Document:

EXHIBIT 10.13

 

 

PROCOMER

[logo]

PROMOTORA  DEL COMERCIO EXTERIOR DE COSTA RICA

 

OPERATING
AGREEMENT

 

The PROMOTORA DEL COMERCIO EXTERIOR DE COSTA
RICA (“PROCOMER”) [Foreign Trade Promotion Office of Costa Rica], holder of
Corporate Identification No. 3-007-196350, represented in this transaction by
Leda Jiménez Cerdas, who is of legal age, unmarried, has a degree in
International Relations, is a resident of San Antonio de Desamparados de San
José and holder of Identity Card No. 3-229-068, and who has been granted an
unlimited power of attorney, which is recorded in the Public Registry, Personal
Section, in Volume 150, page 191, entry 488, and MCGHAN MEDICO S.A., holder of
Corporate Identification No. three - one hundred and one — two hundred thirty
seven six hundred and sixty five, represented in this transaction by Gregory
Crane, who has no second surname because he is from the United States of
America, and is of legal age, married once, a businessman, holder of  U.S. Passport No. one five seven seven zero
four five nine four, and whose residence is Four N. Dodge Boulevard, Tucson,
Arizona, 85716, United States of America, and who is acting in his capacity as
secretary, with unlimited power of attorney, which is recorded in the Public
Registry, Commercial Section, Volume One Thousand One Hundred and Ninety Two,
Page One Hundred Ninety Three, Entry No. Two Hundred Thirty Six, acting under
Article 19(ch) of the Free Trade Zone Regime Act [Ley del Régimen de Zona Franca] (No. 7210, November 23,
1990) and Executive
Agreement No. 402-99, November 8, 1999 (the “Agreement”), have
agreed to execute this OPERATING AGREEMENT, based on the
provisions of Law No. 7210, of November 23, 1990 and its Regulations, as well
as the following Clauses:

 

ONE.  The
Beneficiary will engage in the manufacture of smooth-textured, round, style 68
silicon breast implants for export to the United States of America, Asia,
Europe, Central America, and other markets, under the classification of Export
Processing Industry, pursuant to sub-section (a) of Article 17 of
Law 7210 and its amendments. In order to change its sphere of operations, the
Beneficiary must apply for the respective authorization from PROCOMER, which
shall recommend to the Executive Authority that the Agreement be revised accordingly,
if necessary. Under the terms of its application, it must operate in the
Industrial Park of the Metropolitan Free Trade Zone, and must begin production
in the month
of January of the year 2000.

 

TWO.  Under the
provisions of Article 20, sub-section (g) of the Free Trade Zone Regime Act
(Law No. 7210, November 23, 1990 and its amendments),

 

1

 

the Beneficiary will be “exempt from all
taxes on profits, as well as any tax based upon gross or net earnings,
dividends paid to shareholders, or income or sales,” as classified in that
Law.  However, the latter exemptions
“shall not be applicable when the potential beneficiaries may deduct the taxes
from which they have been exempted in Costa Rica in their own countries,” or
when they engage in marketing activities. 
In the latter case, the income tax exemption shall be reduced by an
amount proportional to the extent of those activities.

 

The Company may offer its products only on
the local market, while adhering rigorously to the requirements established for
this in Article 22 of Law No. 7210 and its amendments, in particular, those
related to the payment of the respective taxes.

 

THREE.  The
Beneficiary must pay to PROCOMER, on a monthly basis, the fee for the right to
use Free Trade Zone Regime, which is set forth in Law No. 7683 of October 30,
1996, and Executive Order No. 25612-COMEX, about which it will be notified
shortly.

 

The monthly use fee for the Free Trade Zone
Regime becomes effective on the date of the announcement of the aforementioned
Executive Agreement No. 402-99, and must be paid in advance, by the month,
starting on this date.

 

If, for any reason, the Company does not
begin production activities on the date indicated in this Executive Agreement,
the corresponding contribution for the free trade zone use fee shall be
calculated on the basis of sales projections or use of industrial roof area
indicated by the Beneficiary in its respective application.

 

For purposes of updating the collection of the
tax, the Company must inform PROCOMER of any increase it makes in its
industrial roof area.  Failure to comply
with this obligation shall result in the retroactive collection of the tax
starting from the date of the most recent measurement performed by PROCOMER,
which shall use the new measurement as the basis for its calculation.

 

2

 

FOUR.  The Security
Deposit provided by the Beneficiary to PROCOMER will be returned to it during
the month following the Agreement to Revoke [Benefits under] the Regime
[Acuerdo de Revocatoria del Régimen], if the Beneficiary is up-to-date in the
payment of its obligations.  Otherwise,
PROCOMER shall take the sums owed by the Beneficiary to PROCOMER from the
aforementioned security deposit, and shall return the remainder to it, should
any exist.

 

If, within the three months following the
publication of the aforementioned Agreement, the Beneficiary does not appear to
reclaim the deposit, this shall be taken to mean that the deposit has been
relinquished to PROCOMER.

 

FIVE.  The Beneficiary
must inform PROCOMER of any changes or modifications that affect its
commitments to the latter, including but not limited to: (a) reduction of level
of employment and investment; (b) temporary suspension of operations; (c)
increases in industrial roof area; (d) change of business activity; (e) change
of representatives; and anything else that may be relevant within its sphere of
activities.

 

SIX.  The
Beneficiary must provide PROCOMER with an annual report on its operations,
using the forms and conditions that PROCOMER establishes, within four months
following the close of the fiscal year.

 

For the purposes of supervising and
controlling the use of the Free Trade Zone Regime and the incentives that been
received, the Beneficiary is under the obligation to provide to PROCOMER, and
if appropriate, to the Ministry of Finance [Ministerio
de Hacienda], any information that may be requested.  In addition, it must permit the officers of
PROCOMER to enter its facilities at any time they consider appropriate, and
without prior warning, for the purpose of verifying compliance with the
obligations of the Free Trade Zone Act and its Regulations.

 

PROCOMER will monitor compliance with the
levels of new initial investment in fixed assets and the total minimum
investment of the Beneficiary, pursuant to the criteria and parameters included
in the Regulations or the Free Trade Zone Regime Act to be issued, and the
Beneficiary must facilitate the performance of that obligation.

 

3

 

SEVEN.  For
the purpose of receiving future notices, the Beneficiary provides the following
NUMBER: 204-31 41.  PROCOMER must be
immediately notified of any change.

 

EIGHT.  If
the Beneficiary withdraws from the Regime, it must announce its decision at
least one month prior to the last day of operations, by means of a letter sent
to PROCOMER, which will not process the withdrawal application if the period
indicated in this clause is not observed, unless in the opinion of PROCOMER
there exists some significant circumstance that would justify failure to
observe it.

 

NINE. 
PROCOMER will not authorize the removal of the Beneficiary’s assets or
return its security deposit until the Beneficiary has provided PROCOMER with
the following documents:

 

(a)                                  A copy of the
notice that it must publish in a large circulation national newspaper, in which
it announces that it has filed to withdraw from the Regime and that it intends
to be liquidated.

(b)                                 A certificate
issued by the Ministry of Labor [Ministerio
de Trabajo], or any other similar document that is satisfactory to
PROCOMER, affirming that it has duly complied with any pending labor
obligations.

(c)                                  A certificate
issued by the Ministry of Finance stating that the Company has no pending
obligations; and

(d)                                 Any other
document which in the opinion of PROCOMER may be necessary for these purposes.

 

TEN.  If the
Beneficiary should fail to fulfill the conditions of this agreement and Executive
Agreement No. 402-99, or the laws and regulations that may be
applicable to it, PROCOMER may recommend to the Executive Authority that fines
be imposed or that [the Benefits] AWARDED under the Free Trade Zone Regime be
revoked, with no liability to the State, all of which is pursuant to the
provisions of Law No. 7210, its amendments and its regulations.  In addition, it may recommend that the
Executive Authority partially or completely suspend Incentive AWARDS set forth
in Law No. 7210 and its amendments.

 

4

 

The imposition of sanctions, should it occur,
will be notwithstanding any other administrative, civil or criminal liability
that may attach to the Beneficiary or its representatives.

 

ELEVEN.  The
terms of the exemptions provided in Law No. 7210 are subject to the
international agreements signed and approved by Costa Rica.

 

TWELVE.  The
Beneficiary agrees to comply with the environmental regulations of the Ministry
of Natural Resources, Energy and Mines [Ministerio de Recursos Naturales,
Energía y Minas], and SETENA [the National Technical Environmental Secretariat
of the Ministry of the Environment and Energy], and must file the required
studies and documents with those offices or with the Ministry of Health
[Ministerio de Salud].

