  32

  
	
  Renovations

  	
   

  	
  49

  
	
  Rent

  	
   

  	
  6

  
	
  Security Deposit

  	
   

  	
  39

  
	
  Sign Specifications

  	
   

  	
  41

  
	
  Special Identified Parking Area

  	
   

  	
  1

  
	
  Statement

  	
   

  	
  14

  
	
  Subject Space

  	
   

  	
  30

  
	
  Subleasing Costs

  	
   

  	
  32

  
	
  Summary

  	
   

  	
  1

  
	
  Superior Right Holders

  	
   

  	
  2

  
	
  Tax Expenses

  	
   

  	
  12

  
	
  Tenant

  	
   

  	
  1

  
	
  Tenant’s Share

  	
   

  	
  13

  
	
  Tenant’s Signage

  	
   

  	
  41

  
	
  Transaction Costs

  	
   

  	
  32

  
	
  Transfer

  	
   

  	
  33

  
	
  Transfer Notice

  	
   

  	
  30

  
	
  Transfer Premium

  	
   

  	
  32

  
	
  Transferee

  	
   

  	
  30

  
	
  Transfers

  	
   

  	
  30

  
	
  Unusable Area

  	
   

  	
  39

  

 

ii

 

KILROY AIRPORT
CENTER LONG BEACH – PHASE II

 

OFFICE LEASE

 

This Office Lease (the “Lease”), dated as of the date set forth in Section 1
of the Summary of Basic Lease Information (the “Summary”),
below, is made by and between KILROY REALTY, L.P., a Delaware limited
partnership (“Landlord”), and OMP, INC., a
Delaware corporation (“Tenant”).

 

SUMMARY OF BASIC
LEASE INFORMATION

 

	
  TERMS OF LEASE

  	
   

  	
  DESCRIPTION

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Date:

  	
   

  	
  April 22, 2008.

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Premises, Building, Phase I, II and III and
  Project:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Phases and Building

   

  2.1(a)  Phase I:

  	
   

  	
   

   

  3880 & 3900 Kilroy Airport Way, Long Beach,
  California 90806, which Phase contains two (2) buildings (consisting of
  225,083 rentable square feet of space) and comprises Phase I of the “Project”
  (defined below).

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1(b)  Phase II:

  	
   

  	
  3750, 3760 & 3780 Kilroy Airport Way, Long
  Beach, California 90806, which Phase contains three (3) buildings
  (consisting of 395,480 rentable square feet of space) and comprises Phase II
  of the Project.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1(c)  Phase III:

  	
   

  	
  3800 & 3840 Kilroy Airport Way, Long Beach,
  California 90806, which Phase contains two (2) buildings (consisting of
  328,502 rentable square feet of space) and comprises Phase III of the
  Project.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2 Premises:

  	
   

  	
  Approximately 30,884 rentable (28,806 usable) square
  feet of space located in the Building, as further set forth below and in Exhibit A to this Lease.

   

  Suite Nos.: 500, 520, 530, 550, 560, 565, 570
  (collectively referred to as Suite 500) and 620

   

  Floors: fifth (5th) and sixth (6th)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3 

  	
  Project:

  	
   

  	
  Phase
  I, Phase II and Phase III are all part of the office project known as “Kilroy Airport Center Long Beach”, as
  further set forth in Section 1.1.2 and Exhibit A-1 of this Lease.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4 

  	
  Building:

  	
   

  	
  The building located within Phase II at 3760 Kilroy
  Airport Way (consisting of 165,278 rentable square feet) is referred to
  throughout the Lease as the “Building.”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Lease Term 

  (Article 2).

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1 

  	
  Length of Term:

  	
   

  	
  Approximately seven (7) years.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2 

  	
  Lease Commencement Date:

  	
   

  	
  One hundred twenty (120) days following the date 

  

 

 

	
   

  	
   

  	
   

  	
   

  	
  on which Landlord delivers the Premises to Tenant.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3 

  	
  Lease Expiration Date:

  	
   

  	
  The last day of the month in which the 7th
  anniversary of the Lease Commencement Date occurs.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Base Rent 

  (Article 3):

  	
   

  	
   

  

 

	
  Lease Year

  	
   

  	
  Annual

  Base Rent

  	
   

  	
  Monthly

  Installment

  of Base Rent

  	
   

  	
  Monthly

  Rental Rate

  per Rentable

  Square Foot

  	
   

  
	
  1*

  	
   

  	
  $

  	
  963,580.80

  	
  *

  	
  $

  	
  80,298.40

  	
  *

  	
  $

  	
  2.600

  	
   

  
	
  2

  	
   

  	
  $

  	
  992,488.20

  	
   

  	
  $

  	
  82,707.35

  	
   

  	
  $

  	
  2.678

  	
   

  
	
  3

  	
   

  	
  $

  	
  1,022,262.84

  	
   

  	
  $

  	
  85,188.57

  	
   

  	
  $

  	
  2.758

  	
   

  
	
  4

  	
   

  	
  $

  	
  1,052,930.76

  	
   

  	
  $

  	
  87,744.23

  	
   

  	
  $

  	
  2.841

  	
   

  
	
  5

  	
   

  	
  $

  	
  1,084,518.72

  	
   

  	
  $

  	
  90,376.56

  	
   

  	
  $

  	
  2.926

  	
   

  
	
  6

  	
   

  	
  $

  	
  1,117,054.20

  	
   

  	
  $

  	
  93,087.85

  	
   

  	
  $

  	
  3.014

  	
   

  
	
  7

  	
   

  	
  $

  	
  1,150,565.88

  	
   

  	
  $

  	
  95,880.49

  	
   

  	
  $

  	
  3.105

  	
   

  

 

* Subject to the terms of Section 3.2 of this Lease.

 

	
  5.

  	
  Base Year

  (Article 4):

  	
   

  	
  Calendar year 2008.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Tenant’s Share 

  (Article 4):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Tenant’s Share of the Building:

  	
   

  	
  18.6861%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Tenant’s Share of Phase II:

  	
   

  	
  7.8092%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  Tenant’s Share of the Project:

  	
   

  	
  3.2542%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Permitted Use 

  (Article 5):

  	
   

  	
  General office use consistent with the character of
  a first class office building.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Security Deposit 

  (Article 21): 

  	
   

  	
  $95,880.49.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Parking Pass Ratio 

  (Article 28):

  	
   

  	
  Tenant shall have the right, but not the obligation,
  to rent four (4) unreserved parking permits for every 1,000 usable
  square feet of the Premises, for a total of one hundred fifteen
  (115) unreserved parking permits, for the use of unreserved parking in
  the Project parking facility.

  

 

2

 

	
  10.

  	
  Notice Address of Tenant (Section 29.18):

  	
   

  	
  OMP, Inc.

  310
  Golden Shore 

  Long Beach, California 90802

  Telephone:
  (562) 491-6046

  Fax:
  (562) 624-2329

  Attention: Stephen Garcia, CFO

  (Prior to the Lease Commencement Date)

   

  and

   

  OMP, Inc.

  3760 Kilroy Airport Way

  Suite 500

  Long Beach, California 90806

  Attention: CFO

  (After the Lease Commencement Date)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Notice Address of Landlord:

  	
   

  	
  Kilroy Realty Property Management Office

  3780 Kilroy Airport Way

  Suite 410

  Long Beach, California 90806

  Attention: Property Manager

  Phone: (562) 988-1160

  Facsimile: (562) 427-5305

   

  and to:

   

  Kilroy Realty, L.P.

  12200 W. Olympic Boulevard

  Suite 200

  Los Angeles, California 90064

  Attention: Legal Department

  Phone: (310) 481-8400

  Facsimile: (310) 481-6530

   

  and to:

   

  Kilroy Realty, L.P.

  12200 W. Olympic Boulevard

  Suite 200

  Los Angeles, California 90064

  Attention: Asset Management

  Phone: (310) 481-8400

  Facsimile: (310) 481-6530.

   

  With a copy to:

   

  Allen
  Matkins Leck Gamble Mallory & Natsis LLP

  1901
  Avenue of the Stars, Suite 1800

  Los
  Angeles, California 90067

  Attention:      Anton
  N. Natsis, Esq. and

  Delmar L. Nehrenberg, Esq.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Broker(s) 

  Section 29.24):

  	
   

  	
  For Landlord:

  Cushman &
  Wakefield of California, Inc.

  For Tenant:

  The Staubach Company

  

 

3

 

	
  13.

  	
  Improvement Allowance 

  (Section 2 of Exhibit B):

  	
   

  	
  $720,150.00 (i.e., $25.00 per usable square foot of
  the Premises).

  

 

4

 

ARTICLE 1

 

PREMISES, BUILDING,
PROJECT, AND COMMON AREAS

 

1.1          Premises, Building, Project and Common Areas.

 

1.1.1            The Premises.  Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the premises set forth in Section 2.2
of the Summary (the “Premises”).  The outline of the Premises is set forth in Exhibit A attached hereto and has the number of
rentable square feet as set forth in Section 2.2 of the
Summary.  The outline of the Premises,
the “Building” and the “Project,” as those terms are defined in Section 1.1.2
below, are further depicted on the Site Plan attached hereto as Exhibit A-1.  The parties hereto agree that the lease of
the Premises is upon and subject to the terms, covenants and conditions herein
set forth, and Tenant covenants as a material part of the consideration for
this Lease to keep and perform each and all of such terms, covenants and
conditions by it to be kept and performed and that this Lease is made upon the
condition of such performance.  The
parties hereto hereby acknowledge that the purpose of Exhibit A is to show the approximate location
of the Premises in the “Building,” as that term is defined in Section 1.1.2,
below, only, and such Exhibit is not meant to constitute an agreement,
representation or warranty as to the construction of the Premises, the precise
area thereof or the specific location of the “Common Areas,” as that term is
defined in Section 1.1.3, below, or the elements thereof or of the
accessways to the Premises or the Project as that term is defined in Section 1.1.2,
below.  Except as specifically set forth
in this Lease and in the Work Letter attached hereto as Exhibit B (the “Work Letter”), 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, the
Building or the Project or with respect to the suitability of any of the
foregoing for the conduct of Tenant’s business. 
The taking of possession of the Premises by Tenant shall conclusively
establish that the Premises and the Building were at such time in good and
sanitary order, condition and repair, subject to Landlord’s ongoing repair and
maintenance obligations set forth in this Lease.

 

1.1.2            The Building and The Project.  The Premises are a part of the Building
located within Phase II of the
Project as set forth herein, in Section 1.1.1 of this Lease and in Section 2
of the Summary (the “Building”).  The Building is part of a retail/office
project  known as “Kilroy Airport Center Long Beach.”  The term “Project,”
as used in this Lease, shall mean (i) the Building and the Common Areas, (ii) the
other buildings and associated Common Areas within Phase II, (iii) the land within Phase II (which is improved with
landscaping, a five-level above-ground parking facility and other improvements)
upon which the Building, the other Phase II buildings and the Common Areas are located, (iv) the other
buildings located within Phase I and Phase
III of the Project as set forth in Section 2 of the Summary,
(v) the land within the other Phases upon which the other buildings are
located (each improved with landscaping, parking areas and other improvements),
and (vi) at Landlord’s discretion, any additional real property, areas,
land, buildings or other improvements added thereto located adjacent to the
Project; provided, however, that no such additions to the Project shall
materially increase Tenant’s obligations (including, without limitation, Tenant’s
monetary obligations with respect to Tenant’s Share of Operating Expenses) or
materially decrease Tenant’s rights under this Lease.

 

1.1.3            Common Areas.  Tenant shall have the non-exclusive right to
use in common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions
of the Project which are provided, from time to time, for use in common by
Landlord, Tenant and any other tenants of the Project (such areas, together
with such other portions of the Project designated by Landlord, in its
discretion, including certain areas designated for the exclusive use of certain
tenants, or to be shared by Landlord and certain tenants, are collectively
referred to herein as the “Common Areas”).  The Common Areas shall consist of the “Project
Common Areas” and the “Building Common Areas.” 
The term “Project Common Areas,” as used in
this Lease, shall mean the portion of the Project designated as such by
Landlord.  The term “Building
Common Areas,” as used in this Lease, shall mean the portions of the
Common Areas located within the Building designated as such by Landlord.  The manner in which the Common Areas are
maintained and operated shall be at the sole discretion of Landlord and the use
thereof shall be subject to such rules, regulations and restrictions as
Landlord may make from time to time. 
Landlord reserves the right to close temporarily, make 

 

 

alterations or additions to, or change the location of elements of the
Project and the Common Areas. 
Notwithstanding anything above to the contrary, Landlord shall maintain
and operate the Project in a manner materially consistent with that of other
first-class, mid-rise office buildings in the suburban Long Beach Airport
submarket, California, which are comparable in terms of size, age, quality of
construction, appearance, and quality of common area improvements (the “Comparable Buildings”). 
Except when and where Tenant’s right of access is specifically excluded
as the result of (i) an emergency, (ii) a requirement by applicable
laws, or (iii) a specific provision set forth in this Lease, Tenant shall
have the right of access to the Premises, the Building, the Common Areas and
the Project parking facility twenty-four (24) hours per day, seven (7) days
per week during the “Lease Term,” as that term is defined in Section 2.1
of this Lease, provided that Tenant’s access to the same shall be subject to
Landlord’s reasonable security and/or access rules and regulations (if
any) enforced at the Project, specifically including, but not limited to, any
reasonable rules restricting or prohibiting access to certain portions of
the Common Areas and/or the Project parking facility during times other than
the normal business hours for the Project.

 

1.2          Landlord’s Delivery of the Premises.  Landlord and Tenant hereby acknowledge that
Suites 550, 560 and 570 are currently occupied by third parties pursuant to
existing leases (the “Existing Leases”).  Notwithstanding the full execution and
delivery of this Lease between Landlord and Tenant, Landlord’s ability to
deliver the Premises to Tenant is contingent upon (i) such applicable
third parties surrendering Suites 550 and 560 to Landlord upon the natural
expiration of their Existing Leases, as applicable; and (ii) Landlord’s
ability to relocate the third party currently occupying Suite 570 to other
space on such terms and conditions as is acceptable to Landlord in its sole and
absolute discretion.  Landlord shall have
no liability whatsoever to Tenant relating to or arising from Landlord’s
inability or failure to deliver, or Landlord’s delay in delivering, the
Premises to Tenant.

 

1.3          Rentable Square Feet of Premises, Building and Project.  For purposes
of this Lease, the rentable and usable square footages set forth in the Summary
and all percentages based thereupon shall be deemed accurate and neither the
Premises, Building or Project shall be subject to remeasurement.

 

1.4          Tenant
Expansion Right.

 

1.4.1            Expansion Space.  Landlord hereby grants to the originally named
Tenant herein (the “Original Tenant”)
and any “Permitted Transferee” (as that term is defined in Section 14.8
of this Lease), to whom all of Tenant’s interest in this Lease has been
assigned, the one-time right to lease approximately 6,384 rentable square feet
of space, commonly known as Suite 600, and located on the sixth (6th)
floor of the Building (the “Expansion Space”);
provided, however, in the event that prior to Landlord’s delivery to Tenant of
an “Expansion Space Offer Notice” (as that term is defined in Section 1.4.2,
below), Landlord exercises its right to move Tenant to “Substitution Premises”
(as that term is defined in Article 22, below) on the terms and conditions
set forth in Article 22, and, as a result, Tenant no longer occupies that portion
of the Premises that is commonly known as Suite 620 and is located on the
sixth (6th) floor of the Building (“Suite 620”), then the term “Expansion Space” shall be
deemed to refer to an area of approximately 6,000 rentable square feet of space
located adjacent to the Substitution Premises. 
The precise amount of and the location of any such Expansion Space shall
be designated by Landlord, upon the terms and conditions set forth in this Section 1.4.  Notwithstanding the foregoing, such expansion
option shall be subordinate to all rights, if any, of any existing tenants in the Project (collectively, the “Superior Right Holders”), including,
without limitation, Sedgwick Claims Management Services, Inc. and R.L.
Polk & Co., with respect to such Expansion Space.

 

1.4.2            Procedure for Offer of Expansion Space.  Landlord shall notify Tenant (the “Expansion Space Offer Notice”) as soon as
is reasonably practicable following Landlord’s confirmation of when and if
(subject to the terms of Section 1.4.1, above) the Expansion Space
will become available for lease to Tenant, which availability Landlord
anticipates will begin on approximately December 1, 2009.  Pursuant to such Expansion Space Offer
Notice, Landlord shall offer to lease to Tenant the Expansion Space.  The Expansion Space Notice shall describe the
space so offered to Tenant and shall set forth the “Expansion Rent,” as that
term is defined in Section 1.4.4 below, and the other economic
terms upon which Landlord is willing to lease such space to Tenant.

 

2

 

1.4.3            Procedure for Acceptance of Expansion Space.  If Tenant wishes to exercise Tenant’s option
to expand contained in this Section 1.4, then within five (5) business
days following delivery of the Expansion Space Offer Notice to Tenant, Tenant
shall deliver notice to Landlord of Tenant’s election to exercise its right of
expansion with respect to the entire space described in the Expansion Space
Offer Notice on the terms contained in such notice.  If Tenant does not notify Landlord within the
five (5) business day period set forth above, then Landlord shall be free
to lease the space described in the Expansion Space Offer Notice to anyone to
whom Landlord desires on any terms Landlord desires.  Notwithstanding anything to the contrary
contained herein, Tenant must elect to exercise its right to expand, if at all,
with respect to all of the space offered by Landlord to Tenant, and Tenant may
not elect to lease only a portion thereof.

 

1.4.4            Expansion Rent.  The “Rent,” as that term is defined in Section 4.1
of this Lease, below, payable by Tenant for Expansion Space leased by Tenant
(the “Expansion Rent”) shall be
equal to the rent at which Landlord is leasing comparable space in the Project
in recently completed transactions of similar size and term as of the time of
the Expansion Space Commencement Date, including the base year in connection
therewith, taking
into consideration the following concessions: (a) rental abatement
concessions, if any, being granted such tenants in connection with such
comparable space, (b) tenant improvements or allowances provided or to be
provided for such comparable space, taking into account, and deducting the
value of, the existing improvements in the Expansion Space, such value to be
based upon the age, design, quality of finishes, and layout of the improvements
and the extent to which the same could be utilized by a general office user,
and (c) all other monetary and non-monetary concessions, if any, being
granted such tenants in connection with such comparable space.

 

1.4.5            Construction of Expansion Space.  Tenant shall take the Expansion Space in its “as
is” condition, and the construction of improvements in the Expansion Space
shall comply with the terms of Article 8 of this Lease.

 

1.4.6            Amendment to Lease.  If Tenant timely exercises Tenant’s right to
lease Expansion Space as set forth herein, Landlord and Tenant shall within
fifteen (15) days thereafter execute an amendment adding such Expansion Space
to the Lease upon the same terms and conditions as the initial Premises, except
as otherwise set forth in this Section 1.4 and provided that the
terms of the Work Letter, attached hereto as Exhibit B, shall not apply with respect to the
Expansion Space.  Tenant shall commence
payment of Rent for the Expansion Space and the term of the Expansion Space
shall commence upon the date that is ninety (90) days following the date
of delivery of the Expansion Space by Landlord to Tenant (the “Expansion Space Commencement Date”).  The lease term of the Expansion Space shall
expire on the Lease Expiration Date.

 

1.4.7            No Defaults.  The rights contained in this Section 1.4
may only be exercised by Tenant and any Permitted Transferee (and not any other
assignee, sublessee or other transferee of Tenant’s interest in this Lease) if
Tenant or such Permitted Transferee occupies the entire Premises.  Tenant shall not have the right to lease
Expansion Space as provided in this Section 1.4, if, as of the date
of the attempted exercise of the expansion option by Tenant, or as of the
scheduled date of delivery of such Expansion Space to Tenant, Tenant is in
default under this Lease (beyond the applicable notice and cure period provided
in this Lease) or Tenant has previously been in default under this Lease more
than once (beyond the applicable notice and cure period provided in this
Lease).

 

ARTICLE 2

 

INITIAL LEASE TERM; OPTION TERM

 

2.1       Initial Lease Term.         The terms and provisions of this Lease
shall be effective as of the date of this Lease.  The term of this Lease (the “Lease Term”) shall be as set forth in Section 3.1
of the Summary, shall commence on the date set forth in Section 3.2
of the Summary (the “Lease Commencement Date”),
and shall terminate on the date set forth in Section 3.3 of the
Summary (the “Lease Expiration Date”) unless
this Lease is sooner terminated as hereinafter provided.  For purposes of this Lease, the term “Lease Year” shall mean each consecutive twelve (12) month
period during the Lease Term; provided, however, that the first Lease Year
shall commence on the Lease Commencement Date and end on (i) the last day of
the eleventh (11th) calendar month after the calendar month in which
the Lease Commencement Date 

 

3

 

occurs if the Lease Commencement Date occurs on the first (1st)
day of any calendar month, or (ii) the last day of the twelfth (12th)
calendar month after the calendar month in which the Lease Commencement Date
occurs if the Lease Commencement Date occurs on other than the first (1st)
day of any calendar month, and, in either case, the second and each succeeding
Lease Year shall commence on the first day of the next calendar month; and
further provided that the last Lease Year shall end on the Lease Expiration
Date.  At any time during the Lease Term,
Landlord may deliver to Tenant a notice in the form as set forth in Exhibit C, attached hereto, or
such other reasonably comparable form used by Landlord from time to time, as a
confirmation only of the information set forth therein, which Tenant shall
execute and return to Landlord within ten (10) business days of
receipt thereof.

 

2.2          Option
Term.

 

2.2.1            Option Right.   Landlord hereby grants (i) the Original
Tenant, and (ii) any Permitted Transferee to whom all of Tenant’s interest
in this Lease is assigned, one (1) option to extend the Lease Term for a
period of five (5) years (the “Option
Term”), which option shall be exercisable only by written notice
delivered by Tenant to Landlord as provided below, provided that, as of the
date of delivery of such notice, Tenant is not in default (beyond the
applicable notice and cure period provided in this Lease) under this Lease and
Tenant has not previously been in default (beyond the applicable notice and
cure period provided in this Lease) under this Lease more than twice during the
twelve (12) month period immediately preceding the date of Tenant’s
exercise of its option.  Upon the proper
exercise of such option to extend, and provided that, at Landlord’s option, as
of the end of the initial Lease Term, Tenant is not in default (beyond the
applicable notice and cure period provided in this Lease) under this Lease and
Tenant has not previously been in default (beyond the applicable notice and
cure period provided in this Lease) under this Lease more than twice during the
last twelve (12) months of the initial Lease Term, the Lease Term shall be
extended for a period of five (5) years. 
The rights contained in this Section 2.2 shall be personal
to the Original Tenant and/or a Permitted Transferee (as the case may be) and
may only be exercised by the Original Tenant and/or such Permitted Transferee
(as the case may be) (and not any other assignee, sublessee or other transferee
of Tenant’s interest in this Lease) if the Original Tenant or Permitted
Transferee, as the case may be, occupies at least eighty-five percent (85%) of
the Premises.

 

2.2.2            Option Rent.  The rent payable by Tenant during the Option
Term (the “Option Rent”) shall be
equal to the Fair Market Rent Rate.  The “Fair Market Rent Rate” shall be equal to
the rent (including additional rent and considering any “base year” or “expense
stop” applicable thereto), including all escalations, at which tenants, as of
the commencement of the Option Term are leasing non-sublease, non-encumbered,
non-equity, non-renewal, non-expansion space comparable in size, location and
quality to the Premises, for a similar lease term, in an arms length
transaction, which comparable space is located in the Project, and in
Comparable Buildings (the “Comparable Transactions”),
taking into consideration the following concessions: (a) rental abatement
concessions, if any, being granted such tenants in connection with such
comparable space, (b) tenant improvements or allowances provided or to be
provided for such comparable space, taking into account, and deducting the
value of, the existing improvements in the Premises, such value to be based
upon the age, design, quality of finishes, and layout of the improvements and
the extent to which the same could be utilized by a general office user, and (c) all
other monetary and non-monetary concessions, if any, being granted such tenants
in connection with such comparable space  provided,
however, that notwithstanding anything to the contrary herein, no consideration
shall be given to (x) the fact that Landlord is or is not required to pay
a real estate brokerage commission in connection with the applicable term or
the fact that the comparable transactions do or do not involve the payment of
real estate brokerage commissions, and (y) any period of rental abatement,
if any, granted to tenants in Comparable Transactions in connection with the
design, permitting and construction of tenant improvements in such comparable
spaces.  The Fair Market Rent Rate shall
additionally include a determination as to whether, and if so to what extent,
Tenant must provide Landlord with financial security, such as a letter of
credit or guaranty, for Tenant’s Rent obligations during the Option Term.  Such determination shall be made by reviewing
the extent of financial security then generally being imposed in Comparable
Transactions from tenants of comparable financial condition and credit history
to the then existing financial condition and credit history of Tenant (with
appropriate adjustments to account for differences in the then-existing
financial condition of Tenant and such other tenants).  If in determining the Fair Market Rent Rate
for the Option Term, Tenant is deemed to be entitled to a tenant improvement or
comparable allowance for the improvement of the Premises (the total dollar
value of such 

 

4

 

allowance, the “Option Term TI
Allowance”), Landlord may, at Landlord’s sole option, elect any or a
portion of the following:  (A) to
grant some or all of the Option Term TI Allowance to Tenant as a lump sum
payment to Tenant, and/or (B) in lieu of making a lump sum payment (or
portion thereof) to Tenant, to reduce the rental rate component of the Fair
Market Rent Rate to be an effective rental rate (calculated in such a manner as
to account for the amortization of such Option Term TI Allowance (including
interest at a reasonable market rate) that would have occurred) which takes
into consideration that Tenant will not receive a payment of such Option Term
TI Allowance, or portion thereof.

 

2.2.3            Exercise of Option.  The option contained in this Section 2.2
shall be exercised by Tenant, if at all, and only in the following manner:  (i) Tenant shall deliver written notice
to Landlord not more than fourteen (14) months nor less than twelve (12) months
prior to the expiration of the initial Lease Term, stating that Tenant is
interested in exercising its option; (ii) Landlord, after receipt of
Tenant’s notice, shall deliver notice (the “Option
Rent Notice”) to Tenant not less than ten (10) months prior to
the expiration of the initial Lease Term, setting forth the Option Rent; and (iii) if
Tenant wishes to exercise such option, Tenant shall, on or before the earlier
of (A) the date occurring nine (9) months prior to the expiration of
the initial Lease Term, and (B) the date occurring thirty (30) days after
Tenant’s receipt of the Option Rent Notice, exercise the option by delivering
written notice thereof to Landlord, and concurrently with such exercise, Tenant
may, at its option, object to the Option Rent contained in the Option Rent
Notice, in which case the parties shall follow the procedure, and the Option
Rent shall be determined, as set forth in Section 2.2.4 below.

 

2.2.4            Determination
of Option Rent.  In
the event Tenant timely and appropriately objects to the Option Rent Landlord
and Tenant shall attempt to agree upon the Option Rent using their best
good-faith efforts.  If Landlord and
Tenant fail to reach agreement within ten (10) business days following
Tenant’s objection to the Option Rent (the “Outside
Agreement Date”), then each party shall make a separate
determination of the Option Rent within ten (10) business days, and
such determinations shall be submitted to arbitration in accordance with Sections
2.2.4.1 through 2.2.4.7 below.

 

2.2.4.1      Landlord
and Tenant shall each appoint one arbitrator who shall by profession be a real
estate broker or appraiser who shall have been active over the five (5) year
period ending on the date of such appointment in the leasing (or appraisal, as
the case may be) of commercial office properties in the Southern California
market (including, without limitation, the Long Beach, California area). 
The determination of the arbitrators shall be limited solely to the
issue area of whether Landlord’s or Tenant’s submitted Option Rent is the
closest to the actual Option Rent as determined by the arbitrators, taking into
account the requirements of Section 2.2.2 of this Lease.  Each such arbitrator shall be appointed
within fifteen (15) days after the applicable Outside Agreement Date.

 

2.2.4.2      The
two arbitrators so appointed shall within ten (10) business days of the
date of the appointment of the last appointed arbitrator agree upon and appoint
a third arbitrator who shall be qualified under the same criteria set forth
hereinabove for qualification of the initial two arbitrators.

 

2.2.4.3      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 Option Rent and shall notify Landlord and Tenant thereof.

 

2.2.4.4      The
decision of the majority of the three (3) arbitrators shall be binding
upon Landlord and Tenant.

 

2.2.4.5      If
either Landlord or Tenant fails to appoint an arbitrator within fifteen (15)
days after the applicable Outside Agreement Date, the arbitrator appointed by
one of them shall reach a decision, notify Landlord and Tenant thereof, and
such arbitrator’s decision shall be binding upon Landlord and Tenant.

 

2.2.4.6      If
the two arbitrators fail to agree upon and appoint a third arbitrator, or both
parties fail to appoint an arbitrator, then the appointment of the third
arbitrator or any 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 instruction set forth in
this Section 2.2.4.

 

5

 

2.2.4.7      The
cost of arbitration shall be paid by Landlord and Tenant equally.

 

ARTICLE 3

 

BASE RENT

 

3.1          Generally. 
Tenant shall pay, without prior notice or demand, to Landlord or
Landlord’s agent at the management office of the Project, or, at Landlord’s
option, at such other place as Landlord may from time to time designate in
writing, by a check for currency which, at the time of payment, is legal tender
for private or public debts in the United States of America, base rent (“Base
Rent”) as set forth in Section 4 of the Summary, payable in equal
monthly installments as set forth in Section 4 of the Summary  in advance on or before the first day of each
and every calendar month during the Lease Term, without any setoff or deduction
whatsoever.  The
Base Rent for the fourth (4th) month of the Lease Term shall be paid
at the time of Tenant’s execution of this Lease.  If any Rent payment date (including the Lease
Commencement Date) falls on a day of the month other than the first day of such
month or if any payment of Rent is for a period which is shorter than one
month, the Rent for any such fractional month shall accrue on a daily basis
during such fractional month and shall total an amount equal to the product of (i) a
fraction, the numerator of which is the number of days in such fractional month
and the denominator of which is the actual number of days occurring in such
calendar month, and (ii) the then-applicable monthly installment of Base
Rent.  All other payments or adjustments
required to be made under the terms of this Lease that require proration on a
time basis shall be prorated on the same basis.

 

3.2          Abated Base Rent. Notwithstanding the foregoing, to
the extent that Tenant is not then in default under this Lease (beyond
the applicable notice and cure period provided in this Lease), Tenant
shall not be required to pay the monthly installment of Base Rent otherwise
attributable to the Premises (the “Abated
Monthly Base Rent”) for the first three (3) full calendar
months of the Lease Term following the Lease Commencement Date (the “Base Rent Abatement Period”), which period
shall be determined pursuant to the terms of this Section 3.2.  If the Lease Commencement Date occurs on the
first day of a calendar month, then the Base Rent Abatement Period shall
commence on the Lease Commencement Date and expire on the last day of the
third (3rd) month of the Lease Term.  If, however, the Lease Commencement Date
occurs on a day other than the first day of a calendar month, then, the Base
Rent Abatement Period shall commence on the first day of the second (2nd)
calendar month of the Lease Term and expire on the last day of the
fourth (4th) calendar month of the Lease Term.  Landlord and Tenant acknowledge that the
total amount of such abatement of Base Rent equals Two Hundred Forty Thousand
Eight Hundred Ninety-Five and 20/100 Dollars ($240,895.20).

 

ARTICLE 4

 

ADDITIONAL RENT

 

4.1          General Terms.  In addition to paying the Base Rent specified
in Article 3 of this Lease, Tenant shall pay “Tenant’s Share” of
the annual “Direct Expenses,” as those terms are defined in Sections 4.2.6
and 4.2.2 of this Lease, respectively, which are in excess of the amount
of Direct Expenses applicable to the “Base Year,” as that term is defined in Section 4.2.1,
below; provided, however, that in no event shall any decrease in Direct
Expenses for any Expense Year below Direct Expenses for the Base Year entitle
Tenant to any decrease in Base Rent or any credit against sums due under this
Lease.  Such payments by Tenant, together
with any and all other amounts payable by Tenant to Landlord pursuant to the
terms of this Lease, are hereinafter collectively referred to as the “Additional Rent”, and the Base Rent and the Additional Rent
are herein collectively referred to as “Rent.”  All amounts due under this Article 4
as Additional Rent shall be payable for the same periods and in the same manner
as the Base Rent.  Without limitation on
other obligations of Tenant which survive the expiration of the Lease Term, the
obligations of Tenant to pay the Additional Rent provided for in this Article 4
shall survive the expiration of the Lease Term.

 

4.2          Definitions of Key Terms Relating to
Additional Rent. 
As used in this Article 4, the following terms shall have
the meanings hereinafter set forth:

 

6

 

4.2.1            “Base Year” shall mean the period set forth
in Section 5 of the Summary.

 

4.2.2            “Direct Expenses” shall mean “Operating
Expenses” and “Tax Expenses.”

 

4.2.3            “Expense Year” shall mean each calendar year
in which any portion of the Lease Term falls, through and including the
calendar year in which the Lease Term expires.

 

4.2.4            “Operating Expenses” shall mean all
expenses, costs and amounts of every kind and nature which Landlord pays or
accrues during any Expense Year because of or in connection with the ownership,
management, maintenance, security, repair, replacement, restoration or
operation of the Project, or any portion thereof.

 

4.2.4.1      Operating Expenses: Inclusions.  Without limiting the generality of Article 4
and/or Landlord’s right to include other items therein, Operating Expenses
shall specifically include any and all of the following:  (i) the cost of supplying all utilities,
the cost of operating, repairing, maintaining, and renovating the utility,
telephone, mechanical, sanitary, storm drainage, and elevator systems, and the
cost of maintenance and service contracts in connection therewith; (ii) the
cost of licenses, certificates, permits and inspections and the cost of
contesting any governmental enactments which may affect Operating Expenses, and
the costs incurred in connection with any governmentally mandated
transportation system management program or similar program; (iii) the
cost of all insurance carried by Landlord in connection with the Project; (iv) the
cost of landscaping, relamping, and all supplies, tools, equipment and
materials used in the operation, repair and maintenance of the Project, or any
portion thereof; (v) costs incurred in connection with the parking areas
servicing the Project (including costs of painting, restriping and resurfacing
the parking areas servicing the Project); (vi) actual and reasonable fees
and other costs, including management fees, consulting fees, legal fees and
accounting fees, of all contractors and consultants in connection with the
management, operation, maintenance and, subject to the terms of item [i],
below, repair of the Project; (vii) payments under any equipment rental
agreements and the fair rental value of any management office space; (viii) subject
to the terms of Section 4.2.4.3(xi), below, wages, salaries and
other compensation and benefits, including taxes levied thereon, of all persons
engaged in the operation, maintenance and security of the Project (including,
but not limited to, all fringe benefits, workers’ compensation, insurance
premiums and payroll taxes); (ix) costs under any instrument pertaining to
the sharing of costs by the Project; (x) operation, repair, maintenance
and replacement of all systems and equipment and components thereof of the
Building provided that any capital costs incurred by Landlord with respect to
the replacement of such systems and equipment shall be amortized as forth in
items (xii) and (xiii), below; (xi) the cost of janitorial, alarm, security and
other services, replacement of wall and floor coverings, ceiling tiles and
fixtures in common areas, maintenance and replacement of curbs and walkways,
repair to roofs and re-roofing, repairs to the floors slabs and all paved
areas; (xii) amortization over its reasonable useful life (including interest
on the unamortized cost at a rate equal to the floating commercial loan rate
announced from time to time by Bank of America, a national banking association,
or its successor, as its prime rate (the “Amortization
Interest Rate”)) of the cost of acquiring or the rental expense of
personal property used in the maintenance, operation and repair of the Project,
or any portion thereof to the extent such acquisition costs, prior to
amortization, are materially consistent with the costs incurred for such items
by landlords of Comparable Buildings, given the scope, size and nature of the
Project; (xiii) the cost of capital improvements or other costs incurred in
connection with the Project (A) which are intended to effect economies in
the operation or maintenance of the Project, or any portion thereof, or (B) that
are required under any governmental law or regulation; provided, however, that
any such permitted capital expenditure shall be amortized (with interest at the
Amortization Interest Rate) over its reasonable useful life; (xiv) costs, fees,
charges or assessments imposed by, or resulting from any mandate imposed on
Landlord by, any federal, state or local government for fire and police
protection, trash removal, community services, or other services which do not
constitute “Tax Expenses” as that term is defined in Section 4.2.5,
below; (xv) payments under any easement, license, operating agreement,
declaration, restrictive covenant, or instrument pertaining to the sharing of
costs by the Building; (xvi) window cleaning; (xvii) services and amenities of
the Project which are available to all tenants of the Project at the same
charge or at no charge; (xviii) costs of any additional services not provided
to the Building as of the Lease Commencement Date but which are thereafter
provided by Landlord in the prudent management of the Building or the
Project.  Any of the services which may
be included in the computation of 

 

7

 

the Operating Expenses of the Building may be performed by divisions,
subsidiaries or affiliates of Landlord, provided that the contracts for the
performance of such services shall be competitive with similar contracts and
transactions with unaffiliated entities for the performance of such services in
comparable office buildings within the greater Los Angeles metropolitan
area.  Only as provided hereinafter in
this Section 4.2.4 below in items [i] and [ii], in the event
Landlord incurs costs or expenses associated with or relating to separate items
or categories or subcategories of Operating Expenses which were not part of
Operating Expenses during the entire Base Year, Operating Expenses for the Base
Year shall be deemed increased by the amounts Landlord would have incurred
during the Base Year with respect to such costs and expenses had such separate
items or categories or subcategories of Operating Expenses been included in
Operating Expenses during the entire Base Year. 
The foregoing shall only apply as follows:  [i] in the event and to the extent any
portion of the Project is covered by a warranty or service agreement which
provides warranty-type protection at any time during the Base Year and is not
covered by such warranty or such warranty-type protection under such service
agreement in a subsequent Expense Year to the same extent, Operating Expenses
for the Base Year shall be deemed increased by the amount Landlord would have
incurred during the Base Year with respect to the items or matters covered by
the subject warranty or warranty-type protection, had such warranty or such
service agreement not been in effect during the Base Year; and [ii] any
insurance premium resulting from any new forms of insurance, including
earthquake insurance, shall be deemed to be included in Operating Expenses for
the Base Year.

 

4.2.4.2      If
Landlord is not furnishing any particular work or service (the cost of which,
if performed by Landlord, would be included in Operating Expenses) to a tenant
who has undertaken to perform such work or service in lieu of the performance
thereof by Landlord, Operating Expenses shall be deemed to be increased by an
amount equal to the additional Operating Expenses which would reasonably have
been incurred during such period by Landlord if it had at its own expense
furnished such work or service to such tenant. 
If the Project is not at least ninety-five  percent (95%)
occupied during all or a portion of the Base Year or any Expense Year, Landlord
may elect to make an appropriate adjustment to the components of Operating
Expenses for such year to determine the amount of Operating Expenses that would
have been incurred had the Project been ninety-five  percent (95%)
occupied; and the amount so determined shall be deemed to have been the amount of
Operating Expenses for such year. 
Operating Expenses for the Base Year shall not include market-wide
labor-rate increases due to extraordinary circumstances, including, but not
limited to, boycotts and strikes, and utility rate increases due to extraordinary
circumstances including, but not limited to, conservation surcharges, boycotts,
embargoes or other shortages, or amortized costs relating to extraordinary
capital improvements(except to the extent such amortized costs are included in
Operating Expenses for subsequent Expense Years).  Landlord shall (i) not make a profit by
charging items to Operating Expenses that are otherwise also charged separately
to others and (ii) Landlord shall not collect Operating Expenses from
Tenant and all other tenants/occupants in the Building in an amount in excess
of what Landlord incurred for the items included in Operating Expenses.

 

4.2.4.3      Operating Expenses: Exclusions.  The following shall be excluded from
Operating Expenses:

 

(i)            Costs
incurred in connection with the original construction of the Building or in
connection with any major change in the Building, such as adding or deleting
floors;

 

(ii)           Costs
of alterations or improvements to the Premises or the premises of other tenants
as a part of any lease to Tenant or other tenants;

 

(iii)          Depreciation
or interest on debt or amortization payments on any mortgage or mortgages, and
rental under any ground or underlying leases or lease (except to the extent the
same may be made to pay or reimburse, or may be measured by, ad valorem taxes);

 

(iv)          Costs
of correcting defects in or inadequacy of the initial design or construction of
the Building or the Project;

 

(v)           Expenses
directly resulting from the negligence of Landlord, its agents, servants or
employees;

 

8

 

(vi)          Legal
fees, space planners’ fees, real estate brokers’ leasing commissions, and
advertising expenses incurred in connection with the original development or
original leasing or future leasing of the Building or the Project;

 

(vii)         Costs
for which Landlord is reimbursed or would have been reimbursed if Landlord had
carried the insurance Landlord is required to carry pursuant to this Lease or
would have been reimbursed if Landlord had used commercially reasonable efforts
to collect such amounts, and costs reimbursed or reimbursable by any tenant or
occupant of the Project or by insurance from its insurance carrier or any
insurance carrier of any tenant;

 

(viii)        Any
bad debt loss, rent loss, or reserves for bad debts or rent loss;

 

(ix)           Expenses
in connection with services (including sub-metered utilities) or other benefits
of a type which are not standard for the Building or the Project, and which are
not available to Tenant without specific charge therefor, but which are
provided to another tenant or occupant of the Building or the Project whether
or not such other tenant or occupant is specifically charged therefor by
Landlord;

 

(x)            Costs
associated with the operation of the business of the partnership or entity which
constitutes Landlord, as the same are distinguished from the costs of operation
of the Building or the Project, including partnership accounting and legal
matters, costs of defending any lawsuits with any mortgagee (except as the
actions of Tenant or other tenants may be in issue), costs of selling,
syndicating, financing, mortgaging or hypothecating any of Landlord’s interest
in the Building or the Project, costs of any disputes between Landlord and its
employees (if any) not engaged in the Building or the Project operations,
disputes of Landlord with Building or the Project management, or outside fees
paid in connection with disputes with other tenants;

 

(xi)               The
wages and benefits of any employee who does not devote substantially all of his
or her employed time to the Project unless such wages and benefits are prorated
to reflect time spent on operating and managing the Project vis-a-vis time
spent on matters unrelated to operating and managing the Project; provided,
that in no event shall Operating Expenses for purposes of this Lease include
wages and/or benefits attributable to personnel above the level of Project
manager or Project engineer;

 

(xii)              Fines,
penalties, late fees or interest on delinquent payments (interest included on
real property taxes as a part of a bonded assessment included in real property
taxes shall be included as a part of Tax Expenses (hereafter defined));

 

(xiii)             Costs
incurred due to the violation by Landlord of the terms and conditions of any
underlying ground lease pertaining to the Building or the Project;

 

(xiv)            Any
damage or loss resulting from any casualty insured against by Landlord, or if
not so insured, then excluding any damage or loss resulting from the type of
casualty which is normally insured against by owners of first-class office
buildings in Los Angeles County, except to the extent of customary deductibles
(provided that any such deductibles with respect to earthquake insurance shall
not exceed in any single calendar year an amount greater than $1.00 per rentable
square foot of the Premises);

(xv)             All
costs in connection with the ownership, operation and maintenance of any garage
facilities not located within and as a part of and available for use by the
tenants of the Building or the Project;

 

(xvi)            Any
costs in connection with any portion of the ground floor or any mezzanine
levels, or any other floor in the Building or the Project devoted primarily to
retail operations for the general public, except normal electrical current and
other services supplied by Landlord as if such retail premises were offices,
provided such tenant pays its appropriate pro rata share of Operating Expenses.

 

(xvii)           Costs,
including permit, license and inspection costs, incurred with respect to the
installation of tenant improvements made for new tenants or other occupants in
the Project or incurred in renovating or otherwise improving, decorating,
painting 

 

9

 

or redecorating vacant space for tenants or other occupants of the
Project (excluding, however, such costs relating to any common areas of the
Project or parking facilities);

 

(xviii)          Any amount paid by Landlord or to the
parent organization or a subsidiary or affiliate of the Landlord for supplies
and/or services in the Project to the extent the same exceeds the costs of such
supplies and/or services rendered by qualified, first-class unaffiliated third
parties on a competitive basis;

 

(xix)             Electric power costs for which any
tenant directly contracts with a public service company;

 

(xx)              Costs, other than those incurred
in ordinary maintenance and repair, for sculpture, paintings, fountains or
other objects of art;

 

(xxi)             Tax penalties;

 

(xxii)            Costs arising from Landlord’s
charitable or political contributions;

 

(xxiii)           Any finders fees, brokerage
commissions, job placement costs or job advertising cost, other than with
respect to a receptionist or secretary in the Project office, once per year;

 

(xxiv)           Costs of any training or incentive
programs, other than for tenant life safety information services;

 

(xxv)            In-house legal and/or accounting (as
opposed to office building bookkeeping) fees;

 

(xxvi)           Costs for extra or after-hours HVAC,
utilities or services which are provided to Tenant and or any occupant of the
Building and as to which Tenant or such other occupants are separately charged;

 

(xxvii)          Costs of capital repairs and
alterations, capital improvements and equipment and other capital expenses
except as set forth in items 4.2.4.1(xii) and (xiii), above;

 

(xxviii)         Costs
of any tenant relations parties, events or promotions, except to the extent the
cost of comparable events are included in the Base Year calculation of
Operating Expenses;

 

(xxix)       Any
compensation paid to clerks, attendants or other persons in commercial
concessions operated by or on behalf of the Landlord;

 

(xxx)        All
items and services for which Tenant or any other tenant in the Project is
obligated to fully reimburse Landlord or which Landlord provides selectively to
one or more tenants (other than Tenant) without reimbursement;

 

(xxxi)       Rent
for any office space occupied by Project management personnel to the extend the
size or rental rate of such office space exceeds the size or fair market rental
value of office space occupied by management personnel of the Comparable Buildings
in the vicinity of the Building, with adjustment where appropriate for the size
of the applicable project;

 

(xxxii)      Landlord’s
general corporate overhead and general administrative expenses;

 

(xxxiii)     Any
property management fee and/or asset management fee that, when expressed as a
percentage of gross revenue, exceeds the percentage of gross revenue actually
charged during the Base Year;

 

(xxxiv)     Costs
incurred to comply with Applicable Law with respect to “hazardous materials,”
as that term is defined in Section 29.36 of this Lease, which were
in existence in the Building or on the Project prior to the Lease Commencement
Date, and 

 

10

 

were of such a nature that a federal, state or municipal governmental
or quasi-governmental authority, if it had then knowledge of the presence of
such hazardous materials, in the state, and under the conditions that it then
existed in the Building or on the Project, would have then required the
removal, remediation or other action with respect to such hazardous materials;
and costs incurred with respect to hazardous materials, which hazardous
materials are brought into the Building or onto the Project after the date
hereof by Landlord or any other tenant of the Project or by anyone other than
Tenant and is of such a nature, at that time, that a federal, state or
municipal governmental or quasi-governmental authority, if it had then had
knowledge of the presence of such hazardous material, in the state, and under the
conditions, that it then exists in the Building or on the Project, would have
then required the removal, remediation or other action with respect to such
hazardous material;

 

(xxxv)      Any
entertainment, dining or travel expenses for any purpose, except to the extent
comparable expenses are included in the Base Year calculation of Operating
Expenses;

 

(xxxvi)     In
the event any facilities, services or utilities used in connection with the
Project are provided from another building owned or operated by Landlord or
vice versa, the costs incurred by Landlord in connection therewith shall be
allocated to Operating Expenses by Landlord on a reasonably equitable basis;

 

(xxxvii)    Any
reserves retained by Landlord; and

 

(xxxviii)   Costs
incurred to correct any violations or non-compliance with Applicable Law,
provided that compliance with such Applicable Laws is not the responsibility of
Tenant under this Lease and such violations or non-compliance were in existence
in the Building or on the Project prior to the Lease Commencement Date, and
were of such a nature that a federal, state or municipal governmental or
quasi-governmental authority, if it had then knowledge of the violations or
non-compliance, in the state, and under the conditions that they then were
occurring in the Building or on the Project, would have then required
correction with respect to such violations or non-compliance.

 

4.2.4.4      It
is understood that Operating Expenses shall be reduced by all cash discounts,
trade discounts, or quantity discounts taken by Landlord or Landlord’s managing
agent in the purchase of any goods, utilities, or services in connection with
the operation of the Building or the Project. 
If capital items which are customarily purchased by landlords of
first-class office buildings in the Long Beach area are leased by Landlord,
rather than purchased, the decision by Landlord to lease the item in question
shall not serve to increase Tenant’s Share of Operating Expenses beyond that
which would have applied had the item in question been purchased.  In the calculation of any expenses hereunder,
it is understood that no specific expense shall be charged more than once.  Landlord shall use its reasonable efforts to
effect an equitable proration of bills for services rendered to the Building or
the Project and to any other property owned or managed by Landlord.  Landlord agrees to keep books and records
showing the Operating Expenses in accordance with a system of accounts and
accounting practices consistently maintained by Landlord on a year-to-year
basis in compliance with such provisions of this Lease as may affect such
accounts.

 

4.2.4.5      Adjustments to Tenant’s Share.  Should additional office or commercial
rentable areas or any additional buildings be constructed or incorporated by
Landlord into and as a part of the Building or the Project, as Landlord may
elect at Landlord’s sole discretion, whether at date of completion of
construction, date of substantial occupancy, or at a later date, or should the
Building or the Project be joined with or subsequently severed from an adjacent
office building or buildings and/or any parking areas or a parking structure
also owned or operated by Landlord or any of its related entities, as Landlord
may elect at Landlord’s sole discretion, then Tenant’s Share shall be
appropriately adjusted upon such incorporation or severance by Landlord of the
additional office or commercial or parking area or areas into or with or from
the Building or the Project. 
Furthermore, in the event that one tenant occupying all or a substantial
portion of the Building should be required or elect (for example, in instances
where governmental security clearances are required), with Landlord’s
permission, to perform all of its own janitorial and/or interior maintenance
services, and/or pay directly its own utility consumption, then there may be
two (2) or more separate Tenant’s Shares applicable to Tenant, which
Landlord shall determine at Landlord’s sole discretion from time to time based
upon all facts then existing, so that all tenants shall be obligated on a
reasonable basis for their respective 

 

11

 

tenant’s shares of all Operating Expenses for the Building, and the
portion of the Operating Expenses for the Common Areas allocated to the
Building.  For example, one of such
Tenant’s Shares could relate to the rentable square feet of all tenants who
receive janitorial, maintenance and other similar services, and/or who pay
directly their own utilities, and one of which could relate to the balance of
interior services and all Building common area services (landscaping, window
washing, exterior maintenance, etc.) and insurance costs and real property
taxes.  Landlord shall give notice to
Tenant and other affected tenants of Landlord’s election to use either one or
more Tenant’s Shares applicable to Tenant from time to time for the Building or
the Project, or both, promptly after any such election, and the resultant
change in Tenant’s Share thereafter shall be binding upon Tenant.  The allocation of Operating Expenses and
Common Areas may be adjusted from time to time by Landlord, as the facts and
circumstances reasonably require, without prior notice to Tenant; provided, however, Landlord
shall thereafter notify Tenant of any such adjustment and, following written
request from Tenant, provide reasonable documentation of the facts and
circumstances pursuant to which such adjustment was made.

 

4.2.4.6      Proration of Operating Expenses.  Should this Lease commence or terminate at
any time other than the first or last day of the calendar year, respectively,
the amounts due as Additional Rent pursuant to Article 4 for the
commencement or termination year only shall be prorated pursuant to the method
provided in Article 3 of this Lease.

 

4.2.5            Taxes.

 

4.2.5.1      “Tax Expenses” shall mean all federal,
state, county, or local governmental or municipal taxes, fees, charges or other
impositions of every kind and nature, whether general, special, ordinary or
extraordinary, (including, without limitation, real estate taxes, general and
special assessments, transit taxes, leasehold taxes or taxes based upon the
receipt of rent, including gross receipts or sales taxes applicable to the
receipt of rent, unless required to be paid by Tenant, personal property taxes imposed
upon the fixtures, machinery, equipment, apparatus, systems and equipment,
appurtenances, furniture and other personal property used in connection with
the Project, or any portion thereof), which shall be paid or accrued during any
Expense Year (without regard to any different fiscal year used by such
governmental or municipal authority) because of or in connection with the
ownership, leasing and operation of the Project, or any portion thereof.

 

4.2.5.2      Tax
Expenses shall include, without limitation: 
(i) any tax on the rent, right to rent or other income from the
Project, or any portion thereof, or as against the business of leasing the
Project, or any portion thereof; (ii) any assessment, tax, fee, levy or
charge in addition to, or in substitution, partially or totally, of any
assessment, tax, fee, levy or charge previously included within the definition
of real property tax, it being acknowledged by Tenant and Landlord that
Proposition 13 was adopted by the voters of the State of California in the June 1978
election (“Proposition 13”) and that
assessments, taxes, fees, levies and charges may be imposed by governmental
agencies for such services as fire protection, street, sidewalk and road
maintenance, refuse removal and for other governmental services formerly
provided without charge to property owners or occupants, and, in further
recognition of the decrease in the level and quality of governmental services
and amenities as a result of Proposition 13, Tax Expenses shall also include
any governmental or private assessments or the Project’s contribution towards a
governmental or private cost-sharing agreement for the purpose of augmenting or
improving the quality of services and amenities normally provided by
governmental agencies; (iii) any assessment, tax, fee, levy, or charge allocable
to or measured by the area of the Premises or the Rent payable hereunder,
including, without limitation, any business or gross income tax or excise tax
with respect to the receipt of such rent, or upon or with respect to the
possession, leasing, operating, management, maintenance, alteration, repair,
use or occupancy by Tenant of the Premises, or any portion thereof; and (iv) any
assessment, tax, fee, levy or charge, upon this transaction or any document to
which Tenant is a party, creating or transferring an interest or an estate in
the Premises.

 

4.2.5.3      Any
reasonable costs and expenses (including, without limitation, reasonable
attorneys’ fees) incurred in attempting to protest, reduce or minimize Tax
Expenses (excluding, however, those costs and expenses incurred by Landlord in
securing any Proposition 8 reduction as set forth in Section 4.2.5.4.,
below) shall be included in Tax Expenses in the Expense Year such expenses are
paid.  Except as set forth in Section 4.2.5.4,
below, refunds of Tax Expenses shall be credited against Tax Expenses and
refunded to Tenant regardless of when 

 

12

 

received, based on the Expense Year to which the refund is applicable,
provided that in no event shall the amount to be refunded to Tenant for any
such Expense Year exceed the total amount paid by Tenant as Additional Rent
under this Article 4 for such Expense Year.  If Tax Expenses for any period during the
Lease Term or any extension thereof are increased after payment thereof for any
reason, including, without limitation, error or reassessment by applicable
governmental or municipal authorities, Tenant shall pay Landlord upon demand
Tenant’s Share of any such increased Tax Expenses included by Landlord as
Building Tax Expenses pursuant to the terms of this Lease.  Notwithstanding anything to the contrary
contained in this Section 4.2.5 (except as set forth in Section 4.2.5.1,
above), there shall be excluded from Tax Expenses (i) all excess profits
taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other taxes
to the extent applicable to Landlord’s general or net income (as opposed to
rents, receipts or income attributable to operations at the Project), (ii) any
items included as Operating Expenses, and (iii) any items paid by Tenant
under Section 4.5 of this Lease.

 

4.2.5.4      Notwithstanding
anything to the contrary set forth in this Lease, the amount of Tax Expenses
for the Base Year and any Expense Year shall be calculated without taking into
account any decreases in real estate taxes obtained in connection with
Proposition 8, and, therefore, the Tax Expenses in the Base Year and/or an
Expense Year may be greater than those actually incurred by Landlord, but
shall, nonetheless, be the Tax Expenses due under this Lease; provided that (i) any
costs and expenses incurred by Landlord in securing any Proposition 8
reduction shall not be included in Direct Expenses for purposes of this Lease,
and (ii) tax refunds under Proposition 8 shall not be deducted from Tax
Expenses, but rather shall be the sole property of Landlord.  Landlord and Tenant acknowledge that this Section 4.2.5.4
is not intended to in any way affect (A) the inclusion in Tax Expenses of
the statutory two percent (2.0%) annual increase in Tax Expenses (as such
statutory increase may be modified by subsequent legislation), or (B) the
inclusion or exclusion of Tax Expenses pursuant to the terms of Proposition 13,
which shall be governed pursuant to the terms of Sections 4.2.5.1
through 4.2.5.3, above.  The amount of property taxes for the Base
Year attributable to the valuation of the Project and Building, inclusive of
tenant improvements, shall be known as the “Base Taxes.”  If
in any calendar year subsequent to the Base Year, the amount of property taxes
decreases below the amount of Base Taxes, then for purposes of all subsequent
calendar years, including the calendar year in which such decrease in Property
Taxes occurred, the Base Taxes, and therefore the Tax Expenses for the Base
Year, shall be decreased by an amount equal to such decrease in property
taxes.  The Tax Expenses for the Base
Year shall not include increases due to extraordinary circumstances.