 

THIRTEEN.  Compliance with directives issued by PROCOMER regarding the
promotion, administration and supervision of the Regime is obligatory for the
Beneficiaries and the persons who are directly or indirectly related to them or
to PROCOMER.

 

THE
END.

 

The preceding was read and signed by us to
indicate our acceptance, in the city of San José on November 30, 1999.

 

	
  s/LEDA JIMENEZ CERDAS

  	
  s/GREGORY CRANE

  
	
  COSTA
  RICA

  	
  MCGHAN
  MEDICO S.A.

  
	
  FOREIGN TRADE PROMOTER

  	
   

  

 

CONFIDENTIAL [stamp]

 

5

 

[logo]

PROCOMER______________________Promotora del
Comercio Exterior de Costa Rica

[Foreign Trade Promotion Office of Costa
Rica]

 

NOTICE

 

[illegible] o’clock on the  30th   day of 
November, 1999.  Gregory
E. Crane  appears at the office of
the Director of the Foreign Trade Promotion Office of Costa Rica (PROCOMER) to
acknowledge that he has been notified of Executive Agreement No. 402-99, of
November 8, 1999, in which [the benefits of the] Free Trade Zone Regime are awarded
to MCGHAN MEDICO S.A., corporate seal No. 3-101237665.

 

s/Gregory
E. Crane               

SIGNATURE
OF NOTIFIED PARTY

 

	
   

  	
   

  	
   

  
	
  Name
  and Identification Number of Notifying Party

  	
   

  	
  Signature
  of Notifying Party

  

 

 

	
  [stamp]

  	
   

  
	
  CONFIDENTIAL

  	
   

  
	
  McGHAN MEDICAL CORPORATION

  	
   

  
	
  PROPRIETARY INFORMATION

  	
   

  

 

 

Foreign
Commerce Center,

Third
Ave. and 40th St., San José, Costa Rica

Tel:
(506) 256-7111  * Fax (506) 233-5722.

P.O.
Box 1278-1007;

e-mail:  info@procomer.go.cr

http://www.procomer.com

 

 

6

 

MINISTRY OF
FOREIGN TRADE

San José,
Costa Rica

 

AGREEMENT
NO. 402-99

 

THE
PRESIDENT OF THE REPUBLIC

AND THE MINISTRY OF FOREIGN TRADE

 

On the basis of Article 140, sub-sections 3
and 18, of the Constitution of Costa Rica, Article 28, second paragraph,
sub-section (b) of the General Law of Public Administration [Ley General de la
Administración Pública], the Free Trade Zone Regime Act No. 7210 of November
23, 1990, and its amendments, the Law Establishing the Ministry of Foreign
Trade and the Foreign Trade Promotion Office of Costa Rica, No. 7683, October
30, 1996, and Executive Order No. 20355-H-COMEX, April 2, 1991, known as the
Regulations to the Free Trade Zone Regime Act and its amendments,

 

WHEREAS

 

1.                                       The company
MCGHAN MEDICO S.A., corporation number 3-101-237665, filed an application with
the Foreign Trade Promotion Office of Costa Rica (“PROCOMER”) seeking to avail
itself of the Free Trade Zone Regime, pursuant to Law NO. 7210, its amendments
and Regulations.

 

2.                                       PROCOMER’s
Committee to grant awards under special regimes received the application of
MCGHAN MEDICO S.A. at its meeting No. 39, held on October 27, 1999, and agreed
to recommend to the Executive Authority that the aforementioned company be
granted [benefits under] the Free Trade Zone Regime.

 

 

3.                                       Legally
mandated procedure has been followed.

 

IT IS AGREED

 

1.                                       Free Trade Zone
Regime [benefits] shall be awarded to MCGHAN MEDICO S.A., holder of Corporate
Identification No. 3-101-237665 (the “Beneficiary”), classifying it as an
export processing company, under Article 17,sub-section (a) of Law No. 7210 and
its amendments.

 

7

 

2.                                       The activity of
the Beneficiary consists of the manufacture of smooth-textured, round, style 68
silicon breast implants for export to the United States of America, Asia,
Europe, Central America, and other markets.

 

3.                                       The Beneficiary
will operate in the Metropolitan Free Trade Zone Industrial Park.

 

4.                                       The Beneficiary
shall receive the incentives and benefits set forth in Law 7210 and its
amendments, with the restrictions and conditions established therein, in
compliance with the regulations established in this matter by the Executive
Authority and PROCOMER.

 

The terms of the exemptions
provided for in Law No. 7210 are subject to the international agreements signed
and approved by Costa Rica.

 

5.                                       Under the
provisions of Article 20, sub-section (g) of the Free Trade Zone Regime Act
(Law No. 7210, of November 23, 1990 and its amendments), the Beneficiary shall
receive “exemption from all taxes on profits, as well as any tax based on gross
or net earnings, dividends paid to shareholders, or income or sales,” as
classified in that law.  However, the
latter exemptions “shall not be applicable when the potential beneficiaries may
deduct the taxes from which they have been exempted in Costa Rica in their own
countries,” or when they engage in marketing activities.  In the latter case, the income tax exemption
shall be reduced by an amount proportional to the extent of those activities.

 

The company may only offer
its products on the local market while rigorously adhering to the requirements
established for this in Article 22 of Law No. 7210 and its amendments, in
particular, those related to the payment of the respective taxes.

 

6.                                       The Beneficiary
agrees to maintain a minimum work force of fifty workers.  In addition, it agrees to make a new initial
investment of at least USD150, 000.00 (one hundred and fifty thousand United
States dollars) in fixed assets, no later than January 2000.  It will also make and maintain a minimum
total investment of USD3, 000,000.00 (three million United States dollars), in
conformity with the terms and conditions found in the application filed with
PROCOMER.

 

8

 

PROCOMER will monitor
compliance with the levels of new initial investment in fixed assets and the
total minimum investment of the Beneficiary, pursuant to the criteria and
parameters included in the Regulations of the Free Trade Zone Regime Act to be
issued.  This power must be provided for
in the respective operating agreement to be signed by the Beneficiary, as an
obligation for which the latter is responsible.  As a result, the Executive Authority may revoke the [benefits
granted to] that company under the Regime if, within those parameters, it does
not meet the minimum investment levels indicated above.

 

7.                                       When the
operating agreement has been signed, the Company must pay the monthly fee for
the right to use the Free Trade Zone Regime. 
The date on which production activities are expected to begin is January
2000.  If for any reason, the Company
has not begun production activities as of that date, it shall continue to pay
the fee, which PROCOMER shall continue to calculate on the basis of the
industrial roof area stated by the Beneficiary in its respective application.

 

For the purposes of updating
tax collections, the Company must inform PROCOMER of any increase it makes in
its industrial roof area.  Failure to
comply with this obligation shall result in the retroactive collection of the
tax starting from the date of the most recent measurement performed by
PROCOMER, which shall use the new measurement as the basis for its calculation.

 

8.                                       The Beneficiary
agrees to comply with the environmental regulations of the Ministry of the
Environment and Energy [Ministerio del Ambiente y Energía], and must file any
required studies and documents with that Ministry or with the Ministry of
Health.

 

9.                                       The Beneficiary
must provide PROCOMER with an annual report on its operations, using the forms
and conditions that PROCOMER establishes, within four months following the
close of the fiscal year. In addition, the Beneficiary is under the obligation
to provide to PROCOMER, and if appropriate, to the Ministry of Finance, any
information that may be requested of it for the purpose of supervising and
controlling the use of the Free Trade Zone Regime and the incentives
received.  In addition, it must permit
the officers of PROCOMER to enter its facilities at any time they consider
appropriate, without prior warning, for the purpose of verifying compliance
with the obligations of the Free Trade Zone Regime Act and its Regulations.

 

9

 

10.                                 If the
Beneficiary should fail to comply with any of the conditions of this Agreement,
or with the laws, regulations, and directives that may be applicable to it, the
Executive Authority may impose fines upon it, suspend one or more of the
incentives indicated in Article 20 of Law No. 7210, for a period ranging from a
month to a year, or revoke [the benefits] granted to it under the Free Trade
Zone Regime, with no liability to the State, all of which is pursuant to the
provisions of Law No. 7210, its amendments and Regulations.  Any application of these penalties shall be
notwithstanding any other administrative, civil or criminal liability that may
attach to the Beneficiary or its representatives.

 

11.                                 After this
Executive Agreement has been transmitted, the Beneficiary must sign an operating
agreement with PROCOMER, after which it may begin to receive the benefits of
the Regime.

 

12.                                 Compliance with
directives issued by PROCOMER regarding the promotion, administration and
supervision of the Regime is obligatory for the Beneficiaries and the persons
who are directly or indirectly related to them or to PROCOMER

 

The end.

 

For
announcement and publication.

 

Office of the President of the Republic, San
José, on the eighth day of November of 1999.

 

	
  s/MIGUEL ANGEL RODRÍGUEZ

  	
   

  	
  SAMUEL GOZOWSKI

  
	
  ECHEVERRÍA

  	
   

  	
  MINISTER

  
	
  [seal
  of Office of President, Costa Rica]

  	
   

  	
  [seal
  of Foreign Trade Office, Costa Rica]

  

 

10EXHIBIT 10.14

 

SUBLEASE

 

THIS SUBLEASE is made as of January 28,
2000 (“Sublease”) between MCGHAN MEDICAL
CORPORATION, a California corporation having an address at 700 Ward
Drive, Santa Barbara, California 93111 (“McGhan”), and AGILITY COMMUNICATIONS, INC., a Delaware
Corporation having an address at 5385 Hollister Avenue, Santa Barbara,
California 93111 (“Agility”).

 

W-I-T-N-E-S-S-E-T-H:

 

WHEREAS, Pine Avenue
Associates, a California limited partnership (“PAA”), a lessor, and McGhan, as
lessee, entered into that certain Lease, dated July 1, 1994 (as amended by
First Amendment to Lease dated November 15, 1999, the “Prime Lease”, a true
copy of which [but from which the financial provisions have been redacted] is
annexed hereto as Exhibit “A” and made a part hereof) of certain premises
comprising approximately 50,897 sq. ft. of space (the “McGhan Premises”)
located at 600 Pine Avenue, Goleta, California (the “Building”); and

 

WHEREAS, Agility wishes to
sublease from McGhan, and McGhan wishes to sublease to Agility, a portion of
the McGhan Premises, all on and subject to the terms and conditions set forth
herein.

 

NOW, THEREFORE, for and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, McGhan and Agility hereby agree as follows:

 

1.             Demise and Premises.        McGhan
hereby leases to Agility and Agility hereby leases from McGhan approximately
gross 13,050 sq.ft. of space, comprising a portion of the McGhan Premises and
located on the second floor of the Building (the “Premises”, and including
Agility’s pro-rata share of the first-floor common areas), all as shown on
Exhibit “B” annexed hereto.

 

CONFIDENTIAL

[SEAL OF McGHAN MEDICAL CORPORATION

PROPRIETARY INFORMATION]

 

 

2.             Term:

 

2.1          The
term of this Sublease (the “Term”) shall commence on April 15, 2000 (the
“Commencement Date”) and shall continue for six (6) years and three and one
half (3.5) months, , ending on July 31, 2006, unless sooner terminated in
accordance herewith.

 

2.2          In the event that McGhan shall not
have delivered possession of the Premises to Agility on or before April 30,
2000, Agility may terminate this Sublease by notice (“Agility’s Termination
Notice”) delivered to McGhan not later than May 5, 2000, and Agility’s
Termination Notice shall be effective as of the date of delivery; provided,
however, that in the event that Agility shall timely deliver Tenant’s
Termination Notice to McGhan but McGhan shall, on or before May 20, 2000,
deliver the Premises to Agility, Tenant’s Termination Notice shall be void and
of no force or effect whatever and the Term shall continue as provided in
Section 2.1.

 

2.3          The provisions of Section 2.2 shall
not apply to the demise of the machine shop and clean room as provided in

Section 25 hereof, which shall be delivered to Agility when possible and not
necessarily by the Commencement Date.

 

3.             Base Rent:

 

3.1          Base rent (“Base Rent”) for the first
year of the Term shall be due in the amount of Two Hundred Nineteen Thousand
Two Hundred Forty ($219,240.00) Dollars, payable in equal monthly installments
of Eighteen Thousand Two Hundred Seventy ($18,270.00) Dollars.

 

3.2          Base Rent for each subsequent year of
the Term shall be the Base Rent for the previous year of the Term, adjusted
upward, however, by (a)
dividing such amount by the Consumer Price Index, All Urban Consumers, Western
City Average, All Items (1982-84 = 100) published by the Bureau of Labor
Statistics of the U.S. Department of Labor (“CPI”) for January of the prior
calendar year, and (b)
multiplying the quotient thereof by the CPI for January of the then-current
calendar year.  Notwithstanding the
foregoing, in no event shall any annual adjustment of Base Rent be less than an
increase of two (2%) percent or more than an increase of six (6%) percent over
the prior year’s Base Rent.

 

2

 

3.3.                            If the CPI
ceases to use “1982-1984 as 100” as the basis of calculation, or if a material
change is made in the term or number of items contained in the CPI, or if the
CPI is altered, modified, converted or revised in any other material way, then
the CPI shall be adjusted to the figure that would have been arrived at had the
change in the manner of computing the CPI in effect at the date of this
Sublease had not been altered.  If the
CPI shall no longer be published, then any substitute or successor index
publish by the Bureau of Labor Statistics of the U.S. Department of Labor or
any other governmental agency of the United States, and similarly adjusted as
provided above, shall be used.  If the CPI
(or a successor or substitute index similarly adjusted) is not available, a
reliable governmental or other reputable publication reasonably selected by
McGhan and evaluating the information theretofore used in determining the CPI
shall be used for escalations of Base Rent.

 

3.4          Agility shall pay Base Rent to McGhan
without deduction or setoff of any kind on the first day of each and every
month of the Term, in advance, at the above address (or such other place as
McGhan may designate from time to time).  Any Base Rent or additional rentals and all other sums payable by
Agility to McGhan hereunder not received by McGhan within five (5) days after
the due date set forth herein shall be subject to a late charge of ten (10%)
percent of the amount thereof. In addition, any Base Rent or additional rentals
and all other sums payable by Agility to McGhan hereunder not received by
Mcghan within ten (10) days after the due date set forth herein shall be
subject to an additional late charge of five (5%) percent of the amount
thereof.  Agility's failure to pay any
such late charge shall constitute a default under this Sublease.

 

3.5          Agility shall, concurrently with its
execution of this Sublease and its delivery to McGhan, deliver to McGhan the
sum of Twenty-Seven Thousand Four Hundred Five ($27,405) Dollars to be applied
as Base Rent for the period April 15 through May 31, 2000.

 

4.             Security Deposit: Concurrently
with the execution of this Sublease and in addition to the first month’s Base
Rent to be paid pursuant to Section 3.5 hereof, Agility shall deliver to McGhan
the sum of Eighteen Thousand Two Hundred Seventy ($18,270.00) Dollars as
security for the performance by Agility of every covenant and condition of this
Sublease.  Such deposit may be
co-mingled with other funds of McGhan and shall bear no interest.  If Agility shall default with

 

3

 

respect to any convenant or condition of this
Sublease beyond any applicable notice and cure period, inculding but not
limited to the payment of rent, additional rent and any late charges, McGhan
may apply the whole or any part of such security deposit to the payment of any
sum in default or any sum which McGhan may be required to spend by reason of
Agility’s default.  In the case of every
such use, application or retention, Agility shall, on demand, reimburse to
McGhan within ten (10) days the sum so used, applied or retained which shall be
added to the security deposit so that the same shall be replenished to its
former amount.  Should Agility comply
with all of the covenants and conditions of this Sublease, the security deposit
or any balance thereof that has not been applied shall be returned to Agility
at the expriation of the Term.  In the
event that McGhan shall sell assign its interest in this Sublease and transfer
the securty deposit to the new owner thereof, McGhan shall be absolutely
released from any liability for the security deposit.

 

5.             Possession On Commencement Date: McGhan shall
use due diligence and commercially reasonable efforts to give possession as
nearly as possible at the beginning of the Term.  It is understood that if McGhan shall be unable to give Agility
occupancy of the Premises at the time above provided, McGhan shall not be
liable for damages to the Agility therefor, but during the period Agility shall
be unable to occupy the Premises, the Base Rent and additional rents therefor
shall be abated and at the option of McGhan the Term may be extended to the
full original Term recited in Section 2 herein, and the Commencement Date of
this Sublease, ending date and option dates (if any) shall be modified in
accordance therewith, subject, however, to the ending date of the Prime Lease
term.  Should Agility occupy the Premises
prior to the Commencement Date of the Term, all terms of this Sublease shall
then and there go into effect and the rental and any other rental or additonal
charges shall commence (and shall be pro rated if necessary) as of the date of
such prior occupancy.