 

4.2.6            “Tenant’s Share” shall mean the percentages
set forth in Section 6 of the Summary.

 

4.3          Allocation of Direct Expenses.

 

4.3.1            Method
of Allocation.  The
parties acknowledge that the Building is a part of a multi-building project and
that the costs and expenses incurred in connection with the Project (i.e.
the Direct Expenses) should be shared between the tenants of the Building and
the tenants of the other buildings in the Project.  Accordingly, as set forth in Section 4.2
above, Direct Expenses (which consists of Operating Expenses and Tax Expenses)
are determined annually for the Project as a whole, and a portion of the Direct
Expenses, which portion shall be determined by Landlord on an equitable basis,
shall be allocated to the tenants of the Building (as opposed to the tenants of
any other buildings in the Project) and such portion shall be the Direct
Expenses for purposes of this Lease. 
Such portion of Direct Expenses allocated to the tenants of the Building
shall include all Direct Expenses attributable solely to the Building and an
equitable portion of the Direct Expenses attributable to the Project as a
whole.  Following Tenant’s written
request, Landlord shall provide Tenant with a copy of the calculations
described in this Section 4.3.1 which are applicable to the
Premises.

 

4.3.2            Cost Pools.  Landlord shall have the right, from time to
time, to equitably allocate some or all of the Direct Expenses for the Project
among different portions or occupants of the Project (the “Cost Pools”),
in Landlord’s discretion.  Such Cost
Pools may include, but shall not be limited to, the office space tenants of a
building of the Project or of the Project, and the retail space tenants of a
building of the Project or of the Project. 
The Direct Expenses within each such Cost Pool shall be allocated and
charged to the tenants within such Cost Pool in an equitable and reasonable
manner.  Following Tenant’s written
request, Landlord 

 

13

 

shall provide Tenant with a copy of the calculations described in this Section 4.3.2
which are applicable to the Premises.

 

4.4          Calculation and Payment of Additional Rent.  If for any Expense Year ending or commencing
within the Lease Term, Tenant’s Share of Direct Expenses for such Expense Year
exceeds Tenant’s Share of Direct Expenses applicable to the Base Year, then
Tenant shall pay to Landlord, in the manner set forth in Section 4.4.1,
below, and as Additional Rent, an amount equal to the excess (the “Excess”).

 

4.4.1            Statement of Actual Direct Expenses and
Payment by Tenant. 
Landlord shall use commercially reasonable efforts to give to Tenant
within one hundred fifty (150) days following the end of the Base Year and each
Expense Year, a statement (the “Statement”) which
shall state the Direct Expenses incurred or accrued for such preceding Expense
Year, and which shall indicate the amount of the Excess.  Upon receipt of the Statement for each
Expense Year commencing or ending during the Lease Term, if an Excess is present,
Tenant shall pay, with its next installment of Base Rent due, the full amount
of the Excess for such Expense Year, less the amounts, if any, paid during such
Expense Year as “Estimated Excess,” as that term is defined in Section 4.4.2,
below, and if Tenant paid more as Estimated Excess than the actual Excess,
Tenant shall receive a credit in the amount of Tenant’s overpayment against
Rent next due under this Lease.  The
failure of Landlord to timely furnish the Statement for any Expense Year shall
not prejudice Landlord or Tenant from enforcing its rights under this Article 4.  Even though the Lease Term has expired and
Tenant has vacated the Premises, when the final determination is made of Tenant’s
Share of Direct Expenses for the Expense Year in which this Lease terminates,
if an Excess if present, Tenant shall immediately pay to Landlord such amount,
and if Tenant paid more as Estimated Excess than the actual Excess, Landlord
shall, within thirty (30) days, deliver a check payable to Tenant in the amount
of the overpayment.  Notwithstanding the
foregoing, Tenant shall not be responsible for Tenant’s Share of any Direct
Expenses attributable to any Expense Year which are first billed to Tenant more
than two (2) calendar years after the expiration or any earlier
termination of this Lease, provided that in any event Tenant shall be
responsible for Tenant Share of any Direct Expenses levied by any governmental
authority at any time (but not more than three (3) calendar years,
following the expiration or earlier termination of this Lease which are
attributable to any Expense Year.  The
provisions of this Section 4.4.1 shall survive the expiration or
earlier termination of the Lease Term.

 

4.4.2            Statement of Estimated Direct Expenses.  In addition, Landlord shall use commercially
reasonable efforts to give to Tenant within one hundred fifty (150) days
following the commencement of the Base Year and each Expense Year and a yearly
expense estimate statement (the “Estimate Statement”)
which shall set forth, on a line-item by line-item basis Landlord’s reasonable
estimate (the “Estimate”) of what the total
amount of Direct Expenses for the Base Year or then-current Expense Year (as
applicable) shall be and, with respect to each Expense Year, the estimated
excess (the “Estimated Excess”) as calculated
by comparing the Direct Expenses for such Expense Year, which shall be based
upon the Estimate, to the amount of Direct Expenses for the Base Year.  The failure of Landlord to timely furnish the
Estimate Statement for any Expense Year shall not preclude Landlord from
enforcing its rights to collect any Estimated Excess under this Article 4,
nor shall Landlord be prohibited from revising any Estimate Statement or
Estimated Excess theretofore delivered to the extent necessary, provided that,
Landlord shall promptly notify Tenant of such revision to any Estimate
Statement or Estimated Excess. 
Thereafter, Tenant shall pay, with its next installment of Base Rent
due, a fraction of the Estimated Excess for the then-current Expense Year
(reduced by any amounts paid pursuant to the next to last sentence of this Section 4.4.2).  Such fraction shall have as its numerator the
number of months which have elapsed in such current Expense Year, including the
month of such payment, and twelve (12) as its denominator.  Until a new Estimate Statement is furnished
(which Landlord shall have the right to deliver to Tenant at any time), Tenant
shall pay monthly, with the monthly Base Rent installments, an amount equal to
one-twelfth (1/12) of the total Estimated Excess set forth in the previous
Estimate Statement delivered by Landlord to Tenant.

 

4.5          Taxes and
Other Charges for Which Tenant Is Directly Responsible.

 

4.5.1            Tenant
shall be liable for and shall pay ten (10) days before delinquency, taxes
levied against Tenant’s equipment, furniture, fixtures and any other personal
property located in or about the Premises. 
If any such taxes on Tenant’s equipment, furniture,

 

14

 

fixtures and any other personal property are levied against Landlord or
Landlord’s property or if the assessed value of Landlord’s property is
increased by the inclusion therein of a value placed upon such equipment,
furniture, fixtures or any other personal property and if Landlord pays the
taxes based upon such increased assessment, which Landlord shall have the right
to do regardless of the validity thereof but only under proper protest if
requested by Tenant, Tenant shall upon demand repay to Landlord the taxes so
levied against Landlord or the proportion of such taxes resulting from such
increase in the assessment, as the case may be.

 

4.5.2            If
the tenant improvements in the Premises, whether installed and/or paid for by
Landlord or Tenant and whether or not affixed to the real property so as to
become a part thereof, are assessed for real property tax purposes at a
valuation materially higher than the valuation at which tenant improvements
conforming to Landlord’s “building standard” in other space in the Building are
assessed, then the Tax Expenses levied against Landlord or the property by
reason of such excess assessed valuation shall be deemed to be taxes levied
against personal property of Tenant and shall be governed by the provisions of Section 4.5.1,
above.

 

4.5.3            Notwithstanding
any contrary provision herein, Tenant shall pay prior to delinquency any (i) rent
tax or sales tax, service tax, transfer tax or value added tax, or any other
applicable tax on the rent or services herein or otherwise respecting this
Lease, (ii) taxes assessed upon or with respect to the possession,
leasing, operation, management, maintenance, alteration, repair, use or
occupancy by Tenant of the Premises or any portion of the Project, including
the Project parking facility; or (iii) taxes assessed upon this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises.

 

4.6          Tenant’s
Audit Rights.  Notwithstanding anything to the contrary
contained in this Lease, provided that Tenant is not then in default under this
Lease (beyond the applicable notice and cure period set forth in this
Lease), if Tenant reasonably disputes
any amounts set forth in any Statement described above in this Article 4,
Tenant will have the right, at no cost or expense to Landlord (except as
otherwise provided in this Section 4.6 below), to cause Landlord’s
general ledger of accounts with respect to such disputed Statement only to be
audited by a nationally recognized firm of certified public accountants reasonably
approved by Landlord or by a certified public accountant mutually acceptable to
Landlord and Tenant, either of which has prior experience in the review of
financial statements and which shall not be retained by Tenant on a contingency
basis; provided, however, Tenant shall not have the right to perform any such
audit more than one (1) time for any calendar year during the Lease
Term.  Any audit conducted by or on
behalf of Tenant shall commence within six (6) months following
Tenant’s receipt of the relevant Statement, shall be conducted in a diligent
manner, and shall be completed no later than eighteen (18) months
following Tenant’s receipt of such relevant Statement.  In addition, such audit shall be conducted at
Landlord’s office during Landlord’s normal business hours and in the manner so
as to reasonably minimize interference with Landlord’s business
operations.  Landlord shall have no
obligation and Tenant shall have no right to make photocopies of any of
Landlord’s ledgers, invoices or other items. 
Tenant’s audit shall be limited to an on-site review of Landlord’s
general ledger of accounts.  The amounts
payable under this Section 4.6 by Landlord to Tenant or to Tenant
to Landlord, as the case may be, will be appropriately adjusted on the basis of
such audit.  If such audit discloses an
overstatement of Direct Expenses in excess of seven percent (7%) for such
calendar year, Landlord will reimburse Tenant for the reasonable cost of the
audit; otherwise the cost of such audit including Landlord’s costs incurred in
complying with such audit shall be borne by Tenant.  Tenant agrees to keep, and to cause its
accountant and employees to keep, all information revealed by any audit of
Landlord’s books and records strictly confidential and not to disclose any such
information or permit any such information to be disclosed to anyone other than
Landlord, unless compelled to do so by a court of law.  Tenant hereby
acknowledges that Tenant’s sole right to inspect Landlord’s books and records
and to contest the amount of Direct Expenses payable by Tenant shall be as set
forth in this Section 4.6, and Tenant hereby waives any and all other
rights pursuant to applicable law to inspect such books and records and/or to
contest the amount of Direct Expenses payable by Tenant.  The provisions of this Section 4.6
shall survive the expiration or earlier termination of this Lease.

 

15

 

ARTICLE 5

 

USE OF PREMISES

 

5.1          Permitted Use.  Tenant shall use the Premises solely for the
Permitted Use set forth in Section 7 of the Summary and Tenant
shall not use or permit the Premises or the Project to be used for any other
purpose or purposes whatsoever without the prior written consent of Landlord,
which may be withheld in Landlord’s sole discretion.

 

5.2          Prohibited Uses.  The uses prohibited under this Lease shall
include, without limitation, use of the Premises or a portion thereof for (i) offices
of any agency or bureau of the United States or any state or political
subdivision thereof; (ii) offices or agencies of any foreign governmental
or political subdivision thereof; (iii) offices of any health care
professionals or service organization when used for any purpose other than
general office or administrative use (e.g.,
when used for the treatment of patients, as a hospital or other care facility
or emergency room, etc.); (iv) schools or other training facilities which
are not ancillary to corporate, executive or professional office use; (v) retail
or restaurant uses; or (vi) communications firms such as radio and/or
television stations.  Tenant shall not
allow occupancy density of use of the Premises which is materially greater than
the average density of the other tenants of the Building and Comparable
Buildings using their premises under lease for uses comparable to the Permitted
Use; provided, however, Landlord hereby acknowledges that it has reviewed those
certain space plans prepared by Shlemmer Algaze & Associates dated April 2,
2008, referencing Project No. 20.70.6276, consisting of two (2) sheets,
one entitled Space Plan, Sheet No.: H FOR THE 5th FLOOR, and one entitled Space
Plan, Sheet No.: H for Suite 620 (collectively, the “Final Space Plan”) submitted by Tenant to
Landlord on April 9, 2008, and Landlord agrees that the anticipated
occupancy density of use of the Premises as depicted in such space plan is
hereby deemed to not be in violation of the occupancy density requirement set
forth in this sentence; provided, further, however, Landlord’s review of such
space plan shall not imply that Landlord has reviewed the same for quality,
design, code compliance or other like matters and shall not relieve Tenant of
any of Tenant’s obligations with respect to the delivery of any space plans,
construction documents or drawings or other similar documents as set forth in
the Work Letter.  Tenant further
covenants and agrees that Tenant shall not use, or suffer or permit any person
or persons to use, the Premises or any part thereof for any use or purpose
contrary to the provisions of the Rules and Regulations set forth in Exhibit D, attached hereto, or
in violation of the laws of the United States of America, the State of
California, or the ordinances, regulations or requirements of the local
municipal or county governing body or other lawful authorities having
jurisdiction over the Project) including, without limitation, any such laws,
ordinances, regulations or requirements relating to hazardous materials or
substances, as those terms are defined by applicable laws now or hereafter in
effect.  Tenant shall not do or permit
anything to be done in or about the Premises which will in any way damage the
reputation of the Project or unreasonably obstruct or interfere with the rights
of other tenants or occupants of the Building, or injure or annoy them or use
or allow the Premises to be used for any improper, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or
about the Premises.  Tenant shall not
commit or suffer to be committed any waste in or upon the Premises.

 

5.3          CC&Rs.  Tenant shall comply with all recorded
covenants, conditions, and restrictions currently affecting the Project.  Additionally, Tenant acknowledges that the
Project may be subject to any future covenants, conditions, and restrictions
(the “CC&Rs”) which Landlord,
in Landlord’s discretion, deems reasonably necessary or desirable, and Tenant
agrees that this Lease shall be subject and subordinate to such CC&Rs.  Landlord shall have the right to require
Tenant to execute and acknowledge, within fifteen (15) business days of a
request by Landlord, a “Recognition of Covenants, Conditions, and Restriction,”
in a form substantially similar to that attached hereto as Exhibit F, agreeing to and
acknowledging the CC&Rs.  Landlord represents that, as of
the date of this Lease, there are no existing CC&Rs affecting the Project
that this Lease would violate or that prohibit Tenant’s use of the Premises for
the Permitted Use.

 

16

 

ARTICLE 6

 

SERVICES AND UTILITIES

 

6.1          Standard Tenant Services.  Landlord shall provide the following services
on all days (unless otherwise stated below) during the Lease Term.

 

6.1.1            Subject
to limitations imposed by all governmental rules, regulations and guidelines
applicable thereto, Landlord shall provide heating and air conditioning (“HVAC”) when necessary for normal comfort for normal office
use in the Premises from 8:00 A.M.
to 6:00 P.M. Monday through Friday (the “Building
Hours”), except for the date of observation of New Year’s Day,
Presidents’ Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day and, at Landlord’s discretion, other locally or nationally
recognized holidays (collectively, the “Holidays”).

 

6.1.2            Subject
to the other terms of this Lease, Landlord shall provide electrical wiring and
facilities for connection to Tenant’s lighting fixtures and incidental use
equipment.  The connected electrical load
of Tenant’s incidental use equipment shall not exceed that generally consumed
by a normal general office user in the Project during the Building Hours on a
monthly basis (provided
that this limit shall not be deemed exceeded if the connected load of Tenant’s
incidental use equipment does not exceed two and a half (2.5) watts per usable
square foot of the Premises), and the electricity so furnished for
incidental use equipment will be at a nominal one hundred twenty (120) volts
and no electrical circuit for the supply of such incidental use equipment will
require a current capacity exceeding twenty (20) amperes.  The connected electrical load of Tenant’s
lighting fixtures shall not exceed that generally consumed by a normal general
office user in the Project during the Building Hours on a monthly basis (provided that this limit
shall not be deemed exceeded if the connected load of Tenant’s lighting
fixtures does not exceed one and a half (1.5) watts per usable square foot of
the Premises), and the electricity so furnished for Tenant’s lighting
will be at a nominal 277/480 volts, which electrical usage shall be subject to
applicable laws and regulations, including Title 24.  Tenant will design Tenant’s electrical system
serving any equipment producing nonlinear electrical loads to accommodate such
nonlinear electrical loads, including, but not limited to, oversizing neutral
conductors, derating transformers and/or providing power-line filters.  Engineering plans shall include a calculation
of Tenant’s fully connected electrical design load with and without demand
factors and shall indicate the number of watts of unmetered and submetered
loads.  Tenant shall bear the cost of
replacement of lamps, starters and ballasts for non-Building standard lighting
fixtures within the Premises.

 

6.1.3            Landlord
shall provide city water from the regular Building outlets for drinking,
lavatory and toilet purposes in the Building Common Areas.

 

6.1.4            Landlord
shall provide Building standard janitorial services to the Premises five (5) days
per week, except the date of observation of the Holidays, in and about the
Premises.

 

6.1.5            Landlord
shall provide nonexclusive, non-attended automatic passenger elevator service
during the Building Hours and shall have one elevator available at all other
times.

 

6.1.6            Landlord
shall provide nonexclusive freight elevator service subject to scheduling by
Landlord.

 

6.1.7            Landlord
shall provide access-control services in the Building materially similar to
that provided at Comparable Buildings, including the provision of twenty-four
(24) hours per day, seven (7) days per week, on-site Project access
control equipment, personnel, procedures and/or systems.  Notwithstanding the foregoing, Landlord shall
in no case be liable for personal injury or property damage for any error with
regard to the admission to or exclusion from the Building or project of any
person. 

 

Tenant shall cooperate
fully with Landlord at all times and abide by all regulations and requirements
that Landlord may reasonably prescribe for the proper functioning and
protection of the HVAC, electrical, mechanical and plumbing systems.

 

17

 

6.2          Overstandard Tenant Use.  Tenant shall not, without Landlord’s prior
written consent, use heat-generating machines, machines other than normal
fractional horsepower office machines, or equipment or lighting other than
Building standard lights in the Premises, which may affect the temperature
otherwise maintained by the air conditioning system or increase the water
normally furnished for the Premises by Landlord pursuant to the terms of Section 6.1
of this Lease.  If such consent is given,
Landlord shall have the right to install supplementary air conditioning units
or other facilities in the Premises, including supplementary or additional
metering devices, and the cost thereof, including the cost of installation,
operation and maintenance, increased wear and tear on existing equipment and
other similar charges, shall be paid by Tenant to Landlord upon billing by
Landlord.  If Tenant uses water,
electricity, heat or air conditioning in excess of that supplied by Landlord
pursuant to Section 6.1 of this Lease, Tenant shall pay to
Landlord, upon billing, the cost of such excess consumption, the cost of the
installation, operation, and maintenance of equipment which is installed in
order to supply such excess consumption (or an equitable portion thereof, if
such equipment serves more than one tenant), and the cost of the increased wear
and tear on existing equipment caused by such excess consumption; and Landlord
may install devices to separately meter any increased use and in such event
Tenant shall pay the increased cost directly to Landlord, on demand, at the
rates charged by the public utility company furnishing the same, including the
cost of such additional metering devices (or an equitable portion thereof, if
such devices serve more than one tenant). 
Tenant’s use of electricity shall never exceed the capacity of the
feeders to the Project or the risers or wiring installation, and subject to the
terms of Section 29.32, below, and except for office calculators, dictation equipment,
copier machines, personal computers, and other similar office equipment
consistent with general office use in Comparable Buildings, Tenant shall
not install or use or permit the installation or use of any computer or
electronic data processing equipment in the Premises, without the prior written
consent of Landlord, which consent shall not be unreasonably withheld,
conditioned or delayed.  If Tenant
desires to use heat, ventilation or air conditioning during hours other than
those for which Landlord is obligated to supply such utilities pursuant to the
terms of Section 6.1 of this Lease, Tenant shall give Landlord such
reasonable prior notice, if any, as Landlord shall from time to time establish
as appropriate, of Tenant’s desired use in order to supply such utilities, and
Landlord shall supply such utilities to Tenant at an hourly rate of Forty-Five
Dollars ($45.00), which rate shall be subject to increase but only to the
extent that Landlord’s “Actual Cost” (defined below) of providing such
after-hours utilities to Tenant shall increase 
(which shall be treated as Additional Rent).  For purposes of this Lease, “Actual Cost” shall mean the actual cost
incurred by Landlord, as reasonably determined by Landlord but without charge
for depreciation, profit, overhead or administration, provided that,
notwithstanding the foregoing, any amount actually charged by any unrelated
third party to Landlord for the supply of such utilities shall be deemed
Landlord’s “Actual Cost.”

 

6.3          Interruption of Use.  Tenant agrees that Landlord shall not be
liable for damages, by abatement of Rent (other than as expressly set forth in Section 19.6.2
below) or otherwise, for failure to furnish or delay in furnishing any service
(including telephone and telecommunication services), or for any diminution in
the quality or quantity thereof, when such failure or delay or diminution is
occasioned, in whole or in part, by breakage, repairs, replacements, or
improvements, by any strike, lockout or other labor trouble, by inability to
secure electricity, gas, water, or other fuel at the Building or Project after
reasonable effort to do so, by any riot or other dangerous condition,
emergency, accident or casualty whatsoever, by act or default of Tenant or
other parties, or by any other cause or the installation, use or interruption
of use of any equipment in connection with the furnishing of any of the
foregoing utilities or services, or the limitation, curtailment, rationing or
restriction by governmental authority or utility company action on use of
water, electricity, gas or any other form of energy or any other service or
utility whatsoever serving the Premises, the Building or the Project; and such
failures or delays or diminution shall never be deemed to constitute an
eviction or disturbance of Tenant’s use and possession of the Premises or
relieve Tenant from paying Rent (other than as expressly set forth in Section 19.6.2
below) or performing any of its obligations under this Lease.  Furthermore, Landlord shall not be liable
under any circumstances for a loss of, or injury to, property or for injury to,
or interference with, Tenant’s business, including, without limitation, loss of
profits, however occurring, through or in connection with or incidental to a
failure to furnish any of the services or utilities as set forth in this Article 6.  Landlord may comply with voluntary controls
or guidelines promulgated by any governmental entity relating to the use or
conservation of energy, water, gas, light or electricity or the reduction of
automobile or other emissions without creating any liability of Landlord to
Tenant under this Lease, provided that the Premises are not thereby rendered
untenantable.

 

18

 

6.4          Metered Utilities.  Notwithstanding any contrary provision of
this Lease, Tenant agrees to bear no less than that portion of the cost of the
services provided by Landlord described in this Article 6, which
clearly reflects the use by Tenant upon or with respect to the Premises and the
services provided by Landlord with respect thereto, such as computer utility
costs and unusual electricity, air conditioning, heat or water requirements;
and Landlord may, in its reasonable discretion, increase or decrease, from time
to time during the Term of this Lease, the portion of such costs of such
services to be paid by Tenant so that such portion accurately reflects Tenant’s
use thereof in excess of the building standards reasonably established by
Landlord from time to time for normal office use and thereafter disclosed in
writing to Tenant; provided, however, Tenant’s use of electricity shall not be deemed in excess of
the Building standards if such use does not exceed the standards set forth in Section 6.1.2,
above.  Landlord may, in its
reasonable discretion, install separate meters or submeters to measure, or
Landlord’s engineering department may estimate using industry standards, the
consumption by Tenant of utility resources in excess of the building standards
reasonably established by Landlord from time to time for normal office
use.  The cost of any such meters (or an
equitable portion thereof if any such meters serve more than one tenant) and of
the installation, maintenance, and repair thereof shall be paid for by Tenant,
and Tenant agrees to pay Landlord as Additional Rent for all such water,
electric current or other resource consumed, as shown by said meters, or as
Landlord’s engineering department may estimate using industry standards, at the
rates charged by the local public utility furnishing the same, plus any
additional expense incurred in keeping account of the water, electric current
or other utility service or resource consumed or used by Tenant outside of
normal business hours or normal business days (including heat, air conditioning
or elevator use) at the rates and pursuant to the advance notice requirements
and the procedures therefor established by Landlord from time to time.  Landlord shall bill Tenant periodically for
the Actual Cost of utility usage upon or with respect to the Premises, in
excess of the building standards reasonably established by Landlord from time
to time for normal office use, and the amount of such bill shall be payable
within thirty (30) days of Tenant’s receipt thereof, provided that any
such bill is accompanied by reasonable documentation of Tenant’s excess usage.

 

6.5          Tenant’s Obligations.  Tenant shall pay for, prior to delinquency,
all telephone and all other materials and services not expressly required to be
paid by Landlord, which may be furnished to or used in, on or about the
Premises during the term of this Lease. 
Tenant shall also pay, prior to delinquency, all charges and fees
required to be paid by Tenant pursuant to the Rules and Regulations.

 

6.6          Tenant’s Security System.  Tenant may, at its own expense, install its
own security system in the Premises (provided, that such use shall be at Tenant’s
sole risk).  Tenant shall coordinate the
installation and operation of Tenant’s security system with Landlord to assure
that Tenant’s security system is compatible with Landlord’s security system and
the Building systems and equipment. 
Tenant shall be solely responsible, at Tenant’s sole cost and expense,
for the installation, monitoring, operation and removal of Tenant’s security
system.  Any new security system or
modifications to the existing security system shall be subject to Article 8
of this Lease.

 

ARTICLE 7

 

REPAIRS

 

Landlord shall maintain
in good operating order and keep in good repair and condition the structural
portions of the Building, including, without limitation, the foundation,
floor/ceiling slabs, roof, curtain wall, exterior glass and mullions, columns,
beams, shafts (including elevator shafts), stairs, parking areas, landscaping,
fountains, water falls, exterior Project signage, stairwells, elevator cabs,
plazas, art work, sculptures, men’s and women’s washrooms, building mechanical,
electrical and telephone closets, and all common and public areas
(collectively, “Building Structure”)
and the mechanical, electrical, life safety, plumbing, sprinkler systems and
HVAC systems which were not constructed by Tenant, its partners, subpartners
and their respective officers, agents, servants, employees, and independent
contractors, are not located in the Premises, and/or do not exclusively service
the Premises (collectively, the “Building
Systems”).  Notwithstanding
any provision in this Lease to the contrary, Tenant shall be required to pay
Landlord directly for the cost of any repair to the Building Structure and/or
the Building Systems to the extent required because of Tenant’s use of the
Premises for other than the normal and customary business office operations,
unless and to the extent such damage is covered by 

 

19

 

insurance
carried or required to be carried by Landlord pursuant to Article 10
and to which the waiver of subrogation is applicable (such obligation to the
extent applicable to Tenant as qualified and conditioned will hereinafter be
defined as the “BS/BS Exception”).  Tenant shall, at Tenant’s own expense,
pursuant to the terms of this Lease, including without limitation Article 8
hereof, keep the Premises, including all improvements, fixtures and furnishings
therein, all systems and equipment therein, and the floor or floors of the
Building on which the Premises are located (collectively, the “Maintenance Items”), in good order, repair
and condition at all times during the Lease Term (but such obligation shall not
extend to the Building Structure and the Building System except pursuant to the
BS/BS Exception).  Tenant agrees to
repair any damage to the Premises, Building or Project caused by or in
connection with Tenant’s use thereof, or the use of Tenant’s agents or
employees, or the removal of any articles of personal property, business or
trade fixtures, machinery, equipment, cabinetwork, furniture, movable
partitions or permanent improvements or additions, including repairing the
floor and patching and painting the walls where required by Landlord to
Landlord’s reasonable satisfaction, all at the Tenant’s sole cost and expense.

 

In addition, Tenant
shall, at Tenant’s own expense, but under the supervision and subject to the
prior approval of Landlord, and within a commercially reasonable period of time
specified by Landlord, pursuant to the terms of this Lease, including without
limitation Article 8 hereof, promptly and adequately repair all
damage to the Premises and replace or repair all damaged, broken, or worn
fixtures and appurtenances and/or Maintenance Items  (but such obligation shall not extend to the Building
Structure and the Building System except pursuant to the BS/BS Exception),  except for damage caused by ordinary wear
and tear or beyond the reasonable control of Tenant.  In addition, Tenant covenants and agrees that
Tenant shall, at Tenant’s sole cost, maintain all Maintenance Items in
accordance with specifications set forth in their respective then currently
updated operating manuals and shall, upon request from Landlord, provide
certifications or other documentation acceptable to Landlord that the such
Maintenance Items have been and are being maintained to such operating manual
specifications;  provided however, that,
at Landlord’s option, or if Tenant fails to make such repairs and/or maintain
any Maintenance Items as required herein, Landlord may, but need not, make such
repairs and replacements or perform such maintenance and/or contract with a
service provider to perform such maintenance on a regular basis, and Tenant
shall pay Landlord the cost thereof, including a percentage of the cost thereof
sufficient to reimburse Landlord for all overhead, general conditions, fees and
other costs or expenses arising from Landlord’s involvement with such repairs
and replacements or maintenance forthwith upon being billed for same.  Landlord may, but shall not be required to,
enter the Premises at all reasonable times and upon reasonable notice to Tenant
to perform maintenance on and make repairs to the Premises as described in the
preceding sentence, or to make such repairs, alterations, improvements or
additions to the Project or to any equipment located in the Project as Landlord
shall reasonably desire or deem necessary or as Landlord may be required to do
by governmental or quasi-governmental authority or court order or decree.  Tenant hereby waives the right to make
repairs at Landlord’s expense under the provisions of any laws permitting by a
tenant at the expense of Landlord to the extent allowed by law, in that
Landlord and Tenant have by this Lease made specific provision for such repairs
and have defined their respective obligations relating thereto and Tenant
expressly waives any and all rights under and benefits of subsection 1 of Section 1932
and Sections 1941 and 1942 of the California Civil Code or under any similar
law, statute, or ordinance now or hereafter in effect.

 

ARTICLE 8

 

ADDITIONS AND ALTERATIONS

 

8.1          Landlord’s Consent to Alterations.  Tenant may not make any improvements,
alterations, additions or changes to the Premises or any mechanical, plumbing
or HVAC facilities or systems pertaining to the Premises (collectively, the “Alterations”) without first procuring the prior written
consent of Landlord to such Alterations, which consent shall be requested by
Tenant not less than twenty (20) days prior to the commencement thereof, and
which consent shall not be unreasonably withheld, conditioned or delayed by
Landlord, provided it shall be deemed reasonable for Landlord to withhold its
consent to any Alteration which adversely affects the structural portions or
the systems or equipment of the Building or is visible from the exterior of the
Building.  Notwithstanding the foregoing,
Tenant shall have the right, without Landlord’s consent but upon at least
twenty (20) days prior written notice to Landlord, to do the following: make
strictly cosmetic, non-structural Alterations which do not require the issuance
of a building permit or other governmental approval (such Alterations may be 

 

20

 

specifically referred to as “Cosmetic
Alterations”) to the Premises that
do not (i) involve the expenditure of more than Twenty-Five Thousand
Dollars ($25,000.00) in the aggregate in any Lease Year; (ii) affect the
exterior appearance of the Building or (iii) affect the Building Systems
or the Building Structure.   Except for Section 8.5
and Section 8.7, below, the construction of the initial
improvements to the Premises shall be governed by the terms of the Work Letter
and not the terms of this Article 8.

 

8.2          Manner of Construction.  Landlord may impose, as a condition of its
consent to any and all Alterations or repairs of the Premises or about the
Premises, such requirements as Landlord in its reasonable discretion may deem
desirable, including, but not limited to, the requirement that Tenant utilize
for such purposes only mechanical, electrical and plumbing contractors,
subcontractors, materials, mechanics and materialmen selected by Tenant from a
list provided and approved by Landlord (and all other contractors,
subcontractors, materials, mechanics and materialmen shall be reasonably
approved by Landlord in writing). 
Landlord may further condition its approval of any proposed Alteration
requested by Tenant upon some or all of the following requirements:  (a) that such Alteration shall comply
with Landlord’s then existing reasonable building standards for tenant
improvement work; (b) that Landlord or its designee shall act as the
contractor for the performance of such Alteration (provided that Landlord’s or
its designees costs and/or fees for such Alterations work shall be
competitive); (c) that Landlord shall supervise the performance of such
Alteration; (d) that subcontractor and/or consultants specified or
approved by Landlord shall be utilized to insure the integrity of the Building
mechanical and electrical systems; and (e) in connection with any
alterations that are reasonably estimated to cost in excess of $100,000.00 in
the aggregate, that Tenant provides Landlord, at Tenant’s sole cost and
expense, a performance and/or payment bond or a lien and completion bond in an
amount equal to one and one-half (11⁄2) times the estimated cost of the
Alterations, to insure Landlord that said Alterations shall be completed
satisfactorily to Landlord (provided, however, that in no event shall the
foregoing requirement to provide such bond(s) apply to the Original Tenant
or any Permitted Transferee).  Notwithstanding
the foregoing, with respect to Alterations which involve 10,000 rentable square
feet or more of the Premises, Tenant shall not be required to use Landlord or
its designee as the contractor for the performance of such Alteration work as
set forth in subclause (b), above, and Tenant shall be entitled to
competitively bid such Alteration work to contractors selected by Tenant and
reasonably approved by Landlord in writing (the “Bidding Contractors”), provided that Landlord shall have the
right to require that Landlord or its designee be among the Bidding Contractors
and be permitted to submit a bid to Tenant in connection with such Alteration
work.  If Landlord shall give its
consent, the consent shall be deemed conditioned upon Tenant acquiring a permit
to do the work from appropriate governmental agencies, the furnishing of a copy
of such permit to Landlord prior to the commencement of the work, and the
compliance by Tenant with all conditions of said permit in a prompt and
expeditious manner.  If such Alterations will involve
the use of or disturb hazardous materials or substances existing in the
Premises, Tenant shall comply with Landlord’s reasonable rules and
regulations concerning such hazardous materials or substances.  Tenant shall construct such Alterations and
perform such repairs in a good and workmanlike manner, in conformance with any
and all applicable federal, state, county or municipal laws, rules and
regulations and pursuant to a valid building permit, issued by the City of Long
Beach, all in conformance with Landlord’s reasonable construction rules and
regulations.  In the event Tenant
performs any Alterations in the Premises which require or give rise to
governmentally required changes to the “Base Building,” as that term is defined
below, then Landlord shall, at Tenant’s expense, make such changes to the Base
Building.  The “Base
Building” shall include the structural portions of the Building, and
the public restrooms and the systems and equipment located in the internal core
of the Building on the floor or floors on which the Premises are located.  In performing the work of any such
Alterations, Tenant shall have the work performed in such manner so as not to
unreasonably obstruct access to the Project or any portion thereof, by any
other tenant of the Project, and so as not to obstruct the business of Landlord
or other tenants in the Project.  Tenant
shall not use (and upon notice from Landlord shall cease using) contractors,
services, workmen, labor, materials or equipment that, in Landlord’s reasonable
judgment, would disturb labor harmony with the workforce or trades engaged in
performing other work, labor or services in or about the Building or the Common
Areas.  In addition to Tenant’s
obligations under Article 9 of this Lease, upon completion of any
Alterations, Tenant agrees to cause a Notice of Completion to be recorded in
the office of the Recorder of the County of Los Angeles in accordance with Section 3093
of the Civil Code of the State of California or any successor statute, and
Tenant shall deliver to the management office for the Project a 

 

21

 

reproducible copy of the “as built” drawings of the Alterations as well
as all permits, approvals and other documents issued by any governmental agency
in connection with the Alterations.

 

8.3          Payment for Improvements.  If payment is made directly to contractors,
Tenant shall comply with Landlord’s requirements for final lien releases and
waivers in connection with Tenant’s payment for work to contractors.  Whether or not Tenant orders any work
directly from Landlord, with respect to all Alterations for which Landlord’s
consent is required (i.e., not including Cosmetic Alterations) there shall be
included within the cost of such work and Tenant shall pay to Landlord a fee
for Tenant’s use of Landlord’s personnel involved with the supervision,
coordination, inspection and the like pertaining to such Alterations.  Said fee shall be three percent (3%) of the
cost of the Alterations if the Alterations are performed by an outside general
contractor (whether employed by Landlord or Tenant) and eight percent (8%) of
the cost of the Alterations (including Landlord’s overhead, profit, general
conditions and construction and/or supervision fee) if Landlord (or a
subsidiary or an affiliate of Landlord) is acting as the general contractor,
and such fee shall be paid by Tenant within ten (10) days after rendition
of an invoice therefor.

 

8.4          Construction Insurance.  In addition to the requirements of Article 10
of this Lease, in the event that Tenant makes any Alterations, prior to the
commencement of such Alterations, Tenant shall provide Landlord with evidence
that Tenant carries “Builder’s All Risk”
insurance in an amount reasonably approved by Landlord covering the
construction of such Alterations, and such other insurance as Landlord may
require, it being understood and agreed that all of such Alterations shall be
insured by Tenant pursuant to Article 10 of this Lease immediately
upon completion thereof.

 

8.5          Landlord’s Property.  Landlord and Tenant hereby acknowledge and
agree that (i) all Alterations, Cosmetic Alterations, improvements,
fixtures, equipment and/or appurtenances which may be installed or placed in or
about the Premises, from time to time, shall be at the sole cost of Tenant and
shall be and become the property of Landlord, except as more particularly set
forth below, and (ii) the Improvements to be constructed in the Premises
pursuant to the terms and conditions of the Work Letter shall, upon completion
of the same, be and become a part of the Premises and the property of Landlord,
except that Tenant may remove any Alterations, improvements, fixtures and/or
equipment which Tenant can substantiate to Landlord have not been paid for with
any improvement allowance funds, provided Tenant repairs any damage to the
Premises and Building caused by such removal and returns the affected portion
of the Premises to a building standard tenant improved condition as determined
by Landlord.  Furthermore, Landlord may,
by written notice to Tenant prior to the end of the Lease Term, or given
following any earlier termination of this Lease, require Tenant, at Tenant’s
expense, to remove any Alterations, Cosmetic Alterations, or improvements in
the Premises, (excluding the “Improvements” (as that term is defined in the
Work Letter), the removal of which shall be as set forth in Section 8.6,
below and in the Work Letter), and to repair any damage to the Premises and
Building caused by such removal and return the affected portion of the Premises
to a building standard tenant improved condition as determined by Landlord;
provided, however, notwithstanding the foregoing, in the event that, at the
time Tenant requests Landlord’s consent to any Alterations, if Tenant also
requests in writing a determination of whether Landlord will require
restoration and/or removal of the particular Alterations (or Cosmetic
Alterations) or portions thereof for which consent is being requested upon
expiration or any earlier termination of this Lease, Landlord shall so notify
Tenant along with Landlord’s consent (if such consent is given) (or, with
respect to any Cosmetic Alterations, within five (5) business days
following Landlord’s receipt of notice from Tenant of such Cosmetic
Alterations).  Notwithstanding the
foregoing or the terms of Section 8.6 below or Section 2.3 of the
Work Letter, Tenant shall, without the necessity of any such notice from
Landlord, be required to (I) repair any damage to the Premises and
Building caused in connection with the installation, construction or alteration
of the “Improvements” (as that term is defined in the Work Letter), including,
but not limited to, the repairing and restoring of any holes or saw cuts in the
walls or ceiling, (II) remove all cabling and other “Lines” (as that terms
is defined in Section 29.32, below), and (III) repair any
damage to the Improvements themselves (normal wear and tear excepted).  If Tenant fails to complete any such removal
and/or to repair any damage caused by the removal of any Alterations, Cosmetic
Alterations, or improvements in the Premises (including items (I)-(III),
above), and return the affected portion of the Premises to a building standard
tenant improved condition as determined by Landlord prior to the expiration or
earlier termination of this Lease, then at Landlord’s option, either (A) Tenant
shall be deemed to be holding over in the Premises and Rent shall continue to
accrue in accordance with the terms of Article 16, below, until
such work shall 

 

22

 

be completed, and/or (B) Landlord may do so and may charge the
cost thereof to Tenant.  Tenant hereby
protects, defends, indemnifies and holds Landlord harmless from any liability,
cost, obligation, expense or claim of lien in any manner relating to the
installation, placement, removal or financing of any such Alterations, Cosmetic
Alterations, improvements, fixtures and/or equipment in, on or about the
Premises, except to the extent that such liability, cost, obligation, expense
or claim of lien is due to the willful misconduct or gross negligence of
Landlord, which obligations of Tenant shall survive the expiration or earlier
termination of this Lease.

 

8.6          Landlord Restoration Work With Regard to Improvements.  Landlord shall, by written notice (the “Landlord Restoration Work Notice”)
delivered to Tenant not sooner than eight (8) months prior to the
expiration of the initial Lease Term, inform Tenant of the estimated cost (the “Landlord Restoration Work Cost”) to remove
and/or restore the following Improvements (the “Landlord Restoration Items”) from the Premises (all of which
removal and restoration shall be to Landlord’s then applicable Building
standards, using Building standard materials, procedures and finishes): (i) restoration
of the currently existing multi-tenant corridor on the fifth (5th) floor of the
Building which is anticipated to be removed by Tenant as part of Tenant’s
construction of the Improvements, (ii) restoration of the elevator lobby
on the fifth (5th) floor of the Building; (iii) removal of the walls and
doors of certain offices and identified as office numbers 561, 562, 563, 564,
565, 566, 567, 569, 571, and 572 on the Final Space Plan, and return the area
occupied by such offices to open office space, including, without limitation,
restoration of the ceiling, lighting, sprinklers, and HVAC distribution, and
restoration of all areas affected by any such removal to match existing
finishes, (iv) removal of all floor mounted electrical boxes installed by
Tenant throughout the Premises, including all corresponding conduit and wire,
and repair of all floor penetrations, (v) removal and restoration of
accordion doors, interior closets, and the three (3) entrances furthest
away from the elevator lobby in Suite 620, (vi) removal of any wall
coverings installed in connection with the Improvements and skim coat such
walls to return surface to a smooth, even, paint-ready condition, and (vii) as
more particularly set forth in Section 2.3 of the Work Letter, (as
that term is defined in the Work Letter), any other Improvements that Landlord
identifies at the time of Landlord’s review and approval of the “Final Working
Drawings” (collectively, the “Landlord
Restoration Work”).  Such
Landlord Restoration Work Cost shall include all costs related to plans,
permits, approvals and other documents issued by any governmental agency in
connection with the Landlord Restoration Work. 
Landlord shall determine the Landlord Restoration Work Cost by
competitively bidding the Landlord Restoration Work to not less than three (3) contractors,
and the lowest qualified bid (after necessary adjustments are made for
exclusions or qualifications to such bids) shall be the basis for the
determination of the Landlord Restoration Work Cost.  Within ten (10) business days following
Tenant’s receipt of the Landlord Restoration Work Notice, Tenant shall pay to
Landlord the full amount of such Landlord Restoration Work Cost.  Provided that Landlord shall have received
Tenant’s payment of the Landlord Restoration Work Cost within such ten (10) business
day period, Tenant shall have no further removal and restoration obligations
with respect to the Landlord Restoration Items. 
Notwithstanding the foregoing provisions of this Section 8.6,
in the event that Tenant properly exercises its option to extend the Lease Term
for the Option Term pursuant to the terms and conditions set forth in Section 2.2,
above, Tenant’s obligation to pay the Landlord Restoration Work Cost shall be
waived; provided, however, in the event that despite Tenant’s exercise of its
option to extend the Lease Term, the Lease Term is not actually extended for
any reason, then the foregoing waiver of Tenant’s obligation to pay the
Landlord Restoration Work Cost shall not apply as otherwise set forth in this
sentence.  Neither the terms of this Section 8.6
or the terms of Section 2.3 of the Work Letter shall apply to
Tenant’s removal obligations with respect to Alterations, which shall be
governed by the terms and conditions set forth in Section 8.5,
above.

 

8.7          Recognition of Landlord’s Notice of
Nonresponsibility. 
Before commencing any such work or construction in or about the Premises
(provided Tenant has theretofore obtained Landlord’s consent to the particular
Alteration if required under this Lease), Tenant shall notify Landlord at least
twenty (20) days in advance in writing of the expected date of commencement
thereof.  Landlord shall have the right
at any time and from time to time to post and maintain on the Premises such
notices as Landlord deems necessary to protect the Premises and Landlord from
the liens of mechanics, laborers, materialmen, suppliers or vendors.  In the event that any liens are filed against
the Premises by any mechanics, laborers, materialmen, suppliers or vendors,
Tenant shall execute and/or cause the necessary parties to execute such lien
releases as may be requested by Landlord to clear such liens from the
Premises.  In addition, 

 

23

 

Tenant covenants and agrees that it shall cause any and all contractors
or other parties engaged by Tenant in connection with the construction of any
Alterations, improvements, maintenance, repairs or other items to timely
execute and deliver to Landlord a written acknowledgment in Landlord’s standard
form waiving, to the fullest extent permitted by law, any rights granted under
any applicable owner’s participation doctrine or related doctrines, rules,
laws, ordinances, etc. and to further acknowledge that Landlord’s Notice of
Nonresponsibility (in Landlord’s standard form) in connection therewith has
been verified, has been properly posted, is valid and enforceable against such
party.  Tenant shall indemnify, defend
and hold harmless Landlord in connection with any failure of Tenant to comply,
or failure to cause any such contractors or other parties to comply, with the
terms of this Section 8.7 of this Lease.

 

ARTICLE 9

 

COVENANT AGAINST LIENS

 

Tenant shall keep the
Project and Premises free from any liens or encumbrances arising out of the
work performed, materials furnished or obligations incurred by or on behalf of
Tenant, and shall protect, defend, indemnify and hold Landlord harmless from
and against any claims, liabilities, judgments or costs (including, without
limitation, reasonable attorneys’ fees and costs) arising out of same or in
connection therewith.  Tenant shall give
Landlord notice at least twenty (20) days prior to the commencement of any such
work on the Premises (or such additional time as may be necessary under
applicable laws) to afford Landlord the opportunity of posting and recording
appropriate notices of non-responsibility. 
Landlord shall have the right at all reasonable times to post and keep
posted on the Premises any  notices which
it deems necessary for protection from such liens.  Tenant shall remove any such lien or
encumbrance by bond or otherwise within five (5) business days after
notice by Landlord, and if Tenant shall fail to do so, Landlord may pay the
amount necessary to remove such lien or encumbrance, without being responsible
for investigating the validity thereof. 
The amount so paid shall be deemed Additional Rent under this Lease
payable upon demand, without limitation as to other remedies available to
Landlord under this Lease.  Nothing
contained in this Lease shall authorize Tenant to do any act which shall
subject Landlord’s title to the Building or Premises to any liens or
encumbrances whether claimed by operation of law or express or implied
contract.  Any claim to a lien or
encumbrance upon the Building or Premises arising in connection with any such
work or respecting the Premises not performed by or at the request of Landlord
shall be null and void, or at Landlord’s option shall attach only against
Tenant’s interest in the Premises and shall in all respects be subordinate to
Landlord’s title to the Project, Building and Premises.

 

ARTICLE 10

 

INSURANCE

 

10.1        Indemnification and Waiver.  Except to the extent caused by the active
negligence or willful misconduct of any Landlord Party (as defined herein),
Tenant hereby assumes all risk of damage to property or injury to persons in,
upon or about the Premises from any cause whatsoever and agrees that Landlord,
its partners, subpartners and their respective officers, agents, servants, and
employees (collectively, “Landlord Parties”)
shall not be liable for, and are hereby released from any responsibility for,
any damage either to person or property or resulting from the loss of use
thereof, which damage is sustained by Tenant or by other persons claiming
through Tenant.  Tenant shall indemnify,
defend, protect, and hold harmless the Landlord Parties from any and all loss,
cost, damage, expense and liability (including, but not limited to, court costs
and reasonable attorneys’ fees), except to the extent arising from the active
negligence or willful misconduct of any of the Landlord Parties,  incurred in connection with or arising from: (a) any
causes in, on or about the Premises; (b) the use or occupancy of the
Premises by Tenant or any person claiming under Tenant; (c) any activity,
work, or thing done, or permitted or suffered by Tenant in or about the
Premises; (d)  any wrongful acts or omissions, or negligence of Tenant or
of any person claiming under Tenant, or the contractors, agents, employees,
invitees, or visitors of Tenant or any such person; or (e) any breach,
violation, or non-performance by Tenant or any person claiming under Tenant or
the employees, agents, contractors, invitees, or visitors of Tenant or any such
person of any term, covenant, or provision of this Lease or any law, ordinance,
or governmental requirement of any kind. 
Further, Tenant’s agreement to indemnify Landlord pursuant to this Section 10.1
is not intended and shall not relieve any insurance carrier of its obligations
under policies required to be carried by Tenant pursuant to the provisions of
this Lease, to the extent such policies cover the matters subject to 

 

24

 

Tenant’s indemnification obligations; nor shall they supersede any
inconsistent agreement of the parties set forth in any other provision of this
Lease.  The provisions of this Section 10.1
shall survive the expiration or sooner termination of this Lease with respect
to any claims or liability arising in connection with any event occurring prior
to such expiration or termination.

 

10.2        Landlord’s Fire, Casualty and
Liability Insurance.

 

10.2.1          Landlord shall maintain Commercial
General Liability Insurance with respect to the Building during the Lease Term
covering claims for bodily injury, personal injury and property damage in the
Project Common Areas and with respect to Landlord’s activities in the Premises.

 

10.2.2          Landlord shall insure the Base
Building and Landlord’s remaining interest in the Tenant Improvements and
Alterations with a policy of Physical Damage Insurance including building
ordinance coverage, written on a standard Causes of Loss – Special Form basis
(against loss or damage due to fire and other casualties covered within the
classification of fire and extended coverage, vandalism, and malicious
mischief, sprinkler leakage, water damage and special extended coverage).

 

10.2.3          Landlord shall maintain Boiler and
Machinery/Equipment Breakdown Insurance covering the Building against risks
commonly insured against by a Boiler & Machinery/Equipment Breakdown
policy and such policy shall cover the full replacement costs, without
deduction for depreciation.

 

10.2.4          The foregoing coverages may contain
commercially reasonable deductible amounts, and be on such other terms and
conditions (including policy limits) and issued by such carriers, as Landlord
may from time to time reasonably determine.

 

10.2.5          Additionally, at the option of
Landlord, such insurance coverage may include the risk of (i) earthquake, (ii) flood
damage and additional hazards, (iii) a rental loss endorsement for a
period of up to two (2) years, (iv) one or more loss payee
endorsements in favor of holders of any mortgages or deeds of trust encumbering
the interest of Landlord in the Building, or any portion thereof.

 

Notwithstanding the foregoing
provisions of this Section 10.2, the coverage and amounts of
insurance carried by Landlord in connection with the Building shall, at a
minimum, be comparable to the coverage and amounts of insurance which are
generally carried by landlords of Comparable Buildings, and Worker’s
Compensation and Employer’s Liability coverage as required by applicable
law.  Tenant shall, at Tenant’s expense,
comply with all insurance company requirements pertaining to the use of the
Premises.  If Tenant’s conduct or use of
the Premises causes any increase in the premium for such insurance policies
then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant’s
expense, shall comply with all rules, orders, regulations or requirements of
the American Insurance Association (formerly the National Board of Fire
Underwriters) and with any similar body.

 

10.3        Tenant’s Insurance.  Tenant shall maintain the following coverages
in the following amounts.

 

10.3.1          Commercial
General Liability Insurance covering the insured against claims of bodily
injury, personal injury and property damage (including loss of use thereof)
arising out of Tenant’s operations in, on or about the Premises, and contractual
liabilities covering the insuring provisions of this Lease and the performance
by Tenant of the indemnity agreements set forth in Section 10.1 of
this Lease, for limits of liability not less than:

 

	
  Bodily Injury and 

  Property Damage Liability*

  	
   

  	
  $5,000,000 each occurrence

  $5,000,000 annual aggregate

  
	
   

  	
   

  	
   

  
	
  Personal Injury Liability*

  	
   

  	
  $5,000,000 each occurrence

  $5,000,000 annual aggregate

  

 

*NOTE:  A single limit of $5,000,000 for Bodily
Injury and Property Damage on an “occurrence” basis or a combination of the GL
and an Umbrella or Excess Policy may be used to complete the requested limits.

 

25

 

10.3.2          Physical
Loss or Damage Insurance covering (i) all office furniture, business and
trade fixtures, office equipment, free-standing cabinet work, movable
partitions, merchandise and all other items of Tenant’s property on the
Premises installed by, for, or at the expense of Tenant, (ii) the “Improvements”,
as that term is defined in Section 2.1 of the Work Letter, and any
other improvements which exist in the Premises as of the Lease Commencement
Date (excluding the Base Building) (the “Original Improvements”),
and (iii) all other improvements, alterations and additions to the
Premises.  Such insurance shall be
written on a broad form basis for the full replacement cost value (subject to
reasonable deductible amounts) new without deduction for depreciation of the
covered items and in amounts that meet any co-insurance clauses of the policies
of insurance and shall include coverage for damage or other loss caused by fire
or other peril including, but not limited to, vandalism and malicious mischief,
theft, water damage of any type, including sprinkler leakage, bursting or stoppage of
pipes, and explosion, and providing loss of income coverage for a period of one
year.

 

10.3.3          Worker’s
Compensation and Employer’s Liability or other similar insurance pursuant to
all applicable state and local statutes and regulations.

 

10.4        Form of Policies.  The minimum limits of policies of insurance
required of Tenant under this Lease shall in no event limit the liability of
Tenant under this Lease.  Such insurance
shall (i) name Landlord, and any other party the Landlord so specifies, as
an additional insured, including Landlord’s managing agent, if any; (ii) specifically
cover the liability assumed by Tenant under this Lease, including, but not
limited to, Tenant’s obligations under Section 10.1 of this Lease; (iii) be
issued by an insurance company having a rating of not less than A-X in Best’s
Insurance Guide or which is otherwise acceptable to Landlord and licensed to do
business in the State of California; (iv) be primary insurance as to all
claims thereunder and provide that any insurance carried by Landlord is excess
and is non-contributing with any insurance requirement of Tenant; (v) be
in form and content reasonably acceptable to Landlord; and (vi) provide
that said insurance shall not be canceled or a material policy change be made
unless thirty (30) days’ prior written notice shall have been given to Landlord
and any mortgagee of Landlord.  All
commercial general liability and property damage liability policies maintained
by Tenant will contain a provision that Landlord and any other additional
insured, although named as an insured, will nevertheless be entitled to recover
under such policies for any loss sustained by Landlord, Landlord’s agents, and
Landlord’s employees as a result of the acts or omissions of Tenant.  The insurance required to be maintained by
Tenant under this Article 10 may be subject to commercially
reasonable deductibles (not to exceed 
$100,000); provided, however, that the Original Tenant (and any
Permitted Transferee to whom all of Tenant’s interest in this Lease has been
assigned) shall be permitted to maintain commercially reasonable deductibles
(in excess of $100,000) in connection with its coverage for perils caused by
flood, windstorm and/or earthquakes. 
Tenant shall deliver certificates evidencing such policies to Landlord
before the earlier to occur of (A) Lease Commencement Date, and (B) the
date Tenant commences to occupy any portion of the Premises, and at least
thirty (30) days before the expiration dates thereof.  In the event Tenant shall fail to procure
such insurance, or to deliver such certificates to Landlord, Landlord may, at
its option, procure such policies for the account of Tenant, and the cost
thereof shall be paid to Landlord within five (5) days after delivery to
Tenant of bills therefor.

 

10.5        Subrogation.  Landlord and Tenant intend that their
respective property loss risks shall be borne by reasonable insurance carriers
to the extent above provided, and Landlord and Tenant hereby agree to look
solely to, and seek recovery only from, their respective insurance carriers in
the event of a property loss to the extent that such coverage is agreed to be
provided hereunder.  The parties each
hereby waive all rights and claims against each other for such losses, and
waive all rights of subrogation of their respective insurers, provided such
waiver of subrogation shall not affect the right to the insured to recover
thereunder.  The parties agree that their
respective insurance policies are now, or shall be, endorsed such that the
waiver of subrogation shall not affect the right of the insured to recover
thereunder, so long as no material additional premium is charged therefor.  Tenant will cause all other occupants of the
Premises claiming by, under, or through Tenant to execute and deliver to
Landlord a waiver of claims similar to the waiver in this Section 10.5
and to obtain such waiver of subrogation rights endorsements.

 

10.6        Additional Insurance Obligations.  Tenant shall carry and maintain during the
entire Lease Term, at Tenant’s sole cost and expense, increased amounts of the
insurance required to be carried by Tenant pursuant to this Article 10
and such other reasonable types of 

 

26

 

insurance coverage and in such reasonable amounts covering the Premises
and Tenant’s operations therein, as may be reasonably requested by Landlord,
but in no event in excess of the amounts and types of insurance then being
required by landlords of other Comparable Buildings.

 

ARTICLE 11

 

DAMAGE AND DESTRUCTION

 

11.1        Repair of Damage to Premises by Landlord.  To the extent that Landlord does not already
have actual knowledge of the same, Tenant shall promptly notify Landlord of any
damage to the Premises resulting from fire or any other casualty.  If the Premises or any Common Areas serving
or providing access to the Premises shall be damaged by fire or other casualty,
Landlord shall promptly and diligently, subject to reasonable delays for insurance
adjustment or other matters beyond Landlord’s reasonable control, and subject
to all other terms of this Article 11, restore the Base Building
and such Common Areas.  Such restoration
shall be to substantially the same condition of the Base Building and the
Common Areas prior to the casualty, except for modifications required by zoning
and building codes and other laws or by the holder of a mortgage on the
Building or Project or any other modifications to the Common Areas deemed
desirable by Landlord, provided that access to the Premises and any common
restrooms serving the Premises shall not be materially impaired.  Upon the occurrence of any damage to the
Premises, upon notice (the “Landlord Repair Notice”)
to Tenant from Landlord, Tenant shall assign to Landlord (or to any party
designated by Landlord) all applicable insurance proceeds payable to Tenant
under Tenant’s insurance required under Section 10.3 of this Lease,
and Landlord shall repair any injury or damage to the Improvements and the Original
Improvements installed in the Premises and shall return such Improvements and
Original Improvements to their original condition; provided that if the cost of
such repair by Landlord exceeds the amount of insurance proceeds received by
Landlord from Tenant’s insurance carrier, as assigned by Tenant, the cost of
such repairs shall be paid by Tenant to Landlord prior to Landlord’s
commencement of repair of the damage.  In
the event that Landlord does not deliver the Landlord Repair Notice within
sixty (60) days following the date the casualty becomes known to Landlord,
Tenant shall, at its sole cost and expense, repair any injury or damage to the
Improvements and the Original Improvements installed in the Premises and shall
return such Improvements and Original Improvements to their original
condition.  Whether or not Landlord
delivers a Landlord Repair Notice, prior to the commencement of construction,
Tenant shall submit to Landlord, for Landlord’s review and approval, all plans,
specifications and working drawings relating thereto, and Landlord shall select
the contractors to perform such improvement work.  Landlord shall not be liable for any
inconvenience or annoyance to Tenant or its visitors, or injury to Tenant’s
business resulting in any way from such damage or the repair thereof; provided
however, that if such fire or other casualty shall have damaged the Premises or
Common Areas necessary to Tenant’s occupancy, Landlord shall allow Tenant a
proportionate abatement of Rent to the extent Landlord is reimbursed from the
proceeds of rental interruption insurance purchased by Landlord as part of
Operating Expenses, during the time and to the extent the Premises are unfit
for occupancy for the purposes permitted under this Lease, and not occupied by
Tenant as a result thereof; unless Landlord shall make available to Tenant,
during the period of such repair, other space in the Building or the Project
which is reasonably suitable for the temporary conduct of Tenant’s business;
provided, further, however, that if the damage or destruction is due to the
negligence or willful misconduct of Tenant or any of its agents, employees,
contractors, invitees or guests, Tenant shall be responsible for any
reasonable, applicable insurance deductible (which shall be payable to Landlord
upon demand) and there shall be no rent abatement.  In the event that Landlord shall not deliver
the Landlord Repair Notice, Tenant’s right to rent abatement pursuant to the
preceding sentence shall terminate as of the date which is reasonably
determined by Landlord to be the date Tenant should have completed repairs to
the Premises assuming Tenant used reasonable due diligence in connection
therewith.  Landlord shall not be liable
for any inconvenience or annoyance to Tenant or injury to the business of
Tenant resulting in any way from such damage or the undertaking of such repair,
reconstruction or restoration.  Landlord
shall have no obligation to carry insurance of any kind on Tenant’s Alterations
or upon Tenant’s goods, furniture or furnishings or on Tenant’s property, and
Landlord shall not be obligated to repair any damage thereto or to replace the
same.  Tenant hereby waives the
provisions of any California law which is in conflict with the provisions of
this Article 11.

 

11.2        Landlord’s Option to Repair.  Notwithstanding the terms of Section 11.1
of this Lease, Landlord may elect not to rebuild and/or restore the Premises,
Building and/or Project, 

 

27

 

and instead terminate this Lease, by notifying Tenant in writing of
such termination within sixty (60) days after the date of discovery of the
damage, such notice to include a termination date giving Tenant sixty (60) days
to vacate the Premises, but Landlord may so elect only if the Building or
Project shall be damaged by fire or other casualty or cause, whether or not the
Premises are affected, and one or more of the following conditions is present: (i) in
Landlord’s reasonable judgment, repairs cannot reasonably be completed within
ninety (90) days after the date of discovery of the damage (when such repairs
are made without the payment of overtime or other premiums); (ii) the
holder of any mortgage on the Building or Project or ground lessor with respect
to the Building or Project shall require that the insurance proceeds or any
portion thereof be used to retire the mortgage debt, or shall terminate the
ground lease, as the case may be; (iii) the damage is not fully covered by
Landlord’s insurance policies (subject to reasonable deductible amounts);
or (iv) Landlord decides to rebuild the Building or Common Areas so that
they will be substantially different structurally or architecturally; (v) the
damage occurs during the last twelve (12) months of the Lease Term ; or (vi) any
owner of any other portion of the Project, other than Landlord, does not intend
to repair the damage to such portion of the Project; provided, however, that if
Landlord does not elect to terminate this Lease pursuant to Landlord’s
termination right as provided above, and the repairs cannot, in the reasonable
opinion of Landlord, be completed within one hundred eighty (180) days after
being commenced, Tenant may elect, no earlier than sixty (60) days after the
date of the damage and not later than ninety (90) days after the date of such
damage, to terminate this Lease by written notice to Landlord effective as of
the date specified in the notice, which date shall not be less than thirty (30)
days nor more than sixty (60) days after the date such notice is given by
Tenant.  Furthermore, if neither Landlord
nor Tenant has terminated this Lease, and the repairs are not actually
substantially completed within such 180-day period, Tenant shall have the right
to terminate this Lease during the first five (5) business days of each
calendar month following the end of such period until such time as the repairs
are complete, by notice to Landlord (the “Damage
Termination Notice”), effective as of a date set forth in the Damage
Termination Notice (the “Damage Termination
Date”), which Damage Termination Date shall not be less than ten (10) business
days following the end of each such month. 
Notwithstanding the foregoing, if Tenant delivers a Damage Termination
Notice to Landlord, then Landlord shall have the right to suspend the occurrence
of the Damage Termination Date for a period ending thirty (30) days after the
Damage Termination Date set forth in the Damage Termination Notice by
delivering to Tenant, within five (5) business days of Landlord’s receipt
of the Damage Termination Notice, a certificate of Landlord’s contractor
responsible for the repair of the damage certifying that it is such contractor’s
good faith judgment that the repairs shall be substantially completed within
thirty (30) days after the Damage Termination Date.  If repairs shall be substantially completed
prior to the expiration of such thirty-day period, then the Damage Termination
Notice shall be of no force or effect, but if the repairs shall not be
substantially completed within such thirty-day period, then this Lease shall
terminate upon the expiration of such thirty-day period.  At any time, from time to time, after the
date occurring sixty (60) days after the date of the damage, Tenant may request
that Landlord inform Tenant of Landlord’s reasonable opinion of the date of
completion of the repairs and Landlord shall respond to such request within
five (5) business days. 
Notwithstanding the provisions of this Section 11.2, Tenant
shall have the right to terminate this Lease under this Section 11.2
only if each of the following conditions is satisfied: (a) the damage to
the Project by fire or other casualty was not caused by the gross negligence or
intentional act of Tenant or its partners or subpartners and their respective
officers, agents, servants, employees, and independent contractors; (b) Tenant
is not then in default under this Lease; (c) as a result of the damage,
Tenant cannot reasonably conduct business from the Premises; and, (d) as a
result of the damage to the Project, Tenant does not occupy or use the Premises
at all.  It is hereby understood that if
Landlord is obligated to or elects to repair or restore as herein provided,
Landlord shall be obligated to make repairs or restoration only of those
portions of the Building and the Premises which were originally provided at
Landlord’s expense, and the repair and restoration of items not provided at
Landlord’s expense shall be the obligation of Tenant.

 

11.3        Mutual Release.  Upon any termination of this Lease under any
of the provisions of this Article 11, the parties shall be released
thereby without further obligation to the other from the date possession of the
Premises is surrendered to Landlord, except for items which have theretofore
accrued and are then unpaid or for the return of any Security Deposit or
prepaid Rent and except for any provisions contained in this Lease expressly
designated as surviving the expiration or earlier termination of this Lease.

 

28

 

11.4        Delay in Restoration.  Tenant shall not be released from any of its
obligations under this Lease by reason of fire or other casualty, except to the
extent and upon the conditions expressly stated in this Article 11.  Notwithstanding anything to the contrary
contained herein, should Landlord be delayed or prevented from repairing or
restoring the damaged Premises by reason of acts of God, war, governmental
restrictions, inability to procure the necessary labor or materials, delays in
effecting insurance recovery, or any other cause beyond the reasonable control
of Landlord, Landlord shall be relieved of its obligation to make such repairs
or restoration for a period equal to such delay or prevention.

 

11.5        Waiver of Statutory Provisions.  The provisions of this Lease, including this Article 11,
constitute an express agreement between Landlord and Tenant with respect to any
and all damage to, or destruction of, all or any part of the Premises, the
Building or the Project, and any statute or regulation of the State of
California, including, without limitation, Sections 1932(2) and 1933(4) of
the California Civil Code, with respect to any rights or obligations concerning
damage or destruction in the absence of an express agreement between the
parties, and any other statute or regulation, now or hereafter in effect, shall
have no application to this Lease or any damage or destruction to all or any
part of the Premises, the Building or the Project.

 

ARTICLE 12

 

NONWAIVER

 

No provision of this
Lease shall be deemed waived by either party hereto unless expressly waived in
a writing signed thereby.  The waiver by
either party hereto of any breach of any term, covenant or condition herein
contained shall not be deemed to be a waiver of any subsequent breach of same
or any other term, covenant or condition herein contained.  The subsequent acceptance of Rent hereunder
by Landlord shall not be deemed to be a waiver of any preceding breach by
Tenant of any term, covenant or condition of this Lease, other than the failure
of Tenant to pay the particular Rent so accepted, regardless of Landlord’s
knowledge of such preceding breach at the time of acceptance of such Rent.  No acceptance of a lesser amount than the
Rent herein stipulated shall be deemed a waiver of Landlord’s right to receive
the full amount due, nor shall any endorsement or statement on any check or
payment or any letter accompanying such check or payment be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord’s right to recover the full amount due.  No receipt of monies by Landlord from Tenant
after the termination of this Lease shall in any way alter the length of the
Lease Term or of Tenant’s right of possession hereunder, or after the giving of
any notice shall reinstate, continue or extend the Lease Term or affect any
notice given Tenant prior to the receipt of such monies, it being agreed that
after the service of notice or the commencement of a suit, or after final
judgment for possession of the Premises, Landlord may receive and collect any
Rent due, and the payment of said Rent shall not waive or affect said notice,
suit or judgment.

 

ARTICLE 13

 

CONDEMNATION

 

If the whole or any part
of the Premises, Building or Project shall be taken by power of eminent domain
or condemned by any competent authority for any public or quasi-public use or
purpose, or if any adjacent property or street shall be so taken or condemned,
or reconfigured or vacated by such authority in such manner as to require the
use, reconstruction or remodeling of any part of the Premises, Building or
Project, or if Landlord shall grant a deed or other instrument in lieu of such
taking by eminent domain or condemnation, Landlord shall have the option to
terminate this Lease effective as of the date possession is required to be
surrendered to the authority.  If more
than twenty-five percent (25%) of the rentable square feet of the Premises is
taken, or if access to the Premises is substantially impaired, in each case for
a period in excess of one hundred eighty (180) days, Tenant shall have the
option to terminate this Lease effective as of the date possession is required
to be surrendered to the authority.  No
taking of a portion of the Building not including the Premises, no taking of another
building within the Project, no taking of Project common area and no taking of
Building common area shall permit Tenant to terminate this Lease, unless Tenant
is thereby prevented on a permanent basis from obtaining access to the
Premises.  If any part of the Building
other than the Premises shall be so taken or appropriated, Landlord shall have
the right at its option to terminate this Lease.  Tenant shall not because of such taking
assert any claim against Landlord or the authority for any compensation 

 

29

 

because
of such taking and Landlord shall be entitled to the entire award or payment in
connection therewith, except that Tenant shall have the right to file any
separate claim available to Tenant for any taking of Tenant’s personal property
and fixtures belonging to Tenant and removable by Tenant upon expiration of the
Lease Term pursuant to the terms of this Lease, and for moving expenses, so
long as such claims do not diminish the award available to Landlord, its ground
lessor with respect to the Building or Project or its mortgagee, and such claim
is payable separately to Tenant.  All
Rent shall be apportioned as of the date of such termination.  If any part of the Premises shall be taken,
and this Lease shall  not be so
terminated, the Rent shall be proportionately abated.  Tenant hereby waives any and all rights it
might otherwise have pursuant to Section 1265.130 of The California Code
of Civil Procedure.  Notwithstanding
anything to the contrary contained in this Article 13, in the event
of a temporary taking of all or any portion of the Premises for a period of one
hundred and eighty (180) days or less, then this Lease shall not terminate but
the Base Rent and the Additional Rent shall be abated for the period of such
taking in proportion to the ratio that the amount of rentable square feet of
the Premises taken bears to the total rentable square feet of the
Premises.  Landlord shall be entitled to
receive the entire award made in connection with any such temporary taking.

 

ARTICLE 14

 

ASSIGNMENT AND SUBLETTING

 

14.1        Transfers.  Tenant shall not, without the prior written
consent of Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit
any lien to attach to, or otherwise transfer, this Lease or any interest
hereunder, permit any assignment, or other transfer of this Lease or any
interest hereunder by operation of law, sublet the Premises or any part
thereof, or enter into any license or concession agreements or otherwise permit
the occupancy or use of the Premises or any part thereof by any persons other
than Tenant and its employees and contractors (all of the foregoing are
hereinafter sometimes referred to collectively as “Transfers”
and any person to whom any Transfer is made or sought to be made is hereinafter
sometimes referred to as a “Transferee”).  If Tenant desires Landlord’s consent to any
Transfer, Tenant shall notify Landlord in writing, which notice (the “Transfer Notice”) shall include (i) the proposed
effective date of the Transfer, which shall not be less than thirty (30) days
nor more than one hundred eighty (180) days after the date of delivery of the
Transfer Notice, (ii) a description of the portion of the Premises to be
transferred (the “Subject Space”),
(iii) all of the terms of the proposed Transfer and the consideration
therefor, including calculation of the “Transfer Premium”, as that term is
defined in Section 14.3 below, in connection with such Transfer,
the name and address of the proposed Transferee, and a copy of all existing
executed and/or proposed documentation pertaining to the proposed Transfer,
including all then existing operative documents to be executed to evidence such
Transfer or the agreements incidental or related to such Transfer, provided
that Landlord shall have the right to require Tenant to utilize Landlord’s
standard Transfer documents in connection with the documentation of such
Transfer, (iv) current financial statements of the proposed Transferee
certified by an officer, partner or owner thereof, business credit and personal
references and history of the proposed Transferee and any other information
required by Landlord which will enable Landlord to determine the financial
responsibility, character, and reputation of the proposed Transferee, nature of
such Transferee’s business and proposed use of the Subject Space and (v) an
executed estoppel certificate from Tenant in the form attached hereto as Exhibit E.  Any Transfer made without Landlord’s prior
written consent shall, at Landlord’s option, be null, void and of no effect, and
shall, at Landlord’s option, constitute a default by Tenant under this
Lease.  Whether or not Landlord consents
to any proposed Transfer, Tenant shall pay Landlord’s review and processing
fees, as well as any reasonable professional fees (including, without
limitation, attorneys’, accountants’, architects’, engineers’ and consultants’
fees) incurred by Landlord, within thirty (30) days after written request by
Landlord, not to exceed Two Thousand and No/100 Dollars ($2,000.00) in the
aggregate per Transfer in the ordinary course of business.

 

14.2        Landlord’s Consent.  Landlord shall not unreasonably withhold its
consent to any proposed Transfer of the Subject Space to the Transferee on the
terms specified in the Transfer Notice. 
Without limitation as to other reasonable grounds for withholding
consent, the parties hereby agree that it shall be reasonable under this Lease
and under any applicable law for Landlord to withhold consent to any proposed
Transfer where one or more of the following apply:

 

30

 

14.2.1          The
Transferee is of a character or reputation or engaged in a business which is
not consistent with the quality of the Building (as reflected by the then
existing tenants of the Building and their respective permitted uses vis-à-vis
their location in the Building);

 

14.2.2          The
Transferee intends to use the Subject Space for purposes which are not
permitted under this Lease;

 

14.2.3          The
Transferee is either a governmental agency or instrumentality thereof;

 

14.2.4          The
Transferee is not a party of reasonable financial worth and/or financial
stability in light of the responsibilities to be undertaken in connection with
the Transfer on the date consent is requested;

 

14.2.5          The
proposed Transfer would cause a violation of another lease for space in the
Project, or would give an occupant of the Project a right to cancel its lease;

 

14.2.6          The
terms of the proposed Transfer will allow the Transferee to exercise a right of
renewal, right of expansion, right of first offer, or other similar right held
by Tenant (or will allow the Transferee to occupy space leased by Tenant
pursuant to any such right); or

 

14.2.7          Either
the proposed Transferee, or any person or entity which directly or indirectly,
controls, is controlled by, or is under common control with, the proposed
Transferee, is negotiating with Landlord to lease space in the Project at such
time, and Landlord has comparable space in the Project available to lease to
such Transferee; or

 

14.2.8          The
Transferee does not intend to occupy the entire Subject Space and conduct its
business therefrom for a substantial portion of the term of the Transfer.

 

If Landlord consents to
any Transfer pursuant to the terms of this Section 14.2 (and does
not exercise any recapture rights Landlord may have under Section 14.4
of this Lease), Tenant may within six (6) months after Landlord’s consent,
but not later than the expiration of said six-month period, enter into such
Transfer of the Premises or portion thereof, upon substantially the same terms
and conditions as are set forth in the Transfer Notice furnished by Tenant to
Landlord pursuant to Section 14.1 of this Lease, provided that if
there are any changes in the terms and conditions from those specified in the
Transfer Notice (i) such that Landlord would initially have been entitled
to refuse its consent to such Transfer under this Section 14.2, or (ii) which
would cause the proposed Transfer to be more favorable to the Transferee than
the terms set forth in Tenant’s original Transfer Notice, Tenant shall again
submit the Transfer to Landlord for its approval and other action under this Article 14
(including Landlord’s right of recapture, if any, under Section 14.4
of this Lease).  Notwithstanding anything
to the contrary in this Lease, if Tenant or any proposed Transferee claims that
Landlord has unreasonably withheld or delayed its consent under Section 14.2
or otherwise has breached or acted unreasonably under this Article 14,
their sole remedies shall be a suit for contract damages (other than damages
for injury to, or interference with, Tenant’s business including, without
limitation, loss of profits, however occurring) or declaratory judgment and an
injunction for the relief sought without any monetary damages, and Tenant hereby
waives all other remedies, including, without limitation, any right at law or
equity to terminate this Lease, on its own behalf and, to the extent permitted
under all applicable laws, on behalf of the proposed Transferee.  Tenant shall indemnify, defend and hold
harmless Landlord from any and all liability, losses, claims, damages, costs,
expenses, causes of action and proceedings involving any third party or parties
(including without limitation Tenant’s proposed subtenant or assignee) who
claim they were damaged by Landlord’s wrongful withholding or conditioning of
Landlord’s consent,
except to the extent that a court of competent jurisdiction, in connection with
Tenant’s or a proposed Transferee’s suit for contract damages, declaratory
judgment and/or injunction as set forth above, determines that Landlord
unreasonably withheld or delayed its consent to a Transfer under this Article 14.

 

14.3        Transfer Premium.  If Landlord consents to a Transfer, as a
condition thereto which the parties hereby agree is reasonable, Tenant shall
pay to Landlord fifty percent (50%) of any “Transfer Premium,” as that term is
defined in this Section 14.3, received by Tenant from such
Transferee.  “Transfer
Premium” shall mean all rent, additional rent or other consideration
payable by such Transferee in connection with the Transfer in excess of the
Rent and Additional Rent payable by Tenant under this Lease during the term of
the Transfer on a per rentable square 

 

31

 

foot basis if less than all of the Premises is transferred, after
deducting the reasonable expenses incurred by Tenant for (i) any changes,
alterations and improvements to the Premises in connection with the Transfer, (ii) any
free base rent reasonably provided to the Transferee, (iii) any brokerage
commissions and/or marketing fees payable by Tenant in connection with the
Transfer, (iv) any key money, bonus money or other cash consideration paid
by Tenant to Transferee for furniture, fixtures, equipment and/or similar
items; (v) any attorney fees actually incurred by Tenant in connection
with such Transfer; (vi) any lease takeover incurred by Tenant in
connection with the Transfer; and (vii) out-of-pocket costs of advertising
the space subject to the Transfer (collectively, “Subleasing Costs”).  “Transfer
Premium” shall also include, but not be limited to, key money, bonus money or
other cash consideration paid by Transferee to Tenant in connection with such
Transfer, and any payment in excess of fair market value for services rendered
by Tenant to Transferee or for assets, fixtures, inventory, equipment, or
furniture transferred by Tenant to Transferee in connection with such Transfer;
provided, however, under no circumstances shall Landlord be paid any Transfer Premium
until Tenant has recovered all applicable Tenant’s Subleasing Costs for each
applicable Transferred Space, it being understood that if in any year the gross
revenues, less the deductions set forth and included in Tenant’s Subleasing
Costs, are less than any and all costs actually paid in assigning or subletting
the affected space (collectively “Transaction
Costs”), the amount of the excess Transaction Costs shall be carried
over to the next year and then deducted from net revenues with the procedure repeated
until a Transfer Premium is achieved.

 

14.4        Landlord’s Option as to Subject Space.  Notwithstanding anything to the contrary
contained in this Article 14, in the event Tenant contemplates a
Transfer of all or a portion of the Premises (or in the event of any other
Transfer or Transfers entered into by Tenant as a subterfuge in order to avoid
the terms of this Section 14.4), Tenant shall give Landlord notice
(the “Intention to Transfer Notice”)
of such contemplated Transfer (whether or not the contemplated Transferee or
the terms of such contemplated Transfer have been determined).  The Intention to Transfer Notice shall
specify the portion of and amount of rentable square feet of the Premises which
Tenant intends to Transfer (the “Contemplated
Transfer Space”), the contemplated date of commencement of the
Contemplated Transfer (the “Contemplated
Effective Date”), and the contemplated length of the term of such
contemplated Transfer, and shall specify that such Intention to Transfer Notice
is delivered to Landlord pursuant to this Section 14.4 in order to
allow Landlord to elect to recapture the Contemplated Transfer Space for the
term set forth in the Intention to Transfer Notice.  Thereafter, Landlord shall have the option,
by giving written notice (the “Recapture
Notice”) to Tenant within thirty (30) days after receipt of any
Intention to Transfer Notice, to recapture the Contemplated Transfer
Space.  Such recapture shall cancel and
terminate this Lease with respect to such Contemplated Transfer Space as of the
Contemplated Effective Date.  However, if
Landlord delivers a Recapture Notice to Tenant, Tenant may, within ten (10) days
after Tenant’s receipt of the Recapture Notice, deliver written notice to
Landlord indicating that Tenant is rescinding its request for consent to the
proposed Transfer, in which case such Transfer shall not be consummated and
this Lease shall remain in full force and effect as to the portion of the
Premises that was the subject of the Transfer. 
Tenant’s failure to so notify Landlord in writing within said ten (10) day
period shall be deemed to constitute Tenant’s election to allow the Recapture
Notice to be effective.  In the event of
a recapture by Landlord, if this Lease shall be canceled with respect to less
than the entire Premises, the Rent reserved herein shall be prorated on the
basis of the number of rentable square feet retained by Tenant in proportion to
the number of rentable square feet contained in the Premises, and this Lease as
so amended shall continue thereafter in full force and effect, and upon request
of either party, the parties shall execute written confirmation of the same;
and Landlord shall (a) install, on a commercially reasonable basis, any
corridor and/or demising wall, at Landlord’s expense, which is required as a
result of the termination of the Lease with respect to less than the entire
Premises, (b) balance the HVAC on the floor containing the Premises, and (c) perform
any electrical or plumbing work necessary to separate the portion of the Premises
that is terminated from the remainder of the Premises.  If Landlord declines, or fails to elect in a
timely manner, to recapture such Contemplated Transfer Space under this Section 14.4,
then, subject to the other terms of this Article 14, for a period
of ninety (90) days (the “Ninety Day Period”)
commencing on the last day of such thirty (30) day period, Landlord shall
not have any right to recapture the Contemplated Transfer Space with respect to
any Transfer made during the Ninety Day Period, provided that any such Transfer
is substantially on the terms set forth in the Intention to Transfer Notice,
and provided further that any such Transfer shall be subject to the remaining
terms of this Article 14.  If
such a Transfer is not so consummated within the Ninety Day Period (or if a
Transfer is so consummated, then upon the expiration of the term of any 

 

32

 

Transfer of such Contemplated Transfer Space consummated within such
Ninety Day Period), Tenant shall again be required to submit a new Intention to
Transfer Notice to Landlord with respect any contemplated Transfer, as provided
above in this Section 14.4.

 

14.5        Effect of Transfer.  If Landlord consents to a Transfer, (i) the
terms and conditions of this Lease shall in no way be deemed to have been
waived or modified, (ii) such consent shall not be deemed consent to any
further Transfer by either Tenant or a Transferee, (iii) Tenant shall
deliver to Landlord, promptly after execution, an original executed copy of all
documentation pertaining to the Transfer in form reasonably acceptable to
Landlord, (iv) Tenant shall furnish upon Landlord’s request a complete
statement, certified by an independent certified public accountant, or Tenant’s
chief financial officer, setting forth in detail the computation of any
Transfer Premium Tenant has derived and shall derive from such Transfer, and (v) no
Transfer relating to this Lease or agreement entered into with respect thereto,
whether with or without Landlord’s consent, shall relieve Tenant or any
guarantor of the Lease from any liability under this Lease, including, without
limitation, in connection with the Subject Space.  Landlord or its authorized representatives
shall have the right at all reasonable times to audit the books, records and
papers of Tenant relating to any Transfer, and shall have the right to make
copies thereof.  If the Transfer Premium
respecting any Transfer shall be found understated, Tenant shall, within thirty
(30) days after demand, pay the deficiency, and if understated by more than
four percent (4%), Tenant shall pay Landlord’s costs of such audit.

 

14.6        Additional Transfers.  For purposes of this Lease, the term “Transfer” shall also include (i) if Tenant is a
partnership, the withdrawal or change, voluntary, involuntary or by operation
of law, of fifty percent (50%) or more of the partners, or transfer of fifty
percent (50%) or more of partnership interests, within a twelve (12)-month
period, or the dissolution of the partnership without immediate reconstitution
thereof, and (ii) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded
through an exchange or over the counter), (A) the dissolution, merger,
consolidation or other reorganization of Tenant or (B) the sale or other
transfer of an aggregate of fifty percent (50%) or more of the voting shares of
Tenant (other than to immediate family members by reason of gift or death),
within a twelve (12)-month period, or (C) the sale, mortgage, hypothecation
or pledge of an aggregate of fifty percent (50%) or more of the value of the
unencumbered assets of Tenant within a twelve (12)-month period.

 

14.7        Occurrence of Default.  Any Transfer hereunder shall be subordinate
and subject to the provisions of this Lease, and if this Lease shall be
terminated during the term of any Transfer, Landlord shall have the right
to:  (i) treat such Transfer as
canceled and repossess the Subject Space by any lawful means, or (ii) require
that such Transferee attorn to and recognize Landlord as its landlord under any
such Transfer.  If Tenant shall be in
default under this Lease (beyond the applicable notice and cure period provided
in this Lease), Landlord is hereby irrevocably authorized, as Tenant’s agent
and attorney-in-fact, to direct any Transferee to make all payments under or in
connection with the Transfer directly to Landlord (which Landlord shall apply
towards Tenant’s obligations under this Lease) until such default is
cured.  Such Transferee shall rely on any
representation by Landlord that Tenant is in default hereunder, without any
need for confirmation thereof by Tenant. 
Upon any assignment, the assignee shall assume in writing all
obligations and covenants of Tenant thereafter to be performed or observed
under this Lease.  No collection or
acceptance of rent by Landlord from any Transferee shall be deemed a waiver of
any provision of this Article 14 or the approval of any Transferee
or a release of Tenant from any obligation under this Lease, whether
theretofore or thereafter accruing.  In
no event shall Landlord’s enforcement of any provision of this Lease against
any Transferee be deemed a waiver of Landlord’s right to enforce any term of
this Lease against Tenant or any other person. 
If Tenant’s obligations hereunder have been guaranteed, Landlord’s
consent to any Transfer shall not be effective unless the guarantor also
consents to such Transfer.

 

14.8        Non-Transfers.  Notwithstanding anything to
the contrary contained in this Article 14, (i) an assignment
to a transferee of all or substantially all of the assets of Tenant, (ii) an
assignment of the Premises to a transferee which is the resulting entity of a
merger or consolidation of Tenant with another entity, or (iii) an
assignment of the Lease or subletting of all or a portion of the Premises to an
affiliate of Tenant (an entity which is controlled by, controls, or is under
common control with, Tenant) (an “Affiliate”),
shall not be deemed a Transfer under this Article 14, provided that
Tenant notifies Landlord of any such assignment or sublease and promptly
supplies Landlord with any documents or information reasonably requested by
Landlord regarding such assignment or sublease or such affiliate, and further 

 

33

 

provided that such assignment or sublease is not a subterfuge by Tenant
to avoid its obligations under this Lease. 
The transferee under a transfer specified in items (i), (ii), or (iii) above
shall be referred to herein as a “Permitted
Transferee”).  “Control,” as
used in this Section 14.8, shall mean the ownership, directly or
indirectly, of at least fifty-one percent (51%) of the voting securities of, or
possession of the right to vote, in the ordinary direction of its affairs, of
at least fifty-one percent (51%) of the voting interest in, any person or
entity.

 

ARTICLE 15

 

SURRENDER OF PREMISES; OWNERSHIP AND 

REMOVAL OF TRADE FIXTURES

 

15.1        Surrender of Premises.  No act or thing done by Landlord or any agent
or employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in writing by Landlord.  The delivery of keys to the Premises to
Landlord or any agent or employee of Landlord shall not constitute a surrender
of the Premises or effect a termination of this Lease, whether or not the keys
are thereafter retained by Landlord, and notwithstanding such delivery Tenant
shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been properly terminated.  The voluntary or other surrender of this
Lease by Tenant, whether accepted by Landlord or not, or a mutual termination
hereof, shall not work a merger, and at the option of Landlord shall operate as
an assignment to Landlord of all subleases or subtenancies affecting the
Premises or terminate any or all such sublessees or subtenancies.

 

15.2        Removal of Tenant Property by Tenant.  Upon the expiration of the Lease Term, or
upon any earlier termination of this Lease, Tenant shall, subject to the
provisions of this Article 15, quit and surrender possession of the
Premises to Landlord in as good order and condition as when Tenant took
possession and as thereafter improved by Landlord and/or Tenant, reasonable
wear and tear and repairs which are specifically made the responsibility of
Landlord hereunder excepted.  Upon such
expiration or termination, Tenant shall, without expense to Landlord, remove or
cause to be removed from the Premises all debris and rubbish, and such items of
furniture, equipment (including, without limitation, all telephone or other
form of communication lines or wires owned and/or installed by Tenant),
business and trade fixtures, free-standing cabinet work, movable partitions,
all signs and placards, and other articles of personal property owned by Tenant
or installed or placed by Tenant at its expense in the Premises, and such
similar articles of any other persons claiming under Tenant, as Landlord may,
in its sole discretion, require to be removed, and Tenant shall repair at its
own expense all damage to the Premises and Building resulting from such
removal.  Landlord may elect to retain or
dispose of, in any manner, any Alterations or Tenant’s personal property that
Tenant does not remove (and was not directed by Landlord to remove) from the
Premises on the expiration or termination of the Term.  Title to any such Alterations or Tenant’s
personal property that Landlord elects to retain or dispose of on expiration of
the Term shall vest in Landlord.  Tenant
hereby waives any rights it may have to notice under Civil Code sections 1980
et seq. with respect to such Alterations or Tenant’s personal property.  Tenant waives all claims against Landlord for
any damage to Tenant resulting from Landlord’s retention or disposition of any
such Alterations or Tenant’s personal property pursuant to this Section 15.2.  Tenant shall be liable to Landlord for
Landlord’s costs for storing, removing and disposing of any Alterations or
Tenant’s personal property pursuant to this Section 15.2 and shall
indemnify and hold Landlord harmless from the claim of any third party to an
interest in said personal property.

 

ARTICLE 16

 

HOLDING
OVER

 

If Tenant holds over
after the expiration of the Lease Term or earlier termination thereof, with or
without the express or implied consent of Landlord, such tenancy shall be from
month-to-month only, and shall not constitute a renewal hereof or an extension
for any further term, and in such case Rent shall be payable at a monthly rate
equal to the product of (i) the Rent applicable during the last rental
period of the Lease Term under this Lease, and (ii) a percentage equal to
one hundred twenty-five percent (125%) during the first (1st)
sixty (60) days of such hold over, and one hundred fifty
percent (150%) for the second (2nd) sixty (60) days of
such hold over.  Thereafter, Rent shall
be payable at a monthly rate equal to the product of (A) 200% and (B) the
greater of (x) the Rent applicable during the last rental period of the
Lease Term under 

 

34

 

this
Lease, and (y) the then applicable fair-market rental rate applicable to
the Premises as reasonably determined by Landlord.  Such month-to-month tenancy shall be subject
to every other applicable term, covenant and agreement contained herein.  For purposes of this Article 16,
a holding over shall include, without limitation, (i) Tenant’s remaining
in the Premises after the expiration or earlier termination of the Lease Term,
as required pursuant to the terms of Section 8.5, above, to remove
any Alterations or improvements located within the Premises (including, without
limitation, the Improvements) and replace the same as requested by Landlord
with building standard tenant improvements and Original Improvements, or (ii) Tenant’s
failure to remove items and restore the Premises as required in Article 15,
above.  Nothing contained in this Article 16
shall be construed as consent by Landlord to any holding over by Tenant, and
Landlord expressly reserves the right to require Tenant to surrender possession
of the Premises to Landlord as provided in this Lease upon the expiration or
other termination of this Lease.  The
provisions of this Article 16 shall not be deemed to limit or
constitute a waiver of any other rights or remedies of Landlord provided herein
or at law.  If Tenant fails to surrender
the Premises upon the termination or expiration of this Lease, in addition to
any other liabilities to Landlord accruing therefrom, Tenant shall protect,
defend, indemnify and hold Landlord harmless from all loss, costs (including
reasonable attorneys’ fees) and liability resulting from such failure,
including, without limiting the generality of the foregoing, any claims made by
any succeeding tenant founded upon such failure to surrender and any lost
profits to Landlord resulting therefrom. 
A termination or non-renewal of this Lease is not intended to be and
shall not be deemed to be a breach of the covenant of good faith and fair dealing.

 

ARTICLE 17

 

ESTOPPEL CERTIFICATES

 

Within ten (10) business
days following a request in writing by Landlord, Tenant shall execute,
acknowledge and deliver to Landlord an estoppel certificate, which, as
submitted by Landlord, shall be substantially in the form of Exhibit E, attached hereto (or
such other commercially reasonable form as may be required by any prospective
mortgagee or purchaser of the Project, or any portion thereof), indicating
therein any exceptions thereto that may exist at that time, and shall also
contain any other information reasonably requested by Landlord or Landlord’s
mortgagee or prospective mortgagee.  Any
such certificate may be relied upon by any prospective mortgagee or purchaser
of all or any portion of the Project. 
Tenant shall execute and deliver whatever other instruments may be
reasonably required for such purposes. 
At any time during the Lease Term (but in no event more frequent than
once during any twelve (12) month period), Landlord may require Tenant to
provide Landlord with a current financial statement and financial statements of
the two (2) years prior to the current financial statement year.  Failure of Tenant to timely execute,
acknowledge and deliver such estoppel certificate or other instruments within
five (5) business days following Tenant’s receipt of a notice from
Landlord that such estoppel certificate has not been timely executed and
returned (within the above-referenced ten (10) business day period) shall
constitute an acceptance of the Premises and an acknowledgment by Tenant that
statements included in the estoppel certificate are true and correct, without
exception.  This Article 17
shall be self-operative and no further instrument shall be required in order to
effect it.

 

ARTICLE 18

 

MASTER
GROUND LEASE; SUBORDINATION AND ATTORNMENT

 

18.1        Master Ground Lease.  This Lease is made subject and subordinate to
that certain Ground Lease Agreement, dated December 30, 1988, by and
between the City of Long Beach, a Municipal corporation (therein referred to as
“Landlord” and in this Lease referred to as “Master Lessor”) and Landlord
herein (therein referred to as “Developer”) (the “Master  Ground  Lease”). 
The Master Ground Lease demises the real property constituting Parcels 5
and 6 of Parcel Map No. 16960, in the City of Long Beach, filed in Book
208, Pages 92 through 100 of Parcel Maps in the Office of the Los Angeles
County Recorder.  An instrument entitled “Short
Form Ground Lease,” dated January 26, 1989, between the Master Lessor
and Landlord, which incorporated the Master Ground Lease, was recorded on January 31,
1989, as Instrument No. 89-159802, in the Official Records in the office
of the Los Angeles County Recorder.  All
references herein to the Master Ground Lease shall mean and include the Master
Ground Lease as from time to time amended. 
Landlord shall use commercially reasonable efforts to provide 

 

35

 

Tenant with a nondisturbance agreement from Master Lessor in the form
attached hereto as Exhibit “J”.

 

18.2        Subordination.  In addition to being subordinate to the
Master Ground Lease, this Lease shall be subject and subordinate to all present
and future ground or underlying leases of the Building or Project and to the
lien of any mortgage, trust deed or other encumbrances now or hereafter in
force against the Building or Project or any part thereof, if any, and to all
renewals, extensions, modifications, consolidations and replacements thereof,
and to all advances made or hereafter to be made upon the security of such
mortgages or trust deeds, unless the holders of such mortgages, trust deeds or
other encumbrances, or the lessors under such ground lease or underlying
leases, require in writing that this Lease be superior thereto.  Tenant covenants and agrees in the event any
proceedings are brought for the foreclosure of any such mortgage or deed in
lieu thereof (or if any ground lease is terminated), to attorn, without any
deductions or set-offs whatsoever, to the lienholder or purchaser or any successors
thereto upon any such foreclosure sale or deed in lieu thereof (or to the
ground lessor), if so requested to do so by such purchaser or lienholder or
ground lessor, and to recognize such purchaser or lienholder or ground lessor
as the lessor under this Lease, provided such lienholder or purchaser or ground
lessor shall agree to accept this Lease and not disturb Tenant’s occupancy, so
long as Tenant timely pays the rent and observes and performs the terms,
covenants and conditions of this Lease to be observed and performed by
Tenant.  Landlord’s interest herein may
be assigned as security at any time to any lienholder.  Tenant shall, within ten (10) business
days of request by Landlord, execute such further commercially reasonable
instruments or assurances as Landlord may reasonably deem necessary to evidence
or confirm the subordination or superiority of this Lease to any such
mortgages, trust deeds, ground leases or underlying leases.  Tenant waives the provisions of any current
or future statute, 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 the Tenant hereunder in the event of any foreclosure
proceeding or sale.  This Section 18.1
shall be self-operative and no further instrument of subordination shall be
required in order to effect it.

 

ARTICLE 19

 

DEFAULTS; REMEDIES

 

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

 

19.1.1          Any
failure by Tenant to pay any Rent or any other charge required to be paid under
this Lease, or any part thereof, when due unless such failure is cured within
five (5) business days after Tenant’s receipt of notice that said amounts
are past due; or

 

19.1.2          Except
where a specific time period is otherwise set forth for Tenant’s performance in
this Lease, in which event the failure to perform by Tenant within such time
period shall be a default by Tenant under this Section 19.1.2, any
failure by Tenant to observe or perform any other provision, covenant or
condition of this Lease to be observed or performed by Tenant where such
failure continues for ten (10) business days after written notice thereof
from Landlord to Tenant; provided that if the nature of such default is such
that the same cannot reasonably be cured within a ten (10) business day
period, Tenant shall not be deemed to be in default if it diligently commences
such cure within such period and thereafter diligently proceeds to rectify and
cure such default, but in no event exceeding a period of time in excess of
thirty (30) days after written notice thereof from Landlord to Tenant; or

 

19.1.3          To
the extent permitted by law, a general assignment by Tenant or any guarantor of
this Lease for the benefit of creditors, or the taking of any corporate action
in furtherance of bankruptcy or dissolution whether or not there exists any
proceeding under an insolvency or bankruptcy law, or the filing by or against
Tenant or any guarantor of any proceeding under an insolvency or bankruptcy
law, unless in the case of a proceeding filed against Tenant or any guarantor
the same is dismissed within sixty (60) days, or the appointment of a trustee
or receiver to take possession of all or substantially all of the assets of Tenant
or any guarantor, unless possession is restored to Tenant or such guarantor
within thirty (30) days, or any execution or other judicially authorized
seizure of all or substantially all of Tenant’s assets located upon the
Premises or of Tenant’s interest in this Lease, unless such seizure is
discharged within thirty (30) days; or

 

36

 

19.1.4          The
failure by Tenant to observe or perform according to the provisions of Articles
5, 14, 17 or 18 of this Lease or the Work Letter where
such failure continues for more than two (2) business days after notice
from Landlord; or

 

The notice periods
provided herein are in lieu of, and not in addition to, any notice periods
provided by law.

 

19.2        Remedies Upon Default.  Upon the occurrence of any event of default
by Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity (all of which remedies shall be distinct, separate
and cumulative), the option to pursue any one or more of the following
remedies, each and all of which shall be cumulative and nonexclusive, without
any notice or demand whatsoever.

 

19.2.1          Terminate
this Lease, in which event Tenant shall immediately surrender the Premises to
Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any
other remedy which it may have for possession or arrearages in rent, enter upon
and take possession of the Premises and expel or remove Tenant and any other
person who may be occupying the Premises or any part thereof, without being
liable for prosecution or any claim or damages therefor; and Landlord may
recover from Tenant the following:

 

(i)            The
worth at the time of any unpaid rent which has been earned at the time of such
termination; plus

 

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

 

(iii)          The
worth at the time of award of the amount by which the unpaid rent for the
balance of the Lease Term after the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; plus

 

(iv)          Any
other amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant’s failure to perform its obligations under this Lease or which
in the ordinary course of things would be likely to result therefrom,
specifically including but not limited to, reasonable brokerage commissions and
advertising expenses incurred, expenses of remodeling the Premises or any
portion thereof for a new tenant, whether for the same or a different use, and
any commercially reasonable special concessions made to obtain a new tenant;
and

 

(v)           At
Landlord’s election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law.

 

The term “rent” as used
in this Section 19.2 shall be deemed to be and to mean all sums of
every nature required to be paid by Tenant pursuant to the terms of this Lease,
whether to Landlord or to others.  As
used in Paragraphs 19.2.1(i) and (ii), above, the “worth at the time of
award” shall be computed by allowing interest at the rate set forth in Article 25
of this Lease, but in no case greater than the maximum amount of such interest
permitted by law.  As used in Paragraph
19.2.1(iii) above, the “worth at the time of award” shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).

 

19.2.2          Intentionally
Omitted.

 

19.2.3          Landlord
shall have the remedy described in California Civil Code Section 1951.4
(lessor may continue lease in effect after lessee’s breach and abandonment and
recover rent as it becomes due, if lessee has the right to sublet or assign,
subject only to reasonable limitations). 
Accordingly, if Landlord does not elect to terminate this Lease on
account of any default by Tenant, Landlord may, from time to time, without
terminating this Lease, enforce all of its rights and remedies under this
Lease, including the right to recover all rent as it becomes due.

 

19.2.4          Landlord
shall at all times have the rights and remedies (which shall be cumulative with
each other and cumulative and in addition to those rights and remedies
available under Sections 19.2.1 through 19.2.3, above, or any law
or other provision of this Lease), 

 

37

 

without prior demand or notice except as required by applicable law, to
seek any declaratory, injunctive or other equitable relief, and specifically
enforce this Lease, or restrain or enjoin a violation or breach of any
provision hereof.

 

19.3        Subleases of Tenant.  Whether or not Landlord elects to terminate
this Lease on account of any default by Tenant, as set forth in this Article 19,
Landlord shall have the right to terminate any and all subleases, licenses,
concessions or other consensual arrangements for possession entered into by
Tenant and affecting the Premises or may, in Landlord’s sole discretion,
succeed to Tenant’s interest in such subleases, licenses, concessions or
arrangements.  In the event of Landlord’s
election to succeed to Tenant’s interest in any such subleases, licenses, concessions
or arrangements, Tenant shall, as of the date of notice by Landlord of such
election, have no further right to or interest in the rent or other
consideration receivable thereunder.

 

19.4        Form of Payment After Default.  Following the occurrence of an event of
default by Tenant, Landlord shall have the right to require that any or all
subsequent amounts paid by Tenant to Landlord hereunder, whether to cure the
default in question or otherwise, be paid in the form of cash, money order,
cashier’s or certified check drawn on an institution acceptable to Landlord, or
by other means approved by Landlord, notwithstanding any prior practice of
accepting payments in any different form.

 

19.5        Efforts to Relet.  No re-entry or repossession, repairs,
maintenance, changes, alterations and additions, reletting, appointment of a
receiver to protect Landlord’s interests hereunder, or any other action or
omission by Landlord shall be construed as an election by Landlord to terminate
this Lease or Tenant’s right to possession, or to accept a surrender of the
Premises, nor shall same operate to release Tenant in whole or in part from any
of Tenant’s obligations hereunder, unless express written notice of such
intention is sent by Landlord to Tenant. 
Tenant hereby irrevocably waives any right otherwise available under any
law to redeem or reinstate this Lease.

 

19.6        Default by
Landlord.

 

19.6.1          Generally.  Landlord shall not be deemed to be in default
in the performance of any obligation required by it under this Lease, or under
any agreement executed in connection herewith, unless and until it has failed
to perform such obligation within thirty (30) days after receipt of 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 thirty (30) days are required for its performance, then
Landlord shall not be deemed to be in default if it shall commence such
performance within such thirty (30) day period and thereafter diligently
prosecute the same to completion. 
Nothing in this Article 19 shall be interpreted to mean that
Tenant shall have the right to terminate this Lease or that Tenant is excused
from paying any Rent due hereunder.

 

19.6.2          Abatement of Rent.  Notwithstanding any provision to the contrary
set forth in this Lease, in the event that Tenant is prevented from using, and
does not use, the Premises or any portion thereof, as a result of (i) any
repair, maintenance or alteration performed by Landlord, or which Landlord
failed to perform, after the Lease Commencement Date and required by this
Lease, which substantially interferes with Tenant’s use of or ingress to or
egress from the Building, Project, or Premises or the parking facility; (ii) any
failure to provide services, utilities or ingress to and egress from the
Building, Project, or Premises as required by this Lease; or (iii) damage
and destruction of or eminent domain proceedings in connection with the
Premises, Building, the Project or the parking facility servicing the Project
(any such set of circumstances as set forth in items (i) through (iii),
above, to be known as an “Abatement Event”),
then Tenant shall give Landlord Notice of such Abatement Event, and if such
Abatement Event continues for five (5) consecutive business days
after Landlord’s receipt of any such Notice, or occurs for ten (10) non-consecutive
business days in a twelve (12) month period (provided Landlord is sent a Notice
pursuant to Section 29.18 of this Lease of each of such Abatement
Event) (in either of such events, the “Eligibility Period”),
then the Base Rent and Tenant’s Share of Direct Expenses and charges for Tenant’s
parking passes (to the extent not utilized by Tenant) shall be abated or
reduced, as the case may be, after the expiration of the Eligibility Period for
such time that Tenant continues to be so prevented from using, and does not
use, the Premises, or a portion thereof, in the proportion that the rentable
area of the portion of the Premises that Tenant is prevented from using, and
does not use (“Unusable Area”), bears to the
total rentable area of the Premises; provided, however, in the event that
Tenant is 

 

38

 

prevented from using, and does not use, the Unusable Area for a period
of time in excess of the Eligibility Period and the remaining portion of the
Premises is not sufficient to allow Tenant to effectively conduct its business
therein, and if Tenant does not conduct its business from such remaining
portion, then for such time after expiration of the Eligibility Period during
which Tenant is so prevented from effectively conducting its business therein,
the Base Rent and Tenant’s Share of Direct Expenses and charges for Tenant’s
parking passes (to the extent not utilized by Tenant) for the entire Premises
shall be abated for such time as Tenant continues to be so prevented from
using, and does not use, the Premises. 
If, however, Tenant reoccupies any portion of the Premises during such period,
the Rent allocable to such reoccupied portion, based on the proportion that the
rentable area of such reoccupied portion of the Premises bears to the total
rentable area of the Premises, shall be payable by Tenant from the date Tenant
reoccupies such portion of the Premises. 
Such right to abate Base Rent and Tenant’s Share of Direct Expenses and
charges for Tenant’s parking passes (to the extent not utilized by Tenant)
shall be Tenant’s sole and exclusive remedy at law or in equity for an
Abatement Event; provided, however, that nothing in this Section 19.6.2,
shall impair Tenant’s rights under Section 19.6.1, above.  To the extent Tenant is entitled to abatement
because of an event covered by Articles 11 or 13 of this
Lease, then the Eligibility Period shall not be applicable.

 

ARTICLE 20

 

COVENANT OF QUIET ENJOYMENT

 

Landlord covenants that
Tenant, on paying the Rent, charges for services and other payments herein
reserved and on keeping, observing and performing all the other terms,
covenants, conditions, provisions and agreements herein contained on the part
of Tenant to be kept, observed and performed, shall, during the Lease Term,
peaceably and quietly have, hold and enjoy the Premises subject to the terms,
covenants, conditions, provisions and agreements hereof without interference by
any persons lawfully claiming by or through Landlord.  The foregoing covenant is in lieu of any
other covenant express or implied.

 

ARTICLE 21

 

SECURITY DEPOSIT

 

Concurrent with Tenant’s execution of this Lease, Tenant shall deposit
with Landlord a security deposit (the “Security Deposit”)
in the amount set forth in Section 8 of the Summary, as security
for the faithful performance by Tenant of all of its obligations under this
Lease.  If Tenant defaults with respect
to any provisions of this Lease (beyond the applicable notice and cure period
provided in this Lease), including, but not limited to, the provisions relating
to the payment of Rent, the removal of property and the repair of resultant
damage, Landlord may, without notice to Tenant, but shall not be required to
apply all or any part of the Security Deposit for the payment of any Rent or
any other sum in default and Tenant shall, within five (5) business days
following demand therefor, restore the Security Deposit to its original
amount.  Any unapplied portion of the
Security Deposit shall be returned to Tenant, or, at Landlord’s option, to the
last assignee of Tenant’s interest hereunder, within sixty (60) days following
the expiration of the Lease Term so long as Tenant is not in default under this
Lease (beyond the applicable notice and cure period provided in this
Lease).  Tenant shall not be entitled to
any interest on the Security Deposit. 
Tenant hereby waives the provisions of Section 1950.7 of the California
Civil Code, or any successor statute.

 

ARTICLE 22

 

SUBSTITUTION OF PREMISES

 

With respect to (i) Suite 620,
(ii) the Expansion Space, and (iii) any other space leased by Tenant
in the Building and comprising less than a full floor (such items (i)-(iii) above
are, individually or collectively, the “Eligible
Space”), Landlord shall have the right to move Tenant from any such
Eligible Space, upon sixty (60) days’ prior written notice of the date of
such move, to other space in the Building which is reasonably comparable to the
applicable Eligible Space in size, design, layout and improvements (“Substitution Premises”), and all terms
hereof shall apply to the new space with equal force; provided, however, to the
extent that any space comprising Eligible Space is immediately adjacent to or
contiguous with another space comprising Eligible Space, then Landlord shall
not have the right to only move Tenant from one 

 

39

 

such
Eligible Space, but shall only have the right to move Tenant from all of such
adjacent or contiguous Eligible Space. 
In the event that Landlord elects to move Tenant from Eligible Space,
Landlord shall (i) give Tenant not less than sixty (60) days’ prior
written notice, (ii) provide Tenant, at Landlord’s sole cost and expense,
a reasonable allowance for moving expenses, stationery, business cards and
related items to replace those which become obsolete by such move, (iii) provide,
at Landlord’s sole cost and expense, tenant improvements at least equal in
quality and design to those in the applicable Eligible Space, including,
without limitation, any Alterations or data and voice cabling which may have
been installed in the applicable Eligible Space by Tenant and Landlord and
shall move Tenant’s effects to the new space at Landlord’s sole cost and
expense at such time and in such manner as to inconvenience Tenant as little as
reasonably practicable.  Simultaneously
with such relocation of such portion of the Premises, the parties shall
immediately execute an amendment to this Lease stating the relocation of such
portion of the Premises.  In no event
shall Tenant’s Rent be increased unless Tenant has requested a space larger
than the applicable Eligible Space at the time of notice of relocation or
unless Tenant has then currently been in negotiations with Landlord for
expansion space.  Except as otherwise
specified in this Article 22, such relocation of Tenant from the
Eligible Space to other space in the Building shall have no effect on Tenant’s
lease of the remainder of the Premises. 
Notwithstanding anything to the contrary set forth in this Article 22,
to the extent that all of the Eligible Space that is located on any one floor
of the Building comprises, in the aggregate, at least seventy-five percent
(75%) of the applicable rentable square footage on such floor of the Building,
Landlord’s rights under this Article 22 shall be ineffective except to the
extent that such Eligible Space shall at any point thereafter comprise, in the
aggregate, less than seventy-five percent (75%) of the applicable rentable
square footage on such floor of the Building.

 

ARTICLE 23

 

SIGNS

 

23.1        Full Floors.  Subject to Landlord’s prior written approval,
in its sole discretion, and provided all signs are in keeping with the quality,
design and style of the Building and Project, Tenant, if the Premises comprise
an entire floor of the Building, at its sole cost and expense, may install
identification signage anywhere in the Premises including in the elevator lobby
of the Premises, provided that such signs must not be visible from the exterior
of the Building.

 

23.2        Multi-Tenant Floors.  If other tenants occupy space on the floor on
which any portion of the Premises is located, Tenant’s identifying signage on
such floor shall be provided by Landlord, at Tenant’s cost, and such signage
shall be comparable to that used by Landlord for other similar floors in the
Building and shall comply with Landlord’s Building standard signage program.

 

23.3        Prohibited Signage and Other Items.  Any signs, notices, logos, pictures, names or
advertisements which are installed and that have not been separately approved
by Landlord may be removed without notice by Landlord at the sole expense of
Tenant.  Tenant may not install any signs
on the exterior or roof of the Project or the Common Areas.  Any signs, window coverings, blinds (even if
the same are located behind the Landlord-approved window coverings for the
Building), or other items to the extent such items are visible from the
exterior of the Premises or Building, shall be subject to the prior approval of
Landlord, in its reasonable discretion.

 

23.4        Building
Directory.  A
building directory will be located in the lobby of the Building.  Tenant shall have the right, at Tenant’s
expense, to use up to ten (10) lines on such directory for the display of
Tenant’s name or the name of any Affiliate occupying the Premises, which
display shall be in Building standard font and size.  Any changes to such strip(s) on the
Building directory shall be at Tenant’s sole cost and expense.

 

23.5        Monument
Signage.

 

23.5.1          In General.  In addition to the signage rights set forth
above in this Article 23, Tenant shall be entitled to install one (1) sign
identifying Tenant’s name and/or logo on the currently existing monument sign
for the Building (which monument sign is visible from 

 

40

 

the “405 Freeway”) (“Tenant’s Signage”)
in connection with Tenant’s lease of the Premises, as more particularly shown
on Exhibit A-2,
attached hereto.

 

23.5.2          Specifications and Permits.  Tenant’s Signage shall set forth Tenant’s
name and logo as determined by Tenant in its sole discretion; provided,
however, in no event shall Tenant’s Signage include an “Objectionable Name,” as
that term is defined in Section 23.5.3, below.  The graphics, materials, color, design,
lettering, lighting, size, illumination, specifications and exact location of
Tenant’s Signage (collectively, the “Sign Specifications”)
shall be subject to the prior written approval of Landlord, which approval
shall not be unreasonably withheld, conditioned or delayed, and shall be
consistent and compatible with the quality and nature of the Project and
Landlord Building standard signage specifications.  In addition, Tenant’s Signage shall be
subject to Tenant’s receipt of all required governmental permits and approvals
and shall be subject to all applicable laws and to any covenants, conditions
and restrictions affecting the Project. 
Landlord shall use commercially reasonable efforts, at no cost to
Landlord, to assist Tenant in obtaining all necessary governmental permits and
approvals for Tenant’s Signage.  Tenant
hereby acknowledges that Landlord has made no representation or warranty to
Tenant with respect to the probability of obtaining all necessary governmental
approvals and permits for Tenant’s Signage. 
In the event Tenant does not receive the necessary governmental
approvals and permits for Tenant’s Signage, Tenant’s and Landlord’s rights and
obligations under the remaining terms and conditions of the Lease shall be
unaffected.