 

6.             Use of Premises: Agility warrants
and represents to McGhan that the Premises shall be used and occupied only for
the purpose of general office and research and development purposes only and
for no other purpose.  Agility shall not
use the Premises for any other purpose without first having secured the written
consent of McGhan and PAA.  Agility
shall occupy the Premises, conduct its business and control its agents,
employees, invitees and visitors in such a way

 

4

 

as is lawful, reputable and will not create
any nuisance or otherwise interfere with, annoy or disturb McGhan or other
surrounding tenants.  Agility shall not
commit, or suffer to be committed any waste on the Premises or use the Premises
for any auctions, liquidation or going out of business sales.  Nor shall Agility use the Premises for
storage or processing of any toxic or hazardous materials, pesticides,
solvents, flammable products or any “red label” merchandise without McGhan’s
written consent in each instance.

 

7.             Insurance and Indemnity: The terms and
conditions of Section 7 of the Prime Lease are hereby incorporated by
reference, except that the word “Lessee” contained therein shall be deemed to
mean “Agility”, the word “Lessor” contained therein shall be deemed to read “McGhan
and PAA” and the number “$1,000,000” in Section 7.1 of the Prime Lease shall be
deemed to read “$3,000,000.00”.

 

8.             Taxes and Maintenance: The terms and
conditions of Sections 3.2 and 3.4 of the Prime Lease are hereby incorporated
by reference, except that the word "Lessee" contained therein shall
be deemed to mean “Agility” and the word “Lessor” contained therein shall be
deemed to read “McGhan”, and the terms and conditions of Section 6 of the Prime
Lease are hereby incorporated by reference, except that the word “Lessee”
contained therein shall be deemed to mean “Agility”, the word
"Lessor" contained in Section 6.1 therein shall be deemed to read
“PAA” and the word “Lessor” contained in Section 6.2 therein shall be deemed to
read “McGhan”.

 

9.             Utilities: The terms and
conditions of Section 10 of the Prime Lease are hereby incorporated by
reference, except that the word “Lessee” contained therein shall be deemed to
mean “Agility” and the word “Lessor” contained therein shall be deemed to read
“McGhan”.

 

10.          Janitorial Service:  Agility shall be responsible for contracting
for and providing its own janitorial service, and McGhan shall no obligation
whatever to provide or pay for any such service.

 

5

 

11.          Parking:  The terms and conditions of Section 16 of
the Prime Lease are hereby incorporated by reference, except that (a) the word “Lessee”
contained therein shall be deemed to mean “Agility” and the word “Lessor”
contained therein shall be deemed to read “PAA”, and (b) the words “ the
number of parking spaces shown in Item 10 of the Basic Lease Provisions” shall
be deemed to be deleted and the words “45 nonexclusive parking spaces”
substituted therefor.

 

12.          Net Sublease:  This Sublease is intended and understood to
be a “pure net” sublease, pursuant to which Agility shall be responsible for
all maintenance, repairs and upkeep of the premises and for the payment of all
occupancy costs, including without limitation Agility’s pro rata share of
taxes, assessments and insurance.  The
Base Rent and additional rents (including without limitation all operating
costs) reserved herein is intended to be absolutely net to McGhan without
abatement, deduction or setoff of any kind. 
Under no circumstances or conditions, whether now existing or hereafter
arising, or whether beyond the contemplation of the parties, shall McGhan be
expected or required to make any payment of any kind whatsoever or to be under
any other obligation or liability hereunder. 
Notwithstanding anything to the contrary contained herein, Agility shall
not be required to pay any additional rent or perform any obligation that is (a) fairly allocable
to any period of time prior to the Commencement Date or following the
expiration of the Term or (b)
payable as a result of a late payment by McGhan or its default (beyond
applicable notice and cure periods) under the Prime Lease unless such late
payment or default relates to Agility’s late payment or default hereunder.

 

13.          “As Is” Condition of the Premises:

 

13.1        Agility acknowledges that it is
subleasing the Premises in absolutely “as is” condition, with all its faults
and without any representation or warranty of any kind whatsoever about the
condition of the Premises, the parking and common areas, the Building or any of
the systems contained therein, except that McGhan shall deliver the Premises in
its current condition as of the date of this Sublease is mutually executed and
delivered, in “broom clean” condition, subject, however, to ordinary wear and
tear and insured casualty.  Agility
further acknowledges that in connection with any improvements or alterations
that it wishes to perform on the Premises, Agility shall be

 

6

 

required to obtain the consent of PAA as
provided in Section 6.3 of the Prime Lease.

 

13.2         Notwithstanding the provisions of
Section 13.1 hereof, McGhan, and not Agility, will be responsible for paying
for any “capital costs” of HVAC replacements in the Premises during the Term,
provided, however, that such replacements are not requested as a result of any
damage or destruction caused by Agility or its personnel or contractors.  For the purpose of this Section 13.2,
“capital costs” shall mean the reasonable parts and labor cost of replacement
of a compressor, cooling coil, cooling condenser or heat exchanger of a heating
or air conditioning unit serving the Premises.

 

14.          PAA’s Consent Rights:

 

14.1        This Sublease is subject to PAA’s rights
concerning consents to subleases of all or any part of the McGhan Premises
contained in Section 11 of the Prime Lease, and McGhan makes no representation
or warranty concerning whether or not PAA will consent to this Sublease. McGhan
will make the request for PAA's consent as provides in Section 11.1 of the
Prime Lease as soon as possible after Agility provided to McGhan the
information concerning Agility described in Section 11.1 of the Prime Lease,
and Agility shall provide all such information to McGhan within ten (10) days
of the date hereof.

 

14.2        The form of consent shall provide, among
other things, (a)
an agreement by PAA that the waiver of subrogation set forth in Section 17.20
of the Prime Lease shall also apply as between Agility and PAA; (b) Agility, without
McGhan’s or PAA’s prior written consent (but upon ten [ten] days’ notice to
McGhan and PAA), may assign the Sublease to (i) a corporation controlling,
controlled by or under common control with Agility; (ii) by operation of
law to any party with whom Agility shall merge (provided that the merged
entity’s net worth is equal to or greater than the net worth of Agility at the
time of the transfer) or (iii)
a purchaser of all or substantially all of Agility’s assets, provided that the
purchaser’s net worth is equal to or greater than the net worth of Agility’s at
the time of transfer; (c)
a sale of all of Agility’s capital stock shall not be deemed an assignment,
subletting or other transfer of the Sublease, provided, however, that the
purchaser’s a provided, combined net worth after such transaction shall be at
least that of Agility prior to such transaction; and (d) a

 

7

 

transfer of Agility’s stock on a public
exchange shall not, by itself, constitute a change of control of Agility.

 

14.3        In the event that such
consent is not obtained on or before February 15, 2000, then Agility may
terminate this Sublease by notice to McGhan given not later than February 22,
2000.

 

15.          Letter of Credit:

 

15.1        In addition to the cash security
deposit, Agility shall deposit with McGhan, upon the mutual execution and
delivery of this Sublease, a clean, irrevocable letter of credit issued by an
FDIC-insured bank in Santa Barbara, California reasonably acceptable to McGhan
(and McGhan hereby confirms that Montecito Bank and Trust is acceptable to
McGhan) in the amount of One Hundred Twenty-Eight Thousand Four Hundred Twelve
($128,412.00) Dollars (which letter of credit, together with any extensions or
renewals thereof or substitutions therefor, is hereinafter collectively referred
to as the “Letter of Credit”).  The
Letter of Credit shall serve as additional security for the full and punctual
performance by Agility of all of the terms of this Sublease, and shall permit
McGhan to draw down the full amount or any portion or portions thereof upon
presentation of a sight draft therefor accompanied by a statement signed by an
officer of McGhan stating that (a) Agility is in default under the Sublease (after
notice and applicable cure periods, if any) and (b) that the amount being drawn under
the Letter of Credit is the amount due on account of Agility’s default.  In the event that Agility shall default
(beyond any applicable notice and cure periods) in the performance of any of
the terms of this Sublease, including without limitation the payment of rent,
McGhan may draw all or any part of the amount outstanding under the Letter of
Credit to the extent required for the payment of any rent or for any sum which
McGhan may expend or may be required to expend by reason of Agility’s default
under any term or terms of this Sublease, including any damages or deficiency
from the reletting the premises, whether before or after reentry by McGhan
..  In the case of every draw on the
Letter of Credit, Agility shall, on demand, either pay to McGhan the amount
drawn or increase the amount outstanding under the Letter of Credit by an
amount equalling the sum so drawn such that at all times during the Term of the
Sublease, the Letter of Credit shall remain outstanding in the amounts set
forth in Section 15.2.