 

23.5.3          Objectionable
Name.  To the
extent the Original Tenant or its Permitted Transferee desires to change the
name and/or logo set forth on Tenant’s Signage, such name and/or logo shall not
have a name which relates to an entity which is of a character or reputation,
or is associated with a political faction or orientation, which is inconsistent
with the quality of the Project, or which would otherwise reasonably offend a
landlord of Comparable Buildings (an “Objectionable Name”).

 

23.5.4          Termination of Right to Tenant’s Signage.  The rights contained in this Section 23.5
shall be personal to the Original Tenant and its Permitted Transferee, and may
only be exercised by the Original Tenant or its Permitted Transferee (and not
any other assignee, sublessee or other transferee of either of the Original
Tenant’s interest in the Lease) if (i) the Original Tenants or its
Permitted Transferee are in occupancy of no less than eighty-five percent (85%) of the
Premises, (ii) Tenant is not then in economic default or material
non-economic default under the Lease, as amended (beyond the applicable notice
and cure period provided in this Lease), (iii) Tenant has not been in
economic default or material non-economic default under the Lease, as amended
(beyond the applicable notice and cure period provided in this Lease), more
than once during the prior twelve (12) month period, and (iv) Tenant has
not been in economic default or material non-economic default under the Lease,
as amended (beyond the applicable notice and cure period provided in this
Lease) more than two (2) times during the immediately preceding five (5) year
period.  In the
event that Tenant ever fails to meet the requirements of items (i), (ii), (iii) or
(iv) above, Tenant shall, at Tenant’s sole cost and expense, immediately
remove Tenant’s Signage, which removal shall be otherwise in accordance with
the removal and repair requirements set forth in Section 23.6,
below

 

23.6        Cost and Maintenance.  The costs of Tenant’s Signage and the
installation, design, construction and any and all other costs associated with
Tenant’s Signage, including, without limitation, utility charges and hook-up
fees, permits, and maintenance and repairs, shall be the sole responsibility of
Tenant.  Should Tenant’s Signage require
repairs and/or maintenance, as determined in Landlord’s reasonable judgment,
Landlord shall cause such repairs and/or maintenance to be performed, and
Tenant shall pay Landlord upon demand the cost of the same as Additional
Rent.  Upon the expiration or earlier
termination of the Lease, Tenant shall, at Tenant’s sole cost and expense,
cause Tenant’s Signage to be removed and shall cause the areas in which Tenant’s
Signage was located to be restored to the condition existing immediately prior
to the placement of Tenant’s Signage (reasonable wear and tear excepted).  If Tenant fails to timely remove Tenant’s
Signage or to restore the areas in which such Tenant’s Signage was located, as
provided in the immediately preceding sentence, then Landlord may perform such
work, and all actual costs incurred by Landlord in so performing shall be
reimbursed by Tenant to Landlord within thirty (30) days after Tenant’s receipt
of an invoice therefor.  The terms and
conditions of this Section 23.5.5 shall survive the expiration or
earlier termination of the Lease.

 

41

 

ARTICLE 24

 

COMPLIANCE WITH LAW

 

Tenant shall not do
anything or suffer anything to be done in or about the Premises or the Project
which will in any way conflict with any law, statute, ordinance or other
governmental rule, regulation or requirement now in force or which may
hereafter be enacted or promulgated (collectively, “Applicable Laws”).  At
its sole cost and expense, Tenant shall promptly comply with all such
Applicable Laws which relate to (i) Tenant’s use of the Premises for other
than general office use, (ii) the Alterations or the Improvements in the
Premises, or (iii) the Base Building, but, as to the Base Building, only
to the extent such obligations are triggered by Tenant’s Alterations, the
Improvements, or use of the Premises for other than general office use.  Should any standard or regulation now or
hereafter be imposed on Landlord or Tenant by a state, federal or local
governmental body charged with the establishment, regulation and enforcement of
occupational, health or safety standards for employers, employees, landlords or
tenants, then Tenant agrees, at its sole cost and expense, to comply promptly
with such standards or regulations to the extent to which the same relate to
the Premises or Tenant’s use thereof. 
The judgment of any court of competent jurisdiction or the admission of
Tenant in any judicial action, regardless of whether Landlord is a party
thereto, that Tenant has violated any of said governmental measures, shall be
conclusive of that fact as between Landlord and Tenant.  Landlord shall comply with all Applicable Laws
relating to the Base Building, provided that compliance with such Applicable
Laws is not the responsibility of Tenant under this Lease, and provided further
than Landlord’s failure to comply therewith would prohibit Tenant from
obtaining or maintaining a certificate of occupancy for the Premises, or would
unreasonably and materially affect the safety of Tenant’s employees or create a
significant health hazard for Tenant’s employees.  Landlord shall be permitted to include in
Operating Expenses any costs of expenses incurred by Landlord under this Article 24
to the extent consistent with the terms of Section 4.2.4.1,
above.  Subject to the foregoing terms
and conditions, Tenant shall be responsible, at its sole cost and expense, to
make all alterations within the Premises as are required to comply with the
governmental rules, regulations, requirements or standards described in this Article 24.

 

ARTICLE 25

 

LATE CHARGES

 

Tenant hereby
acknowledges that late payment by Tenant to Landlord of Rent or Additional Rent
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 include, but are not limited to,
processing, administration and accounting charges and late charges which may be
imposed on Landlord by the terms of any encumbrance covering the Premises.  Accordingly, if any installment of Rent or
any other sum due from Tenant shall not be received by Landlord or Landlord’s
designee within five (5) business days following Tenant’s receipt of
notice that said amount is past due, then Tenant shall pay to Landlord a late
charge equal to the greater of (i) five percent (5%) of the overdue amount
(ii) two Hundred Fifty Dollars ($250.00), plus any actual and reasonable
attorneys’ fees incurred by Landlord by reason of Tenant’s failure to pay Rent
and/or other charges when due hereunder. 
The late charge shall be deemed Additional Rent and the right to require
it shall be in addition to all of Landlord’s other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord’s remedies in any manner. 
In addition to the late charge described above, any Rent or other
amounts owing hereunder which are not paid within ten (10) days following
Tenant’s receipt of notice that said amount are past due shall bear interest
from the date when due until paid at a rate per annum equal to the lesser of (i) the
annual “Bank Prime Loan” rate cited
in the Federal Reserve Statistical Release Publication H.15(519), published on
the first Tuesday of each calendar month (or such other comparable index as
Landlord and Tenant shall reasonably agree upon if such rate ceases to be
published) plus four (4) percentage points, and (ii) the highest
rate permitted by applicable law.

 

42

 

ARTICLE 26

 

LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS BY
TENANT

 

26.1        Landlord’s Cure.  All covenants and agreements to be kept or
performed by Tenant under this Lease shall be performed by Tenant at Tenant’s
sole cost and expense and without any reduction of Rent, except to the extent,
if any, otherwise expressly provided herein. 
If Tenant shall fail to perform any obligation under this Lease, and
such failure shall continue in excess of the time allowed under Section 19.1.2,
above, unless a specific time period is otherwise stated in this Lease,
Landlord may, but shall not be obligated to, make any such payment or perform any
such act on Tenant’s part without waiving its rights based upon any default of
Tenant and without releasing Tenant from any obligations hereunder.

 

26.2        Tenant’s Reimbursement.  Except as may be specifically provided to the
contrary in this Lease, Tenant shall pay to Landlord, upon delivery by Landlord
to Tenant of statements therefor:  (i) sums
equal to expenditures reasonably made and obligations incurred by Landlord in
connection with the remedying by Landlord of Tenant’s defaults pursuant to the
provisions of Section 26.1; (ii) sums equal to all losses,
costs, liabilities, damages and expenses that are the responsibility of Tenant
pursuant to Article 10 of this Lease; and (iii) sums equal to
all expenditures made and obligations incurred by Landlord in collecting or
attempting to collect the Rent or in enforcing or attempting to enforce any
rights of Landlord under this Lease or pursuant to law, including, without
limitation, all legal fees and other amounts so expended.  Tenant’s obligations under this Section 26.2
shall survive the expiration or sooner termination of the Lease Term.

 

ARTICLE 27

 

ENTRY BY LANDLORD

 

Landlord reserves the
right at all reasonable times and upon not less than twenty-four (24) hours
prior notice to Tenant (except in the case of an emergency, in which case prior
notice shall not be required) to enter the Premises to (i) inspect them; (ii) show
the Premises to prospective purchasers, mortgagees or tenants, or to current or
prospective mortgagees, ground or underlying lessors or insurers; (iii) post
notices of nonresponsibility; or (iv) alter, improve or repair the
Premises or the Building, or for structural alterations, repairs or
improvements to the Building or the Building’s systems and equipment.  Notwithstanding anything to the contrary
contained in this Article 27, Landlord may enter the Premises at
any time to (A) perform services required of Landlord, including
janitorial service; (B) take possession due to any breach of this Lease in
the manner provided herein; and (C) correct any default under this Lease
of Tenant that is continuing beyond the applicable notice and cure period set
forth in this Lease.  Landlord may make
any such entries without the abatement of Rent and may take such reasonable
steps as required to accomplish the stated purposes.  Tenant hereby waives any claims for damages
or for any injuries or inconvenience to or interference with Tenant’s business,
lost profits, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss occasioned thereby, all claims for such damage being hereby
released.  For each of the above
purposes, Landlord shall at all times have a key with which to unlock all the
doors in the Premises, excluding Tenant’s vaults, safes and special security
areas designated in advance by Tenant. 
In an emergency, Landlord shall have the right to use any means that
Landlord may deem proper to open the doors in and to the Premises.  Any entry into the Premises by Landlord in
the manner hereinbefore described shall not be deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an actual or
constructive eviction of Tenant from any portion of the Premises.  No provision of this Lease shall be construed
as obligating Landlord to perform any repairs, alterations or decorations
except as otherwise expressly agreed to be performed by Landlord herein.  No reentry into or taking of possession of
the Premises by Landlord pursuant to this Article 27 shall be
construed as an election to terminate this Lease unless a written notice of
such intention be given to Tenant or unless the termination thereof be decreed
by a court of competent jurisdiction.  No
notice from Landlord under this Lease or under a forcible entry and detainer statute
or similar law will constitute an election by Landlord to terminate this Lease
unless such notice specifically says so. 
Landlord reserves the right following any such reentry or re-letting, or
both, to exercise its right to terminate this Lease by giving Tenant such
written notice, and, in that event the Lease will terminate as specified in
such notice.

 

43

 

ARTICLE 28

 

TENANT PARKING

 

Tenant shall rent from
Landlord, commencing on the Lease Commencement Date, the amount of parking
permits set forth in Section 9 of the Summary, on a monthly basis
throughout the Lease Term, which parking permits shall pertain to the Project
parking facility.  Tenant shall pay to
Landlord for automobile parking permits on a monthly basis the prevailing rate
charged from time to time at the location of such parking permits.  Notwithstanding the foregoing, to the extent that
Tenant is not then in default under this Lease (beyond the
applicable notice and cure period provided in this Lease), Tenant
shall only be required to pay fifty percent (50%) of the fees set forth
above for the use of unreserved parking permits (except with respect to any
applicable taxes, as set forth below) during the first twelve (12) months
of the initial Lease Term. 
There shall be no rent abatements or concession with respect to reserved
parking spaces.  In addition,
notwithstanding any contrary provision of this Lease, Tenant shall be
responsible for the full amount of any taxes imposed by any governmental
authority in connection with the renting of such parking permits by Tenant or
the use of the parking facility by Tenant. 
Tenant’s continued right to use the parking permits is conditioned upon
Tenant abiding by the “Parking Rules and Regulations” attached hereto as Exhibit I, as the same may be
reasonably modified from time to time by Landlord, and all other rules and
regulations prescribed by Landlord for the orderly operation and use of the
parking facility where the parking permits are located, including any sticker
or other identification system established by Landlord, Tenant’s cooperation in
seeing that Tenant’s employees and visitors also comply with the foregoing, and
Tenant not being in default under this Lease (beyond the applicable notice and
cure period provided in this Lease). 
Landlord specifically reserves the right to change the size,
configuration, design, layout and all other aspects of the Project parking
facility at any time and Tenant acknowledges and agrees that Landlord may, without
incurring any liability to Tenant and without any abatement of Rent under this
Lease, from time to time, close-off or restrict access to the Project parking
facility for purposes of permitting or facilitating any such construction,
alteration or improvements; provided, however, that in connection therewith,
Landlord shall use commercially reasonable efforts to minimize interference
with Tenant’s parking rights hereunder. 
Landlord may delegate its responsibilities hereunder to a parking
operator in which case such parking operator shall have all the rights of
control attributed hereby to the Landlord. 
Tenant hereby acknowledges that the parking license privileges provided
for herein are for the exclusive use of Tenant, and the officers and employees
thereof; and, notwithstanding anything to the contrary contained in this Lease,
Tenant shall not assign or sublease any parking license privileges or permits
provided to Tenant herein or by a separate license or other agreement, and any
attempted assignment of parking privileges and/or parking permits by Tenant
shall be null and void and without effect, unless done pursuant to a Landlord
approved Transfer under Article 14, above.  Landlord shall use commercially reasonable
efforts to provide visitor parking for Tenant’s customers, invitees or licensees
in those parking areas located in the Project which may from time to time be
designated for patrons of the Project; provided, however, if Landlord opts to
charge Tenant’s customers, invitees or licensees for the use of such visitor
parking, Tenant may validate visitor parking by such method or methods as the
Landlord may establish, at the validation rate from time to time generally
applicable to visitor parking.  Landlord
assumes no responsibility whatsoever for loss or damage due to fire, theft,
vandalism, malicious mischief or otherwise to any automobiles parked in the
parking areas of the Project, or any personal property therein, except to the
extent that such loss or damage is due to the willful act or gross negligence
of Landlord, and Tenant agrees, upon request from Landlord from time to time,
to notify Tenant’s officers, employees and agents then using any of the parking
privileges provided for in this Lease of such limitation of liability.  It is the intention of the parties hereto
that a license only is hereby granted to Tenant for the parking permit
privileges provided herein and no bailment is intended or shall be created
hereby.

 

ARTICLE 29

 

MISCELLANEOUS PROVISIONS

 

29.1        Terms; Captions.  The words “Landlord” and “Tenant” as used
herein shall include the plural as well as the singular.  The necessary grammatical changes required to
make the provisions hereof apply either to corporations or partnerships or
individuals, men or women, as the case may require, shall in all cases be
assumed as though in each case fully expressed.

 

44

 

The captions of
Articles and Sections are for convenience only and shall not be deemed to
limit, construe, affect or alter the meaning of such Articles and Sections.

 

29.2        Binding Effect.  Subject to all other provisions of this
Lease, each of the covenants, conditions and provisions of this Lease shall
extend to and shall, as the case may require, bind or inure to the benefit not
only of Landlord and of Tenant, but also of their respective heirs, personal
representatives, successors or assigns, provided this clause shall not permit
any assignment by Tenant contrary to the provisions of Article 14
of this Lease.

 

29.3        No Air Rights.  No rights to any view or to light or air over
any property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease.  If at any time any
windows of the Premises are temporarily darkened or the light or view therefrom
is obstructed by reason of any repairs, improvements, maintenance or cleaning
in or about the Project, the same shall be without liability to Landlord and
without any reduction or diminution of Tenant’s obligations under this Lease.

 

29.4        Modification of Lease.  Should any current or prospective mortgagee
or ground lessor for the Building or Project require a modification of this
Lease, which modification will not cause an increased cost or expense to Tenant
or in any other way materially and adversely change the rights and obligations
of Tenant hereunder, then and in such event, Tenant agrees that this Lease may
be so modified and agrees to execute whatever documents are reasonably required
therefor and to deliver the same to Landlord within ten (10) days
following a request therefor.  At the
request of Landlord or any mortgagee or ground lessor, Tenant agrees to execute
a short form of Lease and deliver the same to Landlord within ten (10) days
following the request therefor.

 

29.5        Transfer of Landlord’s Interest.  Tenant acknowledges that Landlord has the
right to transfer all or any portion of its interest in the Project or Building
and in this Lease, and Tenant agrees that in the event of any such transfer,
Landlord shall automatically be released from all liability under this Lease
and Tenant agrees to look solely to such transferee for the performance of
Landlord’s obligations hereunder after the date of transfer and such transferee
shall be deemed to have fully assumed and be liable for all obligations of this
Lease to be performed by Landlord, including the return of any Security
Deposit, and Tenant shall attorn to such transferee.  Tenant further acknowledges that Landlord may
assign its interest in this Lease to a mortgage lender as additional security
and agrees that such an assignment shall not release Landlord from its
obligations hereunder and that Tenant shall continue to look to Landlord for
the performance of its obligations hereunder.

 

29.6        Prohibition Against Recording.  Except as provided in Section 29.4
of this Lease, neither this Lease, nor any memorandum, affidavit or other
writing with respect thereto, shall be recorded by Tenant or by anyone acting
through, under or on behalf of Tenant.

 

29.7        Landlord’s Title.  Landlord’s title is and always shall be
paramount to the title of Tenant.  Nothing herein contained shall empower Tenant
to do any act which can, shall or may encumber the title of Landlord.

 

29.8        Relationship of Parties.  Nothing contained in this Lease shall be
deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant.

 

29.9        Application of Payments.  Landlord shall have the right to apply
payments received from Tenant pursuant to this Lease, regardless of Tenant’s
designation of such payments, to satisfy any obligations of Tenant hereunder,
in such order and amounts as Landlord, in its sole discretion, may elect;
provided, however, in no event shall Landlord apply any payments or amounts
received from Tenant against any charges or obligations of Tenant that are then
the subject of a good faith dispute between Landlord and Tenant.

 

29.10      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.

 

29.11      Partial Invalidity.  If any term, provision or condition contained
in this Lease shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term, provision or condition to
persons or circumstances other than those with respect to 

 

45

 

which it is
invalid or unenforceable, shall not be affected thereby, and each and every
other term, provision and condition of this Lease shall be valid and
enforceable to the fullest extent possible permitted by law.

 

29.12      No Warranty.  In executing and delivering this Lease,
Tenant has not relied on any representations, including, but not limited to,
any representation as to the amount of any item comprising Additional Rent or
the amount of the Additional Rent in the aggregate or that Landlord is
furnishing the same services to other tenants, at all, on the same level or on
the same basis, or any warranty or any statement of Landlord which is not set
forth herein or in one or more of the exhibits attached hereto.  Tenant agrees that neither Landlord nor any
agent of Landlord has made any representation or warranty as to the suitability
of the Premises for the conduct of Tenant’s business, that any specific tenant
or number of tenants shall occupy any space in the Project, nor has Landlord
agreed to undertake any modification, alteration or improvement to the Premises
except as provided in this Lease.  Tenant
further agrees that neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the physical condition of the
Building, the Project, the land upon which the Building or the Project are
located, or the Premises, or the expenses of operation of the Premises, the
Building or the Project, or any other matter or thing affecting or related to
the Premises, except as herein expressly set forth in the provisions of this
Lease.

 

29.13      Landlord Exculpation.  The liability of Landlord or the Landlord
Parties to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord’s operation, management, leasing, repair,
renovation, alteration or any other matter relating to the Project or the
Premises shall be limited solely and exclusively to an amount which is equal to
the lesser of (a) the interest of Landlord in the Building or (b) the
equity interest Landlord would have in the Building if the Building were
encumbered by third-party debt in an amount equal to eighty percent (80%) of
the value of the Building (as such value is determined by Landlord), provided
that in no event shall such liability extend to any sales or insurance proceeds
received by Landlord or the Landlord Parties in connection with the Project,
Building or Premises.  Neither Landlord,
nor any of the Landlord Parties shall have any personal liability therefor, and
Tenant hereby expressly waives and releases such personal liability on behalf
of itself and all persons claiming by, through or under Tenant.  The limitations of liability contained in
this Section 29.13 shall inure to the benefit of Landlord’s and the
Landlord Parties’ present and future partners, beneficiaries, officers,
directors, trustees, shareholders, agents and employees, and their respective
partners, heirs, successors and assigns. 
Under no circumstances shall any present or future partner of Landlord
(if Landlord is a partnership), or trustee or beneficiary (if Landlord or any
partner of Landlord is a trust), have any liability for the performance of
Landlord’s obligations under this Lease. 
Notwithstanding any contrary provision herein, neither Landlord nor the
Landlord Parties shall be liable under any circumstances for injury or damage
to, or interference with, Tenant’s business, including but not limited to, loss
of profits, loss of rents or other revenues, loss of business opportunity, loss
of goodwill or loss of use, in each case, however occurring.

 

29.14      Entire Agreement.  It is understood and acknowledged that there
are no oral agreements between the parties hereto affecting this Lease and this
Lease constitutes the parties’ entire agreement with respect to the leasing of
the Premises and supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease.  None of the terms, covenants,
conditions or provisions of this Lease can be modified, deleted or added to
except in writing signed by the parties hereto.

 

29.15      Right to Lease.  Landlord reserves the absolute right to
effect such other tenancies in the Project as Landlord in the exercise of its
sole business judgment shall determine to best promote the interests of the
Building or Project, so long as those tenancies within the Building are
consistent with a first-class office building. 
Tenant does not rely on the fact, nor does Landlord represent, that any
specific tenant or type or number of tenants shall, during the Lease Term,
occupy any space in the Building or Project.

 

29.16      Force Majeure.  Any prevention, delay or stoppage due to
strikes, lockouts, labor disputes, acts of God, inability to obtain services,
labor, or materials or reasonable substitutes therefor, governmental actions,
civil commotions, fire or other casualty, and other causes beyond the
reasonable control of the party obligated to perform, except with respect to
the obligations 

 

46

 

imposed with
regard to Rent and other charges to be paid by Tenant pursuant to this Lease
and except as to Tenant’s obligations under Articles 5 and 24
of this Lease (collectively, a “Force Majeure”),
notwithstanding anything to the contrary contained in this Lease, shall excuse
the performance of such party for a period equal to any such prevention, delay
or stoppage and, therefore, if this Lease specifies a time period for
performance of an obligation of either party, that time period shall be
extended by the period of any delay in such party’s performance caused by a
Force Majeure.

 

29.17      Waiver of Redemption by Tenant.  Tenant hereby waives, for Tenant and for all
those claiming under Tenant, any and all rights now or hereafter existing to
redeem by order or judgment of any court or by any legal process or writ,
Tenant’s right of occupancy of the Premises after any termination of this
Lease.

 

29.18      Notices.  All notices, demands, statements,
designations, approvals or other communications (collectively, “Notices”) given or required to be given by either party to
the other hereunder or by law shall be in writing, shall be (A) sent by
United States certified or registered mail, postage prepaid, return receipt
requested (“Mail”), (B) transmitted by
telecopy, if such telecopy is promptly followed by a Notice sent by Mail, (C) delivered
by a nationally recognized same-day or overnight courier, or (D) delivered
personally.  If any Notice is sent by
telecopy, the transmitting party may as a courtesy send a duplicate copy of the
Notice to the other party by regular mail. 
In all events, however, any Notice sent by telecopy transmission shall
govern all matters dealing with delivery of the Notice, including the date on
which the Notice is deemed to have been received by the other party.  Any Notice shall be sent, transmitted, or
delivered, as the case may be, to Tenant at the appropriate address set forth
in Section 10 of the Summary, or to such other place as Tenant may
from time to time designate in a Notice to Landlord, or to Landlord at the
addresses set forth in Section 11 of the Summary, or to such other
places as Landlord may from time to time designate in a Notice to Tenant.  Any Notice will be deemed given (i) three
(3) days after the date it is posted if sent by Mail, (ii) the date
the telecopy is transmitted, (iii) the date the overnight courier delivery
is made, or (iv) the date personal delivery is made or attempted to be
made.  If Notice is tendered under the
provisions of this Lease and is refused by the intended recipient of the
Notice, the Notice shall nonetheless be considered to have been given and shall
be effective as of the date provided in this Lease.  The contrary notwithstanding, any Notice
given to Tenant in a manner other than that provided in this Lease, that is
actually received by Tenant, shall be effective with respect to Tenant on
receipt of such Notice.  If Tenant is
notified of the identity and address of Landlord’s mortgagee or ground or
underlying lessor, Tenant shall give to such mortgagee or ground or underlying
lessor written notice of any default by Landlord under the terms of this Lease
by registered or certified mail, and such mortgagee or ground or underlying
lessor shall be given a reasonable opportunity to cure such default prior to
Tenant’s exercising any remedy available to Tenant.

 

29.19      Joint and Several.  If there is more than one Tenant, the
obligations imposed upon Tenant under this Lease shall be joint and several.

 

29.20      Authority.  If Tenant is a corporation, trust or
partnership, each of the persons executing this Lease on behalf of Tenant
warrants to Landlord that Tenant is a duly authorized and existing corporation,
that Tenant is qualified to do business in the state in which the Premises are
located, that Tenant has full right and authority to enter into this Lease and
that each person signing this Lease on behalf of Tenant has full authority to
do so.  Within thirty (30) days
after this Lease is signed, Tenant shall deliver to Landlord a certified copy
of a resolution of Tenant’s Board of Directors authorizing the execution of
this Lease or other evidence of such authority reasonably acceptable to
Landlord.  If Tenant is a partnership,
each person signing this Lease for Tenant represents and warrants that he is a
general partner of the partnership, that he has full authority to sign for the
partnership and that this Lease binds the partnership and all general partners
of the partnership.  Tenant shall give
written notice to Landlord of any general partner’s withdrawal or
addition.  Within thirty (30) days after
this Lease is signed, Tenant shall deliver to Landlord a copy of Tenant’s
recorded statement of partnership or certificate of limited partnership.

 

29.21      Attorneys’ Fees.  In the event that either Landlord or Tenant
brings any action or proceeding against the other for possession of the
Premises or for the recovery of any sum due hereunder, or because of the breach
of any covenant, condition, or provision hereof, or for any other relief
against the other, declaratory or otherwise, including appeals therefrom, and
whether 

 

47

 

being an action
based upon a tort, or contract or this Lease, then the prevailing party to this
Lease in any such proceeding shall be paid by the other party to this Lease in
any such proceeding actual and reasonable attorneys’ fees and all costs of such
action or proceeding which shall be enforceable , whether or not such action or
proceeding is prosecuted to final judgment, and including an allowance for
attorneys’ fees for appeals and rehearings. 
Should Landlord be made a party to any suit or proceeding brought by any
third party, arising by reason of Tenant’s use or occupancy of the Premises and
not being a dispute essentially between Landlord and Tenant, then Tenant shall
defend the same and Landlord therein, at Tenant’s sole cost and expense, and
shall hold Landlord free and harmless from any liability, duty or obligation
therein, including all attorneys’ fees of Landlord.

 

29.22      Governing Law; WAIVER OF TRIAL BY JURY.  This Lease shall be construed and enforced in
accordance with the laws of the State of California.  IN ANY ACTION OR PROCEEDING ARISING HEREFROM,
LANDLORD AND TENANT HEREBY CONSENT TO (I) THE JURISDICTION OF ANY
COMPETENT COURT WITHIN THE STATE OF CALIFORNIA, (II) SERVICE OF PROCESS BY
ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN THE INTEREST OF
SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR
SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF
THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR
STATUTORY REMEDY.

 

29.23      Submission of Lease.  Submission of this instrument for examination
or signature by Tenant does not constitute a reservation of, option for or
option to lease, and it is not effective as a lease or otherwise until
execution and delivery by both Landlord and Tenant.

 

29.24      Brokers.  Landlord and Tenant hereby warrant to each
other that they have had no dealings with any real estate broker or agent in
connection with the negotiation of this Lease, excepting only the real estate
brokers or agents specified in Section 12 of the Summary (the “Brokers”), and that they know of no other real estate broker
or agent who is entitled to a commission in connection with this Lease.  Each party agrees to indemnify and defend the
other party against and hold the other party harmless from any and all claims,
demands, losses, liabilities, lawsuits, judgments, costs and expenses
(including without limitation reasonable attorneys’ fees) with respect to any
leasing commission or equivalent compensation alleged to be owing on account of
any dealings with any real estate broker or agent, other than the Brokers,
occurring by, through, or under the indemnifying party.

 

29.25      Independent Covenants.  This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein, Tenant
shall not be entitled to make any repairs or perform any acts hereunder at
Landlord’s expense or to any setoff of the Rent (except as otherwise expressly
set forth in Section 19.6.2, above) 
or other amounts owing hereunder against Landlord.

 

29.26      Project or Building Name and Signage.  Landlord shall have the right at any time to
change the name of the Project or Building as Landlord may, in Landlord’s sole
discretion, desire, and to install, affix and maintain any and all signs on the
exterior and on the interior of the Project or Building as Landlord may, in
Landlord’s reasonable discretion, desire. 
Tenant shall not use the name of the Project or Building or use pictures
or illustrations of the Project or Building in advertising or other publicity
or for any purpose other than as the address of the business to be conducted by
Tenant in the Premises, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld.

 

29.27      Counterparts.  This Lease may be executed in counterparts
with the same effect as if both parties hereto had executed the same
document.  Both counterparts shall be
construed together and shall constitute a single lease.

 

29.28      Confidentiality.  Tenant acknowledges that the content of this
Lease and any related documents are confidential information.  Tenant shall keep such confidential
information strictly confidential and shall not disclose such confidential
information to any person or entity 

 

48

 

other than Tenant’s
financial, legal, and space planning consultants and any parties whose services
shall be retained pursuant to the Work Letter.

 

29.29      Transportation Management.  The City of Long Beach has adopted an
ordinance requiring Landlord to coordinate and facilitate a transportation
management program for the Project with the objective of reducing vehicular
trips to and from the Project.  Landlord
has or intends to develop a Transportation Systems Management Plan which seeks
to reduce vehicular trips and to improve vehicle occupancy by encouraging
employees to seek alternate transportation modes, such as carpooling,
vanpooling, city bus service, bicycles, and motorcycles, among other
methods.  Other programs, such as
flexible working hours or staggered shifts, also may be encouraged.  Tenant agrees to cooperate with Landlord to
the extent commercially reasonably to achieve the objectives of the City of
Long Beach, including commercially reasonable participation in a transportation
program at a level of participation consistent with the number of employees of
Tenant.  In addition, Tenant shall use
commercially reasonable efforts to comply with all present or future programs
intended to manage parking, transportation or traffic in and around the
Building, and in connection therewith, Tenant shall take responsible action for
the transportation planning and management of all employees located at the
Premises by working directly with Landlord, any governmental transportation
management organization or any other transportation-related committees or
entities.

 

29.30      Building Renovations.  It is specifically understood and agreed that
Landlord has made no representation or warranty to Tenant and has no obligation
and has made no promises to alter, remodel, improve, renovate, repair or
decorate the Premises, Building, or any part thereof and that no
representations respecting the condition of the Premises or the Building have
been made by Landlord to Tenant except as specifically set forth herein or in
the Work Letter.  However, Tenant hereby
acknowledges that Landlord is currently renovating or may during the Lease Term
renovate, improve, alter, or modify (collectively, the “Renovations”)
the Project, the Building and/or the Premises including without limitation the
parking structure, common areas, systems and equipment, roof, and structural
portions of the same, which Renovations may include, without limitation, (i) installing
sprinklers in the Building common areas and tenant spaces, (ii) modifying
the common areas and tenant spaces to comply with applicable laws and
regulations, including regulations relating to the physically disabled, seismic
conditions, and building safety and security, and (iii) installing new
floor covering, lighting, and wall coverings in the Building common areas, and
in connection with any Renovations, Landlord may, among other things, erect
scaffolding or other necessary structures in the Building, limit or eliminate
access to portions of the Project, including portions of the common areas, or
perform work in the Building, which work may create noise, dust or leave debris
in the Building.  Tenant hereby agrees
that such Renovations and Landlord’s actions in connection with such
Renovations shall in no way constitute a constructive eviction of Tenant nor
entitle Tenant to any abatement of Rent (other than as expressly set forth in Section 19.6.2,
above).  Landlord shall have no
responsibility or for any reason be liable to Tenant for any direct or indirect
injury to or interference with Tenant’s business arising from the Renovations,
nor shall Tenant be entitled to any compensation or damages from Landlord for
loss of the use of the whole or any part of the Premises or of Tenant’s
personal property or improvements resulting from the Renovations or Landlord’s
actions in connection with such Renovations, or for any inconvenience or
annoyance occasioned by such Renovations or Landlord’s actions.

 

29.31      No Violation.  Tenant hereby warrants and represents that
neither its execution of nor performance under this Lease shall cause Tenant to
be in violation of any agreement, instrument, contract, law, rule or
regulation by which Tenant is bound, and Tenant shall protect, defend,
indemnify and hold Landlord harmless against any claims, demands, losses, damages,
liabilities, costs and expenses, including, without limitation, reasonable
attorneys’ fees and costs, arising from Tenant’s breach of this warranty and
representation.

 

29.32      Communications and Computer Lines.  Tenant may install, maintain, replace, remove
or use any communications or computer wires and cables (collectively, the “Lines”) at the Project in or serving the Premises, provided
that (i) Tenant shall obtain Landlord’s prior written consent, use the
contractor designated by Landlord for such work, and comply with all of the
other provisions of Articles 7 and 8 of this Lease, (ii) an
acceptable number of spare Lines and space for additional Lines shall be
maintained for existing and future occupants of the Project, as determined in
Landlord’s reasonable opinion, (iii) the Lines therefor (including riser
cables) shall be appropriately insulated to prevent excessive electromagnetic
fields or radiation, and shall be surrounded by a protective conduit reasonably
acceptable to Landlord, (iv) any new 

 

49

 

or existing Lines
servicing the Premises shall comply with all applicable governmental laws and
regulations, (v) as a condition to permitting the installation of new
Lines, Landlord may require that Tenant remove existing Lines located in or
serving the Premises and repair any damage in connection with such removal (it
being acknowledged that Landlord shall, as more particularly set forth in Section 1
of the Work Letter, remove the unused Lines from the Premises existing as of
the date of this Lease), and (vi) Tenant shall pay all costs in connection
therewith.  Upon the expiration of the
Lease Term, or immediately following any earlier termination of this Lease,
Tenant shall, at Tenant’s sole cost and expense, remove all Lines installed by
Tenant, and repair any damage caused by such removal.  In the event that Tenant fails to complete
such removal and/or fails to repair any damage caused by the removal of any Lines,
Landlord may do so and may charge the cost thereof to Tenant.  In addition, Landlord reserves the right to
require that Tenant remove any Lines located in or serving the Premises prior
to the expiration or any earlier termination of the Lease Term or, at any time,
any Lines which are installed in violation of these provisions, or which are at
any time in violation of any laws or represent a dangerous or potentially
dangerous condition.

 

29.33      Development of the Project.

 

29.33.1        Subdivision.  Tenant acknowledges that the Project has been
subdivided.  Landlord reserves the right
to further subdivide all or a portion of the buildings and Common Areas in the
Project.  Tenant agrees to execute and
deliver, within twenty (20) days after Landlord’s written demand, and in the
form reasonably requested by Landlord, any additional documents needed to
conform this Lease to the circumstances resulting from a subdivision and any
all maps in connection therewith. 
Notwithstanding anything to the contrary set forth in this Lease, the
separate ownership of any buildings and/or Common Areas of the Project by an
entity other than Landlord shall not affect the calculation of Direct Expenses
or Tenant’s payment of Tenant’s Share of Direct Expenses.

 

29.33.2        The Other Improvements.  If portions of the Project or property
adjacent to the Project (collectively, the “Other
Improvements”) are owned by an entity other than Landlord, Landlord,
at its option, may enter into an agreement with the owner or owners of any or
all of the Other Improvements to provide (i) for reciprocal rights of
access and/or use of the Project and the Other Improvements, (ii) for the
common management, operation, maintenance, improvement and/or repair of all or
any portion of the Project and the Other Improvements, (iii) for the
allocation of a portion of the Direct Expenses to the Other Improvements and
the operating expenses and taxes for the Other Improvements to the Project, and
(iv) for the use or improvement of the Other Improvements and/or the
Project in connection with the improvement, construction, and/or excavation of
the Other Improvements and/or the Project. 
Nothing contained herein shall be deemed or construed to limit or
otherwise affect Landlord’s right to convey all or any portion of the Project
or any other of Landlord’s rights described in this Lease.

 

29.33.3        Construction of Project and Other
Improvements.  Tenant
acknowledges that portions of the Project and/or the Other Improvements may be
under construction following Tenant’s occupancy of the Premises, and that such
construction may result in levels of noise, dust, obstruction of access, etc.
which are in excess of that present in a fully constructed project, provided
that Landlord hereby agrees that it will use commercially reasonable efforts to
minimize any disruption to Tenant’s use of the Premises for the Permitted Use
that may be caused by the foregoing. 
Tenant hereby waives any and all rent offsets or claims of constructive
eviction which may arise in connection with such construction.

 

29.34      Arbitration.

 

29.34.1        General Submittals to Arbitration.  The submittal of all matters to arbitration
in accordance with the provisions of this Section 29.34 is the sole
and exclusive method, means and procedure to resolve any and all claims,
disputes or disagreements arising under this Lease, including, but not limited
to any matter relating to Landlord’s failure to approve an assignment, sublease
or other transfer of Tenant’s interest in the Lease under Article 14
of this Lease, any other defaults by Landlord, or any Tenant Default, except
for (i) all claims by either party which (A) seek anything other than
enforcement of rights under this Lease, or (B) are primarily founded upon
matters of fraud, willful misconduct, bad faith or any other allegations of
tortious action, and seek the award of punitive or exemplary damages, (ii) all
claims by either party arising from the determination of Fair Market Rental
Rate, and (iii) claims relating to 

 

50

 

Landlord’s
exercise of any unlawful detainer rights pursuant to California law or rights
or remedies used by Landlord to gain possession of the Premises or terminate
Tenant’s right of possession to the Premises, which disputes shall be resolved
by suit filed in the Superior Court of Los Angeles County, California, the
decision of which court shall be subject to appeal pursuant to Applicable
Laws.  The parties hereby irrevocably
waive any and all rights to the contrary and shall at all times conduct themselves
in strict, full, complete and timely accordance with the provisions of this Section 29.34
and all attempts to circumvent the terms and conditions of this Section 29.34
shall be absolutely null and void and of no force or effect whatsoever.  As to any matter submitted to arbitration
(except with respect to the payment of money) to determine whether a matter
would, with the passage of time, constitute a default, such passage of time
shall not commence to run until any such affirmative arbitrated determination,
as long as it is simultaneously determined in such arbitration that the
challenge of such matter as a potential Tenant Default or Landlord default was
made in good faith.  As to any matter
submitted to arbitration with respect to the payment of money, to determine
whether a matter would, with the passage of time, constitute a default, such
passage of time shall not commence to run in the event that the party which is
obligated to make the payment does in fact make the payment to the other
party.  Such payment can be made “under
protest,” which shall occur when such payment is accompanied by a good faith
Notice stating the reasons that the party has elected to make a payment under
protest.  Such protest will be deemed
waived unless the subject matter identified in the protest is submitted to arbitration
as set forth in this Section 29.34.

 

29.34.2        JAMS.  Any dispute to be arbitrated pursuant to the
provisions of this Section 29.34 shall be determined by binding
arbitration before a retired judge of the Superior Court of the State of
California (the “Arbitrator”)
under the auspices of Judicial Arbitration & Mediation Services, Inc.
(“JAMS”).  Such arbitration shall be initiated by the
parties, or either of them, within ten (10) days after either party sends
Notice (the “Arbitration Notice”)
of a demand to arbitrate to the other party and to JAMS.  The Arbitration Notice shall contain a
description of the subject matter of the arbitration, the dispute with respect
thereto, the amount involved, if any, and the remedy or determination
sought.  The parties may agree on a
retired judge from the JAMS panel.  If
they are unable to promptly agree, JAMS will provide a list of three available
judges who, to the extent available, have had extensive experience in handling
real estate commercial lease transactions as practitioners and each party may
strike one.  The remaining judge (or if
there are two, the one selected by JAMS) will serve as the Arbitrator.  In the event that JAMS shall no longer exist
or if JAMS fails or refuses to accept submission of such dispute, then the
dispute shall be resolved by binding arbitration before the American
Arbitration Association (“AAA”)
under the AAA’s commercial arbitration rules then in effect.

 

29.34.3        Arbitration Procedure.

 

29.34.3.1       Pre-Decision Actions.  The Arbitrator shall schedule a pre-hearing
conference to resolve procedural matters, arrange for the exchange of
information, obtain stipulations, and narrow the issues.  The parties will submit proposed discovery
schedules to the Arbitrator at the pre-hearing conference.  The scope and duration of discovery will be
within the sole discretion of the Arbitrator. 
The Arbitrator shall have the discretion to order a pre-hearing exchange
of information by the parties, including, without limitation, production of
requested documents, exchange of summaries of testimony of proposed witnesses,
and examination by deposition of parties and third-party witnesses.  This discretion shall be exercised in favor
of discovery reasonable under the circumstances.

 

29.34.3.2       The Decision.  The arbitration shall be conducted in Los
Angeles, California.  Any party may be
represented by counsel or other authorized representative.  In rendering a decision(s), the Arbitrator
shall determine the rights and obligations of the parties according to the
substantive and procedural laws of the State of California and the provisions
of this Lease.  The Arbitrator’s decision
shall be based on the evidence introduced at the hearing, including all logical
and reasonable inferences therefrom.  The
Arbitrator may make any determination, and/or grant any remedy or relief (an “Arbitration Award”) that is just and
equitable.  The decision must be based
on, and accompanied by, a written statement of decision explaining the factual
and legal basis for the decision as to each of the principal controverted
issues.  The decision shall be conclusive
and binding, and it may thereafter be confirmed as a judgment by the Superior
Court of the State of California, subject only to challenge on the grounds set
forth in the California Code of Civil Procedure Section 1286.2.  The validity and enforceability of the
Arbitrator’s decision is to be determined exclusively by the California courts
pursuant to the terms and conditions of this Lease.  The 

 

51

 

Arbitrator shall
award costs, including without limitation attorneys’ fees, and expert and
witness costs, to the prevailing party as defined in California Code of Civil
Procedure Section 1032 (“Prevailing
Party”), if any, as determined by the Arbitrator in his
discretion.  The Arbitrator’s fees and
costs shall be paid by the non-prevailing party as determined by the Arbitrator
in his discretion.  A party shall be
determined by the Arbitrator to be the prevailing party if its proposal for the
resolution of dispute is the closer to that adopted by the Arbitrator.

 

29.35      Office and Communications
Services.

 

29.35.1        The Provider.  Landlord has advised Tenant that certain
office and communications services may be offered to tenants of the Building by
a concessionaire under contract to Landlord (“Provider”).  Tenant shall be permitted to contract with
Provider for the provision of any or all of such services on such terms and
conditions as Tenant and Provider may agree.

 

29.35.2        Other Terms.  Tenant acknowledges and agrees that:  (i) Landlord has made no warranty or
representation to Tenant with respect to the availability of any such services,
or the quality, reliability or suitability thereof; (ii) the Provider is
not acting as the agent or representative of Landlord in the provision of such
services, and Landlord shall have no liability or responsibility for any
failure or inadequacy of such services, or any equipment or facilities used in
the furnishing thereof, or any act or omission of Provider, or its agents,
employees, representatives, officers or contractors; (iii) except as
otherwise expressly provided herein, Landlord shall have no responsibility or
liability for the installation, alteration, repair, maintenance, furnishing,
operation, adjustment or removal of any such services, equipment or facilities;
and (iv) any contract or other agreement between Tenant and Provider shall
be independent of this Lease, the obligations of Tenant hereunder, and the
rights of Landlord hereunder, and, without limiting the foregoing, no default
or failure of Provider with respect to any such services, equipment or
facilities, or under any contract or agreement relating thereto, shall have any
effect on this Lease or give to Tenant any offset or defense to the full and
timely performance of its obligations hereunder, or entitle Tenant to any
abatement of rent or additional rent or any other payment required to be made
by Tenant hereunder, or constitute any accrual or constructive eviction of
Tenant, or otherwise give rise to any other claim of any nature against
Landlord.

 

29.36      Hazardous Substances.

 

29.36.1        Definitions.  For purposes of this Lease, the following
definitions shall apply:  “hazardous materials” and “hazardous substances” shall mean any solid,
liquid or gaseous substance or material that is described or characterized as a
toxic or hazardous substance, waste, material, pollutant, contaminant or
infectious waste, or any matter that in certain specified quantities would be
injurious to the public health or welfare, or words of similar import, in any
of the “Environmental Laws,” as that term is defined below, or any other words
which are intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity or reproductive toxicity and includes, without
limitation, asbestos, petroleum (including crude oil or any fraction thereof,
natural gas, natural gas liquids, liquefied natural gas, or synthetic gas
usable for fuel, or any mixture thereof), petroleum products, polychlorinated
biphenyls, urea formaldehyde, radon gas, nuclear or radioactive matter, medical
waste, soot, vapors, fumes, acids, alkalis, chemicals, microbial matters (such
as molds, fungi or other bacterial matters), biological agents and chemicals
which may cause adverse health effects, including but not limited to, cancers
and /or toxicity.  “Environmental
Laws” shall mean any and all federal, state, local or
quasi-governmental laws (whether under common law, statute or otherwise),
ordinances, decrees, codes, rulings, awards, rules, regulations or guidance or
policy documents now or hereafter enacted or promulgated and as amended from
time to time, in any way relating to a) the protection of the environment, the
health and safety of persons (including employees), property or the public
welfare from actual or potential release, discharge, escape or emission
(whether past or present) of any hazardous materials or b) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of any hazardous materials.

 

29.36.2        Compliance with
Environmental Laws.  Tenant
represents and warrants that, except as herein set forth, it will not use,
store or dispose of any hazardous materials in or on the Premises.  However, notwithstanding the preceding
sentence, Landlord agrees that Tenant may use, store and properly dispose of
commonly available household 

 

52

 

cleaners and
chemicals to maintain the Premises and Tenant’s routine office operations (such
as printer toner and copier toner) (hereinafter the “Permitted Chemicals”). 
Landlord and Tenant acknowledge that any or all of the Permitted
Chemicals described in this paragraph may constitute hazardous materials.  However, Tenant may use, store and dispose of
same, provided that in doing so, Tenant fully complies with all Environmental
Laws.

 

29.36.3        Landlord’s Right of
Environmental Audit.   Landlord may, upon reasonable
notice to Tenant, be granted access to and enter the Premises no more than once
annually to perform or cause to have performed an environmental inspection,
site assessment or audit.  Such
environmental inspector or auditor may be chosen by Landlord, in its sole
discretion, and be performed at Landlord’s sole expense.  To the extent that the report prepared upon
such inspection, assessment or audit, indicates the presence of hazardous
materials in violation of Environmental Laws, or provides recommendations or
suggestions to prohibit the release, discharge, escape or emission of any
hazardous materials at, upon, under or within the Premises, or to comply with
any Environmental Laws, Tenant shall promptly, at Tenant’s sole expense, comply
with such recommendations or suggestions, including, but not limited to
performing such additional investigative or subsurface investigations or
remediation(s) as recommended by such inspector or auditor.  Notwithstanding the above, if at any time,
Landlord has actual notice or reasonable cause to believe that Tenant has
violated, or permitted any violations of any Environmental Law, then Landlord
will be entitled to perform its environmental inspection, assessment or audit
at any time, notwithstanding the above mentioned annual limitation, and Tenant
must reimburse Landlord for the cost or fees incurred for such as Additional
Rent.

 

29.36.4        Indemnifications.  Tenant agrees to indemnify, defend, protect
and hold harmless the Landlord Parties from and against any liability,
obligation, damage or costs, including without limitation, attorneys’ fees and
costs, resulting directly or indirectly from any use, presence, removal or
disposal of any hazardous materials or breach of any provision of this Section,
to the extent such liability, obligation, damage or costs was a result of
actions caused or permitted by Tenant, its partners, subpartners, members,
managers and their respective officers, directors, agents, servants, employees,
independent contractor, invitees and guests. 
Landlord agrees to indemnify, defend, protect and hold harmless Tenant
from and against any liability, obligation, damage or costs, including without
limitation, attorneys’ fees and costs, resulting directly or indirectly from
any use, presence, removal or disposal of any hazardous materials in the
Project to the extent such liability, obligation, damage or costs was a result
of actions caused or permitted by Landlord or a Landlord Party or to the extent
such hazardous materials were in existence in the Building or on the Project prior
to the Lease Commencement Date, and were of such a nature that a federal, state
or municipal governmental or quasi-governmental authority, if it had then
knowledge of the presence of such hazardous materials, in the state, and under
the conditions that it then existed in the Building or on the Project, would
have then required the removal, remediation or other action with respect to
such hazardous materials.

 

29.37      Approval by Lender.  Tenant acknowledges and agrees that this
Lease may be subject to the approval of Landlord’s lender, and Tenant hereby
agrees to make such modifications of this Lease as shall be reasonably
requested by Landlord’s lender, so long as such modifications shall not
increase Rent payable hereunder, or increase or decrease the Term hereof, or
otherwise materially, adversely affect Tenant’s rights and obligations
hereunder.

 

29.38      Counterparts.  This Lease may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute but one and the same instrument.

 

[The remainder of this page is
intentionally left blank.  Signatures on
the next page.]

 

53

 

IN WITNESS WHEREOF,
Landlord and Tenant have caused this Lease to be executed the day and date
first above written.

 

 

	
   

  	
  “LANDLORD”:

  
	
   

  	
   

  
	
   

  	
  KILROY REALTY,
  L.P.,

  
	
   

  	
  a Delaware
  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  KILROY
  REALTY CORPORATION,

  
	
   

  	
   

  	
  a
  Maryland corporation,

  
	
   

  	
   

  	
  general
  partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  “TENANT”:

  
	
   

  	
   

  
	
   

  	
  OMP,
  INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
						

 

 

EXHIBIT
A

 

KILROY AIRPORT
CENTER LONG BEACH

 

OUTLINE OF
PREMISES

 

 

1

 

 

2

 

EXHIBIT
A-1

 

KILROY AIRPORT CENTER LONG BEACH

 

SITE PLAN

 

 

1

 

EXHIBIT
A-2

 

KILROY AIRPORT CENTER LONG BEACH

 

LOCATION OF MONUMENT SIGN

 

 

1

 

EXHIBIT
B

 

KILROY AIRPORT
CENTER LONG BEACH

 

WORK LETTER

 

This Work Letter shall
set forth the terms and conditions relating to the construction of the
Premises.  This Work Letter is
essentially organized chronologically and addresses the issues of the
construction of the Premises, in sequence, as such issues will arise during the
actual construction of the Premises.  All
references in this Work Letter to Articles or Sections of “this Lease” shall
mean the relevant portions of Articles 1 through 29  of the Office Lease to which this Work
Letter is attached as Exhibit B,
and all references in this Work Letter to Sections of “this Work Letter” shall
mean the relevant portions of Sections 1 through 6 of this Work
Letter.

 

SECTION 1

 

DELIVERY OF THE PREMISES AND BASE BUILDING

 

1.1           Base Building as
Constructed by Landlord.  Following
the full execution and delivery of this Lease by Landlord and Tenant, but
subject to the terms of Section 1.2 of the Lease, Landlord shall
deliver the Premises and “Base Building,” as that term is defined in Section 8.2
of the Lease, to Tenant, and Tenant shall accept the Premises and Base Building
from Landlord in their presently existing, “as-is” condition as of the date of
such delivery.

 

1.2           Removal of Currently
Existing Lines.  Notwithstanding the
terms set forth in Section 1.1, above, Landlord shall, at its sole cost (i.e.,
not to be deducted from the Improvement Allowance, as that term is defined in Section 2,
below), cause all currently existing (i.e., as of the date of this Lease)
unused Lines in the Premises to be removed from the Premises.

 

SECTION 2

 

IMPROVEMENTS

 

2.1           Improvement
Allowance.

 

2.1.1        Initial Improvement
Allowance.  Tenant shall be entitled
to a one-time improvement allowance (the “Improvement
Allowance”) in the amount of $25.00 per usable square foot of the
Premises for the costs relating to the initial design and construction of the
improvements, which are permanently affixed to the Premises (the “Improvements”).  In no event shall Landlord be obligated to
make disbursements pursuant to this Work Letter in the event that Tenant fails
to immediately pay any portion of the “Over-Allowance Amount,” as defined in Section 4.2.1,
nor shall Landlord be obligated to pay a total amount which exceeds the
Improvement Allowance.  Notwithstanding
the foregoing or any contrary provision of this Lease, all Improvements shall
be deemed Landlord’s property under the terms of this Lease.  Any unused portion of the Improvement
Allowance remaining as of the Lease Commencement Date, shall remain with
Landlord and Tenant shall have no further right thereto.

 

2.1.2        Additional Improvement
Allowance.  In addition to the
Improvement Allowance set forth in Section 2.1.1, above, Tenant
shall, only if so elected by Tenant in writing prior to the Lease Commencement
Date, be entitled to a one-time additional allowance increase in an amount not
to exceed $5.00 per usable square foot of the Premises (the “Additional Allowance”) to be used solely
for hard costs in the construction of the Improvements.  In the event Tenant exercises its right to
use all or any portion of the Additional Allowance, the monthly Base Rent for
the Premises for the initial Lease Term (as set forth in Article 2.1
of this Lease) shall be increased by an amount equal to the “Additional Monthly
Base Rent,” as that term is defined below. 
The “Additional Monthly Base Rent”
shall be determined as the missing component of an annuity, which annuity shall
have (i) the amount of the Additional Allowance utilized by Tenant as the
present value amount, (ii) eighty-four (84) as the number of payments, (iii) 0.833,
which is equal to ten percent (10%) divided by twelve (12) months per year, as
the monthly interest factor, and (iv) the Additional Monthly Base Rent as
the missing component of the annuity.  In
the event Tenant uses any portion of the Additional Allowance, then all references
in this Work Letter to the “Improvement Allowance,” shall be deemed to include
the Additional Allowance utilized by Tenant.

 

1

 

2.2           Disbursement of the
Improvement Allowance.

 

2.2.1        Improvement Allowance
Items.  Except as otherwise set forth
in this Work Letter, the Improvement Allowance shall be disbursed by Landlord
(each of which disbursements shall be made pursuant to Landlord’s disbursement
process as set forth in this Section 2.2, including, without
limitation, Landlord’s receipt of invoices for all costs and fees described
herein) only for the following items and costs (collectively the “Improvement Allowance Items”):

 

2.2.1.1     Payment of the fees of the “Architect”
and the “Engineers,” as those terms are defined in Section 3.1 of
this Work Letter, which fees shall, notwithstanding anything to the contrary
contained in this Work Letter, not exceed an aggregate amount equal to $3.50
per usable square foot of the Premises, and payment of the fees incurred by,
and the cost of documents and materials supplied by, Landlord and Landlord’s
consultants in connection with the preparation and review of the “Construction
Drawings,” as that term is defined in Section 3.1 of this Work
Letter;

 

2.2.1.2     The payment of plan check,
permit and license fees relating to construction of the Improvements;

 

2.2.1.3     The cost of construction of
the Improvements, including, without limitation, testing and inspection costs,
and trash removal costs, and contractors’ fees and general conditions;

 

2.2.1.4     The cost of any changes in
the Base Building when such changes are required by the Construction Drawings
(including if such changes are due to the fact that such work is prepared on an
unoccupied basis), such cost to include all direct architectural and/or
engineering fees and expenses incurred in connection therewith;

 

2.2.1.5     The cost of any changes to
the Construction Drawings or Improvements required by all applicable building
codes (the “Code”);

 

2.2.1.6     The cost of the “Coordination
Fee,” as that term is defined in Section 4.2.2.1 of this Work
Letter;

 

2.2.1.7     Sales and use taxes;

 

2.2.1.8     The cost of installing
cabling in the Premises, which costs shall, notwithstanding anything to the
contrary contained in this Work Letter, not exceed an aggregate amount equal to
$3.00 per usable square foot of the Premises; and

 

2.2.1.9     All other costs to be
expended by Landlord as set forth elsewhere in this Work Letter (which costs
shall not be duplicative of the services provided by Landlord as set forth in Section 4.2.2.1
of this Work Letter) in connection with the construction of the Improvements.

 

2.2.2        Disbursement of
Improvement Allowance.  During the
construction of the Improvements, Landlord shall make monthly disbursements of the
Improvement Allowance for Improvement Allowance Items and shall authorize the
release of monies as follows.

 

2.2.2.1     Monthly Disbursements.  On or before the 5th day of each
calendar month, as reasonably determined by Landlord, during the construction of
the Improvements (or such other date as Landlord may designate), Tenant shall
deliver to Landlord:  (i) a request
for payment of the “Contractor,” as that term is defined in Section 4.1.1
of this Work Letter, approved by Tenant, in a form to be provided by Landlord,
showing the schedule, by trade, of percentage of completion of the Improvements
in the Premises, detailing the portion of the work completed and the portion
not completed; (ii) invoices from all of “Tenant’s Agents,” as that term
is defined in Section 4.1.2 of this Work Letter, for labor rendered
and materials delivered to the Premises; (iii) executed mechanic’s lien
releases, which lien releases shall be conditional with respect to the
then-requested payment amounts and unconditional with respect to payment
amounts previously disbursed by Landlord or Tenant, from all of Tenant’s Agents
which shall comply with the appropriate provisions, as reasonably determined by
Landlord, of California Civil Code Section 3262(d); and (iv) all
other information reasonably requested by Landlord related to such disbursement
request.  As between Landlord and Tenant,
Tenant’s 

 

2

 

request for payment shall be deemed Tenant’s
acceptance and approval of the work furnished and/or the materials supplied as
set forth in Tenant’s payment request. 
Thereafter, Landlord shall deliver a check to Tenant made jointly
payable to Contractor and Tenant in payment of the lesser of:  (A) the amounts so requested by Tenant,
as set forth in this Section 2.2.2.1, above, less a ten percent
(10%) retention (the aggregate amount of such retentions to be known as the “Final Retention”), and (B) the balance
of any remaining available portion of the Improvement Allowance (not including
the Final Retention), provided that Landlord does not dispute any request for
payment based on non-compliance of any work with the “Approved Working
Drawings,” as that term is defined in Section 3.4 below, or due to
any substandard work, or for any other reason.  Landlord’s payment of such amounts shall not
be deemed Landlord’s approval or acceptance of the work furnished or materials
supplied as set forth in Tenant’s payment request.

 

2.2.2.2     Final Retention.  Subject to the provisions of this Work
Letter, a check for the Final Retention payable jointly to Tenant and
Contractor shall be delivered by Landlord to Tenant following the completion of
construction of the Premises, provided that (i) Tenant delivers to
Landlord properly executed mechanic’s lien releases in compliance with both
California Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or
Section 3262(d)(4), (ii) Landlord has determined that no substandard
work exists which adversely affects the mechanical, electrical, plumbing,
heating, ventilating and air conditioning, life-safety or other systems of the
Building, the curtain wall of the Building, the structure or exterior
appearance of the Building, or any other tenant’s use of such other tenant’s
leased premises in the Building, and (iii) Architect delivers to Landlord
a certificate, in a form reasonably acceptable to Landlord, certifying that the
construction of the Improvements in the Premises has been substantially
completed.

 

2.2.2.3     Other Terms.  Landlord shall only be obligated to make disbursements
from the Improvement Allowance to the extent costs are incurred by Tenant for
Improvement Allowance Items.  All
Improvement Allowance Items for which the Improvement Allowance has been made
available shall be deemed Landlord’s property under the terms of this Lease.

 

2.3           Building Standards;
Improvement Removal Obligations. 
Landlord has established specifications for certain Building standard
components to be used in the construction of the Improvements in the
Premises.  The quality of Improvements
shall be equal to or of greater quality than the quality of such Building
standards, provided that Landlord may, at Landlord’s option, require the
Improvements to comply with certain Building standards.  Landlord may make changes to Building
Standards from time to time, provided that in no event shall Tenant be required
to modify any drawings or Improvements to comply with revisions to the Building
Standards made after either the completion of the Approved Working Drawings or
the installation of the Improvements. 
Landlord shall notify Tenant in writing at the time of Landlord’s review
and approval of the “Final Working Drawings” (as that term is defined in Section 3.3,
below) of any additional Improvements (i.e., which are in addition to the
Improvements listed in sub-clauses (i)-(v) of Section 8.6 of this
Lease) which shall be included in the Landlord Restoration Work, and which
shall therefore subject to the terms and conditions set forth in Section 8.6
of this Lease; provided, however, Landlord shall not identify any such
additional Improvements to the extent that the full description and scope of
any such Improvements is already clearly identified on the “Final Space Plan”
(as that term is defined in Section 3.2, below).  Notwithstanding the terms of the immediately
preceding sentence or any provision to the contrary set forth in this Lease
(specifically including Section 8.6 of the Lease), Tenant shall (as
more particularly set forth in Section 8.5 of this Lease), without the
necessity of any such notice from Landlord, be required to (I) repair any
damage to the Premises and Building caused in connection with the installation,
construction or alteration of the Improvements, including, but not limited to,
the repairing and restoring of any holes or saw cuts in the walls or ceiling, (II) remove
all cabling and other Lines, and (III) repair any damage to the
Improvements themselves (normal wear and tear excepted)..  None of the foregoing items (I)-(III) shall
be included in the Landlord Restoration Work, all such work shall be performed
by Tenant prior to the expiration of the Lease Term, or immediately following
any earlier termination of this Lease.

 

3

 

SECTION 3

CONSTRUCTION DRAWINGS

 

3.1           Selection of
Architect/Construction Drawings. 
Tenant shall retain Shlemmer+Algaze+Associates (the “Architect”) to prepare the “Construction
Drawings,” as that term is defined in this Section 3.1.  Landlord shall pay, as a cost (“Landlord’s Drawing Contribution”) to be
deducted from the Tenant Improvement Allowance in an amount not to exceed $0.16
per usable square foot of the Premises, the cost of one (1) preliminary
space plan for the Premises, but not the cost of any revisions thereto
requested by Tenant or required by Landlord, and only to the extent such
drawings reflect items from the Building Standards.  Tenant shall retain the engineering
consultants designated by Landlord and as more particularly set forth on Schedule
2 attached hereto (the “Engineers”)
to prepare all plans and engineering working drawings relating to the
structural, mechanical, electrical, plumbing, HVAC, lifesafety, and sprinkler
work in the Premises, which work is not part of the Base Building.  The plans and drawings to be prepared by
Architect and the Engineers hereunder shall be known collectively as the “Construction Drawings.”  All Construction Drawings shall comply with
the drawing format and specifications determined by Landlord, and shall be
subject to Landlord’s approval, which approval shall not be unreasonably
withheld, conditioned or delayed.  Tenant
and Architect shall verify, in the field, the dimensions and conditions as
shown on the relevant portions of the Base Building plans, and Tenant and
Architect shall be solely responsible for the same, and Landlord shall have no
responsibility in connection therewith. 
Landlord’s review of the Construction Drawings as set forth in this Section 3,
shall be for its sole purpose and shall not imply Landlord’s review of the
same, or obligate Landlord to review the same, for quality, design, Code
compliance or other like matters. 
Accordingly, notwithstanding that any Construction Drawings are reviewed
by Landlord or its space planner, architect, engineers and consultants, and
notwithstanding any advice or assistance which may be rendered to Tenant by
Landlord or Landlord’s space planner, architect, engineers, and consultants,
Landlord shall have no liability whatsoever in connection therewith and shall
not be responsible for any omissions or errors contained in the Construction
Drawings, and Tenant’s waiver and indemnity set forth in this Lease shall
specifically apply to the Construction Drawings.

 

3.2           Final Space Plan.  Tenant has prepared, and Landlord has
approved, the Final Space Plan identified in Section 5.2 of this Lease.

 

3.3           Final Working
Drawings.  After the Final Space Plan
has been approved by Landlord, Tenant shall supply the Engineers with a
complete listing of standard and non-standard equipment and specifications,
including, without limitation, B.T.U. calculations, electrical requirements and
special electrical receptacle requirements for the Premises, to enable the
Engineers and the Architect to complete the “Final Working Drawings” (as that
term is defined below) in the manner as set forth below.  Upon the approval of the Final Space Plan by
Landlord and Tenant, Tenant shall promptly cause the Architect and the
Engineers to complete the architectural and engineering drawings for the
Premises, and Architect shall compile a fully coordinated set of architectural,
structural, mechanical, electrical and plumbing working drawings in a form
which is complete to allow subcontractors to bid on the work and to obtain all
applicable permits (collectively, the “Final
Working Drawings”) and shall submit the same to Landlord for
Landlord’s approval.  Tenant shall supply
Landlord with four (4) copies signed by Tenant of such Final Working
Drawings.  Landlord shall advise Tenant
within ten (10) business days after Landlord’s receipt of the Final
Working Drawings for the Premises if the same is unsatisfactory or incomplete
in any respect.  If Tenant is so advised,
Tenant shall immediately revise the Final Working Drawings in accordance with
such review and any disapproval of Landlord in connection therewith.  In addition, if the Final Working Drawings or
any amendment thereof or supplement thereto shall require alterations in the
Base Building (as contrasted with the Improvements), and if Landlord in its
sole and exclusive discretion agrees to any such alterations, and notifies
Tenant of the need and cost for such alterations, then Tenant shall pay the
cost of such required changes in advance upon receipt of notice thereof.

 

3.4           Approved Working
Drawings.  The Final Working Drawings
shall be approved by Landlord (the “Approved
Working Drawings”) prior to the commencement of construction of the
Premises by Tenant.  After approval by
Landlord of the Final Working Drawings, Tenant may submit the same to the
appropriate municipal authorities for all applicable building permits.  Tenant hereby agrees that neither Landlord
nor Landlord’s consultants shall be responsible for obtaining any building
permit or certificate of occupancy for the Premises and that obtaining the 

 

4

 

same shall be Tenant’s responsibility; provided,
however, that Landlord shall cooperate with Tenant in executing permit
applications and performing other ministerial acts reasonably necessary to
enable Tenant to obtain any such permit or certificate of occupancy.  No changes, modifications or alterations in
the Approved Working Drawings may be made without the prior written consent of
Landlord, which consent may not be unreasonably withheld.

 

SECTION 4

CONSTRUCTION OF THE IMPROVEMENTS

 

4.1           Tenant’s
Selection of Contractors.

 

4.1.1        The Contractor.  Tenant shall competitively bid the Tenant
Improvement work to up to four (4) contractors (the “Bidding Contractors”) reasonably approved
by Landlord,  it being understood
that Landlord has approved Innerspace Construction, Corporate Contractors, and
Environmental Contracting Corporation and that any such bid may be GC and Fee
bid.  The Bidding Contractor selected by
Tenant as a result of such bidding process shall be retained by Tenant as the
general contractor (the “Contractor”)
in connection with the construction of the Tenant Improvements.

 

4.1.2        Tenant’s Agents.  All subcontractors, laborers, materialmen,
and suppliers used by Tenant (such subcontractors, laborers, materialmen, and
suppliers, and the Contractor to be known collectively as “Tenant’s Agents”) must be approved in
writing by Landlord, which approval shall not be unreasonably withheld or
delayed.  If Landlord does not approve
any of Tenant’s proposed subcontractors, laborers, materialmen or suppliers,
Tenant shall submit other proposed subcontractors, laborers, materialmen or
suppliers for Landlord’s written approval.

 

4.2           Construction of
Improvements by Tenant’s Agents.

 

4.2.1        Construction Contract;
Cost Budget.  Tenant shall engage the
Contractor under an AIA A101 Stipulated Sum Agreement (1997 Version)
accompanied by Landlord’s standard AIA A201 General Conditions (1997 Version)
as modified by Landlord (collectively, the “Contract”).  Prior to the commencement of the construction
of the Improvements, and after Tenant has accepted all bids for the
Improvements, Tenant shall provide Landlord with a detailed breakdown, by
trade, of the final costs to be incurred or which have been incurred, as set
forth more particularly in Sections 2.2.1.1 through 2.2.1.8,
above, in connection with the design and construction of the Improvements to be
performed by or at the direction of Tenant or the Contractor, which costs form
a basis for the amount of the Contract (the “Final
Costs”).  In the event that
the Final Costs are greater than the amount of the Improvement Allowance (the “Over-Allowance Amount”), then Tenant shall
pay a percentage of each amount requested by the Contractor or otherwise to be
disbursed under this Work Letter, which percentage shall be equal to the
Over-Allowance Amount divided by the amount of the Final Costs (after deducting
from the Final Costs any amounts expended in connection with the preparation of
the Construction Drawings, and the cost of all other Improvement Allowance
Items incurred prior to the commencement of construction of the Improvements),
and such payments by Tenant (the “Over-Allowance
Payments”) shall be a condition to Landlord’s obligation to pay any
amounts from the Improvement Allowance. 
In the event that, after the Final Costs have been delivered by Tenant
to Landlord, the costs relating to the design and construction of the
Improvements shall change, any additional costs for such design and
construction in excess of the Final Costs shall be added to the Over-Allowance
Amount and the Final Costs, and the Over-Allowance Payments shall be
recalculated in accordance with the terms of the immediately preceding
sentence.  In connection with any
Over-Allowance Payment made by Tenant pursuant to this Section 4.2.1,
Tenant shall continue to provide Landlord with the documents described in Sections
2.2.2.1(i), (ii), (iii) and (iv) of this
Work Letter, above, for Landlord’s approval, prior to Tenant paying such costs.

 

4.2.2        Tenant’s Agents.

 

4.2.2.1     Landlord’s General
Conditions for Tenant’s Agents and Improvement Work.  Tenant’s and Tenant’s Agent’s construction of
the Improvements shall comply with the following:  (i) the Improvements shall be
constructed in strict accordance with the Approved Working Drawings, except
with respect to any revisions to the Approved Working Drawings requested in
writing by Tenant and approved by Landlord, which approval shall not be 

 

5

 

unreasonably withheld, conditioned or delayed (“Permitted Revisions”); (ii) Tenant’s
Agents shall submit schedules of all work relating to the Improvements to
Contractor and Contractor shall, within five (5) business days of receipt
thereof, inform Tenant’s Agents of any changes which are necessary thereto, and
Tenant’s Agents shall adhere to such corrected schedule; and (iii) Tenant
shall abide by all rules made by Landlord’s Building manager with respect
to the use of freight, loading dock and service elevators, storage of
materials, coordination of work with the contractors of other tenants
(specifically including, without limitation, the Jobsite Rules and
Regulations for Construction Personnel attached hereto as Schedule 1), and any
other matter in connection with this Work Letter, including, without
limitation, the construction of the Improvements.  Tenant shall pay a logistical coordination
fee (the “Coordination Fee”) to
Landlord in an amount equal to Ten Thousand and No/100 Dollars ($10,000.00),
which Coordination Fee shall be for services relating to the coordination of
the construction of the Improvements.

 

4.2.2.2     Indemnity.  Tenant’s indemnity of Landlord as set forth
in this Lease shall also apply with respect to any and all costs, losses,
damages, injuries and liabilities related in any way to any act or omission of
Tenant or Tenant’s Agents, or anyone directly or indirectly employed by any of
them, or in connection with Tenant’s non-payment of any amount arising out of
the Improvements and/or Tenant’s disapproval of all or any portion of any
request for payment, except to the extent caused by any breach of the Landlord
obligations under the Lease or this Work Letter.  Such indemnity by Tenant, as set forth in this
Lease, shall also apply with respect to any and all costs, losses, damages,
injuries and liabilities related in any way to Landlord’s performance of any
ministerial acts reasonably necessary (i) to permit Tenant to complete the
Improvements, and (ii) to enable Tenant to obtain any building permit or
certificate of occupancy for the Premises, provided that the terms of such
indemnity shall not apply to the extent of the negligence or willful misconduct
of Landlord.

 

4.2.2.3     Requirements of Tenant’s
Agents.  Each of Tenant’s Agents
shall guarantee to Tenant and for the benefit of Landlord that the portion of
the Improvements for which it is responsible shall be free from any defects in
workmanship and materials for a period of not less than one (1) year from
the date of completion thereof.  Each of
Tenant’s Agents shall be responsible for the replacement or repair, without
additional charge, of all work done or furnished in accordance with its
contract that shall become defective within one (1) year after the later
to occur of (i) completion of the work performed by such contractor or
subcontractors and (ii) the Lease Commencement Date.  The correction of such work shall include,
without additional charge, all additional expenses and damages incurred in
connection with such removal or replacement of all or any part of the
Improvements, and/or the Building and/or common areas that may be damaged or
disturbed thereby.  All such warranties
or guarantees as to materials or workmanship of or with respect to the Improvements
shall be contained in the Contract or subcontract and shall be written such
that such guarantees or warranties shall inure to the benefit of both Landlord
and Tenant, as their respective interests may appear, and can be directly
enforced by either.  Tenant covenants to
give to Landlord any assignment or other assurances which may be necessary to
effect such right of direct enforcement.

 

4.2.2.4     Insurance Requirements.

 

4.2.2.4.1  General
Coverages.  All of Tenant’s Agents
shall carry worker’s compensation insurance covering all of their respective
employees, and shall also carry public liability insurance, including property
damage, all with limits, in form and with companies as are required to be
carried by Tenant as set forth in this Lease.

 

4.2.2.4.2  Special
Coverages.  Tenant shall carry “Builder’s
All Risk” insurance in an amount approved by Landlord covering the construction
of the Improvements, and such other insurance as Landlord may require, it being
understood and agreed that the Improvements shall be insured by Tenant pursuant
to this Lease immediately upon completion thereof.  Such insurance shall be in amounts and shall
include such extended coverage endorsements as may be reasonably required by
Landlord including, but not limited to, the requirement that all of Tenant’s Agents
shall carry excess liability and Products and Completed Operation Coverage
insurance, each in amounts of, in the case of the Contractor not less than
$5,000,000 per incident, $5,000,000 in aggregate, and in the case of Tenant’s
Agents other than Contractor, in such amounts as Landlord may reasonably
require, and in form and with companies as are required to be carried by Tenant
as set forth in this Lease.

 

6

 

4.2.2.4.3  General
Terms.  Certificates for all
insurance carried pursuant to this Section 4.2.2.4 shall be
delivered to Landlord before the commencement of construction of the
Improvements and before the Contractor’s equipment is moved onto the site.  All such policies of insurance must contain a
provision that the company writing said policy will give Landlord thirty (30)
days prior written notice of any cancellation or lapse of the effective date or
any reduction in the amounts of such insurance. 
In the event that the Improvements are damaged by any cause during the
course of the construction thereof, Tenant shall immediately repair the same at
Tenant’s sole cost and expense.  Tenant
shall require that Tenant’s Agents maintain all of the foregoing insurance
coverage in force until the Improvements are fully completed and accepted by
Landlord, except for any Products and Completed Operation Coverage insurance
required by Landlord, which Tenant shall require Contractor to maintain for ten
(10) years following completion of the work and acceptance by Landlord and
Tenant.  All policies carried under this Section 4.2.2.4
shall insure Landlord and Tenant, as their interests may appear, as well as
Contractor and Tenant’s Agents.  All
insurance, except Workers’ Compensation, maintained by Tenant’s Agents shall
preclude subrogation claims by the insurer against anyone insured
thereunder.  Such insurance shall provide
that it is primary insurance as respects the owner and that any other insurance
maintained by owner is excess and noncontributing with the insurance required
hereunder.  The requirements for the
foregoing insurance shall not derogate from the provisions for indemnification
of Landlord by Tenant under Section 4.2.2.2 of this Work
Letter.  Landlord may, in its discretion,
require Tenant to obtain a lien and completion bond or some alternate form of
security satisfactory to Landlord in an amount sufficient to ensure the
lien-free completion of the Improvements and naming Landlord as a co-obligee.

 

4.2.3        Governmental Compliance.  The Improvements shall comply in all respects
with the following:  (i) the Code
and other state, federal, city or quasi-governmental laws, codes, ordinances
and regulations, as each may apply according to the rulings of the controlling
public official, agent or other person; (ii) applicable standards of the
American Insurance Association (formerly, the National Board of Fire
Underwriters) and the National Electrical Code; and (iii) building
material manufacturer’s specifications.

 

4.2.4        Inspection by Landlord.  Landlord shall have the right to inspect the
Improvements at all times, provided however, that Landlord’s failure to inspect
the Improvements shall in no event constitute a waiver of any of Landlord’s
rights hereunder nor shall Landlord’s inspection of the Improvements constitute
Landlord’s approval of the same. 
Landlord shall have the right to disapprove any portion of the Tenant
Improvements only to the extent such portion is not in compliance with the
Approved Working Drawings or Permitted Revisions thereto.  Should Landlord disapprove any portion of the
Improvements, Landlord shall notify Tenant in writing of such disapproval and
shall specify the items disapproved.  Any
defects or deviations in, and/or disapproval by Landlord of, the Improvements
shall be rectified by Tenant at no expense to Landlord, provided however, that
in the event Landlord reasonably determines that a defect or deviation exists
or disapproves of any matter in connection with any portion of the Improvements
and such defect, deviation or matter might adversely affect the mechanical,
electrical, plumbing, heating, ventilating and air conditioning or life-safety
systems of the Building, the structure or exterior appearance of the Building
or any other tenant’s use of such other tenant’s leased premises, Landlord may,
take such action as Landlord reasonably deems necessary, at Tenant’s expense
and without incurring any liability on Landlord’s part, to correct any such
defect, deviation and/or matter, including, without limitation, causing the
cessation of performance of the construction of the Improvements until such
time as the defect, deviation and/or matter is corrected to Landlord’s
satisfaction.

 

4.2.5        Meetings.  Commencing upon the execution of this Lease,
Tenant shall hold weekly meetings at a reasonable time, with the Architect and
the Contractor regarding the progress of the preparation of Construction
Drawings and the construction of the Improvements, which meetings shall be held
at a location designated by Landlord, and Landlord and/or its agents shall
receive prior notice of, and shall have the right to attend, all such meetings,
and, upon Landlord’s request, certain of Tenant’s Agents shall attend such
meetings.  In addition, minutes shall be
taken at all such meetings, a copy of which minutes shall be promptly delivered
to Landlord.  One such meeting each month
shall include the review of Contractor’s current request for payment.

 

4.3           Notice of
Completion; Copy of Record Set of Plans. 
Within ten (10) days after completion of construction of the Improvements,
Tenant shall cause a Notice of Completion to 

 

7

 

be recorded in the office of the Recorder of the
county in which the Building is located in accordance with Section 3093 of
the California Civil Code or any successor statute, and shall furnish a copy
thereof to Landlord upon such recordation. 
If Tenant fails to do so, Landlord may execute and file the same as
Tenant’s agent for such purpose, at Tenant’s sole cost and expense.  At the conclusion of construction, (i) Tenant
shall cause the Architect and Contractor (A) to update the Approved
Working Drawings as necessary to reflect all material changes made to the
Approved Working Drawings during the course of construction, (B) to
certify to the best of their knowledge that the “record-set” of as-built
drawings are true and correct, which certification shall survive the expiration
or termination of this Lease, and (C) to deliver to Landlord two (2) sets
of copies of such record set of drawings within ninety (90) days following
issuance of a certificate of occupancy for the Premises, and (ii) Tenant
shall deliver to Landlord a copy of all warranties, guaranties, and operating
manuals and information relating to the improvements, equipment, and systems in
the Premises.

 

SECTION 5

 

LANDLORD CAUSED DELAYS

 

5.1           Landlord Caused
Delays.  The Lease Commencement Date
shall occur as provided in Section 2.1 of this Lease and Section 3.2
of the Summary; provided, however, that the Lease Commencement Date shall be extended
on a day-for-day basis by the number of actual days of delay of the “Substantial
Completion of the Improvements,” as that term is defined in Section 5.3
below, to the extent caused by a “Landlord Caused Delay,” as that term is
defined below.  As used in this Work
Letter, “Landlord Caused Delay”
shall mean actual delays to the extent resulting from the acts or omissions of
Landlord including, but not limited to (i) failure of Landlord to timely
approve or disapprove any Construction Documents; (ii) material and
unreasonable interference by Landlord, its agents, employees or contractors
with the Substantial Completion of the Improvements and which objectively
preclude or delay the construction of Improvements in the Building by any
person, which interference relates to access by Tenant, or Tenant’s Agents to
the Building or any Building facilities (including loading docks and freight
elevators) or service (including temporary power and parking areas as provided
herein) during normal construction hours, or the use thereof during normal
construction hours; and (iii) delays due to the acts or failures to act of
Landlord, its agents, employees or contractors including without limitation any
such acts or failures to act with respect to payment of the Improvement
Allowance.

 

5.2           Determination of a
Landlord Caused Delay.  If Tenant
contends that a Landlord Caused Delay has occurred, Tenant shall notify
Landlord in writing (the “Delay Notice”)
of the event that Tenant contends constitutes a Landlord Caused Delay.  If such actions, inaction or circumstance
described in the Delay Notice constitute a Landlord Caused Delay and are not
cured by Landlord within one (1) business day of Landlord’s receipt of the
Delay Notice and if such action, inaction or circumstance otherwise qualify as
a Landlord Caused Delay, then a Landlord Caused Delay shall be deemed to have
occurred commencing as of the date of Landlord’s receipt of the Delay Notice
and ending as of the date such delay ends.

 

5.3           Definition of
Substantial Completion of the Improvements. 
For purposes of this Section 5, “Substantial Completion of the Improvements” shall mean
completion of construction of the Improvements in the Premises pursuant to the
Approved Working Drawings, with the exception of any punch list items.

 

SECTION 6

MISCELLANEOUS

 

6.1           Tenant’s
Representative.  Tenant has
designated Ms. Maria Naughton as its sole representative with respect to
the matters set forth in this Work Letter, who shall have full authority and
responsibility to act on behalf of the Tenant as required in this Work Letter.

 

6.2           Landlord’s
Representative.  Landlord has
designated Mr. Richard Mount and Mr. David Hajnal as “Project Managers” who shall each be
responsible for the implementation of all Improvements to be performed by
Landlord in the Premises.  It is hereby
expressly acknowledged by Tenant that such Contractor is not Landlord’s agent
and has no authority 

 

8

 

whatsoever to enter into agreements on Landlord’s
behalf or otherwise bind Landlord.  The
Project Managers will furnish Tenant with notices of substantial completion,
cost estimates for above standard Improvements, Landlord’s approvals or
disapprovals of all documents to be prepared by Tenant pursuant to this Work Letter
and changes thereto.

 

6.3           Time of the Essence
in This Work Letter.  Unless
otherwise indicated, all references herein to a “number of days” shall mean and
refer to calendar days.  If any item
requiring approval is timely disapproved by Landlord, the procedure for
preparation of the document and approval thereof shall be repeated until the
document is approved by Landlord.

 

6.4           Tenant’s Lease
Default.  Notwithstanding any
provision to the contrary contained in the Lease or this Work Letter, if any
default by Tenant under the Lease or this Work Letter (including, without
limitation, any failure by Tenant to fund any portion of the Over-Allowance
Amount) occurs and is continuing beyond the applicable notice and cure period
set forth in the Lease or this Work Letter, at any time on or before the
substantial completion of the Improvements, then (i) in addition to all
other rights and remedies granted to Landlord pursuant to the Lease, Landlord
shall have the right to withhold payment of all or any portion of the
Improvement Allowance and/or Landlord may, without any liability whatsoever,
cause the cessation of construction of the Improvements (in which case, Tenant
shall be responsible for any delay in the substantial completion of the
Improvements and any costs occasioned thereby), and (ii) all other
obligations of Landlord under the terms of the Lease and this Work Letter shall
be suspended until such time as such default is cured pursuant to the terms of
the Lease.

 

6.5           Miscellaneous
Charges.  In connection with the
construction of the Improvements, to the extent the same is reasonably
available, Landlord shall provide, and neither Tenant nor Tenant’s Agents nor
the Contractor or subcontractors retained by Tenant to construct the
Improvements shall be charged directly or indirectly for (i) HVAC during
the Building Hours, or (ii) the use of parking, elevators, electricity,
water, and/or loading docks. 
Notwithstanding the foregoing, if Tenant, Tenant’s Agents or the
Contractor requires any of the foregoing (i) outside of the hours
identified herein above, or (ii) in connection with any use reasonably
unrelated to Tenant’s construction and/or installation of the Improvements,
Tenant shall pay the applicable cost of such service.

 

9

 

SCHEDULE
1 TO EXHIBIT B

 

JOBSITE
RULES AND REGULATIONS

FOR
CONSTRUCTION PERSONNEL

 

1.     Advance notice must be given to Kilroy Realty Property Management
regarding activity, which may affect neighboring tenants so that information
can be relayed.

 

2.     Building sprinkler system
will be reworked so that the system is functional during construction.  Work must be coordinated with the building
engineers and Kilroy Property Management so that outside services will be put
on notice regarding any changes to building systems.

 

3.     Any Fire/Life Safety System
testing will be done prior to 8:00 am and after 5:00 p.m. if it will
affect other occupied areas (i.e. same floor, floor above, floor below).

 

4.     Temporary power and lighting
to be maintained during construction until permanent power is provided.  All doors to work areas to remain closed at
all times.  Do not string extension cords
across public corridors or walkways.

 

5.     Temporary protection
(Masonite) in public corridors, lobby and restrooms shall be incorporated
during construction.  These areas must be
cleaned up at the end of each day.

 

6.     No tennis shoes, tank top, or
shirts with inappropriate language allowed.

 

7.     Contractor must provide
temporary restroom facilities unless permission to use the building facilities
is granted by Kilroy Property Management. 
No smoking in the Building.

 

8.     All food and drink trash to
be disposed of immediately after breaks into an appropriate container.  No food or drinks allowed after carpet or
wall finishes.  NO EXCEPTIONS!!!

 

9.     Windows are easily
scratched!  Any materials found leaning
against or on the windowsills could result in a backcharge to the contractor
for repair or replacement.

 

10.   Any procedure causing excessive
noise that affect the neighboring tenants must be approved by Kilroy’s
Construction Department prior to commencement. 
No loud radios or headsets allowed.

 

11.   All
construction personnel to use freight elevator ONLY.  USE OF THE PASSENGER
ELEVATORS IS PROHIBITED. 
Utilize the back entrance to the freight elevator at all times to avoid
use of main lobby.

 

12.   Construction
personnel parking are restricted to unreserved spaces as specified by Kilroy
Property Management.  Any oversized
trucks should be on premises only long enough to load and unload.  No large trucks or trailers should be stored
in the parking lot.  PLEASE DO
NOT PARK IN VISITOR SPACES; YOU WILL BE TOWED.

 

13.   Inform the Kilroy Realty
Construction Department of construction schedule so that tenants and outside
service companies will be aware of activity that is taking place.  Work authorization permits must be on file
with the security guard (via Property Management) for after-hours access.

 

14.   If access to other areas in the
building is required as a result of construction activity (i.e. other tenant
suites, electrical closets, etc.), please provide notice so that arrangements
can be made for access through Kilroy Realty Corporation.  A minimum of 24 hours notice should be given
for access into other tenant suites.

 

15.   A Certificate of Insurance must
be on file prior to commencement of work. 
Samples of Certificates required are available upon request.

 

16.   Contractors are required to use
sweeping compound to keep the dust to a minimum.  If the building is occupied then sweep compound
must be used sparingly and in late afternoon for odor control.

 

17.   All painting shall be performed
after hours subject to Landlord’s prior approval.  Contractor shall provide a minimum of
forty-eight (48) hours prior advance notice. 
Contractor shall provide the necessary ventilation equipment required to
purge odors from the space prior to the start of the next business day.

 

18.   All staining, varnishing and
other application, which may cause lingering odors, shall be performed during
weekend hours only subject to Landlord’s prior approval.  Contractor shall provide the necessary
ventilation equipment required to purge odors from the space prior to the start
of the next business day.

 

1

 

SCHEDULE
2 TO EXHIBIT B

 

Any of
the following three engineering firms may be selected by Tenant to prepare
engineering drawings in connection with the preparation of the Construction
Drawings:

 

1.     Fruchtman and Associates

2.     Syska and Hennessy

3.     Levine Seegel

 

With respect to fire/life safety work, Tenant must utilize the following
subcontractor:

 

Tony Gauf

National Fail Safe

6442 Industry Way

Westminster, CA 92683

United States of America

(714) 895-4543

tonyg@nf-s.com

 

With respect to roofing work, Tenant must utilize the following
subcontractor:

 

Brenda Little

Stone Roofing

(626) 969-6515 x234

litlbs@aol.com

 

With respect to riser work, Tenant must utilize the following subcontractor:

 

Summit Riser

 

1

 

EXHIBIT
C

 

KILROY AIRPORT
CENTER LONG BEACH

 

NOTICE OF LEASE
TERM DATES

 

To:

 

 

 

 

Re:          Office Lease dated
                        ,
200     between
                                        ,
a                                           
(“Landlord”), and
                                              ,
a
                                              
(“Tenant”) concerning Suite             
on floor(s)                     
of the office building located at
                                                        ,
Long Beach, California.

 

Gentlemen:

 

In accordance with the
Office Lease (the “Lease”), we
wish to advise you and/or confirm as follows:

 

1.             The
Lease Term shall commence on or has commenced on
                            
for a term of                                     
ending on
                                    .

 

2.             Rent
commenced to accrue on
                                    ,
in the amount of
                                .

 

3.             If the
Lease Commencement Date is other than the first day of the month, the first
billing will contain a pro rata adjustment. 
Each billing thereafter, shall be for the full amount of the monthly
installment as provided for in the Lease.

 

4.             Your
rent checks should be made payable to
                                    
at                                       .

 

5.             The
exact number of rentable square feet within the Premises is
                        
square feet.

 

6.             Tenant’s
Share as adjusted based upon the exact number of rentable square feet within
the Premises is                 %.

 

	
   

  	
  “Landlord”:

  
	
   

  	
   

  
	
   

  	
   

  	
  ,

  
	
   

  	
  a

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
  Agreed to and Accepted

  	
   

  
	
  as of
                          ,
  200    .

  	
   

  
	
   

  	
   

  
	
  “Tenant”:

  	
   

  
	
   

  	
   

  
	
   

  	
  ,

  
	
  a

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
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1

 

EXHIBIT
D

 

KILROY AIRPORT
CENTER LONG BEACH

 

RULES AND
REGULATIONS

 

Tenant shall faithfully
observe and comply with the following Rules and Regulations.  Landlord shall not be responsible to Tenant
for the nonperformance of any of said Rules and Regulations by or
otherwise with respect to the acts or omissions of any other tenants or
occupants of the Project; provided, however, Landlord shall use commercially
reasonable efforts to enforce all Rules and Regulations with all tenants
of the Project in a non-discriminatory manner. 
In the event of any conflict between the Rules and Regulations and
the other provisions of this Lease, the latter shall control.

 

1.             Tenant shall not
alter any lock or install any new or additional locks or bolts on any doors or
windows of the Premises without obtaining Landlord’s prior consent; provided,
however, Tenant shall have the right (without Landlord’s consent) to install
new or additional locks and/or bolts on interior suite doors located in the
Premises so long as Tenant coordinates the same with Landlord.  Tenant shall bear the cost of any lock
changes or repairs required by Tenant. 
Two keys will be furnished by Landlord for the Premises.  Additional keys shall be obtained only from
the manager of the Building or Project (as designated by Landlord) at a charge
of Four and 50/100 Dollars ($4.50) per key, or as such key charge may be
adjusted from time to time by Landlord. 
Tenant shall not duplicate or obtain keys from any other source.  Upon the termination of this Lease, Tenant shall
restore to Landlord all keys of stores, offices, and toilet rooms, either
furnished to, or otherwise procured by, Tenant and in the event of the loss of
keys so furnished, Tenant shall pay to Landlord the cost of replacing same or
of changing the lock or locks opened by such lost key if Landlord shall deem it
necessary to make such changes.

 

2.             All doors opening to
public corridors shall be kept closed at all times except for normal ingress
and egress to the Premises.

 

3.             Landlord reserves the
right to close and keep locked all entrance and exit doors of the Building
during such hours as are customary for comparable buildings in the Long Beach, California area.  Tenant, its employees and agents must be sure
that the doors to the Building are securely closed and locked when leaving the
Premises if it is after the normal hours of business for the Building.  Any tenant, its employees, agents or any
other persons entering or leaving the Building at any time when it is so
locked, or any time when it is considered to be after normal business hours for
the Building, may be required to sign the Building register.  Access to the Building may be refused unless
the person seeking access has proper identification or has a previously
arranged pass for access to the Building. 
Landlord will furnish passes to persons for whom Tenant requests same in
writing.  Tenant shall be responsible for
all persons for whom Tenant requests passes and shall be liable to Landlord for
all acts of such persons.  The Landlord
and his agents shall in no case be liable for damages for any error with regard
to the admission to or exclusion from the Building of any person.  In case of invasion, mob, riot, public
excitement, or other commotion, Landlord reserves the right to prevent access
to the Building or the Project during the continuance thereof by any means it
reasonably deems appropriate for the safety and protection of life and
property.

 

4.             All moving activity
into or out of the Building shall be scheduled with Landlord and done only at
such time and in such manner as Landlord reasonably designates.  Landlord shall have the right to reasonably
prescribe the weight, size and position of all safes and other heavy property
brought into the Building and also the times and manner of moving the same in
and out of the Building.  Safes and other
heavy objects shall, if considered necessary by Landlord, stand on supports of
such thickness as is necessary to properly distribute the weight.   Landlord will not be responsible for loss of
or damage to any such safe or property in any case.  Any damage to any part of the Building, its
contents, occupants or visitors by moving or maintaining any such safe or other
property shall be the sole responsibility and expense of Tenant.

 

5.             No furniture, packages,
supplies, equipment or merchandise will be received in the Building or carried
up or down in the elevators, except between such hours, in such specific 

 

1

 

elevator and by such personnel as shall be reasonably
designated by Landlord or except to the extent such items can be easily
hand-carried.

 

6.             The requirements of
Tenant will be attended to only upon application at the management office for
the Project or at such office location designated by Landlord.  Employees of Landlord shall not perform any
work outside their regular duties unless under special instructions from
Landlord.

 

7.             Except as otherwise
provided in the Lease, no sign, advertisement, notice or handbill shall be
exhibited, distributed, painted or affixed by Tenant on any part of the
Premises or the Building without the prior written consent of the
Landlord.  Tenant shall not disturb,
solicit, peddle, or canvass any occupant of the Project and shall cooperate
with Landlord and its agents of Landlord to prevent same.  Landlord shall have the right to remove any
sign, placard, picture, advertisement, name, or notice placed or maintained by
Tenant in violation of these Rules and Regulations or of the Lease,
without notice, at Tenant’s expense and Landlord shall not be liable in damages
for such removal.  Standard interior
signs, such as on doors, shall be affixed for Tenant by Landlord at Tenant’s
expense, and all such signs shall be of a type, size and kind approved by
Landlord.  If Landlord shall have given
its consent with respect to any sign at any time, whether before or after the
execution of this Lease, such consent shall in no way operate as a waiver or
release of any of the provisions hereof or of the Lease and shall be deemed to
relate only to the particular sign, placard, picture, advertisement, name or
notice so consented to by Landlord and shall not be construed as dispensing
with the necessity of obtaining the specific written consent of Landlord with
respect to each and every such sign, placard, picture, advertisement, name or
notice other than the particular sign, placard, picture, advertisement, name or
notice, as the case may be, so consented to by Landlord.

 

8.             The toilet rooms,
urinals, wash bowls and other apparatus shall not be used for any purpose other
than that for which they were constructed, and no foreign substance of any kind
whatsoever shall be thrown therein.  The
expense of any breakage, stoppage or damage resulting from the violation
of this rule shall be borne by the tenant who, or whose servants,
employees, agents, visitors or licensees shall have caused same.

 

9.             Tenant shall not
overload the floor of the Premises, nor mark, drive nails or screws, or drill
into the partitions, woodwork or drywall or in any way deface the Premises or
any part thereof without Landlord’s prior written consent, except in connection
with the installation of wall hangings that are customarily permitted in
first-class office spaces (including, without limitation, picture frames and
diplomas).  Tenant shall not purchase
ice, towel, linen, maintenance or other like services from any person or
persons not approved by Landlord.  The
expense of repairing any damage resulting from a violation of this rule (including
the expense of removal and repair of anything so affixed to any wall, ceiling
or floor) shall be borne by the tenant who shall have caused or permitted such
damage.

 

10.           Except for vending
machines intended for the sole use of Tenant’s employees and invitees, no
vending machine or machines other than fractional horsepower office machines
shall be installed, maintained or operated upon the Premises without the
written consent of Landlord.

 

11.           Except with respect to
the Permitted Chemicals set forth in Section 29.36.2 of the Lease,
Tenant shall not use or keep in or on the Premises, the Building, or the
Project any kerosene, gasoline, explosive material, corrosive material,
material capable of emitting toxic fumes, or other inflammable or combustible
fluid chemical, substitute or material. 
Tenant shall provide material safety data sheets for any hazardous
material used or kept on the Premises.

 

12.           Tenant shall not
without the prior written consent of Landlord use any method of heating or air
conditioning other than that supplied by Landlord.

 

13.           Tenant shall not use,
keep or permit to be used or kept, any foul or noxious gas or substance in or
on the Premises, or permit or allow the Premises to be occupied or used in a
manner offensive or objectionable to Landlord or other occupants of the Project
by reason of noise, odors, or vibrations, or interfere with other tenants or
those having business therein, whether by the use of any musical instrument,
radio, phonograph, or in any other way. 
Tenant shall not throw anything out of doors, windows or skylights or
down passageways.

 

2

 

14.           Tenant shall not bring
into or keep within the Project, the Building or the Premises any animals
(except service animals), birds, aquariums, or, except in areas designated by
Landlord, bicycles or other vehicles.

 

15.           No cooking shall be
done or permitted on the Premises, nor shall the Premises be used for the
storage of merchandise, for lodging or for any improper, objectionable or
immoral purposes.  Notwithstanding the
foregoing, Underwriters’ laboratory-approved equipment and microwave ovens may
be used in the Premises for heating food and brewing coffee, tea, hot chocolate
and similar beverages for employees and visitors, provided that such use is in
accordance with all applicable federal, state, county and city laws, codes,
ordinances, rules and regulations.

 

16.           The Premises shall not
be used for manufacturing or for the storage of merchandise except as such
storage may be incidental to the use of the Premises provided for in the
Summary.  Tenant shall not occupy or
permit any portion of the Premises to be occupied as an office for a
messenger-type operation or dispatch office, public stenographer or typist, or
for the manufacture or sale of liquor, narcotics, or tobacco in any form, or as
a medical office, or as a barber or manicure shop, or as an employment bureau
without the express prior written consent of Landlord.  Tenant shall not engage or pay any employees
on the Premises except those actually working for such tenant on the Premises
nor advertise for laborers giving an address at the Premises.  Except with the prior written consent of the
Landlord, no tenant of the Project shall sell or permit the sale (at retail or
wholesale) of newspapers, magazines, periodicals, theatre tickets, liquor,
narcotics or tobacco, in any form, or any other goods or merchandise to the
general public in or from their premises or from anywhere in the Project.

 

17.           Landlord reserves the
right to exclude or expel from the Project any person who, in the judgment of
Landlord, is intoxicated or under the influence of liquor or drugs, or who
shall in any manner do any act in violation of any of these Rules and
Regulations.

 

18.           Tenant, its employees
and agents shall not loiter in or on the entrances, corridors, sidewalks,
lobbies, courts, halls, stairways, elevators, vestibules or any Common Areas
for the purpose of smoking tobacco products or for any other purpose, nor in
any way obstruct such areas, and shall use them only as a means of ingress and
egress for the Premises.

 

19.           Tenant shall not waste
electricity, water or air conditioning and agrees to cooperate fully with
Landlord to ensure the most effective operation of the Building’s heating and
air conditioning system, and shall refrain from attempting to adjust any
controls.  Tenant shall participate in
recycling programs undertaken by Landlord.

 

20.           Tenant shall store all
its trash and garbage within the interior of the Premises.  No material shall be placed in the trash
boxes or receptacles if such material is of such nature that it may not be
disposed of in the ordinary and customary manner of removing and disposing of
trash and garbage in Long Beach,
California without violation of any law or ordinance governing such disposal.  All trash, garbage and refuse disposal shall
be made only through entry-ways and elevators provided for such purposes at
such times as Landlord shall designate. 
If the Premises is or becomes infested with vermin as a result of the
use or any misuse or neglect of the Premises by Tenant, its agents, servants,
employees, contractors, visitors or licensees, Tenant shall forthwith, at
Tenant’s expense, cause the Premises to be exterminated from time to time to
the satisfaction of Landlord and shall employ such licensed exterminators as
shall be approved in writing in advance by Landlord.

 

21.           Tenant shall comply
with all safety, fire protection and evacuation procedures and regulations
established by Landlord or any governmental agency.  All tenants and their authorized
representatives shall observe and participate in scheduled fire prevention and
other calamitous drills and observances, whether required by Landlord or any
law or public official or agency.  Tenant
agrees that it shall comply with all fire and security regulations that may be
issued from time to time by Landlord and Tenant also shall provide Landlord
with the name of a designated responsible employee to represent Tenant in all
matters pertaining to such fire or security regulations.

 

22.           Any persons employed by
Tenant to do janitorial work shall be subject to the prior written approval of
Landlord, and while in the Building and outside of the Premises, shall be
subject to and under the control and direction of the Building manager (but not
as an agent or 

 

3

 

servant of such manager or of Landlord), and Tenant
shall be responsible for all acts of such persons.

 

23.           No awnings or other
projection shall be attached to the outside walls of the Building without the
prior written consent of Landlord, and no curtains, blinds, shades or screens
shall be attached to or hung in, or used in connection with, any window or door
of the Premises visible from the exterior of the Premises, other than Landlord
standard drapes.  All electrical ceiling
fixtures hung in the Premises or spaces along the perimeter of the Building
must be fluorescent and/or of a quality, type, design and a warm white bulb
color approved in advance in writing by Landlord.  Neither the interior nor exterior of any
windows shall be coated or otherwise sunscreened without the prior written
consent of Landlord.  Tenant shall be
responsible for any damage to the window film on the exterior windows of the
Premises and shall promptly repair any such damage at Tenant’s sole cost and
expense.  Tenant shall use reasonable
efforts to keep its window coverings closed during any period of the day when
the sun is shining directly on the windows of the Premises.  Prior to leaving the Premises for the day,
Tenant shall extinguish all lights. 
Tenant shall abide by Landlord’s regulations concerning the opening and
closing of window coverings which are attached to the windows in the Premises,
if any, which have a view of any interior portion of the Building or Building
Common Areas.

 

24.           Tenant must comply with
requests by the Landlord concerning the informing of their employees of items
of importance to the Landlord.

 

25.           Tenant must comply with
applicable “NO-SMOKING” ordinances
and all related, similar or successor ordinances, rules, regulations or
codes.  If Tenant is required under the
ordinance to adopt a written smoking policy, a copy of said policy shall be on
file in the office of the Building.  In
addition, no smoking of any substance shall be permitted within the Project
except in specifically designated outdoor areas.  Within such designated outdoor areas, all
remnants of consumed cigarettes and related paraphernalia shall be deposited in
ash trays and/or waste receptacles.  No
cigarettes shall be extinguished and/or left on the ground or any other surface
of the Project.  Cigarettes shall be
extinguished only in ashtrays. 
Furthermore, in no event shall Tenant, its employees or agents smoke
tobacco products or other substances within any interior areas of the Project
or within seventy-five feet (75’) of any entrance into the Building or into any
other Project building.

 

26.           Tenant hereby
acknowledges that Landlord shall have no obligation to provide guard service or
other security measures for the benefit of the Premises, the Building or the
Project.  Tenant hereby assumes all
responsibility for the protection of Tenant and its agents, employees,
contractors, invitees and guests, and the property thereof, from acts of third
parties, including keeping doors locked and other means of entry to the
Premises closed, whether or not Landlord, at its option, elects to provide
security protection for the Project or any portion thereof.  Tenant further assumes the risk that any safety
and security devices, services and programs which Landlord elects, in its sole
discretion, to provide may not be effective, or may malfunction or be
circumvented by an unauthorized third party, and Tenant shall, in addition to
its other insurance obligations under this Lease, obtain its own insurance
coverage to the extent Tenant desires protection against losses related to such
occurrences.  Tenant shall cooperate in
any reasonable safety or security program developed by Landlord or required by
law.

 

27.           All office equipment of
any electrical or mechanical nature shall be placed by Tenant in the Premises
in settings approved by Landlord, to absorb or prevent any vibration, noise and
annoyance.

 

28.           No auction,
liquidation, fire sale, going-out-of-business or bankruptcy sale shall be
conducted in the Premises without the prior written consent of Landlord.

 

29.           No tenant shall use or
permit the use of any portion of the Premises for living quarters, sleeping
apartments or lodging rooms.

 

30.           Tenant shall install
and maintain, at Tenant’s sole cost and expense, an adequate, visibly marked
and properly operational fire extinguisher next to any duplicating or
photocopying machines or similar heat producing equipment, which may or may not
contain combustible material, in the Premises.

 

4

 

31.           Landlord reserves the
right at any time to change or rescind any one or more of these Rules and
Regulations, or to make such other and further reasonable Rules and
Regulations as in Landlord’s judgment may from time to time be necessary for
the management, safety, care and cleanliness of the Premises, Building, the
Common Areas and the Project, and for the preservation of good order therein,
as well as for the convenience of other occupants and tenants therein, provided
that Landlord agrees to provide Tenant with reasonable notice of any changes or
addition to or rescissions of these Rules and Regulations.  Landlord may waive any one or more of these Rules and
Regulations for the benefit of any particular tenants, but no such waiver by
Landlord shall be construed as a waiver of such Rules and Regulations in
favor of any other tenant, nor prevent Landlord from thereafter enforcing any
such Rules or Regulations against any or all tenants of the Project.  Tenant shall be deemed to have read these Rules and
Regulations and to have agreed to abide by them as a condition of its occupancy
of the Premises.

 

32.           Landlord reserves the
right to prohibit “Personal Goods and Services Vendors” (defined below) from
access to the Building and the Project, except upon such reasonable terms and
conditions, including the payment of a reasonable fee and provision for
insurance coverage, as are related to the safety, care and cleanliness of the
Building and the Project, the preservation of good order thereon, and the
relief of any financial or other burden on the Landlord occasioned by the
presence of such vendors or the sale by them of personal goods or services to a
tenant or a tenant’s employees. If necessary for the accomplishment of these
purposes, Landlord may exclude a particular vendor entirely or limit the number
of vendors who may be present at any one time or during any week in the
Building or the Project.  As used herein,
“Personal Goods and Services Vendors”
means persons who may periodically enter the Building in which the Premises are
located for the purpose of selling goods or services to a tenant, other than
goods or services which are used by the tenant only for the purpose of
conducting its business on the Premises. 
Personal goods and services include, but are not limited to, drinking
water and other beverages, food, barbering services, and shoeshining services.

 

33.           The sashes, sash doors,
glass doors, windows, glass lights, and any glass, plastic material, lights or
skylights that reflect or admit light into the halls or other places of a
Building or the Premises shall not be covered or obstructed in any way,
partially or in full.  No furniture,
files or other solid objects above thirty (30) inches in height shall be placed
against or within two (2) feet of any clear or transparent glass exterior
window of the Building or any interior window facing common areas, on the first
or second floor.

 

34.           Tenant shall not use
any curtains, blinds, shades, screens, window ventilator or other form of
window covering (collectively “window
covering”) in connection with any window or door of the Premises
visible from the exterior of the Premises unless approved in writing by
Landlord.   Tenant shall not use any
window covering facing any exterior glass surface other than the Building
standard window covering established by Landlord.  If Landlord by a notice to Tenant shall
object to any window covering attached to, or hung in, or used in connection with,
any window or door of the Premises, such use of such window covering shall be
forthwith discontinued by Tenant. 
Landlord reserves the right, at Landlord’s expense, to install in the
Premises of any tenant any Building standard window covering selected by
Landlord, and any subsequent changes of such Building standard window covering,
so that the premises shall have a uniformity in outside appearance.  No awnings shall be permitted on any part of
the Premises.

 

35.           Tenant shall not do or
permit anything to be done in the Premises, or bring or keep anything therein,
which shall in any way increase the rate of fire insurance on the Premises,
Building or the Project, or on the property kept therein, or obstruct or
interfere with the rights of other tenants, or in any way injure or annoy them;
or conflict with the regulations of the Fire Department or fire laws, or with
any insurance policy upon the Building or the Project, or any part thereof, or
with any rules and ordinances established by the City of Long Beach, Board
of Health, or other governmental authority or agency.

 

36.           No hand trucks or
vehicles, including bicycles, other than a wheelchair for an individual, shall
be used or carried in the elevators without Landlord’s prior approval.  Any hand trucks permitted in the Building
must be equipped with soft rubber tires and rubber side guards.

 

37.           No tenant shall engage
or pay any employees on the Premises, or conduct classes or training programs
for employees, except for those employees, contractors or agents actually 

 

5

 

working for such Tenant on the Premises, nor shall any
Tenant advertise for laborers or salesmen giving an address for interviews at
the Premises.

 

38.           Landlord will direct
electricians or other installers as to where and how telephone and other
communication and electrical facilities are to be introduced.  No boring or cutting of or for these
facilities shall be allowed without the prior written consent of Landlord.  The location of telephones, call boxes, and
other communication or office electrical equipment shall be as specified by
Landlord.

 

39.           Landlord shall have the
right to prohibit any advertising by any tenant in, on or about the Project
which, in Landlord’s opinion, tends to impair the reputation of the Project or
its desirability as a first-class office building project, and upon written
notice from Landlord, Tenant shall refrain from and discontinue such
advertising.

 

40.           The Building in which
the Premises are located and the Project is and it shall remain private property
(except for any dedicated streets or sidewalks).  No part of the Project is maintained for nor
is it open to the general public.  At any
time and from time to time Landlord may establish perimeter restraints around
the entire Project or portions of the Project, or around any one or more of the
Buildings comprising the Project, and admit only those persons who have
identification as tenants or as authorized representatives of tenants of the
Building and/or the Project.  All
facilities and common areas forming a part of a Building and the Project shall
be under the sole and absolute control of Landlord with the exclusive right to
regulate and control these areas and to exclude therefrom any one who is not a
tenant or an employee or authorized representative of a tenant.

 

41.           Landlord may require
any person leaving the Building with any package or other object to exhibit a
pass from the tenant from whose premises the packages or object is being
removed, but the establishment and enforcement of such requirement shall not
impose any responsibility on Landlord for the protection of any tenant against
the removal of property from the Premises of Tenant.

 

42.           In the event any
demonstration, picketing, or other event or commotion is directed primarily at
any one tenant, Landlord may, but shall not be obligated to, charge directly to
such tenant any additional guards or other direct or indirect or additional
administrative or legal costs occasioned thereby.

 

43.           If any governmental
license or permit shall be required for the proper and lawful conduct of any
business or other activity carried on by Tenant in the Premises, and if the
failure to secure such license or permit would in any manner affect Landlord,
Tenant shall duly procure and thereafter maintain such license or permit.

 

44.           Landlord shall have no
liability to any tenant by reason of the non-compliance with or violation of
these Rules and Regulations by any other tenant.

 

45.           Any consent, approval,
request, agreement or other communication to be given or made under these Rules and
Regulations shall be in writing.  Any
violation of these Rules and Regulations which results in damage or injury
to persons or to property, or requires additional cleaning or other services to
the Premises, Building or Project shall be borne by and paid by the Tenant who,
or whose employees or agents, violated these Rules and Regulations.

 

46.           All Rules and
Regulations contained in this Exhibit D
shall be enforced by Landlord in a nondiscriminatory manner.  Notwithstanding the foregoing, in no event
shall Landlord’s failure to enforce any rule or regulation set forth in
this Exhibit D
constitute a waiver of Landlord’s future rights of enforcement with respect to
the same as contained herein.

 

6

 

EXHIBIT
E

 

KILROY
AIRPORT CENTER LONG BEACH

 

FORM OF
TENANT’S ESTOPPEL CERTIFICATE

 

The undersigned as Tenant
under that certain Office Lease (the “Lease”)
made and entered into as of
                      ,
200   by and between
                              
as Landlord, and the undersigned as Tenant, for Premises on the
                            
floor(s) of the office building located at
                            ,
Long Beach, California                         ,
certifies as follows:

 

1.             Attached hereto as Exhibit A is a true and correct
copy of the Lease and all amendments and modifications thereto.  The documents contained in Exhibit A represent the entire
agreement between the parties as to the Premises.

 

2.             The undersigned
currently occupies the Premises described in the Lease, the Lease Term
commenced on
                    ,
and the Lease Term expires on                       ,
and the undersigned has no option to terminate or cancel the Lease or to
purchase all or any part of the Premises, the Building and/or the Project.

 

3.             Base Rent became
payable on
                        .

 

4.             The Lease is in full
force and effect and has not been modified, supplemented or amended in any way
except as provided in Exhibit A.

 

5.             Tenant has not transferred,
assigned, or sublet any portion of the Premises nor entered into any license or
concession agreements with respect thereto except as follows:

 

6.                             No
modifications of any of the documents contained in Exhibit A shall be binding upon
Landlord’s mortgagee unless made with the prior written consent of Landlord’s
mortgagee.

 

7.             All monthly
installments of Base Rent, all Additional Rent and all monthly installments of
estimated Additional Rent have been paid when due through
                      .  The current monthly installment of Base Rent
is
$                                          .

 

8.             Unless otherwise
provided in Exhibit B,
attached hereto, all conditions of the Lease to be performed by Landlord
necessary to the enforceability of the Lease have been satisfied and Landlord
is not in default thereunder.  In
addition, unless otherwise provided in Exhibit B,
attached hereto, the undersigned has not delivered any notice to Landlord
regarding a default by Landlord thereunder.