 

8

 

15.2        The letter of Credit shall
by its terms remain outstanding for a period of one (1) year, and shall by its
terms provide that the Letter of Credit shall be automatically renewed unless
the issuing bank shall deliver notice to McGhan, by certified mail, return
receipt requested, not less than thirty (30) days prior to the Letter of
Credit’s expiration date, stating that the Letter of Credit shall not be
renewed.  Notwithstanding anything to the
contrary contained in this Section 15, (a) provided that Agility is not then in
default hereunder (beyond any applicable notice and cure period) at the
commencement of the second year of the Term, McGhan shall allow the amount of
the Letter of Credit to be reduced to Seventy-Five Thousand One Hundred Sixty
($75,160.00) Dollars, and (b)
provided that Agility is not then in default hereunder (beyond  any applicable notice and cure period) at
the commencement of the third year of the Term, McGhan shall allow the amount
of the Letter of Credit to be reduced to Thirty-Seven Thousand Five Hundred
Eighty ($37,580.00) Dollars.

 

15.3        In the Event that the issuing bank shall
deliver notice to McGhan as provided herein stating that the Letter of Credit
shall not be renewed, then unless Agility shall deliver to McGhan, not less
than twenty (20) days prior to the expiration of the Letter of Credit, a
substitute letter of credit on the same terms and conditions as are contained
in the original Letter of Credit, McGhan may draw upon the entire amount
outstanding under the Letter of Credit. In such event, McGhan shall hold and
utilize such proceeds as a security deposit to insure the full, complete and
timely performance of Agility’s obligations hereunder.

 

15.4        The Letter of Credit (if the
same shall then be outstanding) shall be returned to Agility after to
expiration of this Sublease and the surrender of the premises to McGhan in
accordance with Agility’s surrender obligations contained herein.  In the event of a sale of McGhan’s interest
in this Sublease, McGhan shall have the right to transfer the Letter of Credit
or any other security to the vendee and McGhan shall thereupon be released by
Agility from all liability for the return of the Letter of Credit or other security,
and Agility agrees to look solely to the new sublandlord for the return of the
Letter of Credit or other security.  The
provisions of the preceding sentence shall apply to every transfer or
assignment made of the Letter of Credit or other security to a new
sublandlord.  Agility shall promptly and
without charge execute,

 

9

 

acknowledge and deliver to McGhan whatever
instruments McGhan may reasonably request with respect to the transfer by
McGhan of the Letter of Credit or other security.  Agility shall not assign or encumber or attempt to assign or
encumber the Letter of Credit, cash or any other instrument or monies deposited
with McGhan as security, and neither McGhan nor its successors or assigns shall
be bound by any such assignment, encumbrance or attempted assignment or
encumbrance.

 

16.          Brokers: Agility
represents and warrant to McGhan that except with respect to CB Richard Ellis /
Blair Hayes Commercial (representing McGhan) and Pacifica Commercial Realty
(representing Agility) (the “Brokers”), there are no brokers or other parties
entitled to any brokerage or leasing commissions or finder’s fees in connection
with this Sublease.  In reliance upon
such representation and warranty, McGhan agrees to pay a brokerage commission
to the Brokers in connection with this Sublease provided, however, that PAA
shall consent to this Sublease.  Agility
agrees to indemnify, defend and hold McGhan harmless from any and all costs,
expenses, liabilities, claims and fees arising out of any claim for any other
brokerage commission or finder's fee claimed in connection with this Sublease
by any broker claiming under Agility.

 

17.          Incorporation of Prime Lease Terms
by Reference:

 

17.1         Except as otherwise provided herein, this
Sublease is subject to, and Agility accepts this Sublease subject to, all of
the terms and conditions contained in the Prime Lease and the matters to which
the Prime Lease is subject and subordinate, all of which are hereby
incorporated by reference, except that the term “Lessor” set forth therein
shall be deemed to mean “McGhan”, the term “Lessee” set forth therein shall be
deemed to mean “Agility” and the term “Premises” forth therein shall be deemed
to mean the term “Premises” as defined herein. 
This Sublease shall also be subject to, and Agility hereby accepts this
Sublease as subject to, any and all amendments to the Prime Lease hereafter
made between PAA and McGhan, provided, however, that such amendments do not
materially adversely affect Agility’s rights hereunder.

 

10

 

17.2        Agility agrees to perform,
observe and be bound by each and every covenant, condition and provision of the
Prime Lease (including without limitation the exhibits thereto) respecting the
Premises, and Agility shall not do or cause to be done or suffer or permit any
act or thing to be done which might cause the Prime Lease or the rights of
McGhan as tenant under the Prime Lease to be cancelled, terminated or forfeited
or make McGhan liable for any damages, claim or penalty as a result thereof,
and Agility hereby agrees to indemnify, defend and hold McGhan harmless from
any such damages, claim or penalty (including without limitation McGhan’s
reasonable attorney’s fees and costs incurred in connection therewith).

 

17.3        Not withstanding the
provisions of Section 16.1 hereof, the “Basic Lease Provisions” and Sections 2,
4, 3.1, 3.1.1, 12.4, 14, 15, 20 and 22 of the Prime Lease, and the Guaranty to
the Prime Lease (as well as all references to the Guaranty in the Prime Lease),
are hereby expressly excluded from incorporation herein.

 

17.4        Notwithstanding the
provisions of Section 16.1 hereof, the following provisions of the Prime Lease
are hereby incorporated by reference except that the term “Lessor” contained
therein shall be deemed to mean “PAA” and the term “Lessee” contained therein
shall be deemed to mean “Agility”:

 

17.4.1     Sections 8.1
through 8.5, and the term “this Lease” shall be deemed to mean “this Prime
Lease”, and the term “Lessor” contained in the last line of Section 8.3(a)
shall be deemed to mean “PAA” and McGhan”.

 

17.4.2    
Sections 8.1 and 8.2, and the term “this Lease” shall be deemed to mean “this
Prime Lease”.

 

17.4.3      Section 15,
and the term “this Lease” shall be deemed to mean “this Prime Lease”

 

17.4.4     Section 18, and
the term “this Lease” shall be deemed to mean “this Prime Lease”

 

11

 

17.5        Section 12 of the Prime
Lease shall be incorporated by reference except that the term “Lessor” set
forth therein shall be deemed to mean “McGhan”, the term “Lessee” set forth
therein shall be deemed to mean “Agility” and the term “Premises” forth therein
shall be deemed to mean the term “Premises” as defined herein, but “ten (10) days”
therein shall be deemed to mean “five (5) days” “thirty (30) days” therein
shall be deemed to mean “twenty (20) days”.

 

17.6        To McGhan’s best knowledge, (a) no Hazardous
Material is present on the Premises or the Building, the soil, surface water or
groundwater thereof, (b)
there are no underground storage tanks present under the Building or the land
associated therewith, and (c)
there is no action, proceeding or claim pending or threatened regarding the
Building concerning any Hazardous Material or pursuant to any environmental
law.

 

18.          Entire
Agreement: This Sublease is the complete agreement between
McGhan and Agility concerning the Premises. 
There are no oral agreements, understanding, promises or representations
between McGhan and Agility affecting this Sublease.  All prior negotiations and understandings, if any, between the
parties hereto with respect to the Premises shall be of no force or effect and
shall not be used to interpret this Sublease. 
This Agreement may be executed in several counterparts, each of which is
deemed an original.  Such counterparts
shall constitute but one and the same instrument.

 

19.          McGhan’s
Liability: Recourse by Agility for any claim against McGhan
(except for claims arising from McGhan’s willful misconduct) shall at all times
be limited to McGhan’s interest in the Premises, and Agility hereby waives any
right to assert any claims against any other interest of McGhan (except for
claims arising from McGhan's willful of misconduct) or of McGhan’s partners,
principals or stockholders.  The term
“McGhan” as used in this Sublease, so far as agreements on the part of McGhan
to be performed are concerned, shall be limited to mean the owner of the
sublandlord’s interest in the Premises at the time in question; in the event of
any transfer of such interest (except for transfers as security), the
particular sublandlord named herein shall be automatically freed and relieved
from and after the date of such transfer of any and all liability for acts then
to be performed by the sublandlord hereunder.