 

9.             No rental has been paid
more than thirty (30) days in advance and no security has been deposited with
Landlord except as provided in the Lease.

 

10.           As of the date hereof,
unless otherwise provided in Exhibit C,
attached hereto, there are no existing defenses or offsets, or, to the
undersigned’s knowledge, claims or any basis for a claim, that the undersigned
has against Landlord.

 

11.           If Tenant is a
corporation or partnership, each individual executing this Estoppel Certificate
on behalf of Tenant hereby represents and warrants that Tenant is a duly formed
and existing entity qualified to do business in California and that Tenant has
full right and authority to execute and deliver this Estoppel Certificate and
that each person signing on behalf of Tenant is authorized to do so.

 

12.           There are no actions
pending against the undersigned under the bankruptcy or similar laws of the
United States or any state.

 

1

 

13.           Other than in
compliance with all applicable laws and incidental to the ordinary course of
the use of the Premises, the undersigned has not used or stored any hazardous
substances in the Premises.

 

14.           To the undersigned’s
knowledge, all tenant improvement work to be performed by Landlord under the
Lease has been completed in accordance with the Lease and has been accepted by
the undersigned and all reimbursements and allowances due to the undersigned
under the Lease in connection with any tenant improvement work have been paid
in full.

 

The undersigned
acknowledges that this Estoppel Certificate may be delivered to Landlord or to
a prospective mortgagee or prospective purchaser, and acknowledges that said
prospective mortgagee or prospective purchaser will be relying upon the
statements contained herein in making the loan or acquiring the property of
which the Premises are a part and that receipt by it of this certificate is a
condition of making such loan or acquiring such property.

 

Executed
at
                            
on the          day of                       ,
200  .

 

	
   

  	
  “Tenant”:

  
	
   

  	
   

  
	
   

  	
   

  	
  ,

  
	
   

  	
  a

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
							

 

2

 

EXHIBIT
F

 

KILROY
AIRPORT CENTER LONG BEACH

 

RECORDING
REQUESTED BY

AND
WHEN RECORDED RETURN TO:

 

ALLEN
MATKINS LECK GAMBLE

                &
MALLORY LLP

1901
Avenue of the Stars

18th
Floor

Los
Angeles, California 90067

Attention:  Anton N. Natsis, Esq. and Delmar L. Nehrenberg, Esq.

 

RECOGNITION OF
COVENANTS,

CONDITIONS, AND
RESTRICTIONS

 

This Recognition of
Covenants, Conditions, and Restrictions (this “Agreement”) is entered into as of the     
day of
                ,
200    , by and between
                                    
(“Landlord”), and 
                                
(“Tenant”), with reference to the
following facts:

 

A.            Landlord and Tenant
entered into that certain Office Lease Agreement dated
          ,
200     (the “Lease”).  Pursuant to the Lease, Landlord leased to
Tenant and Tenant leased from Landlord space (the “Premises”) located in an office building on certain real
property described in Exhibit A
attached hereto and incorporated herein by this reference (the “Property”).

 

B.            The Premises are located
in an office building located on real property which is part of an area owned
by Landlord containing approximately
      (    ) acres of real
property located in the City of                         ,
California (the “Project”), as
more particularly described in Exhibit B
attached hereto and incorporated herein by this reference.

 

C.            Landlord, as
declarant, has previously recorded, or proposes to record concurrently with the
recordation of this Agreement, a Declaration of Covenants, Conditions, and Restrictions
(the “Declaration”), dated
                                ,
200    , in connection with the Project.

 

D.            Tenant is agreeing to
recognize and be bound by the terms of the Declaration, and the parties hereto
desire to set forth their agreements concerning the same.

 

NOW, THEREFORE, in
consideration of (a) the foregoing recitals and the mutual agreements
hereinafter set forth, and (b) for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows,

 

1.             Tenant’s
Recognition of Declaration. 
Notwithstanding that the Lease has been executed prior to the
recordation of the Declaration, Tenant agrees to recognize and by bound by all
of the terms and conditions of the Declaration.

 

2.             Miscellaneous.

 

2.1           This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, estates, personal representatives, successors, and
assigns.

 

2.2           This
Agreement is made in, and shall be governed, enforced and construed under the
laws of, the State of California.

 

2.3           This
Agreement constitutes the entire understanding and agreements of the parties
with respect to the subject matter hereof, and shall supersede and replace all
prior understandings and agreements, whether verbal or in writing.  The parties confirm and acknowledge that
there are no other promises, covenants, understandings, agreements, 

 

1

 

representations, or
warranties with respect to the subject matter of this Agreement except as
expressly set forth herein.

 

2.4           This
Agreement is not to be modified, terminated, or amended in any respect, except
pursuant to any instrument in writing duly executed by both of the parties
hereto.

 

2.5           In
the event that either party hereto shall bring any legal action or other
proceeding with respect to the breach, interpretation, or enforcement of this
Agreement, or with respect to any dispute relating to any transaction covered
by this Agreement, the losing party in such action or proceeding shall
reimburse the prevailing party therein for all reasonable costs of litigation,
including reasonable attorneys’ fees, in such amount as may be determined by
the court or other tribunal having jurisdiction, including matters on appeal.

 

2.6           All
captions and heading herein are for convenience and ease of reference only, and
shall not be used or referred to in any way in connection with the
interpretation or enforcement of this Agreement.

 

2.7           If
any provision of this Agreement, as applied to any party or to any
circumstance, shall be adjudged by a court of competent jurisdictions to be
void or unenforceable for any reason, the same shall not affect any other
provision of this Agreement, the application of such provision under
circumstances different form those adjudged by the court, or the validity or
enforceability of this Agreement as a whole.

 

2.8           Time
is of the essence of this Agreement.

 

2.9           The
Parties agree to execute any further documents, and take any further actions,
as may be reasonable and appropriate in order to carry out the purpose and
intent of this Agreement.

 

2.10         As
used herein, the masculine, feminine or neuter gender, and the singular and
plural numbers, shall each be deemed to include the others whenever and
whatever the context so indicates.

 

[Remainder
of this page is intentionally left blank.]

 

2

 

SIGNATURE PAGE OF
RECOGNITION OF

 

COVENANTS,
CONDITIONS AND RESTRICTIONS

 

IN WITNESS WHEREOF, the
parties hereto have duly executed this Agreement as of the day and year first
above written.

 

	
   

  	
  “Landlord”:

  
	
   

  	
   

  
	
   

  	
  KILROY REALTY,
  L.P.,

  
	
   

  	
  a Delaware
  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  KILROY REALTY CORPORATION,

  
	
   

  	
   

  	
  a Maryland corporation,

  
	
   

  	
   

  	
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nadine K. Kirk

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Vice President, Legal Administration

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John T. Fucci

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  SR. Vice President, Asset Management

  
	
   

  	
   

  	
   

  
	
   

  	
  “Tenant”:

  
	
   

  	
   

  	
   

  
	
   

  	
  OMP Inc.

  
	
   

  	
  a

  	
  Delaware Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven R. Carlson

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Chief Executive Officer and President

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen A. Garcia

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Chief Financial Officer

  
							

 

3

 

EXHIBIT
G

 

KILROY
AIRPORT CENTER LONG BEACH

 

INTENTIONALLY
OMITTED

 

1

 

EXHIBIT
H

 

KILROY
AIRPORT CENTER LONG BEACH

 

INTENTIONALLY
OMITTED

 

1

 

EXHIBIT
I

 

KILROY
AIRPORT CENTER LONG BEACH

 

PARKING
RULES AND REGULATIONS

 

1.             No vehicle shall be
permitted to park in any portion of the Project unless the driver is a guest,
invitee or customer of a tenant of the Project and is issued a parking ticket
or a currently validated parking decal (or such other parking permit
identification as may then be employed by Landlord) is affixed to and/or
displayed on the vehicle in the manner prescribed by Landlord, or unless the
vehicle’s driver is in possession of a valid temporary parking permit.

 

2.             Parking decals and/or
parking key cards (or other form of identification then used by Landlord) shall
be issued only to and can be held only by tenants and employees of tenants of
the Project.  All items issued for such
identification purposes shall be returned to Landlord upon the expiration or
any earlier termination of the Lease. 
Landlord reserves the right to make a reasonable charge for the costs of
reserved parking signs.

 

3.             Landlord reserves the
right to restrict access to the parking areas of the Project, or to have
removed from the parking areas, at the expense of the defaulting tenant or the
vehicle owner, any vehicle which, in the reasonable opinion of Landlord:  (a) presents a hazard to the health and
welfare of the tenants or the general public; (b) is not in operable
condition; (c) contains explosive cargo or any toxic materials other than
gasoline or fuel in the original equipment vehicle tanks; (d) leaks fluids
of any kind, including water; (e) is without proper licenses attached; (f) contains
illegal goods or contraband; or (g) is excessive in width, length or
height or has attachments thereto making it excessive in width, length or
height.

 

4.             All persons shall
observe all speed and traffic controls established by Landlord, and shall park
only in such areas or spaces as are authorized by Landlord.  In the event an area or areas are marked or
identified for parking for only a specific tenant (“Special Identified Parking Area”), then no unauthorized
persons shall park in such Special Identified Parking Area.

 

5.             No tenant shall
operate any motor vehicle of any kind in any parking garage or other parking
area faster than five (5) miles per hour.

 

6.             No tenant shall leave
or permit its employees or agents to leave vehicles in the parking areas
overnight, nor park any vehicles in the parking areas other than automobiles,
motorcycles, motor-driven or non-motor driven bicycles or four-wheeled light
trucks without Landlord’s prior consent.

 

7.             The vehicles of
persons who violate the provisions of the Parking Rules and Regulations
may be impounded and/or removed from the parking facilities at the option of
Landlord and at the expense of the particular tenant involved or the owner of
such vehicle.

 

8.             Landlord shall not be
liable nor responsible for fire, theft, or any damage to or loss of any vehicle
or contents therein, from any cause or circumstance whatsoever, nor for the
failure of any vehicle owner or operator to observe these Parking Rules and
Regulations.

 

9.             Landlord reserves the
right from time to time to amend, modify, expand or change in any way these
Parking Rules and Regulations and agrees to notify Tenant in writing upon
any parking or other rule changes.

 

10.           All Parking Rules and
Regulations contained in this Exhibit I
shall be enforced by Landlord in a nondiscriminatory manner.  Notwithstanding the foregoing, in no event
shall Landlord’s failure to enforce any rule or regulation set forth in
this Exhibit I
constitute a waiver of Landlord’s future rights of enforcement with respect to
the same as contained herein.

 

1

 

EXHIBIT
J

 

KILROY AIRPORT
CENTER LONG BEACH

 

NON-DISTURBANCE
AGREEMENT FROM THE MASTER LESSOR

 

THIS
AGREEMENT is made as of the day of , 200_, by and among the
CITY OF LONG BEACH, a Municipal Corporation, (hereinafter called “Landlord”);
KILROY REALTY, L.P., a Delaware Limited Partnership (hereinafter called “Developer”); and (hereinafter called “Subtenant”).

 

A.            Landlord and Developer
have entered into a Lease Agreement, dated December 30, 1988 (hereinafter
referred to as the “Ground  Lease”) pursuant to which Landlord has
demised and leased to Developer certain real property located in the City of
Long Beach, County of Los Angeles, State of California, and described as
Parcels 5 and 6 in the City of Long Beach, County of Los Angeles, State of
California, as shown on Parcel Map No. 16960 filed in Book 208, Pages 92
through 100, of Parcel Maps in the office of the County Recorder of said
county. A short form of the Ground Lease was recorded January 31, 1989 as
Instrument No. 89-159802 in the Official Records of said county.

 

B.            Developer, acting in
the capacity of and therein referred to as “Landlord,” but herein referred to
as Developer, as sublandlord, and Subtenant, acting in the capacity of “Tenant,”
herein referred to as Subtenant, have entered into a Sublease (therein referred
to as the “Lease”), dated
                          ,
200   (hereinafter referred to as the “Sublease”) which Sublease demises to Subtenant Suite Nos.
       of Building No.       ,
which constitutes a portion of the premises demised by the Ground Lease (and
grants to Subtenant certain rights with respect to other portions of the
premises demised by the Ground Lease).

 

C.            The parties hereto now
desire to enter into this Agreement so as to clarify their rights, duties and
obligations under the Ground Lease and the Sublease and to further provide for
various contingencies as hereinafter set forth.

 

NOW,
THEREFORE, in consideration of the foregoing and of the
mutual agreement of the parties hereto to the terms and conditions hereinafter
contained, the parties hereto agree as follows:

 

1.             In the event
Developer shall default in the payment of any sum or in the performance of any
covenant or condition of the Ground Lease, all as provided therein, or in the
event of any termination or expiration of the Ground Lease for any reason
whatsoever prior to the expiration of the term of the Sublease as provided in
the Sublease (other than a termination of the Ground Lease only as to portions
of the premises demised thereby not described in Recital B hereof), then
Landlord, Developer and Subtenant do hereby agree that the Sublease, and all
terms, provisions, covenants and agreements thereof shall survive any such
default or defaults in, or termination or expiration of the Ground Lease,
whether such termination occurs as a result of, or arising out of, any such
default or defaults, or otherwise, and the Sublease (subject to the rights of
any Leasehold Mortgagee, as defined in the Ground Lease, to enter into a New
Lease with Landlord upon the same terms and conditions and having the same
priority as the Ground Lease, pursuant to subsection 4.8 of the Ground
Lease) shall continue in force and effect in accordance with and subject to all
of its terms, provisions, agreements and covenants as a direct lease with Landlord,
as landlord, and Subtenant, as lessee. Subtenant agrees, in such event, to
attorn to Landlord and to recognize Landlord as the landlord under the
Sublease. Landlord shall, in such event, exercise and undertake all of the
rights, obligations and duties of Developer in and under said Sublease and
thereafter shall be entitled to collect all rents and payments due and payable
under said Sublease, including the right to collect any sums being due and
payable thereunder prior to the termination or expiration of the Ground Lease
which are accrued and unpaid by Subtenant on the date of termination of the
Ground Lease.  Subtenant agrees not to
prepay rentals under the Sublease beyond the amounts provided in the Sublease
without the prior written consent of Landlord.

 

2.             Landlord agrees that,
prior to terminating the Ground Lease or taking any proceedings to enforce any
such termination thereof for any reason other than the expiration of the term
of the Ground Lease as provided therein, Landlord shall give Subtenant thirty
(30) days’ 

 

1

 

notice in writing prior to the effective date of such
termination, specifying the reason for such termination.  Such notice shall be given to Subtenant at
the address provided in the Sublease for notices to Subtenant.  Subtenant may change such address by written
notice to Landlord.

 

3.             Landlord hereby
approves of the Sublease and of the rights and privileges granted to Subtenant
thereunder and agrees that, for and during the term of the Sublease and any
extensions thereof, Landlord shall not take any action, directly or indirectly,
to disturb or otherwise affect Subtenant’s occupancy of and/or rights and
privileges with respect to the premises demised by the Sublease and hereinabove
described so long as Subtenant is not in default under the Sublease (beyond the
applicable notice and cure period provided in the Sublease), nor shall
Subtenant’s exercise of any such rights or privileges constitute a default
under the Ground Lease, notwithstanding any provisions to the contrary
contained in the Ground Lease.

 

4.             No provision
contained herein shall be deemed an amendment or modification of any provision
contained in the Sublease, including, without limiting the generality of the
foregoing, any rights given thereunder to Developer to terminate the Sublease.

 

5.             In the event that the
Ground Lease is divided, in accordance with its terms, into two (2) or
more New Leases or Separate Leases, the term “Ground Lease,” as used herein,
shall be deemed to refer to the said New Lease or Separate Lease leasing and
demising the subleased premises.

 

6.             This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
successors, transferees and assigns.

 

IN
WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first hereinabove set forth.

 

	
   

  	
  “LANDLORD”

  
	
   

  	
   

  
	
   

  	
  CITY OF LONG BEACH

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  “DEVELOPER”

  
	
   

  	
   

  
	
   

  	
  KILROY REALTY, L.P.,

  
	
   

  	
  a Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  KILROY REALTY CORPORATION

  
	
   

  	
   

  	
  a Maryland corporation,

  
	
   

  	
   

  	
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  “SUBTENANT”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
								

 

This Agreement is hereby
approved as to form this
           day of
              ,
200    .

 

2

 

	
   

  	
   

  	
  , City Attorney

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
				

 

3

 

LANDLORD’S
ACKNOWLEDGMENT

 

State of                                                                     )

County of                                                                 )

 

On
                                                  ,
before me,                                                                                                                 ,

                                                                                                                                 (insert
name and title of the officer)

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

 

I certify under
PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

 

WITNESS my hand and official seal.

 

 

	
  Signature

  	
   

  	
   

  	
  (Seal)

  

 

 

DEVELOPER’S
ACKNOWLEDGMENT

 

State of                                                                     )

County of                                                                 )

 

On
                                                  ,
before me,                                                                                                                 ,

                                                                                                                                 (insert
name and title of the officer)

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

 

I certify under
PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

 

WITNESS my hand and official seal.

 

 

	
  Signature

  	
   

  	
   

  	
  (Seal)

  

 

 

SUBTENANT’S
ACKNOWLEDGMENT

 

State of                                                                     )

County of                                                                 )

 

On
                                                  ,
before me,                                                                                                                 ,

                                                                                                                                 (insert
name and title of the officer)

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

 

1

 

I certify under
PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

 

WITNESS my hand and official seal.

 

 

	
  Signature

  	
   

  	
   

  	
  (Seal)

  

 

2

 

EXHIBIT
“A” TO EXHIBIT “J”

 

LEGAL DESCRIPTION

 

EXHIBIT “A” to that
certain NON-DISTURBANCE AGREEMENT FROM THE
MASTER LESSOR, dated as of
                            ,
200      , by and between the CITY OF LONG BEACH as Landlord,
                                                                  
as Subtenant, and KILROY REALTY, L.P.
as Developer.

 

Parcels 5 and 6 in the City of Long Beach, County of Los Angeles, State
of California, as shown on Parcel Map #16960, filed in Book 208, pages 92
through 100, of Parcel Maps in the Office of the County Recorder of said
County.

 

1Exhibit 10.64

 

ASSET PURCHASE AND SALE AGREEMENT

 

BY AND AMONG

 

FOXTEQ HOLDINGS INC.-CAYMAN

 

and

 

SANMINA-SCI USA INC.

SCI TECHNOLOGY, INC.

SANMINA-SCI SYSTEMS DE
MEXICO S.A. DE C.V.

SANMINA-SCI SYSTEMS
SERVICES DE MEXICO S.A. DE C.V.

SANMINA-SCI HUNGARY ELECTRONICS
MANUFACTURING L.L.C.

SANMINA-SCI AUSTRALIA PTY
LTD

 

AND

 

SANMINA-SCI CORPORATION

 

Dated as of February 17, 2008

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
  3

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
    Certain Definitions

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE II PURCHASE AND SALE OF ASSETS

  	
  14

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
    Purchase and Sale of Assets

  	
  14

  
	
   

  	
  2.2

  	
    Assumption of Liabilities

  	
  16

  
	
   

  	
  2.3

  	
    Closing

  	
  17

  
	
   

  	
  2.4

  	
    Post Closing Purchase Price
  Adjustments

  	
  18

  
	
   

  	
  2.5

  	
    Post Closing

  	
  20

  
	
   

  	
  2.6

  	
    Prorations

  	
  21

  
	
   

  	
  2.7

  	
    Taxes

  	
  21

  
	
   

  	
  2.8

  	
    Nontransferable Assets

  	
  22

  
	
   

  	
  2.9

  	
    Taking of Necessary Action; Further
  Action

  	
  22

  
	
   

  	
  2.10

  	
    Allocation of Purchase Price
  Consideration

  	
  22

  
	
   

  	
  2.11

  	
    Schedules

  	
  23

  
	
   

  	
  2.12

  	
    Contingent Consideration

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS AND
  WARRANTIES OF SELLER

  	
  27

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
    Organization, Qualification, and
  Corporate Power

  	
  27

  
	
   

  	
  3.2

  	
    Authorization

  	
  27

  
	
   

  	
  3.3

  	
    No Conflicts

  	
  28

  
	
   

  	
  3.4

  	
    Consents

  	
  28

  
	
   

  	
  3.5

  	
    Legal Compliance

  	
  28

  
	
   

  	
  3.6

  	
    Financial Information

  	
  29

  
	
   

  	
  3.7

  	
    Tax Matters

  	
  29

  
	
   

  	
  3.8

  	
    Title of Properties; Absence of
  Liens and Encumbrances; Condition of Equipment

  	
  29

  
	
   

  	
  3.9

  	
    Intellectual Property

  	
  30

  
	
   

  	
  3.10

  	
    Contracts

  	
  30

  
	
   

  	
  3.11

  	
    Litigation

  	
  30

  
	
   

  	
  3.12

  	
    Employee Matters

  	
  31

  
	
   

  	
  3.13

  	
    Labor Matters

  	
  31

  
	
   

  	
  3.14

  	
    Environmental Matters

  	
  31

  
	
   

  	
  3.15

  	
    Fees

  	
  32

  
	
   

  	
  3.16

  	
    Inventories

  	
  32

  
	
   

  	
  3.17

  	
    Epidemic Failure

  	
  32

  
	
   

  	
  3.18

  	
    Product Warranty

  	
  32

  
	
   

  	
  3.19

  	
    Sufficiency of Purchased Assets

  	
  32

  

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND
  WARRANTIES OF BUYER

  	
  33

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
    Organization, Qualification, and
  Corporate Power

  	
  33

  
	
   

  	
  4.2

  	
    Authorization

  	
  33

  
	
   

  	
  4.3

  	
    No Conflicts

  	
  33

  
	
   

  	
  4.4

  	
    Consents

  	
  33

  
	
   

  	
  4.5

  	
    Purchase Price

  	
  34

  
	
   

  	
  4.6

  	
    Fees

  	
  34

  
	
   

  	
  4.7

  	
    Investigation by the Buyer

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE V PRE CLOSING COVENANTS

  	
  34

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
    Operation of Business

  	
  34

  
	
   

  	
  5.2

  	
    Access to Information

  	
  36

  
	
   

  	
  5.3

  	
    Notice of Developments

  	
  37

  
	
   

  	
  5.4

  	
    No Solicitation

  	
  37

  
	
   

  	
  5.5

  	
    Reasonable Efforts

  	
  37

  
	
   

  	
  5.6

  	
    Seller Consents

  	
  37

  
	
   

  	
  5.7

  	
    Buyer Consents

  	
  37

  
	
   

  	
  5.8

  	
    Employee Matters

  	
  38

  
	
   

  	
  5.9

  	
    Employee Severance

  	
  39

  
	
   

  	
  5.10

  	
    Confidentiality

  	
  41

  
	
   

  	
  5.11

  	
    Non-Solicitation Of Employees

  	
  41

  
	
   

  	
  5.12

  	
    Open Purchase Orders

  	
  41

  
	
   

  	
  5.13

  	
    Environmental Baseline

  	
  42

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI OTHER AGREEMENTS AND
  COVENANTS

  	
  42

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
    Additional Documents and Further
  Assurances

  	
  42

  
	
   

  	
  6.2

  	
    Books and Records

  	
  43

  
	
   

  	
  6.3

  	
    Consigned Inventory

  	
  43

  
	
   

  	
  6.4

  	
    Payment of Purchase Price and
  Contingent Consideration

  	
  43

  
	
   

  	
  6.5

  	
    Inventory Confirmations

  	
  43

  
	
   

  	
  6.6

  	
    Monterey Transition Services
  Agreement

  	
  44

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII CONDITIONS TO THE
  CLOSING

  	
  44

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
    Conditions to Buyer’s Obligation to
  Close

  	
  44

  
	
   

  	
  7.2

  	
    Conditions to Seller’s Obligations

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII SURVIVAL OF
  REPRESENTATIONS, WARRANTIES AND COVENANTS

  	
  47

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
    Representations, Warranties and
  Covenants

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX INDEMNIFICATION

  	
  47

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
    Indemnification by Sellers

  	
  47

  

 

ii

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
    Indemnification by Buyer

  	
  48

  
	
   

  	
  9.3

  	
    Notice and Opportunity to Defend

  	
  49

  
	
   

  	
  9.4

  	
    Remedies

  	
  50

  
	
   

  	
  9.5

  	
    Certain Limitations

  	
  50

  
	
   

  	
   

  	
   

  
	
  ARTICLE X TERMINATION

  	
  51

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
    Termination of the Agreement

  	
  51

  
	
   

  	
  10.2

  	
    Effect of Termination

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI MISCELLANEOUS

  	
  52

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
    Press Releases and Public
  Announcements

  	
  52

  
	
   

  	
  11.2

  	
    No Third Party Beneficiaries

  	
  52

  
	
   

  	
  11.3

  	
    Entire Agreement and Modification

  	
  53

  
	
   

  	
  11.4

  	
    Amendment

  	
  53

  
	
   

  	
  11.5

  	
    Waivers

  	
  53

  
	
   

  	
  11.6

  	
    Successors and Assigns

  	
  53

  
	
   

  	
  11.7

  	
    Counterparts

  	
  53

  
	
   

  	
  11.8

  	
    Headings

  	
  53

  
	
   

  	
  11.9

  	
    Notices

  	
  53

  
	
   

  	
  11.10

  	
    Governing Law

  	
  54

  
	
   

  	
  11.11

  	
    Severability

  	
  55

  
	
   

  	
  11.12

  	
    Expenses

  	
  55

  
	
   

  	
  11.13

  	
    Construction

  	
  55

  
	
   

  	
  11.14

  	
    Attorneys’ Fees

  	
  55

  
	
   

  	
  11.15

  	
    Further Assurances

  	
  55

  
	
   

  	
  11.16

  	
    Time of Essence

  	
  55

  
	
   

  	
  11.17

  	
    Consent to Jurisdiction

  	
  55

  
	
   

  	
  11.18

  	
    Schedules and Exhibits

  	
  56

  
	
   

  	
  11.19

  	
    Specific Peformance

  	
  56

  

 

iii

 

	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A –
  Raleigh Sublease Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit B –
  Huntsville License Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit C –
  Intellectual Property License Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit D –
  Transition Services Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit E
  –Access Agreement

  	
   

  

 

iv

 

ASSET PURCHASE AND SALE AGREEMENT

 

THIS
ASSET PURCHASE AND SALE AGREEMENT (this “Agreement”) is
made and entered into as of February 17, 2008, by and among Foxteq
Holdings Inc.-Cayman, a company organized under the laws of the Cayman Islands
(“Buyer”) and Sanmina-SCI USA Inc., a
Delaware corporation (“Sanmina-SCI USA”),
SCI Technology, Inc., an Alabama corporation (“SCI
Technology”), Sanmina-SCI Systems de Mexico S.A. de C.V., a company
organized under the laws of the United Mexican States (“SSCI Systems
Mexico”), Sanmina-SCI Systems Services de Mexico S.A. de C.V., a
company organized under the laws of the United Mexican States (“SSCI Services Mexico” and together with SSCI Systems Mexico,
“SSCI Mexico”), Sanmina-SCI Hungary
Electronics Manufacturing Limited Liability Company, a company organized under
the laws of the Republic of Hungary (“SSCI Hungary”),
Sanmina-SCI Australia PTY LTD, a company organized under the laws of the
Commonwealth of Australia (“SSCI Australia”)
and Sanmina-SCI Corporation, a Delaware corporation (“Sanmina-SCI”
and together with Sanmina-SCI USA, SCI Technology, SSCI Systems Mexico, SSCI
Services Mexico, SSCI Hungary and SSCI Australia, the “Sellers”).  Buyer and Sellers are sometimes referred to
herein individually as a “Party” and
collectively as the “Parties.”

 

RECITALS

 

A.            Sellers
are engaged in the Business at the facilities located in Huntsville, Alabama
(the “Huntsville Facility”), Raleigh, North
Carolina (the “Raleigh Facility”),
Szekesfehervar, Hungary (the “Szekesfehervar Facility”)
and Guadalajara, Mexico (the “Guadalajara Facility”
and, together with the Huntsville Facility, the Raleigh Facility and the
Szekesfehervar Facility, the “Facilities”),
in each case at the location set forth in Section A of the Seller
Disclosure Letter.

 

B.            Sellers
are engaged in the building, configuring and assembling personal computers and
servers and the related management, manufacturing (including but not limited to
custom software downloading, asset tagging and custom labeling) and logistics
and order fulfillment services for or on behalf of Hewlett Packard Company at
the Szekesfehervar Facility by or on behalf of Lenovo at a facility located in
Monterrey, Mexico, and these operations do not constitute part of the Business
(the “Excluded Business”).

 

C.            Sellers
desire to sell to Buyer, and Buyer desires to purchase from Sellers, on the
terms and subject to the conditions set forth herein, the Purchased Assets; and
Sellers desire Buyer to assume, and Buyer desires to assume, the Assumed
Liabilities, on the terms and subject to the conditions set forth herein.

 

D.            In
connection with the transactions contemplated by this Agreement, Buyer (or a
wholly-owned subsidiary of Buyer as designated by Buyer) and each of SSCI
Hungary and SSCI Mexico desire to enter into the Szekesfehervar Lease
Assignment Agreement and the Guadalajara Lease Assignment Agreement to be dated
as of the Closing Date, pursuant to which SSCI Hungary 

 

1

 

and SSCI Mexico will
assign their leases to the Szekesfehervar Facility and the Guadalajara
Facility, respectively, to Buyer (or a wholly-owned subsidiary of Buyer
designated by Buyer).

 

E.             In
connection with the transactions contemplated by this Agreement, Buyer and
Sanmina-SCI desire to enter into the Raleigh Sublease Agreement to be dated as
of the Closing Date, in the form of Exhibit A hereto, pursuant to
which Sanmina-SCI will license to Buyer (or a wholly-owned subsidiary of Buyer
designated by Buyer) the right to operate the Business at the Raleigh Facility.

 

F.             In
connection with the transactions contemplated by this Agreement, Buyer and SCI
Technology desire to enter into the Huntsville License Agreement to be dated as
of the Closing Date, in the form of Exhibit B hereto, pursuant to which
SCI Technology will license to Buyer (or a wholly-owned subsidiary of Buyer
designated by Buyer) the right to operate the Business at the Huntsville
Facility.

 

G.            In
connection with the transactions contemplated by this Agreement, SSCI Australia
desires to assign, and Buyer desires to assume, certain agreements with third
parties for logistics operations in Australia (the “Australia
Facility”) required to support customers of the Business as of the
Closing Date.

 

H.            In
connection with the transactions contemplated by this Agreement, Buyer and
Sellers desire to enter into an Intellectual Property License Agreement to be
dated as of the Closing Date, in the form of Exhibit C hereto,
pursuant to which Sellers will license to Buyer certain intellectual property
used by Sellers prior to the Closing in the conduct of the Business.

 

I.              In
connection with the transactions contemplated by this Agreement, Buyer and
Sellers desire to enter into a Transition Services Agreement to be dated as of
the Closing Date, in the form of Exhibit D hereto, pursuant to
which Sellers shall provide, or cause to be provided, to the Business certain
services that are currently provided by Sellers and its Affiliates to the
Business prior to the Closing.

 

J.             In
connection with the transactions contemplated by this Agreement, Buyer and
Sellers also desire to enter into the Access Agreement to be dated as of the
Closing Date, in the form of Exhibit E hereto, pursuant to which
Buyer shall provide, or cause to be provided, to Sellers or any party
designated by Sellers, certain IT and other services.

 

K.            Buyer
and Sellers also desire to make certain representations, warranties, covenants
and other agreements in connection with the transactions contemplated hereby.

 

NOW, THEREFORE, in consideration of the covenants and
representations set forth herein, and for other good and valuable
consideration, the parties agree as follows:

 

2

 

ARTICLE I

 

DEFINITIONS

 

1.1           Certain Definitions.  As used in this Agreement,
the following terms have the following meanings (terms defined in the singular
to have a correlative meaning when used in the plural and vice versa).  Certain other terms are defined in the text
of this Agreement.

 

(a)           “Accrued
Liabilities” means any and all liabilities listed on Schedule 1.1(a).

 

(b)           “Actions or
Proceeding” means any action, suit, proceeding, or arbitration.

 

(c)           “Affiliate”
means any Person that directly or indirectly, through one of more
intermediaries, controls or is controlled by or is under common control with
the Person specified.  For purposes of
this definition, control of a Person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such Person
whether by voting power, contract or otherwise and, in any event and without
limitation of the previous sentence, any Person owning five percent (5%) or
more of the voting securities of another Person shall be deemed to control that
Person.

 

(d)           “Aggregate
Severance Payment” has the meaning set forth in Section 5.9.

 

(e)           “Ancillary
Agreements” means all agreements and instruments delivered pursuant
to this Agreement to carry out obligations hereunder and to consummate the
transactions contemplated hereby.

 

(f)            “Assets”
of any Person means all assets and properties of every kind, nature, character
and description (whether real, personal or mixed, whether tangible or
intangible, whether absolute, accrued, contingent, fixed or otherwise and
wherever situated), including the goodwill related thereto, operated, owned or
leased by such Person, including without limitation, chattel paper, documents,
instruments, real estate, equipment, inventory and goods.

 

(g)           “Assigned
Contracts” means any contracts, indentures, orders, mortgages,
instruments, liens, guarantees, purchases or other agreements of Sellers set
forth on Schedule 1.1(g).

 

(h)           “Assumed
Liabilities” has the meaning set forth in Section 2.2(a).

 

(i)            “Assumed
Permits” means the Permits set forth on Schedule 1.1(i).

 

(j)            “Assumed Warranty
Obligations” means (i) the amount set forth on
Schedule 1.1(j) for each product manufactured and shipped by the
Business for or on behalf of IBM or Lenovo on or before the Closing that is
returned to Buyer after the Closing pursuant to Section 13.2.1 of the
Supply Agreement #4902RL1698, dated February 28, 2003, between IBM and
Sanmina-SCI, Section 13.2.1 of the Supply Agreement #4905RL0274, dated April 29,
2005, 

 

3

 

between Lenovo and Sanmina-SCI or Section 13.2.1 of the Supply
Agreement #4905RL0316, dated April 29, 2005, between Lenovo and
Sanmina-SCI, as the case may be; and (ii) Damages (as defined in Section 9.1)
incurred by Buyer in connection with Section 16.1(a) of the Supply
Agreement #4902RL1698, dated February 28, 2003, between IBM and
Sanmina-SCI, Section 16.1(a) of the Supply Agreement #4905RL0274,
dated April 29, 2005, between Lenovo and Sanmina-SCI or Section 16.1(a) of
the Supply Agreement #4905RL0316, dated April 29, 2005, between Lenovo and
Sanmina-SCI, in each case with respect to products manufactured and shipped by
the Business for or on behalf of IBM or Lenovo, as the case may be, on or
before the Closing.

 

(k)           “Books and
Records” of any Person means all files, documents, instruments, papers,
books and records relating to the business, operations, condition of (financial
or other), results of operations and Assets of such Person, including without
limitation financial statements, Tax Returns, budgets, reliability and cost
data, pricing guidelines, ledgers, journals, deeds, title policies, minute
books and books, contracts, Permits, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental
studies and plans.

 

(l)            “Business”
means building, configuring and assembling personal computers and servers and
the related management, manufacturing (including but not limited to custom
software downloading, asset tagging and custom labeling) and logistics and
order fulfillment services as currently conducted in the ordinary course by
Sellers for or on behalf of IBM and Lenovo using the Purchased Assets at the
Facilities.

 

(m)          “Business Day”
shall mean a day other than Saturday and Sunday or any day on which banks
located in the State of California, the Republic of Hungary or the United
Mexican States are authorized or obligated to close.

 

(n)           “Buyer’s
Mexican Affiliate” means PCE Paragon Solutions (Mexico) S.A. de
C.V., a wholly-owned subsidiary of Buyer duly organized and existing in
accordance with Mexican Law and authorized by the Mexican Ministry of the
Economy to operate in Mexico under maquila status in accordance with the
Mexican IMMEX Decree.

 

(o)           “Business
Intellectual Property” means Intellectual Property and Intellectual
Property Rights owned by Sellers that are used in the operation of the
Purchased Assets at the Facilities to conduct the Business in the ordinary
course, other than the Excluded Intellectual Property.

 

(p)           “Buyer’s
Environmental Liabilities” shall mean any Environmental Claim with
respect to any of the following, except to the extent constituting Sellers’
Retained Environmental Liabilities: (i) the presence at any time after the
Closing Date of any Hazardous Materials in the soil, groundwater, surface
water, air or building materials of any Facility Location occupied at any time
by any of Sellers or Buyer in connection with the Business, or any other real
property occupied at any time in the future in connection with the Business (“Facility Contamination”); (ii) the migration at any
time after the Closing Date of any Facility Contamination to any other real
property, or the soil, groundwater, surface water, air or building materials
thereof; (iii) any Hazardous Materials Activity conducted at any Facility
Location after the 

 

4

 

Closing Date, any other real property occupied at any time in the
future in connection with the Business, or otherwise in connection with or to
benefit the Business after the Closing Date(“Business
Hazardous Materials Activities”); (iv) the exposure of any
person to Facility Contamination or to Hazardous Materials in the course of or
as a consequence of any Business Hazardous Materials Activities; (v) the
violation of any Environmental Laws in connection with any Business Hazardous
Materials Activities at any time after the Closing Date; and (vi) any
actions or proceedings brought or threatened by any third party with respect to
any of the foregoing.

 

(q)           “Closing”
means the consummation of the purchase and sale of the Purchased Assets and the
assumption of the Assumed Liabilities, taking place at such place as Buyer and
Sellers mutual agree, at 10:00 A.M. local time, on the Closing Date unless
otherwise mutually agreed by Buyer and Sellers.

 

(r)            “Closing Net
Asset Value Statement” means the statement setting forth the Closing
Net Asset Value as of the Closing Date.

 

(s)           “Closing Date”
means the date which is two (2) business days following the satisfaction
or, if permitted pursuant to the terms of Article VII hereof, waiver of
the conditions to Closing set forth in Article VII hereof, or at such
other place and such other time or date as the parties hereto shall mutually
agree.

 

(t)            “Closing Net
Asset Value” means:

 

(i)            an amount equivalent
to the book value of Inventories on the books of Sellers as of the Closing
Date; plus

 

(ii)           an amount equivalent to
the net book value of Fixed Assets on the books of Sellers as of the Closing
Date; plus

 

(iii)          the Expensed Capital
Items Amount; plus

 

(iv)          an amount equivalent to
the book value of Prepaid Expenses on the books of Sellers as of the Closing
Date; plus

 

(v)           an amount equivalent to
the book value of Security Deposits on the books of Sellers as of the Closing
Date; minus

 

(vi)          an amount equivalent to
the book value of the Accrued Liabilities on the books of Sellers as of the
Closing Date.

 

(u)           “Consents”
has the meaning set forth in Section 3.4.

 

(v)           “Consigned
Inventory” means all inventory of raw materials and work in process
held by Sellers on behalf of a customer of the Business listed on Schedule 1.1(v).

 

(w)          “Contingent
Consideration” has the meaning set forth in Section 2.12.

 

5

 

(x)            “Customer
Purchase Order” means all purchase orders from customers of the
Business to purchase products manufactured by or services provided by the
Business.

 

(y)           “Definitive
Agreements” means this Agreement, the Ancillary Agreements and the
other the binding, detailed and definitive agreements to be executed between
the Parties in respect of the Transaction.

 

(z)            “Employee”
means each employee of Sellers who currently provides services solely or
primarily to the Business in each case as set forth on Schedule 3.12.

 

(aa)         “Employment
Liabilities” shall mean any and all claims, debts, liabilities,
commitments and obligations, whether fixed, contingent or absolute, matured or
unmatured, liquidated or unliquidated, accrued or unnaccrued, known or unknown,
whenever or however arising, including all costs and expenses relating thereto
arising under Law, rule, regulation, permit, action or proceeding before any
governmental authority, order or consent decree or any award of any arbitrator
of any kind relating to any benefit plan (including any 401(k) plan),
employment agreement, vacation accrual or otherwise relating to an Employee and
his or her employment with the Sellers.

 

(bb)         “Environmental
Baseline” has the meaning set forth in Section 5.13.

 

(cc)         “Environmental
Claim” shall mean any liability, obligation, judgment, penalty,
fine, cost or expense, of any kind or nature, or the duty to indemnify, defend
or reimburse any Person.

 

(dd)         “Environmental
Laws” means all applicable Laws which prohibit, regulate or control
any Hazardous Material or any Hazardous Material Activity, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Resource Recovery and Conservation Act of 1976, the
Federal Water Pollution Control Act, the Clean Air Act, the Hazardous Materials
Transportation Act, the Clean Water Act, and similar foreign Laws all as
amended at any time.

 

(ee)         “Epidemic
Failure” occurs when (i) with respect to products manufactured
for or on behalf of IBM, more than three and a half percent (3.5%) of the units
manufactured during any thirty (30) day period for a particular product (i.e.,
a single part number) fail to perform as specified in the IBM Agreement due to
a defect in manufacturing workmanship and the failure to perform has the same
root cause and (ii) with respect to the units of any particular product
manufactured for or on behalf of Lenovo, more than five (5%) of the units
manufactured during any thirty (30) day period for a particular product (i.e.,
a single part number) fail to perform as specified in the Lenovo Agreement due
to a defect in manufacturing workmanship and the failure to perform has the
same root cause.

 

(ff)           “Excluded
Assets” has the meaning set forth in Section 2.1(b).

 

6

 

(gg)         “Excluded
Claim” means any litigation related to the DRAM business of Sellers.

 

(hh)         “Excluded
Intellectual Property” means Intellectual Property and Intellectual
Property Rights regarding (a) URLS, Domain Names and Trademarks; (b) Seller’s
information technology (IT) systems used outside of the Business, including
human resources and accounting systems, corporate intranet and other corporate
networks and systems; (c) the products manufactured for customers at the
Facilities, including the customer’s designs, schematics and specifications for
such products and components and materials provided by customers or purchased
from third parties for use in such products; (d) Intellectual Property and
Intellectual Property Rights that are subject to the Excluded Agreements or are
related to Excluded Assets that are not licensed to Buyer under the
Intellectual Property License.

 

(ii)           “Excluded
Liabilities” has the meaning set forth in Section 2.2(b).

 

(jj)           “Expensed
Capital Items” means items on hand at any Facilities that are used
in the Business, in each case as set forth in Schedule 1.1(jj).

 

(kk)         “Expensed
Capital Items Amount” means $407,380.

 

(ll)           “Facilities”
has the meaning set forth in Recital A.

 

(mm)       “Facility
Location” means any real property occupied at any time for the
operation of the Business, including, without limitation, the premises that are
the subject of the Lease Assignment Agreements.

 

(nn)         “Facility
Leases” has the meaning set forth in Section 3.8(a).

 

(oo)         “Fixed Assets”
means all items of plant, equipment, machinery, tools, furniture and
furnishings, office materials and supplies and other fixed assets listed or
described in Schedule 1.1(oo) as of the Closing Date.

 

(pp)         “Governmental
Body” means any:

 

(i)            nation, province,
state, county, city, town, village, district, or other jurisdiction of any
nature;

 

(ii)           federal, provincial,
state, local, municipal, foreign, or other government;

 

(iii)          governmental or quasi
governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal);

 

(iv)          multi national
organization or body; or

 

7

 

(v)           body exercising, or
entitled to exercise, any administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of any nature.

 

(qq)         Intentionally left blank.

 

(rr)           “Hazardous
Material” is any material, chemical, emission or substance that has
been designated by any Governmental Body to be radioactive, toxic, hazardous, a
pollutant or otherwise a danger to health, reproduction or the environment.

 

(ss)         “Hazardous
Materials Activity” is the transportation, transfer, recycling,
storage, use, treatment, manufacture, removal, remediation, release, exposure
of others to, sale, or distribution of any Hazardous Material or any product or
waste containing a Hazardous Material, or product manufactured with Ozone
depleting substances, including, without limitation, any required labeling,
payment of waste fees or charges (including so-called e-waste fees) and
compliance with any product take-back or product content requirements.

 

(tt)           “Huntsville
License Agreement” means the Huntsville License Agreement in the
form attached hereto as Exhibit B.

 

(uu)         “IBM”
means International Business Machines Corporation.

 

(vv)         “IBM
Agreements” means Supply Agreement #4902RL1698, dated February 28,
2003, between IBM and Sanmina-SCI, as amended; Distribution and Technical
Services Agreement #4901RL1688, dated January 31, 2002, between IBM and
Sanmina-SCI; Statement of Work #4903RL0003, dated January 6, 2003, to
Distribution and Technical Services Agreement #4901RL1688 between IBM and
Sanmina-SCI; Statement of Work #4904RL0321, dated September 1, 2004, to
Distribution and Technical Services Agreement #4901RL1688 between IBM and
Sanmina-SCI; Participation Agreement #4903GK0002, dated February 18, 2003,
between IBM UK, Ltd. and Sanmina-SCI UK Limited; and AMRS Hungary Statement of
Work #4906UK0174, dated June 30, 2006, to AMRS Agreement #4903GK0002.

 

(ww)       “Indebtedness”
of any Person means all monetary obligations of such Person (i) for
borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments,
(iii) for the deferred purchase price of goods or services (other than
trade payables or accruals incurred in the ordinary course of business), (iv) under
capital leases or (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.

 

(xx)          “Intellectual
Property” means software, protocols, processes, test methodologies,
schematics, specifications, documentation and other tangible embodiments of
Intellectual Property and any media on which any of the foregoing is recorded.

 

(yy)         “Intellectual
Property License Agreement” means that certain Intellectual Property
License Agreement substantially in the form attached hereto as Exhibit D
to be entered into by Buyer and the Sellers in substantially the same form at
the Closing with respect to the license of 

 

8

 

certain Business Intellectual Property to Buyer for the conduct of
Business following the Closing Date.

 

(zz)          “Intellectual
Property Rights” means any or all of the following and all worldwide
common law and statutory rights in, arising out of, or associated therewith: (i) United
States and foreign patents and utility models and applications therefor and all
reissues, divisions, reexaminations, renewals, extensions, provisionals,
continuations and continuations-in-part thereof (“Patents”);
(ii) inventions (whether patentable or not), improvements, trade secrets,
proprietary information, know-how, and any rights in technology, invention
disclosures, technical data and customer lists, and all documentation relating
to any of the foregoing; (iii) copyrights, copyright registrations and
applications therefor, and all other rights corresponding thereto throughout
the world; (iv) domain names, uniform resource locators (“URLs”), other names and locators associated with the
Internet, and applications or registrations therefor (“Domain Names”);
(v) industrial designs and any registrations and applications therefor; (vi) trade
names, logos, common law trademarks and service marks, trademark and service
mark registrations, related goodwill and applications therefor throughout the
world (“Trademarks”); (vii) all rights in
databases and data collections; (viii) all moral and economic rights of
authors and inventors, however denominated; and (ix) any similar or
equivalent rights to any of the foregoing (as applicable).

 

(aaa)       “Inventories”
means all inventories of raw materials, work in process and finished goods (i) held
for use in products manufactured for or on behalf of IBM, listed on Schedule 1.1(aaa)(i),
(ii) held for use in products manufactured for or on behalf of Lenovo,
listed on Schedule 1.1(aaa)(ii), (iii) held for use in
connection with the business conducted for on or behalf of IBM, listed on Schedule 1.1(aaa)(iii) and
(iv) held for use in connection with the business conducted for or on or
behalf of Lenovo, listed on Schedule 1.1(aaa)(iv).

 

(bbb)      “knowledge”
and other similar phrases when used in reference to Sellers means the actual
knowledge of (i) Michael Missios, (ii) Steven H. Jackman, (iii) Michael
Delgado and (iv) the following members of management of the Business who
report directly to Michael Missios including, but not limited to, : James
Campbell, George Griffith, Shelia Ponder, Anca Thompson and Theodore
Wilson.  The foregoing notwithstanding,
the fact that information is contained in the electronic or documentary records
or files maintained by such individuals, stored on the computers or servers maintained
by such individuals or contained in any emails received by such individuals
shall not create the presumption that such individuals possess actual
knowledge.

 

(ccc)       “Law”
means any law, statute, rule, regulation, ordinance, extension order, or other
pronouncement having the effect of law of the United States, any foreign
country or foreign state, county, city or other political subdivision or of any
Governmental Body.

 

(ddd)      Intentionally left blank.

 

(eee)       “Lenovo” means Lenovo Group Ltd.

 

(fff)         “Lenovo
Agreements” means the Supply Agreement #4905RL0274, dated April 29,
2005, between Lenovo and Sanmina-SCI; Supply Agreement #4905RL0316, dated April

 

9

 

29, 2005, between Lenovo and Sanmina-SCI; Distribution and Technical
Services Agreement #4905RL0262, dated May 26, 2005, between Lenovo and
Sanmina-SCI; Statement of Work #4903RL0315, dated May 26, 2005, to
Distribution and Technical Services Agreement #4905RL0262 between Lenovo and
Sanmina-SCI; Agreement # 4906L10041, dated February 25, 2006, between
Lenovo Singapore and Sanmina-SCI Hungary; and AMRS Hungary Statement of Work
#4906L10042, dated February 28, 2006, to AMRS Agreement #4906L10041.

 

(ggg)      “Liability”
means any Indebtedness, obligation or other liability of a Person (whether
absolute, accrued, contingent, fixed or otherwise, or whether due or to become
due).

 

(hhh)      “Lien”
means any mortgage, pledge, lien, charge, claim, security interest, adverse
claims of ownership or use, restrictions on transfer, defect of title or other
encumbrance of any sort, other than (a) mechanic’s, materialmen’s, and
similar liens with respect to any amounts not yet due and payable, and (b) customary
liens for Taxes not yet due and payable.

 

(iii)          “Material
Adverse Effect” means any material adverse change in the business,
operations, assets (including intangible assets), liabilities (contingent or
otherwise), results of operations or financial performance or condition
(financial or otherwise) of such Party which is material to Purchased Assets
and the Business, taken as a whole; provided, however,
that in determining whether a Material Adverse Effect has occurred, any effect
to the extent attributable to the following shall not be considered:  (a) changes in Laws, rules or
regulations of general applicability or interpretations thereof by governmental
entities, (b) changes that result from conditions generally affecting the
United States economy or the world economy, (c) changes that result from
conditions generally affecting the electronics contract manufacturing services
industry, (d) changes that result from the announcement, pendency or
occurrence of the termination, transition or winding down at any time prior to
or after the Closing of the Business conducted by Sellers for or on behalf of
Lenovo prior to the Closing or the Business that is to be conducted by Buyer on
or behalf of Lenovo after the Closing (the “Lenovo
Transition”), (e) changes that result from the announcement,
pendency or occurrence of the termination, transition or winding down of the
Excluded Business, (f) changes that result from the announcement, pendency
or occurrence of the termination, transition or winding down at any time prior
to or after the Closing of the Business conducted by Sellers for or on behalf
of IBM prior to the Closing, (g) changes that result from the announcement
and the pendency of this Agreement and the transactions contemplated hereby.

 

(jjj)          “Multiemployer
Plan” shall mean any “Pension Plan” which is a “multiemployer plan,”
as defined in Section 3(37) of ERISA.

 

(kkk)       “Order”
means any writ, judgment, decree, injunction, administrative order, directive
or similar order or directive of any Governmental Body (in each such case
whether preliminary or final).

 

(lll)          “Permit”
shall mean the licenses, permits, authorizations, registrations, certificates,
variances, approvals, consents and franchises and similar rights obtained from
governments and any Governmental Body, and any pending applications relating to
the foregoing.

 

10

 

(mmm)    “Permitted
Liens” means any (i) liens for taxes and other similar
governmental charges and assessments which are not yet delinquent or liens for
taxes being contested in good faith by any appropriate proceedings for which
adequate reserves have been established, (ii) liens of landlords and liens
of carriers, warehousemen, mechanics and materialmen and other like liens
arising in the ordinary course of business for sums not yet due and payable;
and (iii) such imperfections of title and Liens, if any, which do not
interfere with the present use of, in any material respect, assets subject
thereto.

 

(nnn)      “Person”
means any individual, corporation (including any non-profit corporation),
company, general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, Governmental
Body or other entity.

 

(ooo)      “Personal
Property Leases” means all rights of Sellers in, to or under (A) the
leases or subleases of tangible personal property listed on Schedule 1.1(ooo)(i) as
to which any Seller is the lessor or sublessor and (B) the leases of
tangible personal property listed on Schedule 1.1(ooo)(ii) as
to which any Seller is the lessee or sublessee, together with any options to
purchase the underlying property.

 

(ppp)      “Phase I”
has the meaning set forth in Section 5.13(a).

 

(qqq)      “Phase II”
has the meaning set forth in Section 5.13(b).

 

(rrr)         “Preliminary
Net Asset Value Statement” means a statement setting forth Sellers’
estimate of the Preliminary Net Asset Value as of the Closing Date.

 

(sss)       “Preliminary
Net Asset Value” means:

 

(i)            an amount equivalent
to the book value of Inventories on the books of Sellers; plus

 

(ii)           an amount equivalent to
the net book value of Fixed Assets on the books of Sellers; plus

 

(iii)          the Expensed Capital
Items Amount; plus

 

(iv)          an amount equivalent to
the book value of Prepaid Expenses on the books of Sellers; plus

 

(v)           an amount equivalent to
the book value of Security Deposits on the books of Sellers; minus

 

(vi)          an amount equivalent to
the book value of the Accrued Liabilities on the books of Sellers.

 

(ttt)         “Prepaid
Expenses” means all prepaid expenses listed on Schedule 1.1(ttt).

 

11

 

(uuu)      “Purchase
Order” means Customer Purchase Orders and Supplier Purchase Orders.

 

(vvv)      “Purchase
Price” means an amount equal to the Preliminary Net Asset Value (as
adjusted pursuant to Section 2.4) (the “Preliminary
Net Asset Value Amount”) plus a
premium amount of [(*)].  All payment amounts
expressed in this Agreement are in U.S. dollars.

 

(www)    “Purchased
Assets” has the meaning set forth in Section 2.1(a).

 

(xxx)        “Raleigh
Sublease Agreement” means the Raleigh Sublease Agreement in the form
attached hereto as Exhibit A.

 

(yyy)      Intentionally left blank.

 

(zzz)        “Representatives”
means, with respect to a Person, that Person’s officers, directors, employees,
accountants, counsel, investment bankers, financial advisors, agents and other
representatives.

 

(aaaa)     “SSCI Mexico
Imported Inventory” means the raw materials, work-in-progress,
finished goods, spare parts, expendable supplies and other supplies that are
saleable, usable or held exclusively in connection with or related exclusively
to the business of the Guadalajara Facility, imported temporarily into Mexico
for such purpose, which includes the items set forth in Schedule 1.1(aaaa)
hereto.  The SSCI Mexico Imported
Inventory was originally purchased outside of Mexico and has been bailed with
SSCI Mexico under a maquila agreement entered into between SSCI Mexico and
Sanmina-SCI USA (“SSCI Mexico/Sanmina-SCI
USA Maquila Agreement”) subject to the terms and conditions of SSCI
Mexico’s IMMEX Program, pursuant to which such items have been temporarily
imported into Mexico by SSCI Mexico (in-bond) and is physically located at the
Guadalajara Facility.

 

(bbbb)    “SSCI Mexico
Imported Machinery and Equipment” means all of the machinery and
equipment held and/or used exclusively in connection with or related
exclusively to the Business at the Guadalajara Facility, which are currently
located at the Guadalajara Facility, having been bailed with SSCI Mexico by
Sanmina-SCI USA under SSCI’s IMMEX Program or which were purchased by SSCI
Mexico, and which include the following:

 

(1)           the Assets described in
Schedule 1.1(bbbb)(i) hereto, which were purchased outside of
Mexico (or are deemed by Mexican Law to have been purchased outside of Mexico)
by Sanmina-SCI USA and have been temporarily imported into Mexico by SSCI
Mexico under SSCI Mexico’s IMMEX Program (imported in-bond, with title
remaining vested in Sanmina-SCI USA) (“Sanmina-SCI USA’s Mexico
Imported Assets”);

 

*
Information omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission. 

 

12

 

(2)           the Assets described in
Schedule 1.1(bbbb)(ii) hereto, which were purchased outside of
Mexico (or are deemed by Mexican Law to have been purchased outside of Mexico)
and have been temporarily imported into Mexico by SSCI Mexico under SSCI Mexico’s
IMMEX Program (imported in-bond, with title vested in SSCI Mexico) (“SSCI Mexico’s Temporarily Imported Assets”);

 

(3)           the Assets described in
Schedule 1.1(bbbb)(iii) hereto, which are not presently
covered by the SSCI Mexico’s IMMEX Program and were purchased outside of Mexico
(or are deemed by Mexican Law to have been purchased outside of Mexico) and
definitively imported into Mexico by SSCI Mexico (with title vested in SSCI
Mexico) (“SSCI Mexico’s Definitively Imported Assets”);
and

 

(4)           the Assets described in
Schedule 1.1(bbbb)(iv) hereto, which are not covered by the
SSCI’s IMMEX Program, but were purchased in Mexico through other than a “first
hand sale”, as defined under applicable Mexican customs law or regulation (with
title vested in SSCI Mexico) (“SCI Mexico’s Assets
Purchased in Mexico”).

 

(cccc)     “Security
Deposit” means all security deposits deposited by or on behalf of
Sellers as lessee or sublessee under the leases for the Personal Property Leases,
as well as all security deposits associated with Facility Leases assigned to
Buyer under the Lease Assignment Agreements in each case as set forth in Schedule 1.1(cccc).

 

(dddd)    “Seller
Records” means all Books and Records of Sellers relating to the Purchased
Assets and necessary for the conduct of the Business at the Closing, other than
Books and Records of Sellers concerning trade secrets or other confidential
information of Sellers, privileged information, internal financial statements
and related information or records not solely related to the Purchased Assets
or used exclusively for the conduct of the Business at the Closing and other
than files and records of Employees or related human resource matters prior to
the Closing;

 

(eeee)     “Sellers’
Retained Environmental Liabilities” shall mean any Environmental
Claim originated or caused by any Person other than Buyer or its Affiliates
with respect to any of the following: (i) the presence on or before the
Closing Date of any Hazardous Materials in the soil, groundwater, surface
water, air or building materials of any Facility Location (“Pre-Existing Contamination”); (ii) the migration prior
to or after the Closing Date of Pre-Existing Contamination to any other real
property, or the soil, groundwater, surface water, air or building materials
thereof; (iii) any Hazardous Materials Activity conducted on any Facility
Location prior to the Closing Date or otherwise occurring prior to the Closing
Date in connection with or to benefit the Business (“Pre-Closing
Hazardous Materials Activities”); (iv) the exposure of any
person to Pre-Existing Contamination or to Hazardous Materials in the course of
or as a consequence of any Pre-Closing Hazardous Materials Activities, without
regard to whether any health effect of the exposure has been manifested as of
the Closing Date; (v) the violation of any Environmental Laws by the
Company or its agents, employees, predecessors in interest, contractors,
invitees or licensees prior to the Closing Date or in connection with any
Pre-Closing Hazardous Materials Activities prior to the Closing Date (other
than violations of Environmental Laws that arise 

 

13

 

from changes in
Environmental Laws after the Closing Date); and (vi) any actions or
proceedings brought or threatened by any third party with respect to any of the
foregoing.

 

(ffff)        “Supplier
Purchase Order” means any purchase order to purchase material,
components and other supplies to be acquired by Sellers.

 

(gggg)    Intentionally left blank.

 

(hhhh)    “Transaction”
means the transactions contemplated by this Agreement and the Ancillary
Agreements.

 

(iiii)         “Transition
Services Agreement” means that certain Transition Services Agreement
substantially in the form attached hereto as Exhibit D to be
entered into by Buyer and Sellers at the Closing with respect to the provision
of certain transition services with respect to the Business following the
Closing Date.

 

ARTICLE II

 

PURCHASE AND SALE
OF ASSETS

 

2.1           Purchase and Sale of
Assets.  Upon the terms and subject to the conditions set forth
herein, at the Closing (as defined in Section 2.3 hereof), Buyer (or a
wholly-owned subsidiary of Buyer as designated by Buyer) shall purchase from
Sellers, and Sellers shall irrevocably sell, convey, transfer, assign and
deliver to Buyer (or a wholly-owned subsidiary of Buyer as designated by
Buyer), the Purchased Assets (as defined in Section 2.1(a) hereof)
free and clear of all Liens (other than Permitted Liens).

 

(a)           Definition of
Purchased Assets.  For all purposes
of and under this Agreement, the term “Purchased Assets”
shall mean, refer to and include all of Sellers’ right, title and interest in
and to all of the following tangible and intangible assets, properties and
rights to the extent owned, used or held for use by Sellers as of the Closing
(but specifically excluding the Excluded Assets (as defined in Section 2.1(b) hereof)):

 

(i)            all Inventories;

 

(ii)           all Fixed Assets;

 

(iii)          all Expensed Capital
Items;

 

(iv)          all Prepaid Expenses;

 

(v)           all Security Deposits.

 

(vi)          all Personal Property
Leases;

 

14

 

(vii)         all Seller Records;

 

(viii)        all rights under any
Assigned Contracts; and

 

(ix)           all rights under any
Assumed Permits.

 

(b)           Definition of Excluded
Assets.  Notwithstanding anything to
the contrary set forth in this Section 2.1 or elsewhere in this Agreement,
the term “Purchased Assets” shall not mean, refer
to or include the following (collectively, the “Excluded
Assets”) to the extent owned, used or held for use by Sellers as of
the Closing:

 

(i)            cash, cash
equivalents, investments in cash, securities or otherwise and all of Sellers’
bank accounts;

 

(ii)           all refunds of Taxes
with respect to Taxes paid or accrued by Sellers and not reimbursed or paid by
Buyer;

 

(iii)          all claims, actions,
deposits, prepayments, refunds, causes of action, choses in action, rights of
recovery, rights of set off, and rights of recoupment of any kind or nature
(including any such item relating to Taxes) to the extent attributable to the
Excluded Agreements, Excluded Assets or the Excluded Liabilities;

 

(iv)          all rights of the
Sellers under this Agreement and any Ancillary Agreements, or any other
agreement, certificate, instrument or other document executed and delivered by
Sellers or Buyer in connection with the Transaction or any side agreement
between the Sellers and Buyer entered into on or after the date hereof;

 

(v)           all Books and Records
of Sellers which relate to the Taxes, Excluded Agreements or Excluded Assets; provided, however that, Sellers agree that they shall
provide Buyer with copies of, or reasonable access to, such Books and Records
to the extent that any such Books and Records (i) relate to any of the
Business, the Purchased Assets or Assumed Liabilities; and (ii) do not
reflect confidential information or privileged materials;

 

(vi)          all accounts receivable
and all notes, bonds and other evidences of Indebtedness, and all security
agreements related thereto, including any rights with respect to any third party
collection procedures or any other Actions or Proceedings which have been
commenced in connection therewith;

 

(vii)         all Intellectual Property
and Intellectual Property Rights of Sellers, including software, web sites and
the trade name Sanmina-SCI and derivatives thereof and logos associated
therewith and all related trademarks and service marks, and software licenses.

 

(viii)        all rights and licenses to
Intellectual Property and Intellectual Property Rights under the Excluded
Agreements, including third party software licenses.

 

15

 

(ix)           all assets other than
Purchased Assets, including but not limited to land, buildings, leasehold
improvements, information technology systems, hardware and software (and other
related intellectual property);

 

(x)            all capital stock,
options and other securities of Sellers, and all corporate minutes and stock
books of account of Sellers, blank stock certificates, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals and other documents relating to the organization, maintenance and
existence of Sellers as corporations or other entities;

 

(xi)           all agreements and
contracts to which any of the Sellers is a party or is bound or to which any of
its assets are subject that are not Assigned Contracts; and

 

(xii)          all assets or rights
that relate to the Multiemployer Plan of Sellers, all Books and Records relating
to the Employees of Sellers as of the Closing;

 

(xiii)         all claims, actions,
deposits, prepayments, refunds, causes of action, choses in action, rights of
recovery, rights of set off, and rights of recoupment of any kind or nature to
the extent attributable to the Excluded Claims.

 

2.2           Assumption of
Liabilities.  Upon the terms and subject to the conditions set forth
herein, at the Closing, Buyer (or a wholly-owned subsidiary of Buyer as
designated by Buyer) shall assume from Sellers, and Sellers shall irrevocably
convey, transfer and assign to Buyer (or a wholly-owned subsidiary of Buyer as
designated by Buyer), all of the Assumed Liabilities (as defined in Section 2.2(a) hereof).  Buyer shall not assume any liabilities of
Sellers pursuant hereto, other than the Assumed Liabilities.

 

(a)           Definition of
Assumed Liabilities.  For all
purposes of and under this Agreement, the term “Assumed
Liabilities” shall mean, refer to and include the following
Liabilities of the Sellers (but specifically excluding the Excluded Liabilities
(as defined in Section 2.2(b) hereof)):

 

(i)            all Liabilities under
the Assigned Contracts arising after the Closing Date;

 

(ii)           all Liabilities under
Assumed Permits arising after the Closing Date;

 

(iii)          all Liabilities related
to the Purchased Assets or the operation of the Business to the extent arising
from or related to any facts or circumstances occurring on or after the Closing
Date;

 

(iv)          except as set forth in Section 5.9,
all Liabilities relating to Employees that are hired by Buyer for actions that
occur on or after the date of hire;

 

(v)           all Buyer’s
Environmental Liabilities;

 

16

 

(vi)          all Accrued Liabilities;
and

 

(vii)         all Assumed Warranty
Obligations.

 

(b)           Definition of
Excluded Liabilities. 
Notwithstanding anything to the contrary set forth in this Section 2.2
or elsewhere in this Agreement, the term “Assumed Liabilities”
shall not mean, refer to or include the following (collectively, “Excluded Liabilities”):

 

(i)            all Liabilities
relating to agreements not assumed by Buyer (the “Excluded
Agreements”);

 

(ii)           any and all Liabilities
or obligations of Sellers arising from the breach by a Seller of any term,
covenant or provisions of any of the Assigned Contracts prior to the Closing;

 

(iii)          subject to Section 2.7,
all Liabilities for Taxes of Sellers or Taxes attributable to the ownership or
operation of the Purchased Assets for any taxable period (or portion of any
period) ending on or prior to the Closing Date;

 

(iv)          all Liabilities of
Sellers under the Definitive Agreements or any other certificate, instrument or
other agreement entered into by the Parties in connection with the Transaction;

 

(v)           except as set forth in Section 2.2(a),
all Employment Liabilities and all Liabilities arising under or with respect to
any Pension Plan;

 

(vi)          all Liabilities for
legal, accounting, audit and investment banking fees, brokerage commissions and
any other expenses incurred by Sellers in connection with the Transaction;

 

(vii)         all Liabilities for or
related to Indebtedness of the Sellers, on its own behalf or on behalf of other
Persons, to banks, financial institutions or other Persons with respect to
borrowed money, and including any accrued interest payable in respect thereof;

 

(viii)        all Liabilities of Sellers
with respect to accounts payable;

 

(ix)           all Liabilities that
are attributable to any of the Excluded Assets;

 

(x)            Sellers’ Retained
Environmental Liabilities; and

 

(xi)           all Liabilities other
than Assumed Liabilities.

 

2.3           Closing. 
The consummation of the purchase and sale of the Purchased Assets and the
assumption of the Assumed Liabilities (the “Closing”)
shall take place at such place as Buyer and Sellers mutually agree, at 10:00 A.M.
local time, on the Closing Date unless otherwise mutually agreed by Buyer and
Sellers.

 

17

 

(a)           As soon as practicable
following the date hereof and at all times until the Closing of the purchase by
Buyer of the Purchased Assets and the assumption of the Assumed Liabilities,
Buyer and Sellers shall cooperate in good faith to (i) formulate and effect
a plan and closing schedule for the transfer of the Purchased Assets and the
Business to Buyer (or a company designated by Buyer) pursuant to this
Agreement, and (ii) identify the Purchased Assets to be purchased by Buyer
pursuant to this Agreement at the Closing, and (iii) identify the Assumed
Liabilities to be assumed by Buyer pursuant to this Agreement at the Closing.

 

(b)           At least ten (10) Business
Days prior to the Closing Date (unless the Buyer and the Sellers agree to a
shorter period), Sellers shall furnish to Buyer the Preliminary Net Asset Value
Statement.

 

(c)           At the Closing, on the
terms and subject to the conditions set forth in this Agreement, as full
payment for the transfer of the Purchased Assets by Sellers to Buyer, Buyer
shall pay to Sellers the Purchase Price by wire transfer of immediately
available funds in United States dollars to such account or accounts as Sellers
may direct by written notice delivered to Buyer by Sellers at least two (2) Business
Days prior to the Closing Date.

 

(d)           At the Closing, and
simultaneously with the payment of the Purchase Price, (i) Sellers shall
assign and transfer to Buyer (or a wholly-owned subsidiary of Buyer as
designated by Buyer) good and valid title in and to the Purchased Assets (free
and clear of all Liens, other than Permitted Liens) by delivery of a General
Assignment and Bill of Sale in form and substance reasonably acceptable to
Buyer and Sellers (the “General Assignment”),
duly executed by Sellers; and such other instruments of conveyance, assignment
and transfer as Buyer shall reasonably request, in form and substance
reasonably acceptable to Buyer and Sellers, as shall be effective to vest in
Buyer (or a wholly-owned subsidiary of Buyer as designated by Buyer) good and
valid title to the applicable Purchased Assets as contemplated by this
Agreement (the General Assignment and the other instruments being collectively
referred to herein as the “Assignment Instruments”);
and (ii) Buyer (or a wholly-owned subsidiary of Buyer as designated by Buyer)
shall assume from Sellers the due payment, performance and discharge of the
Assumed Liabilities by delivery of an Assumption Agreement in form and
substance reasonably acceptable to Sellers and Buyer (the “Assumption
Agreement”), duly executed by Buyer (or a wholly-owned subsidiary of
Buyer as designated by Buyer) and such other instruments of assumption as the
Sellers shall reasonably request, in form and substance reasonably acceptable
to Sellers and Buyer, as shall be effective to cause Buyer (or a wholly-owned
subsidiary of Buyer as designated by Buyer) to assume the Assumed Liabilities
as and to the extent provided in Section 2.2(a) (the Assumption
Agreement and such other instruments referred to in clause (ii) being
collectively referred to herein as the “Assumption Instruments”).  At the Closing, there shall also be delivered
to Sellers and Buyer the certificates and other contracts, documents and
instruments required to be delivered pursuant to Article VII hereof.

 

2.4                                Post
Closing Purchase Price Adjustments

 

(a)                                  Preparation
of Closing Net Asset Value Statement. 
As soon as reasonably practicable after the Closing Date, Sellers shall
prepare and deliver to Buyer at Sellers’ expense an unaudited Closing Net Asset
Value Statement indicating the 

 

18

 

Closing Net Asset Value
as of the Closing Date (the “Closing Net Asset Value
Statement”).  The date Sellers
deliver the Closing Net Asset Value Statement shall be referred to as the “Notice Date”.  Buyer
shall reasonably cooperate with Sellers to enable the preparation of the
Closing Net Asset Value Statement including but not limited to providing
Sellers information related to the Business and making Employees of the
Business available to Sellers as Sellers deem reasonably necessary for the
preparation of the Closing Net Asset Value Statement.

 

(b)           Verification.  As soon as reasonably practicable after the
Notice Date (but not later than thirty (30) days after the Notice Date), Buyer
shall verify that the Closing Net Asset Value is accurately reflected on the
Closing Net Asset Value Statement (the “Verification”).  Sellers shall reasonably cooperate with Buyer
to enable Buyer to perform the Verification.

 

(c)           Review of
Preliminary Closing.  Buyer shall be
given full access, during regular business hours, to the relevant records and
working papers used by Sellers to prepare the Closing Net Asset Value Statement
for the purpose of conducting the Verification in relation to the Closing Net
Asset Value Statement.  If Buyer believes
that any changes are required to be made to the Closing Net Asset Value
Statement and the Closing Net Asset Value due to differences between the
Closing Net Asset Value Statement and the results of the Verification (a “Material Uncertainty”), Buyer shall, within thirty (30) days
following the Notice Date (the “Dispute Period”),
give written notice to Sellers (a “Dispute Notice”)
of any such Material Uncertainty, describing the Material Uncertainty and the
basis for the Material Uncertainty in reasonable detail.  The Closing Net Asset Value Statement shall
be binding and conclusive upon, and deemed accepted by, Buyer unless Buyer
shall have timely delivered a Dispute Notice to Sellers during the Dispute
Period.

 

(d)           Disputes.  Disputes between Buyer and Sellers relating
to the Closing Net Asset Value Statement that cannot be resolved by them within
thirty (30) days after receipt by Sellers of a Dispute Notice shall be referred
for arbitration to an independent accounting firm that has not provided audit
services to any Party or any of its subsidiaries or affiliates in the three
years prior to the date of such referral and that none of the Parties or any of
its subsidiaries or affiliates intend to engage such accountants to provide audit
services in the foreseeable future, and reasonably agreed upon by the Parties
for arbitration (the “Independent Accountant”)
with respect to the Dispute Notice.  The
Independent Accountant will be instructed to select, in its discretion, the
individuals within its organization who will have primary responsibility for
this matter and to reach a determination within forty-five (45) days following
the date of referral.  The Independent
Accountant determination hereunder shall be limited to determining the Closing
Net Asset Value.  The Independent
Accountant will not have the authority to alter or vary this Agreement.  The decision of the Independent Accountant
will be final and binding upon the Parties. 
The engagement of the Independent Accountant shall be paid one-half by
Sellers and one-half by Buyer.  The
Closing Net Asset Value and the Closing Net Asset Value Statement as adjusted
by the Independent Accountant in accordance with this Section 2.4(d),
shall be final and binding on the parties. 
The foregoing notwithstanding, if the amount in dispute under this Section 2.4(d) is
or is reasonably likely to be more than Four Million Dollars ($4,000,000),
either Sellers or Buyer may pursue a court action with respect to such claims
in accordance with Section 11.10. 
If an Independent Accountant 

 

19

 

is engaged to resolve a
dispute in accordance with this Section 2.4(d), it is understood and
agreed that the decision of the Independent Accountant shall not be subject to
judicial review by any court or tribunal under any circumstances whatsoever and
the Parties hereby expressly waive any right to appeal or otherwise seek
judicial review of any decision of the Independent Accountant under this Section 2.4(d).

 

(e)           Final Closing Net
Asset Value Statement.  The Closing
Net Asset Value and the Closing Net Asset Value Statement shall become final
with respect to all or any portion thereof, and binding upon Buyer and Sellers
upon the earlier of (i) the failure by Buyer to timely object to all or
any portion thereof during the Dispute Period, (ii) an agreement between
Buyer and Sellers with respect thereto, or (iii) the decision by the
Independent Accountant with respect to any disputed matters pursuant to Section 2.4(d).  The Closing Net Asset Value and the Closing
Net Asset Value Statement as finally determined under this Section 2.4(e),
shall be referred to herein as the “Final Closing Net Asset
Value Statement” and the “Final Closing Net Asset
Value,” respectively.

 

(f)            Adjustments.

 

(i)            If the Final Closing
Net Asset Value as reflected in the Final Closing Net Asset Value Statement is
less than the Preliminary Net Asset Value as reflected in the Preliminary Net
Asset Value Statement, then the difference between the Preliminary Net Asset
Value and the Final Closing Net Asset Value shall be payable by the Sellers to
Buyer in immediately available funds pursuant to Section 2.4(g).

 

(ii)           If the Final Closing
Net Asset Value as reflected in the Final Closing Net Asset Value Statement is
greater than the Preliminary Net Asset Value as reflected in the Preliminary
Net Asset Value Statement, then the difference between the Preliminary Net
Asset Value and the Final Closing Net Asset Value shall be payable by Buyer to
the Sellers in immediately available funds pursuant to Section 2.4(g).

 

(g)           Payments of
Adjustments.  As soon as practicable
(but not more than ten (10) Business Days) after all or any portion of a
Closing Net Asset Value shall become final and binding pursuant to Section 2.4(e) hereof,
Buyer or Sellers, as the case may be, shall make the payment contemplated by Section 2.4(f) in
respect of all or such portion of such Closing Net Asset Value that has become
final and binding (it being the intention of the parties that the payment of
all undisputed amounts set forth in the Final Closing Net Asset Value
Statement  that become final and binding
pursuant to Section 2.4(e) shall not be contingent upon the
resolution of any disputed amounts set forth in such Final Closing Net Asset Value
Statement ).

 

2.5           Post
Closing.  No later than thirty (30) calendar days after the Closing:

 

(a)           SSCI Mexico Virtual
Transfer.  Buyer shall cause Buyer’s
Mexican Affiliate to conduct all formalities and obtain all approvals necessary
to legally allow SSCI Mexico to transfer virtually to the Buyer’s Mexican
Affiliate (i) the SSCI Mexico Imported Inventory, (ii) Sanmina-SCI
USA’s Mexico Imported Assets, and (iii) SSCI Mexico’s Temporarily Imported
Assets, for which purpose SSCI Mexico shall previously deliver to the Buyer’s
Mexican Affiliate the commercial 

 

20

 

invoices and export
manifests (“pedimentos”) covering such Assets, thereby allowing SSCI Mexico to
discharge its corresponding temporary import manifests (“pedimentos”), which
shall be substituted by temporary import manifests (“pedimentos”) in which
Buyer’s Mexican Subsidiary shall appear as importer of record and meet all
requirements of Mexican customs and tax laws and regulations, certified copies
of which temporary import manifests shall be delivered to SSCI Mexico.

 

(b)           Mexico Sales
Invoices.  SSCI Mexico shall deliver
to Buyer’s Mexican Affiliate one or more sales invoices covering the SSCI
Mexico’s Definitively Imported Assets and SSCI Mexico’s Purchased Assets in
Mexico, which invoices shall meet all formal requirements established in
Mexican Laws and regulations.

 

(c)           Mexico Competition
Notice of Closing.  SSCI Mexico and
Buyer’s Mexican Affiliates shall jointly notify the Mexican Federal Competition
Commission of the fact that the Closing has taken place.

 

2.6           Prorations. 
Except as otherwise provided for in this Agreement, the following prorations
relating to the Purchased Assets and the ownership and conduct of the Business
shall be made as of the Closing Date, with Sellers liable to the extent such
items relate to any time period up to the Closing Date, and Buyer liable to the
extent such items relate to periods beginning at and immediately after the
applicable Closing Date:

 

(a)           governmental property
or similar taxes or levys on or with respect to the Purchased Assets; and

 

(b)           rents, additional
rents, operating expense pass throughs, Taxes and other items payable by Seller
under any Personal Property Leases.

 

Except as otherwise
provided in this Agreement or as otherwise agreed by the Parties, the net
amount of all such pro rations will be settled and paid on the Closing Date.

 

2.7           Taxes. 
Buyer shall bear any sales, use, value-added, goods and services, gross
receipts, excise, registration, stamp duty or other similar taxes or
governmental fees arising out of the transfer of the Purchased Assets to Buyer
pursuant hereto (“Transfer Taxes”).

 

(a)           Straddle Period
Taxes.  In the case of any real or
personal property taxes or any similar ad valorem taxes attributable to the
Purchased Assets for which Taxes are reported on a Tax Return covering a period
commencing before the Closing and ending thereafter (a “Straddle
Period Tax”), any such Straddle Period Taxes shall be prorated
between Buyer and the Sellers on a per diem basis.  The party required by law to file a Tax
Return with respect to Straddle Period Taxes shall do so within the time period
prescribed by law and the other party shall promptly reimburse the first party
for its share of such Straddle Period Taxes.

 

(b)           Tax Returns.  To the extent relevant to the Business or the
Purchased Assets, each party shall (i) provide the other with such
assistance as may reasonably be required in connection with the preparation of
any Tax Return and the conduct of any audit or other examination 

 

21

 

by any governmental
authority or in connection with judicial or administrative proceedings relating
to any liability for Taxes and (ii) retain and provide the other with all
records or other information that may be relevant to the preparation of any Tax
Returns, or the conduct of any audit or examination, or other proceeding
related to Taxes.

 

2.8           Nontransferable
Assets.  To the extent that any Purchased Asset or Assumed Liability
to be sold, conveyed, assigned, transferred, delivered or assumed to or by
Buyer pursuant hereto, or any claim, right or benefit arising thereunder or
resulting therefrom, is not capable of being sold, conveyed, assigned,
transferred or delivered without the approval, consent or waiver of the issuer
thereof or the other party thereto, or any third person (including a
Governmental Body), or if such sale, conveyance, assignment, transfer or
delivery or attempted sale, conveyance, assignment, transfer or delivery would
constitute a breach or termination right thereof or a violation of any law,
decree, order, regulation or other governmental edict, except as expressly
otherwise provided herein, this Agreement shall not constitute a sale, conveyance,
assignment, transfer or delivery thereof, or an attempted sale, conveyance,
assignment, transfer or delivery thereof absent such approvals, consents or
waivers.  If any such approval, consent
or waiver shall not be obtained, or if an attempted assignment of any such
Purchased Asset or the assumption of any Assumed Liability by Buyer would be
ineffective so that Buyer would not in fact receive all such Purchased Assets
or assume all such Assumed Liabilities pursuant hereto, Sellers and Buyer shall
cooperate in a mutually agreeable arrangement and use reasonable diligent
efforts to provide Buyer with the benefits and assume the obligations of such
Purchased Assets and Assumed Liabilities in accordance with this Agreement,
including subcontracting, sublicensing, or subleasing to Buyer, or under which
Sellers, at Buyer’s expense, would enforce for the benefit of Buyer, with Buyer
assuming all of the Sellers’ obligations thereunder, any and all rights of the
Sellers against a third party thereto; provided that
in no event shall Sellers be required to make a cash payment to a third-party
(other than as required under any agreement with such third-party) or to Buyer
in connection with its obligations under this Section 2.8.  Buyer agrees to reasonably cooperate with
Sellers and supply relevant information to such party or parties or such
third-party in order to assist the Sellers in their obligations under this Section 2.8.

 

2.9           Taking
of Necessary Action; Further Action.  From time to time after the
Closing Date, at the request of any Party hereto and at the expense of such
Party, the Parties hereto shall execute and deliver such other instruments of
sale, transfer, conveyance, assignment and confirmation as Buyer or Sellers may
reasonably determine is necessary to transfer, convey and assign to Buyer, and
to confirm Buyer’s title to or interest in the Purchased Assets or the Assumed
Liabilities pursuant to this Agreement, to put Buyer in actual possession and
operating control of such Purchased Assets as contemplated by this Agreement
and to assist Buyer in exercising all rights with respect thereto.  In the event of a breach of Section 3.9(a) hereof,
the Parties shall promptly amend the Intellectual Property License such that
the “Licensed Intellectual Property” shall include the respective item of
Business Intellectual Property that is required for the ordinary day-to-day
conduct of the Business by Buyer.

 

2.10         Allocation
of Purchase Price Consideration.  The sum of the Purchase Price and
the Assumed Liabilities (except to the extent that such Assumed Liabilities are
not required to be 

 

22

 

capitalized
for income tax purposes) shall be allocated among the Purchased Assets as of
the Closing Date in accordance with Schedule 2.10, which shall be
delivered by the Sellers three (3) business days prior to the Closing Date
and shall be reasonably acceptable to Buyer. 
Any subsequent adjustments to the sum of the Purchase Price and Assumed
Liabilities under Section 2.4 of this Agreement or otherwise (except to
the extent that such Assumed Liabilities are not required to be capitalized for
income tax purposes) shall be reflected by Sellers in the allocation hereunder
in a manner consistent with Section 1060 of the Code and the regulations
thereunder.  For all Tax purposes, Buyer
and Sellers agree to report the transactions contemplated in this Agreement in
a manner consistent with the terms of this Agreement, including the allocation
under Schedule 2.10, and that none of them will take any position
inconsistent therewith in any Tax Return, in any refund claim, in any related
litigation, or other related dispute.

 

2.11         Schedules. 
Except as otherwise set forth in this agreement, the schedules to this
Agreement shall be delivered as follows:

 

(a)           Signing Schedules.  Upon the execution of this Agreement, Sellers
shall deliver to Buyer the following schedules dated as of November 24,
2007, with the exception of Schedule 1.1(v) and Schedules
1.1(aaa)(iii) and (iv), each of which shall be dated as of January 19,
2008:

 

	
  (i)

  	
   

  	
  Schedule 1.1(a) (Accrued
  Liabilities);

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  Schedule 1.1(g) (Assigned
  Contracts);

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  Schedule 1.1(i) (Assumed
  Permits);

  
	
   

  	
   

  	
   

  
	
  (iv)

  	
   

  	
  Schedule 1.1(j) (Assumed
  Warranty Obligations);

  
	
   

  	
   

  	
   

  
	
  (v)

  	
   

  	
  Schedule 1.1(v) (Consigned
  Inventories);

  
	
   

  	
   

  	
   

  
	
  (vi)

  	
   

  	
  Schedule 1.1(jj)
  (Expensed Capital Items);

  
	
   

  	
   

  	
   

  
	
  (vii)

  	
   

  	
  Schedule 1.1(oo)
  (Fixed Assets);

  
	
   

  	
   

  	
   

  
	
  (viii)

  	
   

  	
  Schedule 1.1(aaa)(i), (ii) (iii) and (iv) (Inventories);

  
	
   

  	
   

  	
   

  
	
  (ix)

  	
   

  	
  Schedule 1.1(ooo)(i) (Personal
  Property Leases (Sellers as lessor));

  
	
   

  	
   

  	
   

  
	
  (x)

  	
   

  	
  Schedule 1.1(ooo)(ii) (Personal
  Property Leases (Sellers as lessee));

  
	
   

  	
   

  	
   

  
	
  (xi)

  	
   

  	
  Schedule 1.1(ttt)
  (Prepaid Expenses);

  
	
   

  	
   

  	
   

  
	
  (xii)

  	
   

  	
  Schedule 1.1(aaaa)
  (SSCI Mexico Imported Inventory);

  
	
   

  	
   

  	
   

  
	
  (xiii)

  	
   

  	
  Schedule 1.1(bbbb)(i) (Sanmina-SCI USA’s Mexico Imported
  Assets);

  

 

23

 

	
  (xiv)

  	
   

  	
  Schedule 1.1(bbbb)(ii) (SSCI
  Mexico’s Temporarily Imported Assets);

  
	
   

  	
   

  	
   

  
	
  (xv)

  	
   

  	
  Schedule 1.1(bbbb)(iii) (SSCI
  Mexico’s Definitively Imported Assets);

  
	
   

  	
   

  	
   

  
	
  (xvi)

  	
   

  	
  Schedule 1.1(bbbb)(iv) (SCI
  Mexico’s Assets Purchased in Mexico); and

  
	
   

  	
   

  	
   

  
	
  (xvii)

  	
   

  	
  Schedule 1.1(cccc)
  (Security Deposits).

  

 

(b)           Preliminary
Schedules.  In connection with and at
the same time as the delivery of the Preliminary Net Asset Value Statement,
Sellers shall deliver to Buyer the Updated Schedules (as defined below) as of a
recent practicable date and, in any event, within thirty (30) days prior to the
Closing Date.  The “Updated
Schedules” means:

 

	
  (i)

  	
   

  	
  Schedule 1.1(a) (Accrued
  Liabilities);

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  Schedule 1.1(v) (Consigned
  Inventories);

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  Schedule 1.1(jj)
  (Expensed Capital Items);

  
	
   

  	
   

  	
   

  
	
  (iv)

  	
   

  	
  Schedule 1.1(oo)
  (Fixed Assets);

  
	
   

  	
   

  	
   

  
	
  (v)

  	
   

  	
  Schedule 1.1(aaa)(i), (ii) (iii) and (iv) (Inventories);

  
	
   

  	
   

  	
   

  
	
  (vi)

  	
   

  	
  Schedule 1.1(aaaa)
  (SSCI Mexico Imported Inventory);

  
	
   

  	
   

  	
   

  
	
  (vii)

  	
   

  	
  Schedule 1.1(bbbb)(i) (Sanmina-SCI USA’s Mexico Imported
  Assets);

  
	
   

  	
   

  	
   

  
	
  (viii)

  	
   

  	
  Schedule 1.1(bbbb)(ii) (SSCI Mexico’s Temporarily Imported Assets);

  
	
   

  	
   

  	
   

  
	
  (ix)

  	
   

  	
  Schedule 1.1(bbbb)(iii) (SSCI
  Mexico’s Definitively Imported Assets);

  
	
   

  	
   

  	
   

  
	
  (x)

  	
   

  	
  Schedule 1.1(bbbb)(iv) (SCI
  Mexico’s Assets Purchased in Mexico); and

  
	
   

  	
   

  	
   

  
	
  (xi)

  	
   

  	
  Schedule 1.1(cccc)
  (Security Deposits).

  

 

(c)           Closing Schedules.  In connection with the delivery of the
Closing Net Asset Value Statement, Sellers shall deliver to Buyer the Updated
Schedules as of the Closing Date.

 

24

 

2.12         Contingent
Consideration

 

(a)           Amount of Contingent
Consideration.  As additional
consideration in connection with the Transaction (the “Contingent Consideration”), subject to
adjustment pursuant to Section 5.9(h):

 

(i)        Buyer shall
pay to Sellers an aggregate amount equal to 0.01 multiplied by the Lenovo
Systems BTO/CTO Business Revenue earned during the Measurement Period.

 

(ii)       Buyer shall
pay to Sellers an aggregate amount equal to 0.2 multiplied by the Lenovo
Logistics Business Revenue earned during the Measurement Period provided that
Buyer records gross margin of at least 20% (in accordance with U.S. GAAP as
consistently applied by Sellers with respect to the Business prior to Closing
in the preparation of Sellers’ annual and quarterly
financial statements) with respect to logistics services
performed for or on behalf of Lenovo at Szekesfehervar Facility, the Raleigh
Facility and the Australia Facility during the Measurement Period.

 

(b)           Contingent
Consideration Definitions.

 

(i)        “Lenovo
Systems BTO/CTO Business Revenue” means revenue recorded by Buyer
(in accordance with U.S. GAAP as consistently applied by Sellers with respect
to the Business prior to Closing in the preparation of Sellers’ annual and quarterly financial statements) with respect to
the sales of products and services that are manufactured or performed for or on
behalf of Lenovo at Szekesfehervar Facility and the Raleigh Facility during the
Measurement Period.

 

(ii)       “Lenovo Systems Logistics Business Revenue” means revenue
recorded by Buyer (in accordance with U.S. GAAP as consistently applied by
Sellers with respect to the Business prior to Closing in the preparation of Sellers’
annual and quarterly financial statements) with respect to logistics services
performed for or on behalf of Lenovo at the Szekesfehervar Facility, the
Raleigh Facility and the Australia Facility during the Measurement Period.  In the event Sellers continue to conduct the
logistics systems business for Lenovo at Sellers’ facility in Tatabanya,
Hungary (the “Tatabanya Facility”) as of
immediately prior to the Closing Date and the Parties intend that Buyer shall
continue to operate such business at the Tatabanya Facility following the
Closing Date, the Parties hereby agree to amend the agreement such that the Lenovo
Systems Logistics Business Revenue includes revenue recorded by Buyer (in
accordance with U.S. GAAP as consistently applied by Sellers with respect to
the Business prior to Closing in the preparation of Sellers’ annual and
quarterly financial statements) with respect to logistics services performed
for or on behalf of Lenovo at the Tatabanya Facility.  For the avoidance of doubt, Lenovo
Systems Logistics Business Revenue does
not include actual pass-through material costs (regardless of whether such
material has been purchased by Sellers.)

 

(iii)      “Measurement Period” means the period
beginning on the day following the Closing Date and ending on the one year
anniversary of the Closing Date; provided, however,
that in the event Buyer terminates all sales of products and services that are
manufactured or performed for or on behalf of Lenovo at the Szekesfehervar
Facility and/or Buyer terminates all logistics services performed for or on
behalf of Lenovo at the Szekesfehervar Facility, the Raleigh 

 

25

 

Facility and the
Australian Facility earlier than the one year anniversary of the Closing Date
(a “Lenovo Termination”) the Measurement
Period shall end for the respective business on the date of such termination.

 

(c)           Quarterly Reports.  Within fifteen (15) days following the
completion of each fiscal quarter of Buyer following the Closing Date, Buyer shall
deliver to Sellers a schedule setting forth a computation of the Contingent
Consideration earned during such fiscal quarter and a copy of the financial
information used in making such computation (each, a “Quarterly
Report”).

 

(d)           Determination of Contingent
Consideration; Dispute Resolution.  Within thirty (30) days following the
completion of the Measurement Period, Buyer shall deliver to Sellers a schedule
(the “Computation Schedule”) setting forth
the computation of the aggregate Contingent Consideration for the Measurement
Period and a copy of the financial information used in making such computation
(the “Measurement Period Report”).  The Measurement Period Report shall be
consistent with the Quarterly Reports for the periods covered by such Quarterly
Reports.  Buyer shall provide Sellers
reasonable access to Buyer’s designated employees, books and records of Buyer
as Sellers may reasonably request in order to verify such amounts.  Buyer’s computation of any payment under this
Section 2.12(d) shall be conclusive and binding upon the parties
hereto unless, within forty-five (45) days following Sellers’ receipt of the
Measurement Period Report (the “Dispute Period”),
Sellers notify Buyer in writing that they disagree with Buyer’s computation of
the Contingent Consideration (a “Contingent Consideration
Dispute Notice”).

 

If Sellers deliver
a Contingent Consideration Dispute Notice to Buyer, the parties shall attempt
in good faith to reach a resolution of such disagreement.  If such disagreement is not resolved within
thirty (30) days after delivery of Sellers’ Contingent Consideration Dispute
Notice to Buyer, Independent Accountants agreed to by Buyer and Sellers shall
be directed to compute the amount of the Contingent Consideration as promptly
as practicable and such computation shall be binding upon the parties
hereto.  The expenses of such Independent
Accountants in connection with the calculation of the Contingent Consideration
in response to a Contingent Consideration Dispute Notice by Sellers shall be
borne equally by Buyer and Sellers.  The
foregoing notwithstanding, if the amount of Contingent Consideration in dispute
under Section 2.12 is or is reasonably likely to be more than Four Million
Dollars ($4,000,000), either Sellers or Buyer may pursue a court action with
respect to such claims in accordance with to Section 11.10.

 

(e)           Final and Binding.  If Sellers do not deliver to Buyer a
Contingent Consideration Dispute Notice during the Dispute Period, the
Computation Schedule shall be final and binding upon the termination of
the Dispute Period.  If Sellers deliver
to Buyer a Contingent Consideration Dispute Notice during the Dispute Period,
the Computation Schedule shall be final and binding at such time as Buyer
and Sellers agree that the Computation Schedule shall be final and binding
or, if Independent Accountants are engaged to resolve a dispute, upon a final
and binding determination by such Independent Accountants.

 

26

 

(f)            Payment.

 

(i)            If the final and
binding Contingent Consideration pursuant to Section 2.12(e) is
greater than the final and binding Aggregate Severance Payment pursuant to Section 5.9(f),
Buyer shall pay Sellers an amount equal to such Contingent Consideration less
such Aggregate Severance Amount within twenty (20) days following the later of (x) the
date the Contingent Consideration is final and binding pursuant to Section 2.12(e) or
(y) the date the Aggregate Severance Amount is final and binding pursuant
to Section 5.9(f), and Sellers shall have no obligation to make any
further payments pursuant to Section 5.9. 
If the final and binding Contingent Consideration pursuant to Section 2.12(e) is
less than the final and binding Aggregate Severance Amount pursuant to Section 5.9(f),
Sellers shall pay Buyer an amount equal to such Aggregate Severance Amount less
such Contingent Consideration within twenty (20) days following the later of (x) the
date the Contingent Consideration is final and binding pursuant to Section 2.12(e) or
(y) the date the Aggregate Severance Amount is final and binding pursuant
to Section 5.9(f), and Buyer shall have no obligation to make any further
payments pursuant to Section 2.12.

 

ARTICLE III

 

REPRESENTATIONS AND
WARRANTIES OF SELLER

 

Subject
to such exceptions as are specifically disclosed in the disclosure letter
supplied by Sellers to Buyer (the “Seller Disclosure Letter”),
each of the Sellers hereby represents and warrants to Buyer that the statements
contained in this Article III are true and correct as of the date of this
Agreement and will be true and correct in all material respects as of the
Closing (as though made at the Closing ); provided, that
the representations and warranties made as of a specified date will be true and
correct as of such date.

 

3.1           Organization,
Qualification, and Corporate Power.  Each Seller is duly incorporated
and validly existing under the laws of the jurisdiction of its
incorporation.  Each Seller has all
necessary corporate or other equivalent power and authority to enter into this
Agreement and all agreements and instruments delivered pursuant hereto (the “Ancillary Agreements”), to carry out its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby.  Each Seller is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
the Business makes such licensing or qualification necessary, except to the
extent that the failure to be so licensed or qualified would not (i) 
adversely affect the ability of such Seller to execute and deliver the
Agreement and the Ancillary Agreements, or to consummate the Transactions and (ii) result
in a Material Adverse Effect on the Business.

 

3.2           Authorization. 
The execution and delivery of this Agreement and the Ancillary Agreements, the
performance by each Seller of its obligations hereunder and thereunder and the
consummation by each Seller of the transactions contemplated hereby and thereby
have been duly authorized by all requisite action on the part of Sellers and no
other corporate proceedings on the part of Sellers are necessary to authorize
this Agreement or the Ancillary Agreements, or to consummate the transactions
contemplated hereby and thereby.  This
Agreement and the Ancillary 

 

27

 

Agreements
to which each Seller is a party have been duly and validly executed and
constitute the valid and legally binding obligations of such Seller, enforceable
against such Seller in accordance with their respective terms and conditions,
except as such enforceability may be limited by principles of public policy and
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies.

 

3.3           No Conflicts. 
Except as set forth in Section 3.3 of the Seller Disclosure Letter,
neither the execution and the delivery of this Agreement and the Ancillary
Agreements by Sellers nor the consummation of the Transaction, assuming receipt
of the Consents will (A) violate any material constitution, law,
injunction, judgment, order, decree, ruling, charge, or other restriction of
any government, governmental agency, or court to which a Seller is subject, (B) violate
or conflict with any provision of the charter documents, bylaws or
organizational documents of the Sellers, or (C) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice or consent under, any Assigned Contract or any Assumed Permit (or result
in the imposition of any Lien upon any of the Purchased Assets) except for such
violations, conflicts, breaches, defaults, alterations, terminations,
modifications or cancellations that would not have a Material Adverse Effect on
the Business.

 

3.4           Consents. 
No consent, waiver, approval, order, license, permit, certificates, filing or
authorization of, or registration, declaration or filing (each a “Consent”) with, any Governmental Body or any third party is
required by or with respect to Sellers in connection with the execution and
delivery of this Agreement or the consummation of the Transaction, except for (i) such
Consent listed in Section 3.4 of the Seller Disclosure Letter, (ii) such
Consents as may be required under applicable federal and state securities laws
and comparable foreign laws, (iii) the expiration or early termination of
the waiting period under the Hart-Scott-Rodino Act, and under any comparable
foreign antitrust laws, if applicable, and (iv) such Consents in which the
failure of which to obtain would not (X) individually or in the aggregate
have a Material Adverse Effect on the Business, or (Y)  materially
adversely affect the ability of Sellers to execute and deliver this Agreement
and the Ancillary Agreements, or consummate the Transaction.

 

3.5           Legal Compliance. 
To the knowledge of Sellers, the operations of the Business are being conducted
by Sellers as of the date hereof in material compliance with all applicable
laws (including without limitation rules, regulations, codes, plans,
injunctions, judgments, orders, extension orders, decrees, rulings, and charges
thereunder) except where the failure to be in compliance would not,
individually or in the aggregate, have a Material Adverse Effect.  No Action, or to the knowledge of Sellers,
investigation, charge, complaint, claim, demand, notice or inquiry, is pending,
or to the knowledge of Sellers, is threatened against any Seller by any
Governmental Body alleging any failure to so comply in any material
respect.  Sellers have all Permits that
are necessary to operate the Business and hold the Purchased Assets as of the
Closing except to the extent that the failure to have any such Permit would not
result in a Material Adverse Effect.

 

28

 

3.6           Financial
Information.  The Preliminary Net Asset Value Statement and the
Closing Net Asset Value Statement will be and, as of the Closing Date, the
Preliminary Net Asset Value Statement has been prepared in accordance with
accounting principles applied on a basis consistent with Sellers’ past practice
and present fairly in all material respects the financial condition of the
Business as of such dates.

 

3.7           Tax Matters. 
For purposes of this Agreement, “Tax” or,
collectively, “Taxes”, means  any and all, regardless of country, national,
federal, state, local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities, including taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation, and
value added (including GST), ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, stamp duties and
customs and other import and export duties together with all interest,
penalties and additions imposed with respect to such amounts.

 

Except to the extent not relevant to the Purchased
Assets or the Business:

 

(a)           Sellers have timely
filed all returns, estimates, information statements and reports with respect
to any material Taxes (“Tax Returns”)
that it was required to file.  All such
Tax Returns are correct and complete in all material respects.  All Taxes owed by Sellers were paid in full
when due.

 

(b)           Sellers have timely
withheld or paid with respect to its employees or other third parties and
timely paid over any withheld amounts to the appropriate Taxing authority all
material income and payroll taxes required to be withheld or paid.

 

(c)           Sellers have made
available to Buyer copies of all Tax Returns (or relevant portions thereof)
relating to the Business or the Purchased Assets for all periods since the
Sellers incorporation.

 

3.8           Title of
Properties; Absence of Liens and Encumbrances; Condition of Equipment.

 

(a)           All current leases
related to the Business are in full force and effect (“Facility
Leases”), are valid and effective in accordance with their
respective terms, and there is not, to the knowledge of the Sellers, under any
of such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default) on the part of
any Seller or on the part of any other party thereto.

 

(b)           Sellers have good and
valid title to, or, in the case of leased properties and assets valid leasehold
interests in, the Purchased Assets, free and clear of any Liens, except
Permitted Liens.

 

(c)           All of the Fixed Assets
necessary for the operation of the Business are in operating condition (normal
wear and tear excepted).

 

29

 

(d)           Sellers have the power
and right to sell, assign, transfer, convey and deliver the Purchased Assets to
Buyer pursuant to this Agreement. 
Following the consummation of the Transaction and the execution of the
instruments of transfer contemplated by this Agreement and the Ancillary
Agreements, Buyer will own, with good and valid title to, or otherwise acquire
the interests of Sellers in, the Purchased Assets, free and clear of any Liens,
other than the Permitted Liens.

 

3.9           Intellectual
Property.

 

(a)           To the knowledge of
Sellers, other than the Business Intellectual Property licensed by Sellers to
Buyer under the Intellectual Property License Agreement (“Licensed
Intellectual Property”), no license of Business Intellectual
Property from Seller to Buyer is required for the ordinary day-to-day conduct
of the Business by Buyer.

 

(b)           To the knowledge of
Sellers, except as set forth in Section 3.9 of the Seller Disclosure
Letter, the manufacturing processes included in the Licensed Intellectual
Property as currently used by Sellers in the Business do not infringe or
misappropriate any Intellectual Property Rights of any third party and no
Actions or Proceeding are pending against Sellers alleging any such
infringement or misappropriation.

 

(c)           No Licensed Intellectual
Property is subject to any outstanding decree, order, injunction, judgment or
ruling restricting the use of such Licensed Intellectual Property in the
conduct of the Business or to any pending Actions or Proceeding challenging
Sellers’ ownership of such Licensed Intellectual Property.

 

(d)           Sellers have taken
reasonable steps in accordance with normal industry practice to maintain the
confidentiality of the trade secrets within the Licensed Intellectual Property
that Sellers intend to maintain confidential.

 

3.10         Contracts. 
With respect to each Assigned Contract: (A) the Assigned Contract, with
respect to each Seller that is a party thereto and, to the Sellers’ knowledge,
all other parties thereto, is valid, binding, enforceable, and in full force and
effect in all material respects except that (i) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws, now or hereafter in effect, relating to or limiting
creditors’ rights generally, and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or
in equity); and (B) neither Sellers nor, to Seller’s knowledge, any other
party is in breach or default, and no event has occurred, which with notice or
lapse of time would constitute a breach or default under the Assigned
Contract.  Solely with
respect to the Business or
the Purchased Assets, Sellers have not entered into any agreement under which
Sellers are restricted from selling the products or providing services of the
Business to customers or potential customers or any class of customers in any
geographic area or in any segment of the market.

 

3.11         Litigation. 
Section 3.11 of Seller Disclosure Letter sets forth each instance in which
the Business or the Purchased Assets (i) is subject to any material
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is
or has been, or, to the knowledge of Sellers, is threatened to 

 

30

 

be made a party, to any material action, suit,
proceeding, hearing, mediation, arbitration, or investigation of, in, or before
any court or quasi judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any mediator or arbitrator.

 

3.12         Employee
Matters.  Schedule 3.12 contains a complete and accurate
list of all Employees as of the date of this Agreement, showing for each such
Employee the following: employee name, position held and annual base salary.

 

(a)           Benefit Plans.  Neither Sellers nor any other person or
entity under common control with any Seller within the meaning of Section 414(b),
(c), (m) or (o) of the Code and the regulations issued thereunder has
ever maintained, established, sponsored, participated in, contributed to, or
had or could have any obligation to, any of the following that could result in
liability to Buyer following the Closing: (A) Pension Plan which is
subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of
ERISA or Section 412 of the Code, (B) multiple employer plan or to
any plan described in Section 413 of the Code, or (C) Multiemployer
Plan.

 

(b)           No Post Employment
Obligations.  No Seller has any
liability to provide, life insurance, medical or other employee benefits to any
current or former employee of the Business upon his or her retirement or
termination of employment for any reason, except as may be required by law,
which could result in liability to Buyer following the Closing and unless
otherwise agreed by the Parties.

 

3.13         Labor
Matters.  None of the Sellers is a party to any special collective
bargaining agreement and no special collective bargaining agreement is being
negotiated with respect to the Business. 
There is no material unfair labor practice, charge or complaint pending
against any Seller with respect to the Business, nor is there any material
labor strike, work stoppage, grievance or other labor dispute pending or, to
the knowledge of any of the Sellers, threatened in writing against any of the
Sellers with respect to the Business. 
Each of the Sellers is in compliance in all material respects with all
applicable laws respecting employment and wage and hours, and with all terms
and conditions of employment, agreements with third parties, codes of conduct,
visas, work permits, in each case, with respect to Employees.

 

3.14         Environmental
Matters

 

(a)           Condition of
Property:  To knowledge of Seller, no
Hazardous Materials are present in the soil, groundwater or of any Facility
Location in a manner that is reasonably likely to result in material liability
to the Business or Buyer or otherwise result in a corrective action or remedial
obligation under Environmental Laws.  To
the knowledge of Sellers, there are no underground storage tanks, asbestos
which is friable or likely to become friable or PCBs present on any Facility
Location.

 

(b)           Hazardous Materials
Activities:  Sellers have conducted
all Hazardous Material Activities relating to the Business in compliance in all
material respects with all applicable Environmental Laws, and the Hazardous
Materials Activities of Sellers prior to the Closing have not resulted in the
exposure of any person to a Hazardous Material in a manner which has caused or
could reasonably be expected to cause a material adverse health effect to any
such person.

 

31

 

(c)           Environmental
Litigation:  No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the best of Sellers knowledge, threatened, concerning or
relating to any Hazardous Materials Activity of Sellers relating to its
Business, or any Facility Location.

 

(d)           Reports and Records:  Sellers have delivered to Buyer or made
available for inspection by Buyer and its agents, representatives and employees
all Phase I and Phase II or other environmental assessments of soil or
groundwater at any Facility Location in Sellers possession.

 

3.15         Fees. 
Except with respect to Deutsche Bank, the Sellers do not have any liability or
obligation to pay any fees or commissions to any broker or finder, with respect
to the transactions contemplated by this Agreement.

 

3.16         Inventories. 
The Inventories are in all material respects similar in quality to the raw
materials, supplies and work in process generally included in the inventory of
the Business in the past.  Sellers have
good and valid title to the Inventories free and clear of all Liens, other than
Permitted Liens.  The Inventories do not
consist of, in any material amount, items that are damaged.  None of the Sellers is under any obligation
or liability with respect to accepting returns of items of Inventories or
merchandise in the possession of its customers other than in the ordinary
course of the Business consistent with past practice.  Sellers have not acquired or committed to
acquire Inventories for sale which are not of a quality and quantity usable in
the ordinary course of the Business within a reasonable period of time and
consistent with past practice.

 

3.17         Epidemic
Failure.  To the knowledge of
Sellers, there are no facts or circumstances in existence which would cause
Sellers to expect the occurrence of an Epidemic Failure in any products sold,
produced, manufactured, distributed or otherwise placed into the stream of
commerce by the Business.

 

3.18         Product
Warranty.  The products sold and delivered and all services provided by Sellers in
relation to the Business have conformed in all material respects with all
express contractual warranties, and Sellers have no obligation for replacement
or modification thereof or other damages including, without limitation injury
to persons or property in connection therewith, except to the extent that such
liability could not reasonably be expected to have a Material Adverse Effect.

 

3.19         Sufficiency
of Purchased Assets Except as set forth in Section 3.19 of the Seller
Disclosure Letter, the Purchased Assets are substantially all of the Assets
that are used by Sellers at the Facilities to conduct the Business.

 

32

 

ARTICLE
IV

 

REPRESENTATIONS
AND WARRANTIES OF BUYER

 

Subject to such exceptions as are specifically disclosed in the
disclosure letter supplied by Buyer to Sellers (the “Buyer
Disclosure Letter”), Buyer hereby represents and warrants to Sellers
that the statements contained in this Article IV are true and correct as
of the date of this Agreement and will be true and correct in all material
respects as of the Closing (as though made at the Closing); provided, that the representations and warranties made as of
a specified date will be true and correct as of such date.

 

4.1           Organization,
Qualification, and Corporate Power.  Buyer is a corporation duly
incorporated, validly existing and in good standing under the jurisdiction of
its incorporation.  Buyer is duly
authorized to conduct business and is in good standing under the laws of each
other jurisdiction where such qualification is required and in which the
failure to so qualify would not (i) adversely affect the ability of Buyer
to execute and deliver this Agreement and the Ancillary Agreements, or
consummate the Transactions and (ii) result in a Material Adverse Effect
on Buyer.  Buyer’s Mexican Affiliate is
duly authorized to operate in Mexico under maquila status in accordance with
the IMMEX Decree.

 

4.2           Authorization. 
Buyer has full power and authority to enter into, execute and deliver this
Agreement and the Ancillary Agreements, and to consummate the Transaction and
to perform its obligations hereunder and thereunder.  This Agreement and the Ancillary Agreements
constitute the valid and legally binding obligations of Buyer, enforceable
against Buyer in accordance with its terms and conditions, except as such
enforceability may be limited by principles of public policy and subject to the
laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies.

 

4.3           No
Conflicts.  Neither the execution and the delivery of this Agreement
nor the consummation of the transactions contemplated hereby, will (A) violate
any material constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject, (B) violate or
conflict with any provision of the charters, bylaws or organizational documents
of Buyer, or (C) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under, any
agreement, contract, lease, license, instrument, or other arrangement to which
Buyer is a party or by which Buyer is bound or to which any of its assets is
subject, other than any of the foregoing which would not in the aggregate have
a Material Adverse Effect on Buyer, or (ii) adversely affect the ability
of Buyer to execute and deliver this Agreement and the Ancillary Agreements, or
consummate the Transactions.

 

4.4           Consents. 
No consent, waiver, approval, order, license, permit, certificate, filing or
authorization of, or registration, declaration or filing with, any Governmental
Body or any third party, is required by or with respect to Buyer in connection
with the execution and delivery of this 

 

33

 

Agreement or the consummation of the Transaction,
except for (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and comparable foreign laws, (ii) the
expiration or early termination of the waiting period under the
Hart-Scott-Rodino Act, and securing any required consents or certifications of
non-objection under any comparable foreign antitrust laws, if applicable, and (iv) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings in which the failure of which to obtain would not (i) in
the aggregate have a Material Adverse Effect on Buyer, or (ii) materially
adversely affect the ability of Buyer to execute and deliver this Agreement and
the Ancillary Agreements, or consummate the Transactions.

 

4.5           Purchase
Price.  Buyer has and will have sufficient cash on hand to pay the
Purchase Price and to pay any other amounts payable pursuant to this Agreement
and the Ancillary Agreement and to effect the Transactions.

 

4.6           Fees. 
The Buyer does not have any liability or obligation to pay any fees or
commissions to any broker or finder, with respect to the transactions
contemplated by this Agreement.

 

4.7           Investigation
by the Buyer.  In entering into this Agreement, Buyer has relied upon
its own investigation and analysis, and Buyer acknowledges that neither Sellers
nor any of their Affiliates, agents or representatives makes or has made any
representation or warranty, either express or implied, as to the Business, the
Purchased Assets or Sellers, or the accuracy or completeness of any of the
information provided or made available to Buyer or its directors, officers,
employees, Affiliates, agents or representatives, except as and only to the
extent expressly set forth herein with respect to the representations and
warranties contained in this Agreement and subject to the limitations and
restrictions contained n this Agreement.