 

12

 

20.          No Waiver Governing Law: The rights and
remedies of McGhan under this Sublease, as well as those provided or accorded
by law, shall be cumulative, and none shall be exclusive of any other rights or
remedies hereunder or allowed by law.  A
waiver by McGhan of any breach or breaches, default or defaults of Agility
hereunder shall not be deemed or construed to be a continuing waiver of such
breach or default nor as a waiver of or permission, expressed or implied, for
any subsequent breach or default, and it is agreed that the acceptance by
McGhan of any installment of rent subsequent to the date the same should have
been paid hereunder, shall in no manner alter or affect the covenant and
obligation of Agility to pay subsequent installments of rent promptly upon the
due date thereof.  No receipt of money
by McGhan after the termination in any way of this Sublease shall reinstate,
continue or extend the Term.  This
Sublease shall be governed by and construed under the local law of the State of
California.

 

21.          Notices: All notices
given by Agility to McGhan shall be made and all rent and other payments
required to be made by Agility shall be payable to McGhan at the address set
forth on the first page of this Sublease. 
All notices from McGhan to Agility shall be given to Agility at the
Premises or at any other address within the United States as Agility may
specify from time to time by written notice. 
Any notice or document required or permitted to be delivered under this
Sublease shall be given in writing and shall be deemed to be delivered (whether
or not actually received) when deposited in the United States Mail, postage
prepaid, certified mail, return receipt requested, addressed to the parties at
their respective addresses (Agility’s address shall be the address of the
Premises).  Time shall be of the essence
as to all notices to be given hereunder.

 

22.          Severability, Counterparts:  If any provision of this Sublease or any
term, paragraph, sentence, clause, phrase or word appearing herein shall be
judicially or administratively held invalid or unenforceable for any reason,
such holding shall not be deemed to affect, alter, modify or impair in any
manner any other provision, term, paragraph, sentence, clause, phrase or word
appearing herein. This Sublease may be executed in several counterparts, each
of which is deemed an original.  Such
counterparts shall constitute but one and the same instrument.

 

13

 

23.          Relationship with PAA: McGhan shall
not, without Agility’s prior written consent, terminate the Prime Lease or
commit any act that would entitle PAA to terminate the Prime Lease provided,
however, that Agility shall timely perform all of its obligations
hereunder.  McGhan shall perform its
obligations under the Prime Lease to the extent that the same are not to be
performed directly by Agility.  At
Agility’s written request, McGhan shall use good faith efforts to cause PAA to
perform PAA’s obligations under the Prime Lease, including by requesting PAA’s
performance under the Prime Lease and by permitting Agility to commence a
lawsuit (entirely at Agility’s expense, and subject to Agility’s complete and
unconditional indemnification of McGhan against any liability in connection
therewith, and further subject to McGhan’s satisfactory review, by McGhan’s
counsel and at Agility’s expense, of all pleadings therein) against PAA.  Agility shall indemnify, defend and hold
McGhan harmless against any and all liability, costs (including without
limitation reasonable attorney’s fees and expenses) and claims arising in
connection therewith.

 

24.          Assignment of Sublease: Agility,
without McGhan’s prior written consent (but upon ten [ten] days’ notice to McGhan,
my assign the Sublease to (i)
a corporation controlling, controlled by or under common control with Agility; (ii) a purchaser of
all or substantially all of Agility’s assets, provided that the purchaser’s net
worth after such transaction is equal to or greater than the net worth of
Agility at the time of the transfer, (iii) a purchaser of all of Agility’s stock,
provided, however, that the purchaser's and Agility’s combined net worth  shall be, after such transaction, at least
that of Agility prior to such transaction; or (iv) by operation of law to any party
with whom Agility shall merge (provided that the merged entity’s net worth is
equal to or greater than the net worth of Agility at the time of the
transfer).  A transfer of Agility’s
stock on a public exchange shall not, by itself, constitute a change of control
of Agility and shall not require McGhan’s consent.

 

25.          Demise of Machine Shop and Clean
Room: Notwithstanding anything to the contrary contained
herein, the Premises shall include the existing machine shop and “clean room”
(each as shown on Exhibit “C” annexed hereto), effective as of the date of
McGhan’s notice to Agility stating that McGhan has vacated the machine shop and
the “clean room”, and the square footage of the Premises shall be increased, in
the aggregate, by 8,194 sq. ft. for the machine shop and

 

14

 

the “clean room”.  Base Rent during the first year of the Term shall be increased by
$1.40 per sq. ft. per month (plus the additional pro-rata share of “net”
charges hereunder) for such additional space, in each case commencing on the
date of the notice provided above, and thereafter the Base Rent for such
additions to the Premises shall be subject to annual adjustment (together with
the balance of the Premises) at the time and otherwise as provided in Section
3.2 hereof.  The machine shop may be
utilized as a machine shop or for the uses provided in Section 6 hereof, and
the clean room may be utilized as a clean room or for the uses provided in
Section 6 hereof.

 

IN WITNESS WHEREOF, McGhan and
Agility have each caused to be subscribed their names as of the date first
above written.  This Sublease has been
executed in four counterpart originals.

 

	
  MCGHAN
  MEDICAL CORPORATION

  
	
   

  
	
  By: 

  	
  /s/ C.S. Eschbach, 2/3/00,
  PRESIDENT & CEO

  	
   

  
	
  AGILITY
  COMMUNICATIONS, INC.

  
	
   

  
	
  By:

  	
  /s/ Kathy J. Odell

  	
   

  
	
  Title: Vice President,
  Enterprise Services

  
	
  ******************************

  

 

Table of Exhibits

 

	
  Exhibit A

  	
  Redacted Prime Lease

  
	
  Exhibit B 

  	
  Floor Plan of the Premises

  
	
  Exhibit C 

  	
  Floor Plan of the Machine
  Shop and Clean Room

  

 

15

 

EXHIBIT A

 

Net,
Net, Net

 

LEASE

 

THIS LEASE dated July 1,
1994, for  reference purposes only is
made between Lessor and Lessee named below, effective on the later of the dates
set forth under their respective signatures.

 

Basic Lease Provisions

 

	
  1.

  	
   

  	
  Premises: As depicted on
  Exhibit A.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Building Name: 

  	
  None

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Premises Address: 

  	
  600 Pine Avenue, Goleta,
  CA

  	
   

  	
  Floor:

  	
        1st and 2nd

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Leased  Area: 

  	
  57,897

  	
   

  	
  Square Feet

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Lessee’s Percentages:

  	
  Building 

  	
  100%

  	
   

  	
  Common Area  

  	
  100%

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Initial Annual Rent: 

  	
   

  	
   

  	
   

  	
   

  	
  (Per Square Foot)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Monthly Rental
  Installments: 

  	
   

  	
    (    

  	
   

  	
   

  	
  Per Square Foot)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Term:

  	
   Twelve 

  	
   

  	
  Years and

  	
  0

  	
   

  	
  Months

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Target Commencement Date: 

  	
  September 1, 1994, or
  sooner upon 5 days advance

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  written notice from
  Lessor.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Termination Date: 

  	
   

  	
  July 31, 2006

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Secutiy Deposit:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Broker(s): 

  	
  Blair-Haves
  and Boaver-Free

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Parking Spaces Provided: 

  	
    187 

  	
   

  	
  (Not To Be Separately
  Indentified)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Address for Payments and
  Notices: (if different from below)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  Submission of this
  instrument for examination or signature by Lessee does not constitute a
  reservation of or option for space and it is not effective as a lease or
  otherwise until execution by both Lessee and Lessor.

  	
   

  
																																								

 

IN WITNESS WHEREOF, the
parties hereto have executed this Lease, consisting of the forgoing Basic Lease
Provisions, Articles 1 through 22 which follow, as of the date first above
written.

 

	
  LESSOR

  	
  LESSOR

  
	
   

  	
   

  
	
  PINE AVENUE ASSOCIATES,
  LTD.

  	
  McGHAN MEDICAL CORPORATION

  
	
  a California Limited
  Partnership

  	
   

  
	
  130 Cremona Drive, Suite D

  	
  Address:

  	
  5540 Ekwill Street

  
	
  Goleta, CA 93117-3075

  	
   

  	
  Santa Barbara, CA 93111

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jeffrey C. Bermant

  	
   

  	
  By:

  	
  /s/ Jim McGhan

  	
   

  
	
   

  	
  Jeffrey C. Bermant

  General Partner

  	
   

  	
   

  	
  Jim McGhan,

  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   6/30/94

  	
   

  	
  Date:

  	
   6/30/94

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  MEMORANDUM:

  	
   

  
	
   

  	
   

  
	
  Actual Commencement Date:

  	
   

  	
   

  
													

 

i

 

TABLE
OF CONTENTS

 

	
  ARTICLE

  
	
   

  
	
  Basic
  Lease Provisions

  
	
   

  
	
  Table of Contents

  
	
   

  
	
  1.