 

ARTICLE
V

 

PRE
CLOSING COVENANTS

 

With respect to the period between the execution of
this Agreement and the earlier of the termination of this Agreement in
accordance with its terms and the Closing (the “Pre-Closing
Period”):

 

5.1           Operation
of Business.  (a) Sellers agree that, during the Pre-Closing Period,
except as contemplated by this Agreement, any Ancillary Agreement or the
Transactions, or other than in connection with the Excluded Business or other than
in connection with and reasonably necessary to effectuate the Lenovo Transition
or as otherwise consented to or approved in advance by Buyer, Sellers shall:

 

(i)            use all commercially
reasonable efforts to (a) preserve intact the present business organization,
reputation, contractual and other arrangements of the Business then under the
control of Sellers, (b) keep available (subject to dismissals and
retirements in the ordinary 

 

34

 

course of business consistent with past practice) the services of
substantially all of the present Employees of the Business, (c) maintain
the Purchased Assets in good working order and condition, ordinary wear and
tear excepted, and (d) maintain current relationships with customers,
suppliers and other Persons to whom Sellers sell goods or provide services or
with whom Sellers otherwise have significant business relationships in
connection with the Business in accordance with past practice subject to any
effects resulting from the announcement of this Agreement;

 

(ii)           except to the extent
required by applicable Law and consistent with past practice, (a) cause
the Seller Records to be maintained in the usual, regular and ordinary manner,
and (b) not permit any change in any accounting or Tax practice, policy or
election or Sellers that is not in the ordinary course of business consistent
with past practice that would materially and adversely affect the Business;

 

(iii)          use all commercially
reasonable efforts to continue in full force and effect all material insurance
policies (or comparable insurance policies) insuring the Business and the
Purchased Assets; and

 

(iv)          comply in all material
respects with all Laws and Orders applicable to the Business, and promptly
following receipt thereof deliver to Buyer copies of any written notice
received from any Governmental Body or other Person alleging any violation of
any such Law or Order.

 

(b)           Sellers agree that,
during the Pre-Closing Period, except as contemplated by this Agreement, the
Ancillary Agreements or this Transaction or other than in connection with the
Excluded Business or other therein connection with and reasonably necessary to
effectuate the Lenovo Transition or as otherwise consented to or approved in
advance by Buyer, Sellers shall not:

 

(i)            except for any
existing benefit plan or program or contract, make any representation or
promise, oral or written, to any Employee concerning any employee benefit plan,
except for statements as to the rights or accrued benefits of any Employee
under the terms of any employee benefit plan or agreements, or otherwise
required by Law;

 

(ii)           except for any existing
benefit plan or program or contract, make any increase in the salary, wages or
other compensation (cash, equity or otherwise) of any Employee other than
increases necessary in Sellers’ sole determination to retain or replace
Employees or increases in accordance with the Sellers’ past practice;

 

(iii)          adopt, enter into or
become bound by any employee benefit plan, any employment related contract or
any collective bargaining agreement with respect to the Business or any of the
Employees, or, amend, modify or terminate (partially or completely) any such
employee benefit plan, employment related contract or collective bargaining
agreement, except to the extent required by applicable Law or existing
contractual obligation and, in the event compliance with legal requirements
presents options, only to the extent that the option which Sellers reasonably
believe to be the least costly is chosen, except in the ordinary course of
business consistent with past practice; or

 

35

 

(iv)          enter into any contract
to do or engage in any of the foregoing items set forth in this

Section 5.1(b).

 

(v)           acquire, lease, license
or dispose of or agree to acquire, lease, license or dispose of any Assets that
would constitute Purchased Assets hereunder, other than in the ordinary course
of business consistent with past practice, or create or incur any material
Lien, other than a Permitted Lien, on any Assets that would constitute
Purchased Assets hereunder; provided that to the extent any restrictions set
forth in this clause (v) or in clause (ix) of this Section 5.1(b) conflict
with or impose restrictions that are inconsistent with the obligations of
Sanmina-SCI and its subsidiaries set forth in any credit agreements, such
restrictions shall be inoperable and shall not apply (it being understood that
such restrictions shall apply to the maximum extent possible without conflicting
with such obligations or covenants);

 

(vi)          enter into, amend,
modify, terminate (partially or completely), grant any waiver under or give any
consent with respect to any Assigned Contract or any Assumed Permit, in each
case other than in the ordinary course of business consistent with past
practice or other than any amendment, modification, termination, waiver or
consent that is not material to the Business;

 

(vii)         violate, breach or
default in any material respect under, or take or fail to take any action that
(with or without notice or lapse of time or both) would constitute a material
violation or breach of, or material default under, any term or provision of any
Assigned Contract or any Assumed Permit;

 

(viii)        make any material changes
in the conduct of the Business, except as specifically contemplated or
permitted by this Agreement, any Ancillary Agreement or this Transaction; or

 

(ix)           enter into any contract
to do or engage in any of the foregoing items set forth in this Section 5.1(b).

 

5.2           Access
to Information.  Sellers shall permit Buyer and its representatives
during the Pre-Closing Period to have reasonable access during normal business
hours, upon reasonable advance notice, to the Seller Records, Employees and
assets of the Business (including the testing and investigation of any Facility
as Buyer deems reasonably necessary prior to the Closing) then under the
control of Sellers for the purposes of, among other things, identifying and
verifying the Purchased Assets to be purchased at the Closing; provided, however, that such access shall be conducted by
Buyer and its representatives in such a manner as not to interfere unreasonably
with the businesses or operations of Sellers or the Business.  In order to facilitate the resolution of any
claims made by or against or incurred by Buyer after the Closing or for any
other reasonable purpose, for a period of three years following the Closing,
Sellers shall (i) retain all Seller Records which are not transferred to
Buyer pursuant to this Agreement and which relate to the Business for periods
prior to the Closing and which shall not otherwise have been delivered to Buyer
and (ii) upon reasonable notice, afford the officers, employees and
authorized agents and representatives of Buyer, reasonable access (including
the right to make photocopies Buyer’s expense), during normal business hours,
to such Seller Records, all subject to Section 5.10 regarding
confidentiality.

 

36

 

5.3           Notice
of Developments.  During the Pre-Closing Period, Buyer and Sellers
shall give prompt notice to the other party of (i) the occurrence or non
occurrence of any event of which Buyer or Sellers, as the case may be, have
knowledge, the occurrence or non-occurrence of which is reasonably likely to
cause any representation or warranty of Buyer or Sellers, as the case may be,
contained in this Agreement to be untrue or inaccurate at or prior to the
Closing and (ii) any failure of Buyer or Sellers, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.3 shall not
limit or otherwise affect any remedies available to the Party receiving such
notice.

 

5.4           No
Solicitation.  During the Pre-Closing Period, neither Sellers nor any
subsidiary of Sellers shall (nor shall it permit its Representatives to)
directly or indirectly take any of the following actions with any Person other
than Buyer and their designees: (a) solicit, initiate, encourage or accept
any proposals or offers from, or conduct discussions with or engage in
negotiations with, any Person relating to any possible Acquisition Proposal
with Sellers, (b) provide information with respect to Sellers to any
Person, other than Buyer, relating to, or otherwise cooperate with, facilitate
or encourage any effort or attempt by any such Person with regard to, any
possible Acquisition Proposal with Sellers, except as required by Law, (c) enter
into a contract or agreement with any Person, other than Buyer, providing for
an Acquisition Proposal with Sellers, or (d) make or authorize any
statement, recommendation or solicitation in support of any possible
Acquisition Proposal with Sellers other than by Buyer.  Sellers shall, and shall cause their
Representatives to, immediately cease and cause to be terminated any such
contacts or negotiations with any Person relating to any Acquisition Proposal.  As used in this Section 5.4, “Acquisition Proposal” shall mean a proposal or offer for a
merger, consolidation or other business combination involving an acquisition of
the Business or the Purchased Assets.

 

5.5           Reasonable
Efforts.  During the Pre-Closing Period, each of the Parties will use
their reasonable efforts to take all action and to do all things necessary,
proper, or advisable to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Article VII below).

 

5.6           Seller
Consents.  During the Pre-Closing Period, Sellers will use
commercially reasonable efforts to obtain any third party consents that are
required in connection with the matters identified in Sections 3.3 and 3.4
of Seller Disclosure Letter or otherwise required in connection with the
Transaction.  During the Pre-Closing
Period, Sellers will use commercially reasonable efforts to obtain any
authorizations, consents, and approvals of Governmental Bodies in connection
with the matters identified in Sections 3.3 and 3.4 of Seller Disclosure
Letter or as otherwise required in connection with the Transactions
contemplated by this Agreement.  The
parties agree that commercially reasonable efforts shall not include the
payment of any amount to obtain third party consents.

 

5.7           Buyer
Consents.  During the Pre-Closing Period, Buyer will use commercially
reasonable efforts to obtain any third party consents that are required in
connection with the matters identified in Sections 4.3 and 4.4 of Buyer
Disclosure Letter or otherwise required in connection 

 

37

 

with the Transaction. 
During the Pre-Closing Period, Buyer will use commercially reasonable
efforts to obtain any authorizations, consents, and approvals of Governmental
Bodies in connection with the matters identified in Sections 4.3 and 4.4
of the Seller Disclosure Letter or as otherwise required in connection with the
Transactions contemplated by this Agreement. 
The parties agree that commercially reasonable efforts shall not include
any cash or in kind payment of any amount to obtain third party consents.

 

5.8           Employee
Matters

 

(a)           At least
ten (10) Business Days prior to the Closing Date, Sellers shall deliver
Schedule 5.8 to Buyer.  Schedule 5.8
shall contain a list of Employees employed in the Business as of the date no
more than fifteen (15) Business Days prior to the Closing Date (the “Employee List”), including (i) the Employees who as of
such date were engaged partially or solely in the Business on matters related
to products or services produced for or on behalf of IBM (the “IBM Business Employees”) and (ii) the Employees who as
of such date were engaged in the Business on matters related to products or
services produced for or on behalf of Lenovo (the “Lenovo
Business Employees”).

 

(b)           U.S. Employees.  Subject to applicable Law, Buyer shall offer
to all Employees on the Employee List with a principal place of employment in
the United States employment at least at the same base compensation and wage
levels and substantially similar employment benefits that such Employees then
receive from Sellers, such offers to be effective as of 12:01 a.m. on the
Closing Date.  The Employees who accept
such offers of employment from Buyer shall be referred to herein as “Transferring U.S. Employees” and Sellers shall terminate the
employment relationship of each such Transferring U.S. Employee immediately
prior to the Closing Date.

 

(c)           Mexican Employees.  Sellers shall carry out an employer
substitution with respect to all of the Employees of SSCI Mexico or its
Affiliates in Mexico on the Employee List, under the terms of the Mexican
Federal Labor Law, for which purpose Buyer shall cause Buyer’s Mexican
Affiliate to recognize the seniority of such employees as of the time they were
originally employed by SSCI Mexico or its Affiliates and maintain their wage or
salary, benefits and employment conditions at least at the same level they had
with SSCI Mexico or its Affiliates immediately prior to the Closing Date. SSCI
Mexico or its Affiliates shall negotiate and agree with the labor unions with
which it has entered into a collective bargaining agreement for its Employees
on the Employee List to be transferred to the Buyer’s Mexican Affiliate under
an employer substitution and without giving rise to the obligation to pay
statutory or contractual severance. To the extent necessary, the Buyer shall
cause Buyer’s Mexican Subsidiary to enter into a collective bargaining
agreement with a labor union to organize the hourly Employees on the Employee
List to be transferred from SSCI Mexico or its Affiliates.  The Employees whose employment will transfer
to Buyer in Mexico shall be referred to herein as “Transferring
Mexican Employees”.

 

(d)           Hungarian Employees.  Seller shall carry out an employee transfer
with respect to all of the Employees on the Employee List working at the
Szekesfehervar Facility to a company designated by Buyer as a matter of
Hungarian Law upon the Closing from Sellers to the company designated by Buyer.  Such Employees will continue their employment
contracts with the 

 

38

 

company designated by Buyer under the same terms and conditions as such
Employees had with Sellers.  The
Employees on the Employee List whose employment will transfer to Buyer at the
Szekesfehervar Facility shall be referred to herein as “Transferring
Hungarian Employees” and, together with the Transferring U.S.
Employees and the Transferring Mexican Employees, the “Transferring
Employees”.

 

(e)           Transferring
Employee Benefits.  With respect to
Transferring Employees, subject to applicable Law, (i) Buyer will allow
such Transferring Employees and their eligible dependents to participate in employee benefit plans maintained by
Buyer or its subsidiaries on terms substantially similar to the terms of
employee benefit plans maintained by Sellers for such Transferring Employees
prior to the Closing; provided, however, that foregoing shall not include stock
option or other equity plans of Buyer, (ii) for purposes of determining
eligibility to participate, vesting and entitlement to benefits where length of
service is relevant (including for purposes of vacation accrual) under any
Buyer employee benefit plan (other than a defined benefit plan) and Buyer shall
provide that the Transferring Employees shall receive service credit under each
Buyer employee benefit plan (other than a defined benefit plan) for their
period of service with Sellers and their respective subsidiaries and
predecessors prior to the Closing, except where doing so would cause a
duplication of benefits, (iii) Buyer will cause any and all pre-existing
condition limitations, eligibility waiting periods and evidence of insurability
requirements under any group health plans of Buyer in which such Transferring
Employees and their eligible dependents will participate to be waived and will
provide credit for any co-payments and deductibles prior to the Closing Date
for purposes of satisfying any applicable deductible, out-of-pocket or similar
requirements under any such plans that may apply after the Closing Date, and (iv) all
vacation accrued by Transferring Employees under the vacation policies of the
Sellers or their respective subsidiaries or predecessors shall be carried over
by Buyer and shall be permitted to be maintained up to the levels permitted
under the applicable policy of the Sellers or their respective subsidiaries or
predecessors.  Buyer shall make
arrangements for temporary employees pursuant to agency contracts that constitute
Assigned Contracts.

 

5.9           Employee
Severance.

 

(a)           Definitions

 

(i)        For purposes of this
Agreement, “Lenovo Termination Deadline”
means the earlier of (x) the date on which the last Lenovo Terminated
Employee is terminated in connection with a Lenovo Termination and (y) the
date 365 days following the Closing Date.

 

(ii)       For purpose of this
Agreement, “Severance Payment”
shall mean any severance paid to a Terminated Employee that is required by an
employment agreement with the Terminated Employee or applicable Law for any
period of employment with Sellers prior to the Closing Date.  For the avoidance of doubt, the Severance
Payment shall not include any amount or severance liability that is payable as
a result of, or that arises from, a Terminated Employee’s employment on or
after the Closing Date.

 

39

 

(b)           In the event Buyer
terminates any Transferring Employee who is an IBM Business Employee (an “IBM Terminated Employee”) during the ninety (90) day period following
the Closing Date (the “IBM  Termination Deadline”), Buyer shall deliver to Sellers
during the thirty (30) day period following the IBM Termination Deadline a
notice (the “IBM  Terminated Employee Notice”) setting forth the name of each
such IBM Terminated Employee,
the date on which each such IBM Terminated Employee was terminated and the
amount of Severance Payment that was made to each such IBM Terminated Employee
(individually and in the aggregate, the “IBM Severance Payment”).

 

(c)           In the event Buyer
terminates any Transferring Employee who is a Lenovo Business Employee (a “Lenovo Terminated Employee”) prior to the Lenovo Termination
Deadline, Buyer shall deliver to Sellers during the thirty (30) day period
following the Lenovo Termination Deadline a notice (the “Lenovo
Terminated Employee Notice” and,
together with the IBM Terminated Employee Notice, the “Terminated
Employee Notice”) setting forth the name of each such Lenovo Terminated Employee, the date on which each such
Lenovo Terminated Employee was terminated and the amount of Severance Payment
that was made to each such Lenovo Terminated Employee (individually and in the
aggregate, the “Lenovo Severance Payment” and,
together with the IBM Severance Payment, the “Aggregate
Severance Payment”).

 

(d)           Buyer shall provide
Sellers reasonable access to the officers, employees, books and records of
Buyer as Sellers may reasonably request in order to verify the information in
each Terminated Employee Notice and to verify whether any IBM Terminated Employee
was rehired within the one year period following the Closing Date.  Buyer’s computation of the Severance Payment
shall be conclusive and binding upon the parties hereto unless, within thirty
(30) days following Sellers’ receipt of a Terminated Employee Notice, Sellers
notify Buyer in writing that it disagrees with Buyer’s computation of the
Severance Payments.  If Buyer disagrees
with Sellers computation, the parties shall attempt in good faith to reach a
resolution of such disagreement.  If such
disagreement is not resolved within thirty (30) days after delivery of Sellers’
notice, an independent arbitrator agreed to by Buyer and Sellers shall be
directed to compute the amount of the Severance Payment as promptly as
practicable and such computation shall be binding upon the parties hereto.  The expenses of such independent arbitrator
shall be borne equally by Buyer and Sellers. 
The foregoing notwithstanding, if the amount in dispute under
clause 5.9 is or is reasonably likely to be more than Four Million Dollars
($4,000,000), either Sellers or Buyer may pursue a court action with respect to
such claims in accordance with to Section 11.10.

 

(e)           Sellers shall pay Buyer
the amount, if any, equal to the sum of the aggregate amount of the IBM
Severance Payment on the later of (x) the date sixty (60) days following
the IBM Terminated Employee Notice or (y) within fifteen (15) days
following the date the computation of the Severance Payment is binding on the
parties pursuant to Section 5.9(f). 
The foregoing notwithstanding, in the event Buyer or any third party on
behalf of Buyer, including a temporary staffing agency, rehires any IBM
Terminated Employee within one year following the Closing Date, Buyer shall
promptly reimburse Sellers for any IBM Severance Payment made with respect to
such IBM Terminated Employee and in any event within thirty (30) days following
the date any such IBM Terminated Employee is rehired.

 

40

 

(f)            Sellers shall pay
Buyer the amount, if any, equal to the Aggregate Severance Payment; provided, however, in accordance with Section 2.12(f)(ii) of
this Agreement, (i) if the final and binding Contingent Consideration
pursuant to Section 2.12(e) is greater than the final and binding
Aggregate Severance Amount pursuant to Section 5.9(f), Buyer shall pay
Sellers an amount equal to such Contingent Consideration less such Aggregate
Severance Amount, and Sellers shall have no obligation to make any further payments
pursuant to Section 5.9 and (ii) if the final and binding Contingent
Consideration pursuant to Section 2.12(e) is less than the final and
binding Aggregate Severance Amount pursuant to Section 5.9(f), Sellers
shall pay Buyer an amount equal to such Aggregate Severance Amount less such
Contingent Consideration, and Buyer shall have no obligation to make any
further payments pursuant to Section 2.12.

 

5.10         Confidentiality. 
All Book and Records of Sellers, and other confidential and/or proprietary information
of a Party to this Agreement are hereinafter referred to as “Confidential Information.” 
A party who owns and discloses its Confidential Information is referred
to below as a “Disclosing Party” and a Party who
receives or is given access to a Disclosing Party’s Confidential Information is
referred to below as a “Receiving Party.”  Each party hereto agrees that all
Confidential Information of another Party that is disclosed to such party in
the course of negotiating the transaction contemplated by this Agreement or
conducting due diligence in connection herewith will be held in confidence, and
will not be used or disclosed by the Receiving Party except for the purposes
relating to or permitted by this Agreement for which such Confidential
Information was disclosed, and upon termination of this Agreement or the
consummation of the transactions contemplated hereby, will be promptly
destroyed by the Receiving Party or returned to the Disclosing Party, upon the
Disclosing Party’s written request.  No
Party’s employees will be given access to Confidential Information of another
party except on a “need to know” basis and such employees shall be informed of
the need to keep such Confidential Information confidential.  It is agreed that Confidential Information
will not include information that: (i) was known to such Receiving Party
before receipt of such information from the Disclosing Party; (ii) is or
becomes generally known to the public through no breach of this Section 5.10
or any act or omission on the part of the Receiving Party; (iii) is
disclosed by a third party having the legal right to disclose such information
with no obligation of confidence to the Disclosing Party, or is required to be
disclosed as a result of court order or similar process; or (iv) is
independently developed by the Receiving Party without use of any of the
Disclosing Party’s Confidential Information (as evidenced by a contemporaneous
writing).

 

5.11         Non-Solicitation
Of Employees.  Sellers agrees that during the period ending one year
following the Closing Date, Sellers will not directly solicit or attempt to
solicit any of the Transferring Employees to leave his or her employment with
Buyer to become employed with Sellers other than with the written consent of
the Buyer; provided, however, that (i) non-directed newspaper or internet
help wanted advertisements and search firm engagements shall not be considered
solicitations hereunder and (ii) the restrictions of this paragraph shall
not apply to Sellers with respect to employees of Buyer that initiate contact
with Sellers.

 

5.12         Open
Purchase Orders.  Prior to Closing or as soon thereafter as
practicable, the Parties shall cooperate and use commercially reasonable
efforts to cancel all Supplier Purchase 

 

41

 

Orders, effective as of
the Closing, and substitute purchase orders of Buyer in amounts and values for
such Supplier Purchase Orders as are necessary the Parties’ reasonable
determination.  In the event any such
substitution is not achieved prior to Closing, Buyer shall perform all
obligations on and receive benefits of all Supplier Purchase Orders as of the
Closing.  Buyer and Sellers acknowledge
and agree that, effective as of the Closing, there shall be no open Customer
Purchase Orders pursuant to which Sellers are obligated to manufacture and
deliver product to or on behalf of customers of the Business.

 

5.13         Environmental
Baseline.  Prior to Closing, the
Buyer and Seller shall mutually establish the baseline environmental conditions
of the Facilities (“Environmental Baseline”)
in the following manner:

 

(a)           Seller shall engage
Delta Environmental as the environmental consultant who shall perform Phase I
Environmental Assessments meeting the ASTM E 1527-05 standards as well as the
Environmental Protection Agency’s All Appropriate Inquiry Standards (each a “Phase I”).  The terms
of the engagement shall indicate that the results shall be certified to both
Buyer and Seller.  In the event a Phase I
indicates there are no “Recognized Environmental
Conditions”, no further work shall be required.

 

(b)           In the event that a
Phase I indicates a Recognized Environmental Condition, the Buyer and Seller
shall mutually agree on the scope of work for a Phase II Environmental
Assessment.  Seller shall contract for
the work and the terms of the engagement shall indicate that the results shall
be certified to both Buyer and Seller (“Phase II”).

 

(c)           Sellers, on the one
hand, and Buyer, on the other hand, shall share equally the cost for the Phase
I and Phase II.

 

(d)           In the event either
party seeks indemnity for any Environmental Claim involving environmental
conditions on any of the Facilities under Sections 9.1(a), 9.1(b) or
9.2(a) hereof, such environmental conditions shall be deemed to be those demonstrated
in the Environmental Baseline.

 

ARTICLE VI

 

OTHER AGREEMENTS AND COVENANTS

 

6.1           Additional
Documents and Further Assurances. 
Each Party hereto, at the reasonable request of another Party hereto,
shall execute and deliver such other instruments and do and perform such other
acts and things as may be reasonably necessary or desirable for effecting
completely the consummation of the transactions contemplated hereby (provided that the foregoing will not require any Party to
make any payment of consideration to any other Person other than as
contemplated by this Agreement and the exhibits thereto).

 

42

 

6.2           Books
and Records.  In order to facilitate
the resolution of any claims made by or against or incurred by a Party after
the Closing or for any other reasonable purpose, for a period of six (6) years
following the Closing Date, each Party shall (i) retain all Books and
Records relevant to the Transactions, that are in such party’s possession
immediately prior to the Closing (except that Sellers need not retain any
records that are transferred to Buyer pursuant to this Agreement) and which
relate to the Business for periods prior to the Closing and (in the case of
Sellers) which shall not otherwise have been delivered to Buyer and (ii) upon
reasonable notice, afford the officers, employees and authorized agents and
representatives of the other Party, reasonable access (including the right to
make photocopies at such other Party’s expense), during normal business hours,
to such Books and Records.  Buyer also
agrees to make available, upon reasonable notice and during normal business
hours, the officers and employees of Buyer following the Closing for any
purpose reasonably related to such Books and Records or any claim by or against
any third party.  Buyer also agrees with
Sellers that Sellers shall be entitled to possess and retain copies of such
Books and Records for Seller’s internal use (including preparation of financial
statements and tax returns), provided that no use of such records that would
violate this Agreement or any Ancillary Agreement may be made.

 

6.3           Consigned
Inventory.  As of the Closing, Buyer
agrees to assume possession of all Consigned Inventory, and Buyer agrees to
execute and deliver to Sellers or the customers of the Business such documents
and to do such other acts and things as Sellers or such customers may
reasonably request for the purpose of transferring the Consigned Inventory to
Buyer.

 

6.4           Payment
of Purchase Price and Contingent Consideration.  The Purchase Price, Contingent Consideration
and other amounts payable pursuant to this Agreement and any agreements
contemplated by this Agreement shall be paid in United States dollars, free and
clear of, and without deduction or withholding on account of, taxes of any
kind.  If any taxes are so levied or
imposed, Buyer agrees to pay the full amount of such taxes, and such additional
amounts as may be necessary so that every net payment of all amounts due
hereunder, after withholding or deduction for or on account of any taxes, will
not be less than the amount provided for herein.  Buyer will furnish to Sellers within thirty
days after the date the payment of any taxes is due pursuant to applicable law,
certified copies of tax receipts evidencing such payment by Buyer.  Buyer will indemnify and hold harmless
Sellers against and reimburse Sellers upon demand the amount of any taxes so
levied or imposed and paid by Sellers.

 

6.5           Inventory
Confirmations.  At the same time
Sellers deliver the Preliminary Net Asset Value Statement to Buyer, Sellers shall deliver to Buyer (i) a
confirmation from IBM with respect to the Inventory set forth on Schedule 1.1(aaa)(i) (the
“IBM Confirmation”) stating that the Inventory set forth on Schedule 1.1(aaa)(i) is required to satisfy IBM’s future
requirements and that IBM shall be responsible for such Inventory in accordance
with the provisions set forth in the agreement between IBM and Buyer (as
assigned to Buyer in connection with this Agreement) and (ii) a confirmation
from Lenovo with respect to the Inventory set forth on Schedule 1.1(aaa)(ii) (the “Lenovo Confirmation”)
stating that the Inventory set forth on on Schedule 1.1(aaa)(ii) is required to satisfy Lenovo’s future
requirements and that Lenovo shall be responsible for such Inventory in 

 

43

 

accordance
with the provisions set forth in the agreement between Lenovo and Buyer (as
assigned to Buyer in connection with this Agreement).

 

6.6           Monterey Transition
Services Agreement.  In connection
with the transactions contemplated by this Agreement and the Lenovo Transition,
Buyer and Sellers agree to negotiate in good faith to enter into a transition
services agreement to be dated as of the Closing Date pursuant to which Buyer
shall provide, or cause to be provided, to Sellers or any party designated by
Sellers, certain IT and other services.

 

ARTICLE VII

 

CONDITIONS TO THE CLOSING

 

7.1           Conditions
to Buyer’s Obligation to Close.  The obligations of Buyer hereunder
are subject to the fulfillment or satisfaction on, and as of the Closing, of
each of the following conditions (any one or more of which may be waived by
Buyer, but only in a writing signed by Buyer):

 

(a)           Representations and
Warranties.  The representations and
warranties of Sellers set forth in Article III shall be true and correct
in all material respects, in each case as of the date of this Agreement, and as
of the Closing with the same force and effect as if made on and as of the
Closing (except to the extent expressly made as of a particular date, in which
case as of such date).

 

(b)           Covenants.  Sellers shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by Sellers on or prior to the
Closing.

 

(c)           Closing Certificates.  Sellers shall have delivered to Buyer an
officer’s certificate to the effect that each of the conditions specified above
in Section 7.1(a) to 7.1(b) (inclusive) is satisfied in all
respects.

 

(d)           No Actions.  No action, suit, or proceeding shall be
threatened or pending before any court or quasi judicial or administrative
agency of any non-U.S. or any U.S. federal, state or local jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would, if successful, (A) prevent consummation
of any of the Transactions contemplated by this Agreement, or (B) result
in a Material Adverse Effect to the Business.

 

(e)           HSR.  Notification shall have been made and
clearance obtained and the applicable waiting period shall have expired or
terminated under the Hart-Scott-Rodino Act and under any comparable foreign
antitrust laws, if applicable, as reasonably determined by Buyer and Sellers,
or the appropriate agency shall have expressed that it has no objection to the
Closing taking effect.

 

(f)            Third Party
Consents.  All Consents (or waivers
in lieu thereof) listed on Schedule 7.1(f), shall have been
obtained and shall be in full force and effect.

 

44

 

(g)           Preliminary Net
Asset Value Statement.  Sellers shall
have delivered to Buyer the Preliminary Net Asset Value Statement at least ten (10) business
days prior to the Closing (unless the Buyer and Sellers agree on a shorter
period).

 

(h)           Delivery of
Documents.  Sellers will have
delivered to Buyer the following documents:

 

	 
	
  (i)

  	
   

  	
  the Assignment Instruments executed by Sellers;

  
	 
	
   

  	
   

  	
   

  
	 
	
  (ii)

  	
   

  	
  the Assumption Instruments executed by Sellers;

  
	 
	
   

  	
   

  	
   

  
	 
	
  (iii)

  	
   

  	
  the Szekesfehervar Lease Assignment Agreement
  executed by Sellers;

  
	 
	
   

  	
   

  	
   

  
	 
	
  (iv)

  	
   

  	
  the Guadalajara Lease Assignment Agreement executed
  by Sellers;

  
	 
	
   

  	
   

  	
   

  
	 
	
  (v)

  	
   

  	
  the Raleigh Sublease Agreement executed by Sellers;

  
	 
	
   

  	
   

  	
   

  
	 
	
  (vi)

  	
   

  	
  the Huntsville License Agreement executed by
  Sellers;

  
	 
	
   

  	
   

  	
   

  
	 
	
  (vii)

  	
   

  	
  the Intellectual Property License Agreement executed
  by Sellers;

  
	 
	
   

  	
   

  	
   

  
	 
	
  (viii)

  	
   

  	
  the Transition Services Agreement executed by
  Sellers;

  
	 
	
   

  	
   

  	
   

  
	 
	
  (ix)

  	
   

  	
  the Access Agreement executed by Sellers; and

  
	 
	
   

  	
   

  	
   

  
	 
	
  (x)

  	
   

  	
  consents from all Persons to discharge any Lien
  (other than Permitted Liens) existing as of the 

  
	
  Closing on the Purchased Assets.

  
				

 

(i)            Material Adverse
Effect.  There shall not have been a
Material Adverse Effect.

 

(j)            Employee List.  Sellers shall have delivered Schedule 5.8
at least ten (10) Business Days prior to the Closing Date.

 

(k)           Inventory
Confirmations.  Sellers shall have
delivered the IBM Confirmation and the Lenovo
Confirmation.

 

(l)            Board of Directors.  Buyer shall have received a certified copy of
the resolutions of the board of directors of Sellers executed by an officer of
Sellers approving this Agreement, the sale and transfer of the Purchased Assets
to Buyer pursuant to this Agreement and the Ancillary Agreements.

 

7.2           Conditions
to Seller’s Obligations.  The obligations of Sellers hereunder are
subject to the fulfillment or satisfaction on, and as of the Closing, of each
of the following conditions (any one or more of which may be waived by Sellers,
but only in writing signed by the Sellers):

 

45

 

(a)           Representations and
Warranties.  The representations and
warranties of the Buyer set forth in Article IV shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
with the same force and effect as if made on and as of the Closing (except to
the extent expressly made as of a particular date, in which case as of such
date).

 

(b)           Covenants.  Buyer shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing.

 

(c)           Closing Certificate.  Buyer shall have delivered to Sellers an
officer’s certificate to the effect that each of the conditions specified above
in Section 7.2(a) and 7.2(b) is satisfied in all respects.

 

(d)           No Actions.  No action, suit, or proceeding shall be
threatened or pending before any court or quasi-judicial or administrative
agency of any non U.S. or any U.S. federal, state or local jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would, if successful, prevent consummation of any of
the Transactions contemplated by this Agreement.

 

(e)           HSR.  Notification shall have been made and
clearance obtained and the applicable waiting period shall have expired or
terminated under the Hart-Scott-Rodino Act and under any comparable foreign
antitrust Laws, if applicable, as reasonably determined by Buyer and Sellers,
or the appropriate agency shall have expressed that it has no objection to the
Closing taking effect.

 

(f)            Third Party
Consents.  All Consents (or waivers
in lieu thereof) listed on Schedule 7.2(f), shall have been
obtained and shall be in full force and effect.

 

(g)           Purchase Price.  Sellers shall have received the Purchase
Price.

 

(h)           Delivery of
Documents.  Buyer will have delivered
to the Sellers the following documents:

 

	
  (i)

  	
   

  	
  the Assignment Instruments executed by Buyer;

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  the Assumption Instruments executed by Buyer;

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  the Szekesfehervar Lease Assignment Agreement
  executed by Buyer;

  
	
   

  	
   

  	
   

  
	
  (iv)

  	
   

  	
  the Guadalajara Lease Assignment Agreement executed
  by Buyer;

  
	
   

  	
   

  	
   

  
	
  (v)

  	
   

  	
  the Raleigh Sublease Agreement executed by Buyer;

  
	
   

  	
   

  	
   

  
	
  (vi)

  	
   

  	
  the Huntsville License Agreement executed by Buyer;

  
	
   

  	
   

  	
   

  
	
  (vii)

  	
   

  	
  the Intellectual Property License Agreement executed
  by Buyer;

  

 

46

 

	
  (viii)

  	
   

  	
  the Transition Services Agreement executed by
  Buyer;; and

  
	
   

  	
   

  	
   

  
	
  (ix)

  	
   

  	
  the Access Agreement executed by Buyer;

  

 

(i)            Board of Directors.  Sellers shall have received a certified copy
of the resolutions of the board of directors of Buyer approving this Agreement,
the sale and transfer of the Purchased Assets to Buyer, and the Ancillary
Agreements.

 

(j)            Buyer’s Mexican
Affiliate’s IMMEX Amendment.  Sellers
shall have received to their satisfaction a certified copy of the amendment to
Buyer’s Mexican Affiliate’s maquila program issued by the Mexican Ministry of
the Economy allowing Buyer’s Mexican Affiliate to carry out its operations in
Mexico under the Mexican IMMEX Decree and to have (i) the SSCI Mexico
Imported Inventory, (ii) the Sanmina-SCI USA’s Mexico Imported Assets, and
(iii) the SSCI Mexico Temporarily Imported Assets transferred to the Buyer’s
Mexican Affiliate under the same legal status in which such Assets are then in
Mexico in the possession of SSCI Mexico.

 

ARTICLE VIII

 

SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS

 

8.1           Representations,
Warranties and Covenants.  The covenants contained in this Agreement
shall survive the applicable Closing Date in accordance with their terms.  The representations and warranties contained
in this Agreement and the Ancillary Agreements shall survive the Closing Date
for a period of eighteen (18) months; provided, however,
that the representations and warranties contained in Sections 3.1, 3.2,
3.7 and 3.14 of this Agreement shall survive the Closing Date until the
expiration of the applicable statutes of limitations with respect any claim
pursuant to such Sections (such dates upon which they expire being
referred to herein as the applicable “Survival Date”)
and shall thereafter expire.  Buyer’s (or
any Buyer Indemnitee’s) right to make a claim for indemnification under Section 9.1,
and Sellers’ (or any Seller Indemnitee’s) right to make a claim for
indemnification under Section 9.2, shall expire with respect to such
claims which are not made on or prior to the Survival Date.  Any claims under Article IX must be
asserted in writing with reasonable particularity by the party making such
claim, including identifying the basis of the claim and estimate of the
potential Damages covered thereby.

 

ARTICLE IX

 

INDEMNIFICATION

 

9.1           Indemnification
by Sellers.  Subject to this Section 9, Sellers agree to defend,
indemnify and hold harmless Buyer and its respective successors, assigns and
Affiliates (individually, a “Buyer Indemnitee”,
and collectively, the “Buyer Indemnitees”)
from and against and in respect of any and all losses, damages, deficiencies,
liabilities, assessments, judgments, costs

 

47

 

and expenses, net of insurance proceeds received or Tax benefits
realized by the Buyer Indemnittee with respect thereto (collectively, “Damages”) suffered or incurred by any Buyer Indemnitee which
is caused by, resulting from or arising out of:

 

(a)           any breach of any
representation, warranty or covenant of Sellers contained in this Agreement or
in any Ancillary Agreement, or other agreement, certificate, instrument or
other document entered into or delivered by the Sellers at the Closing in
connection herewith (it being understood and agreed that solely for purposes of
determining the amount of Damages for purposes of the indemnification
obligations set forth in this Article IX, all qualifications as to “materiality,”
and all “Material Adverse Effect” qualifications, contained in such
representations and warranties shall be disregarded and have no force or
effect);

 

(b)           any Excluded
Liabilities;

 

(c)           except as otherwise
provided in this Agreement, Liabilities of Sellers, whether arising before or
after the Closing Date, arising from or relating to the ownership or actions or
inactions of Sellers or the conduct of the Business prior to the Closing;

 

(d)           any and all Damages
suffered or incurred by Buyer Indemnitee by reason of or in connection with any
claim or cause of action of any third party to the extent arising out of the
operation of the Business prior to the Closing; and

 

(e)           any Assumed Warranty
Obligations.

 

9.2           Indemnification
by Buyer.  Subject to this Article IX, Buyer agrees to defend,
indemnify and hold harmless Sellers and their respective successors, assigns
and Affiliates (individually, a “Seller Indemnitee”,
and collectively, the “Seller Indemnitees”)
from and against and in respect of any and all Damages suffered or incurred by
any Seller Indemnitee which is caused by, resulting from or arising out of:

 

(a)           any breach of any
representation, warranty or covenant of Buyer contained in this Agreement, or
in any Ancillary Agreement, or other agreement, certificate, instrument or
other document entered into or delivered by Buyer at the Closing in connection
herewith (it being understood and agreed that solely for purposes of
determining the amount of Damages for purposes of the indemnification
obligations set forth in this Article IX, all qualifications as to “materiality,”
and all “Material Adverse Effect” qualifications, contained in such
representations and warranties shall be disregarded and have no force or
effect); and

 

(b)           any Assumed Liabilities
or Assigned Contracts arising out of circumstances existing after the Closing
Date;

 

(c)           Taxes of Buyer as set
forth in Section 2.7;

 

48

 

(d)           except as otherwise
provided in this Agreement, Liabilities of Buyer arising from or relating to
the ownership or actions or inactions of Buyer or the conduct of the Business
on or after the Closing; and

 

(e)           any and all Damages
suffered or incurred by a Seller Indemnitee by reason of or in connection with
any claim or cause of action of any third party to the extent arising out of
the operation of the Business on or after the Closing.

 

9.3           Notice
and Opportunity to Defend.  If any action, proceeding, claim,
liability, demand or assessment shall be asserted against any Buyer Indemnitee
or any Seller Indemnitee (the “Indemnitee”) in
respect of which such Indemnitee proposes to demand indemnification, such
Indemnitee shall notify the party obligated to provide indemnification pursuant
to Section 9.1 or Section 9.2 (the “Indemnifying
Party”) thereof within a reasonably prompt period of time after
assertion thereof; provided, however,
that the failure to so notify the Indemnifying Party shall only affect the
Indemnitee’s right to indemnification hereunder to the extent that the
Indemnifying Party’s interests are actually and materially prejudiced
thereby.  Subject to rights of or duties
to any insurer or other third Person having liability therefor, the
Indemnifying Party shall have the right, within ten (10) days after
receipt of such notice, to assume the control of the defense, compromise or
settlement of any such action, suit, proceeding, claim, liability, demand or
assessment, and to retain counsel in connection therewith; provided,
however, that if the Indemnifying Party shall exercise its right to
assume such control:

 

(a)           the Indemnitee may, in
its sole discretion and at its own expense, employ separate counsel to
represent it in any such matter, and in such event counsel selected by the
Indemnifying Party shall be required to cooperate with such counsel of the
Indemnitee in such defense, compromise or settlement for the purpose of
informing and sharing information with such Indemnitee;

 

(b)           for any subject matter,
the Indemnitee will, at its own expense, make available to the Indemnifying
Party those employees of the Indemnitee or any Affiliate of the Indemnitee
whose assistance, testimony or presence is necessary to assist the Indemnifying
Party in evaluating and in defending any such action, suit, proceeding, claim,
liability, demand or assessment; provided, however,
that any such access shall be conducted in such a manner as not to interfere
unreasonably with the business activities of the Indemnitee and its Affiliates;

 

(c)           the Indemnifying Party
shall not compromise or settle any such action, suit, proceeding, claim,
liability or assessment without the consent of the Indemnitee, which consent
shall not be unreasonably withheld or delayed;

 

(d)           in the event that any
action, suit, proceeding, claim, liability or assessment (or the compromise or
settlement thereof) involves a claim for (i) injunctive relief that
affects or could reasonably be expected to affect the Business in any material
respect, or (ii) a claim for Damages (or a claim that could reasonably be
expected to result in Damages) in excess of limitations set forth in Section 9.5(c),
Buyer shall have the right to control the defense and settlement thereof, at
the sole cost and expense of the Buyer Indemnitee (subject to the limitations
set forth in Article IX and

 

49

 

subject to the Buyer Indemnitee’s right to make a claim for Damages in
respect of such cost and expense if appropriate); provided,
however, that Buyer shall not compromise or settle any such action,
suit, proceeding, claim, liability or assessment without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed.

 

9.4           Remedies. 
Notwithstanding any provision of this Agreement to the contrary, in the absence
of fraud or intentional misrepresentation (a “Fraud Claim”),
the sole and exclusive remedy of Buyer and Sellers with respect to, arising out
of or resulting from the subject matter of this Agreement shall be restricted
to the indemnification rights set forth in this Article IX.

 

9.5           Certain
Limitations.  The liability of Sellers or Buyer, as applicable, for
claims under this Agreement shall be limited by the following:

 

(a)           At any time after the
applicable Survival Date for a representation and warranty, (i)  Sellers
shall have no further obligations under this Article IX for breaches of
such representations and warranties of Sellers, except for Damages with respect
to which Buyer Indemnitee has timely given Sellers written notice prior to such
date in accordance with Sections 8.1 and 9.3 and (ii) Buyer shall
have no further obligations under this Article IX for breaches of such
representations and warranties of Buyer, except for Damages with respect to
which Seller Indemnitee has given Buyer written notice prior to such date in
accordance with Sections 8.1 and 9.3.

 

(b)           Notwithstanding
anything to the contrary herein, except with respect to Fraud Claims, any claim
by a Buyer Indemnitee against Sellers pursuant to Section 9.1(a) shall
be payable by Sellers only in the event that Damages for any single breach of
the representations, warranties and covenants exceeds Twenty Thousand Dollars
($20,000) (the “Per Occurrence Threshold”) and the
accumulated amount of Damages in respect of Sellers’ obligations to indemnify
the Buyer Indemnitees under this Agreement shall exceed One Hundred Thousand
Dollars ($100,000) in the aggregate (the “Seller Indemnification
Threshold”); provided, however,
that at such time as the aggregate amount of Damages in respect of the indemnity
obligations of Sellers shall exceed the Seller Indemnification Threshold,
Seller shall thereafter be liable for all Damages suffered or incurred by the
Buyer Indemnitees in excess of such Seller Indemnification Threshold, subject
to the maximum aggregate liability cap set forth in Section 9.5(c) below.  The foregoing notwithstanding, for purposes
of determining the Per Occurrence Threshold, a breach of a representation and
warranty set forth in Section 3.16 related to Inventory shall be
considered a single breach if such breach arises from the same root cause even
if such breach affects more than one item of Inventory.

 

(c)           Notwithstanding
anything to the contrary herein, except with respect to Fraud Claims (for which
there shall be no limitation), in no event shall the maximum aggregate
liability of Sellers in respect of any claims by Buyer Indemnitees against
Sellers pursuant to Section 9.1(a) for Damages suffered or incurred
by any Buyer Indemnitees exceed Eighteen Million Dollars ($18,000,000) of the
value of the Purchase Price (as adjusted pursuant to Section 2.4).

 

50

 

(d)           Except with respect to
Fraud Claims, a Buyer Indemnitee’s right to make a claim for indemnification
under Sections 9.1(b), 9.1(c), 9.1(d) and 9.1(e) shall expire
with respect to such claims which are not made on or prior to the date five (5)
years following the Closing Date.

 

(e)           IN NO EVENT THAT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY
INDIRECT, PUNITIVE, INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES, WHETHER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, BREACH
OF WARRANTY, AN EXCLUDED LIABILITY, NEGLIGENCE, INDEMNITY, STRICT LIABILITY OR
OTHER TORT.  FURTHERMORE, ANY DAMAGES
PURSUANT TO ARTICLE IX RELATED TO INVENTORIES SHALL BE LIMITED TO THE AMOUNT
PAID FOR SUCH INVENTORIES PURSUANT TO THIS AGREEMENT.

 

ARTICLE X

TERMINATION

 

10.1         Termination of the
Agreement.  The Parties may terminate this Agreement as provided
below:

 

(a)           Buyer and Sellers may
terminate this Agreement as to all Parties by mutual written consent at any
time prior to the Closing;

 

(b)           Buyer or Sellers may
terminate this Agreement by written notice if the Closing has not occurred by
one hundred and twenty (120) days following the date of this Agreement; provided, however, that if the conditions set forth in
Sections 7.1(d) and 7.2(d) have not been satisfied the right to
terminate this Agreement under Section 10.1(b) shall not be available
to any Party until one hundred and fifty (150) days following the date of this
Agreement; provided, further, however, that the
right to terminate this Agreement under this Section 10.1(b) shall
not be available to any Party whose action or failure to act has been a
principal cause of or resulted in the failure of the Closing to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement;

 

(c)           Buyer or Sellers may
terminate this Agreement by written notice if: (i) there shall be a final
nonappealable order of a court of competent jurisdiction in effect preventing
consummation of the transactions contemplated by this Agreement or (ii) there
shall be any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the transactions contemplated by this Agreement by any
Governmental Body that would make consummation of the transactions contemplated
by this Agreement illegal;

 

(d)           Buyer may terminate
this Agreement by written notice if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the transactions contemplated by this Agreement by any
Governmental Body, which would (i) prohibit Buyer’s ownership or operation
of all or a material portion of the Business or the 

 

51

 

Purchased Assets or (ii) compel Buyer to dispose
of or hold separate all or a material portion of the business or assets of
Buyer as a result of the transactions contemplated by this Agreement;

 

(e)           Buyer may terminate
this Agreement by written notice if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Sellers and such breach has not been cured within thirty (30)
calendar days after written notice to Sellers; provided,
however, that, no cure period shall be required for a breach which
by its nature cannot be cured;

 

(f)            Sellers may terminate
this Agreement by written notice if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Buyer and such breach has not been cured within thirty (30)
calendar days after written notice to Buyer; provided,
however, that no cure period shall be required for a breach which by
its nature cannot be cured; and

 

(g)           Buyer may terminate
this Agreement by written notice if an event having a Material Adverse Effect
on the Business, taken as a whole, shall have occurred after the date of this
Agreement.

 

10.2         Effect of Termination. 
If any Party terminates this Agreement pursuant to Section 10.1 above, all
rights and obligations of the Parties hereunder shall terminate without any
liability of any Party to any other Party (except for any liability of any
Party then in breach); that the provisions contained in Section 5.10
(confidentiality) and Article XI (miscellaneous) shall survive
termination.

 

ARTICLE XI

MISCELLANEOUS

 

11.1         Press Releases and
Public Announcements.  No Party shall issue any press release or make
any public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Party; provided,
however, that (a) either Party may make any public disclosure
it believes in good faith is required by applicable Law or any listing or
trading agreement concerning its publicly traded securities (in which case such
Party will use its reasonable efforts to advise the other Parties prior to
making the disclosure) and (b) Sellers may correspond with third parties
with respect to obtaining Consents from such parties pursuant to Section 7.1(f).

 

11.2         No Third Party
Beneficiaries.  Except as provided in Article IX with respect to
indemnification, this Agreement shall not confer any rights or remedies upon
any Person other than the Parties, and their respective successors and
permitted assigns, other than as specifically set forth herein.

 

52

 

11.3         Entire Agreement and
Modification.  This Agreement (including the exhibits hereto) and the
Ancillary Agreements constitute the entire agreement among the Parties with
respect to the subject matter hereof and supersedes any prior understandings,
agreements, warranties or representations by or among the Parties, written or
oral, to the extent they related in any way to the subject matter hereof.

 

11.4         Amendment. 
This Agreement may be amended by the Parties hereto at any time by execution of
an instrument in writing signed on behalf of each of the Parties hereto.

 

11.5         Waivers.  The
rights and remedies of the Parties to this Agreement are cumulative and not
alternative.  Neither the failure nor any
delay by any Party in exercising any right, power or privilege under this
Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power or privilege, and no single or partial exercise of
such right, power, or privilege will preclude any other or further exercise of
such right, power, or privilege or the exercise of any other right, power, or
privilege.  To the maximum extent
permitted by applicable Law, (i) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
one Party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other Party; (ii) no waiver that may
be given by a Party will be applicable except in the specific instance for
which it is given; and (iii) no notice to or demand on one Party will be
deemed to be a waiver of any obligation of such Party or of the right of the
Party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.

 

11.6         Successors and Assigns. 
This Agreement shall be binding upon and inure to the benefit of the Parties
named herein and their respective successors and permitted assigns.  No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior
written approval of the other Parties.

 

11.7         Counterparts. 
This Agreement may be executed in counterparts, each of which shall be deemed
an original but all of which together will constitute one and the same
instrument.

 

11.8         Headings. 
The section headings contained in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of this
Agreement.

 

11.9         Notices.  All
notices and other communications required or permitted hereunder shall be in
writing, shall be effective when given, and shall in any event be deemed to be
given upon receipt or, if earlier, (a) upon delivery, if delivered by
hand, (b) three Business Days after the Business Day of deposit with
Federal Express or similar overnight courier, freight prepaid or (c) one
Business Day after the Business Day of facsimile transmission, if delivered by
facsimile transmission with copy by Federal Express or similar overnight
courier, freight prepaid, and shall be addressed to the intended recipient as
set forth below:

 

53

 

If to Buyer:

 

	
  Hon Hai
  Precision Industry Co., Ltd.

  	
   

  	
   

  
	
  2 Tzu Yu St.
  Tu-Cheng City

  	
   

  	
   

  
	
  Taipei Hsien,
  Taiwan 23644

  	
   

  	
   

  
	
  Attn:

  	
   

  	
  General Counsel

  
	
  Facsimile
  No.:  886-2-2521-1498

  	
   

  	
   

  
					

 

Copy to:

 

	
  Frank Liang

  
	
  Strategic
  Investment

  
	
  4th Floor,
  South-1 Gate, Building D-1, No. 2, 2nd Donghuan Road, 10th Yousong
  Industrial District,

  
	
  Longhua, Baoan,
  Shenzhen City, Guangdong Province, China

  

 

If to the Sellers:

 

	
  Sanmina-SCI
  Corporation

  
	
  2700
  North First Street

  
	
  San
  Jose, CA 95134

  
	
  Attention:

  	
   

  	
  Robin Walker, Senior
  Vice President, Corporate Development

  
	
   

  	
   

  	
  Michael Tyler,
  Executive Vice President and General Counsel

  
	
   

  	
   

  	
  Steven H. Jackman, Vice
  President and Corporate Counsel

  
	
  Telephone No.:

  	
  (408) 964-3500

  
	
  Facsimile No.:

  	
  (408) 964-3636

  
				

 

Copy to:

 

	
  Wilson Sonsini
  Goodrich & Rosati, Professional Corporation

  	
   

  	
   

  
	
  650
  Page Mill Road

  	
   

  	
   

  
	
  Palo Alto,
  California  94304

  	
   

  	
   

  
	
  Attention:

  	
   

  	
  Jon Layman, Esq.

  
	
  Telephone No.:

  	
  (650) 493-9300

  
	
  Facsimile No.:

  	
  (650) 493-6811

  
						

 

Any Party may change the
address to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties ten (10) days’
advance written notice to the other Parties pursuant to the provisions above.

 

11.10       Governing Law. 
This Agreement shall be governed in all respects solely by the laws of the
State of Delaware, without regard to conflicts of laws or the choice of law
principles of any jurisdiction including the State of Delaware, and without the
need of any Party to establish the reasonableness of the relationship between
the laws of the State of Delaware and the subject matter of this Agreement, and
all questions concerning the validity and construction hereof shall be
determined in accordance with the laws of the State of Delaware.

 

54

 

11.11       Severability. 
Any term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability
of the offending term or provision in any other situation or in any other
jurisdiction.

 

11.12       Expenses. 
Subject to the provisions of this Agreement, each Party will bear its own costs
and expenses (including legal and accounting fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.  The foregoing notwithstanding, Buyer shall
bear all costs and expenses of any filings under the Hart-Scott-Rodino Act and
any filings under any comparable foreign antitrust Laws.

 

11.13       Construction.

 

(a)           The Parties have
participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.  Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. 
The word “including” shall mean including
without limitation.

 

(b)           Unless the context
requires otherwise, all words used in this Agreement in the singular number
shall extend to and include the plural, all words in the plural number shall
extend to and include the singular, and all words in any gender shall extend to
and include all genders.

 

11.14       Attorneys’ Fees. 
If any legal proceeding or other action relating to this Agreement is brought
or otherwise initiated, the prevailing Party shall be entitled to recover
reasonable attorneys’ fees, costs and disbursements (in addition to any other
relief to which the prevailing Party may be entitled).

 

11.15       Further Assurances. 
The Parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other
Party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.

 

11.16       Time of Essence. 
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.

 

11.17       Consent to Jurisdiction. 
The Delaware Court of Chancery (the “Competent Court”)
(and not any other court in any state or country) shall have exclusive
jurisdiction in connection with this Agreement. 
Each Party hereby irrevocably consents to submit itself to the exclusive
jurisdiction of the Competent Court in any action or proceeding arising out of
or relating to this Agreement and irrevocably waives any objection such person
may now or hereafter have as to the venue of any such action or proceeding
brought in the Competent Court or that the Competent Court is an inconvenient
forum.

 

55

 

11.18       Schedules and Exhibits. 
The Schedules and Exhibits described herein and attached hereto constitute an
inseparable part of this Agreement and are incorporated into this Agreement for
all purposes as if fully set forth herein. 
Any disclosure made in any Schedule to this Agreement which may be
applicable to another Schedule to this Agreement shall be deemed to be
made with respect to such other Schedule.

 

11.19       Specific Performance. 
Each of the Parties acknowledges and
agrees that the other Party would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, in addition to any other
remedy to which it may be entitled at law or in equity, each of the Parties
agrees that the other Party shall be entitled to an injunction or injunctions
or other equitable relief to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in the Competent Court, this being
in addition to any other remedy to which the Party is entitled and the other
Party expressly waives the defense that a remedy in damages will be adequate.

 

56

 

IN WITNESS WHEREOF, the
Parties hereto have executed this Agreement on of the date first above written.

 

 

	
  Buyer:

  	
  FOXTEQ HOLDINGS INC.-CAYMAN

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  Max Chung

  
	
   

  	
   

  	
  Name:

  	
   Max
  Chung

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Sanmina-SCI USA:

  	
  SANMINA-SCI USA INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  David L. White

  
	
   

  	
   

  	
  Name:

  	
   David
  L. White

  
	
   

  	
   

  	
  Title:

  	
   Chief
  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  SCI
  Technology:

  	
  SCI
  TECHNOLOGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  David L. White

  
	
   

  	
   

  	
  Name:

  	
   David
  L. White

  
	
   

  	
   

  	
  Title:

  	
   Authorized
  Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
  SSCI Systems Mexico:

  	
  SANMINA-SCI SYSTEMS DE MEXICO S.A. DE C.V.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  David L. White

  
	
   

  	
   

  	
  Name:

  	
   David
  L. White

  
	
   

  	
   

  	
  Title:

  	
   Authorized
  Signatory

  
									

 

 

[Signature Page to Asset Purchase
and Sale Agreement]

 

 

	
  SSCI Services Mexico:

  	
  SANMINA-SCI SYSTEMS
  SERVICES DE MEXICO 

  S.A. DE C.V.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  David L. White

  
	
   

  	
   

  	
  Name:

  	
   David
  L. White

  
	
   

  	
   

  	
  Title:

  	
   Authorized
  Signatory

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  SSCI Hungary:

  	
  SANMINA-SCI HUNGARY ELECTRONICS

  MANUFACTURING L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  David L. White

  
	
   

  	
   

  	
  Name:

  	
   David
  L. White

  
	
   

  	
   

  	
  Title:

  	
   Authorized
  Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
  SSCI Australia:

  	
  SANMINA-SCI AUSTRALIA PTY LTD

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  David L. White

  
	
   

  	
   

  	
  Name:

  	
   David
  L. White

  
	
   

  	
   

  	
  Title:

  	
   Authorized
  Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
  Sanmina-SCI:

  	
  SANMINA-SCI CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  David L. White

  
	
   

  	
   

  	
  Name:

  	
   David
  L. White

  
	
   

  	
   

  	
  Title:

  	
   Chief
  Financial Officer

  
											

 

 

[Signature Page to Asset Purchase
and Sale Agreement]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}]]