  	
  Lease of Premises

  
	
  2.

  	
  Term

  
	
  3.

  	
  Rent

  
	
  4.

  	
  Security Deposit

  
	
  5.

  	
  Use

  
	
  6.

  	
  Maintenance,
  Repairs and Alterations

  
	
  7.

  	
  Insurance: Indemnity

  
	
  8.

  	
  Damage
  or Destruction

  
	
  9.

  	
  Personal
  Property Taxes

  
	
  10.

  	
  Utilities

  
	
  11.

  	
  Assignment and Subletting

  
	
  12.

  	
  Defaults: Remedies

  
	
  13.

  	
  Condemnation or
  Restriction on Use

  
	
  14.

  	
  Brokers

  
	
  15.

  	
  Lessor’s Liability

  
	
  16.

  	
  Parking

  
	
  17.

  	
  General
  Provisions

  
	
   

  
	
   

  	
  17.1

  	
  Estoppel
  Certificate

  
	
   

  	
  17.2

  	
  Severability

  
	
   

  	
  17.3

  	
  Time of Essence

  
	
   

  	
  17.4

  	
  Captions

  
	
   

  	
  17.5

  	
  Notices

  
	
   

  	
  17.6

  	
  Waivers

  
	
   

  	
  17.7

  	
  Holding Over

  
	
   

  	
  17.8

  	
  Cumulative
  Remedies

  
	
   

  	
  17.9

  	
  Inurement

  
	
   

  	
  17.10

  	
  Choice of Law

  
	
   

  	
  17.11

  	
  Subordination

  
	
   

  	
  17.12

  	
  Attorney’s Fees

  
	
   

  	
  17.13

  	
  Lessor’s Access

  
	
   

  	
  17.14

  	
  Corporate
  Authority

  
	
   

  	
  17.15

  	
  Surrender or Cancellation

  
	
   

  	
  17.16

  	
  Entire Agreement

  
	
   

  	
  17.17

  	
  Signs

  
	
   

  	
  17.18

  	
  Gender; Number

  
	
   

  	
  17.19

  	
  Memorandum
  of Lease

  
	
   

  	
  17.20

  	
  Waiver
  of Subrogation

  
	
   

  	
  17.21

  	
  Confidentiality of Lease

  
	
   

  	
  17.22

  	
  Quiet Enjoyment

  
	
   

  	
  17.23

  	
  Material Storage
  Restrictions

  
	
   

  	
  17.24

  	
  No Agency

  
	
   

  	
  17.25

  	
  Force Majeure

  
	
   

  	
  17.26

  	
  Meaning

  
	
   

  
	
  18.

  	
  Adjacent
  Construction

  
	
  19.

  	
  Acceptance
  of Premises

  
	
  20.

  	
  Equipment
  Allowance

  
	
  21.

  	
  Hazardous
  Substances

  
	
  22.

  	
  Addenda

  
	
   

  	
   

  
	
  Exhibit A Floor Plans 

  
	
  Exhibit B Site Plan 

  
	
  Exhibit C Rules and
  Regulations 

  

 

 

ii

 

1.             LEASE OF PREMISES

 

Lessor hereby leases to
Lessee and Lessee leases from Lessor for the term, at the rental, and upon all
of the conditions set forth in this Lease, the Premises, identified in Item 1
of the Basic Lease Provisions,  together
with the nonexclusive use, in common with Lessor and other tenants of the
Building(s) and their respective invitees, of common areas in or about the
Building and the parking garage (if any) or parking areas adjoining the
Building.  The approximate anticipated
configuration of 600 Pine Avenue and the location of the Building(s), Premises
and associated common and parking areas is indicated on Exhibit “B”.  The size, location and function of the
buildings and related structures depicted here are approximate.  The configuration of the development, the
design,  size, function and location of
all other improvements, and the identity and location of other tenants to the
extent depicted are subject to change without notice for any reason deemed
sufficient by the owner.  Lessor
reserves the right to alter the configuration of 600 Pine Avenue to construct
additional improvements thereon, to withdraw areas therefrom from time to time
and alter the configuration of ther associated common and parking areas,
provided that the number of parking spaces intended for Lessee’s use shall not
thereby be materially diminished and provided that Lessee’s access to Premises
will not thereby be affected.

 

2.             TERM

 

2.1          Commencement
of Term

 

(a)           The term of the Lease shall be as shown in Item 6 of the
Basic Lease Provisions, commencing on the Commencement Date, which Lessor and
Lessee expect to be the Target Commencement date as shown in Item 7 of the
Basic Lease Provisions but which may be such other date as herein provided, and
ending on the Termination Date unless sooner terminated pursuant to any
provision hereof.

 

(b)           Notwithstanding the foregoing, the term of this Lease and
the payment of rent shall commence upon delivery of possession of the
Premises.  Delivery of possession of the
Premises shall occur upon 5 days advance written tender of same by Lessor.

 

(c)           If delivery of possession occurs prior to the Target
Commencement Date, the term of this Lease shall commence on such date of
delivery of possession, but the Termination Date shall not be advanced.

 

2.2          Delay in
Commencement. 
Notwithstanding the Target Commencement Date, if for any reason Lessor
cannot deliver possession of the Premises to Lessee on or before said date,
Lessor shall not be subject to any liability therefor, nor shall such failure
affect the validity of this Lease or the obligations of Lessee hereunder or
extend the term hereof provided, however, that if Lessor shall not have
delivered possession of the Premises within seven (7) months after the Target
Commencement Date, Lesseee may, at Lessee’s option by notice in writing to
Lessor within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder.

 

2.3          Option and
Right of Notification. 
Lessor hereby grants the Lessee the right to renew this Lease for two
successive periods of five (5) years, upon the same terms, covenants and
conditions as are provided in this Lease.

 

Lessee shall give notice to
Lessor in writing of Lessee’s election to exercise such option no less than six
(6) months prior to the expiration of the term.  Lessee shall not be entitled to exercise the option if, at the
time of such exercise, Lessee is in default of any provision of this Lease.

 

The annual rent for the
first year of the option period, including the commencement thereof, shall be
adjusted as of the commencement of said period, and as of the expiration of
each full or partial calendar year of the option term (the “Adjustment Date”)
to reflect any change in the United States Department of Labor, Bureau of Labor
Statistics, Consumer Price Index, Subgroup “All Items”, entitled “Consumer
Price Index, Urban Wage Earners and Clerical Workers (Revised Series), L.A.-
Anaheim - Riverside Average (1982-84 - 100).” The index for said subgroup
applicable for the month of December (or the month preceding the Commencement
Date for the first full or partial calendar year of the lease term) preceding
each adjustment date shall be considered the “base” and the annual rent
following each adjustment date shall be computed by adjusting the annual rent
payable for the preceding calendar year thereof by the percentage change in the
index as of the adjustment date over the “base”; provided, however, in no event
shall the rent payable for any year be less than the rent payable for the
preceding period on account of the adjustment pursuant to this Section 2.3,
notwithstanding the fact that the index may, as of some adjustment date, be
less than the “base”.  If as of any
adjustment date there shall not exist the Consumer Price Index in the same
format as set forth above, the parties shall substitute any official index
published by the Bureau of Labor Statistics

 

1

 

or any successor or similar governmental
agency as may than be in existence and shall be most nearly equivalent
thereto.  If the parties shall be unable
to agree upon a successor index, the parties shall refer the choice to
arbitration in accordance with the rules of the American Arbitration
Association. The annual rent adjustment for any year of the option period shall
in no event be less than two (2%) percent or greater than six (6%) percent per
annum.

 

3.             Rent

 

3.1          Initial
Annual Rent.  Lessee
shall pay to Lessor as rent for the Premises an Initial Annual Rent in the
amount specified in Item 4 of the Basic Lease Provisions in equal monthly
installments in the amount specified in Item 5 of the Basic Lease provisions in
advance on the first day of each month.

 

3.1.1       Rental
Deposit.  Upon lease
execution, Lessee shall deposit will Lessor an amount equivalent to first
month’s rent, in the sum of $49,212.45.

 

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

 

3.3          All
Rent due under this Lease shall be payable without deduction, abatement or
offset except as may be otherwise expressly provided in this Lease.

 

3.4          Definitions: For purpose of
this Article 3:

 

(a)            Lessee’s Building percentage is a percentage calculated
by dividing the Leased Area of the Premises, as shown in Item 2 of the Basic
Lease Provisions, by the leasable area of the Building, and is stipulated to be
as shown in Item 3 of the Basic Lease Provisions.

 

(b)           Building Operating Expense shall mean the sum of all
expenses incurred by Lessor in connection with the operation, repair and
maintenance of the Building, including but not limited to heating and air
conditioning;  all real property taxes
(as hereinafter defined) imposed upon or with respect to the Building and
related improvements (exclusive of the land underlying all such improvements);
all fire and extended coverage, earthquake, loss of rents, vandalism, malicious
mischief and other insurance covering the Building (exclusive of public
liability insurance) and losses suffered which fall below the insurance
deductible; utilities; materials and supplies; salaries, wages and other
expenses incurred with respect to the operation, repair and maintenance of the
Building; the cost of repainting the Building; 
security and fire protection, amortization of capital investments for
improvements which are designed to reduce operating costs, improve operations
or comply with governmental conservation or safety programs over such
reasonable period as Lessor shall determine [together with interest at five (5)
percentage points above the discount rate of the Federal Reserve Bank of San
Francisco on the unamortized amount] (on any such improvements to update
operations or reduce costs, Lessor will, upon request, reasonably justify such
improvements to Lessee); and an amount equal to fifteen (15%) of all such
expenses to cover Lessor’s 
administrative and overhead expense. 
Building Operating Expenses attributable to the utilities and services
furnished pursuant to Article 10 shall be apportioned among the tenants of the
Building receiving such services (excluding those tenants furnishing or paying
for their own utilities and janitorial services) based on the respective leased
areas occupied by such tenants.

 

(c)           Lessee’s Common Area Percentage is a percentage figure
calculated by the project architect by dividing the Leased Area of the Premises
by the average leasable area in all improvements, including the Building and
other buildings, shown on Exhibit “B” during such year as is initially
stipulated to be as shown in Item 3 of the Basic lease Provisions. Should the
Building and/or landscape area become a separate legal lot, or should
additional improvements or common area be added or deleted from Exhibit “B,”
Lessor may, at its option, calculate Lessee’s Common Area Percentage by
comparing the common area attributable to the Premises with the common area on
such legal lot or otherwise within Exhibit “B” as so revised.

 

(d)           Common Area Operating Expenses shall mean the sum of all
expenses incurred by Lessor in connection with the operation and maintenance of
driveways, landscaping, walkways, plazas, parking facilities, and perimeter
property, including, but not limited to: all real property taxes (as
hereinafter defined) imposed upon or with respect to the land included within
Exhibit “B”; all public liability insurance covering Exhibit “B”, and losses
suffered which fall below the insurance deductible; security and fire
protection; salaries, wages and other expenses incurred with respect to
maintenance of the common areas, gardening, landscaping, repaving, repainting
and trash removal; depreciation of equipment used in such maintenance;
amortization of capital investments for improvements which comply with
governmental conservation or safety programs over such reasonable period as
Lessor shall determine (together with interest at five (5) percentage points
above the discount rate of the Federal

 

2

 

Reserve Bank of San Francisco on the
unamortized amount); and an amount equal to fifteen percent (15%) of all such
expenses to cover Lessor’s administrative and overhead expense. General
overhead and depreciation of improvements shall not be included in the expenses
except as specifically set forth in the foregoing. Any governmental surcharge,
fee or assessment imposed with respect to the parking facilities within Exhibit
“B” shall, to the extent paid by Lessor and not passed on to the users of said
parking facilities, be included in Common Area Operating Expenses.

 

(e)           Real Property Taxes shall mean all real and personal
property taxes and assessments incurred during any calendar year, including,
but not limited to: special and extraordinary assessments, water and sewer
rates and charges, occupancy taxes or similar taxes imposed on or with respect
to the real or personal property whether or not imposed on or measured by the
rent payable by Lessee, and other governmental levies and charges, general and
special, ordinary and extraordinary, unforeseen as well as foreseen, of any
kind and nature whatsoever relating to the real or personal property, and any
gross rental, license or business tax measured by or levied on rent payable or
space occupied. If, by law, any property taxes are payable, or may at the
option of the taxpayer be paid, in installments (whether or not interest shall
accrue on the unpaid balance of such property taxes), Lessor may, at Lessor’s
option, pay the same and, in such event, any accrued interest on the unpaid
balance of such property taxes shall be deemed to be Real Property Taxes as
defined herein. Real Property Taxes shall also include all expenses reasonably
incurred  by Lessor in seeking a reduction
by the taxing authorities of Real Property Taxes applicable to 600 Pine Avenue.
Real Property Taxes shall not include any capital levy, franchise, estate,
inheritance, succession, gift or transfer tax of Lessor, or any income, profits
or excess profits tax, assessment, charge or levy upon the income of Lessor;
provided, however, that if at any time during the term of this Lease under the
laws of the United States or the State of California or any political
subdivision of either, a tax or excise on rents, space or other aspects of real
property, is levied or assessed against Lessor, the same shall be deemed to be
Real Property Taxes. If any such property taxes upon the income of Lessor shall
be imposed on a graduated scale, based upon Lessor’s aggregate rental income,
Real Property Taxes shall include only such portion of such property taxes as
would be payable if the rent payable with respect to the Building and Common
Areas were the only rental income of Lessor subject thereto.

 

3.5          Rent
Adjustment for Consumer Price Index.  The annual rent shall be adjusted as of the expiration of each
full or partial calendar year of the lease term (the “Adjustment Date”) to
reflect any change in the United States Department of Labor, Bureau of Labor
Statistics, Consumer Price Index, Subgroup “All Items”, entitled “Consumer
Price Index, Urban Wage Earners and Clerical Workers (Revised Series), L.A. -
Anaheim - Riverside Average (1982-1984 = 100).” The index for said subgroup
applicable for the month of December (or the month preceding the Commencement
Date for the first full or partial calendar year of the lease term) preceding
each adjustment date shall be considered the “base” and the annual rent
following each adjustment date shall be computed by adjusting the annual rent
payable for the preceding calendar year thereof by the percentage change In the
index as of the adjustment date over the “base”; provided, however, in no event
shall the rent payable for any year be less than the rent payable for the
preceding period on account of the adjustment pursuant to this Section 3.5,
notwithstanding the fact that the index may, as of some adjustment date, be
less than the “base.” If as of any adjustment date there shall not exist the
Consumer Price Index in the same format as set forth above, the parties shall
substitute any official index published by the Bureau of Labor Statistics or
any successor or similar Governmental agency as may then be in existence and
shall be most nearly equivalent thereto. If the parties shall be unable to
agree upon a successor index, the parties shall refer the choice to arbitration
in accordance with the rules of the American Arbitration Association.

 

The Annual Rent Adjustment
for any year of the Initial term shall in no event be less than two percent
(2%) or greater than six percent (6%) per annum.

 

3.6          Calculation
and Payment

 

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

 

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

 

3

 

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

 

3.7          End of
Term. Upon the expiration or earlier termination of this Lease, Lessee shall
pay Lessor, as additional rent, the aggregate rental increase which would have
been payable by Lessee pursuant to this Article 3, except for such expiration
or termination, for the portion of the year in which termination or expiration
occurs through the termination date. 
The amount of such payment shall be calculated by Lessor based upon
Sections 3.2, 3.3, and 3.5 (using the expiration or termination date as the
adjustment date for Section 3.5) and the best information then available to
lessor, and shall give effect to all prior adjustments and payments on account
by Lessee pursuant to this Article 3.

 

4.             SECURITY DEPOSIT

 

Concurrently with Lessee’s
execution of this Lease, Lessee shall deposit with Lessor the sum specified in
Item 8 of the Basic Lease Provisions as security for the faithful performance
by Lessee of all covenants and conditions of this Lease.  If Lessee shall breach’ or default in the
performance of any covenants or conditions of this Lease, including the payment
of rent, Lessor may use, apply or retain the whole or any part of such security
deposit for the payment of any rent in default or for any other sum which
Lessor may spend or be required to spend by reason of Lessee’s default.  If Lessor so uses or applies all or any
portion of said deposit, Lessee shall, within ten (10) days after written
demand therefor, deposit cash with Lessor in an amount sufficient to restore
said deposit to the full amount hereinabove stated and Lessee’s failure to do
so shall be a material breach of this Lease. 
Should Lessee comply with all covenants and conditions of this Lease, the
security deposit or any balance thereof shall be returned to Lessee (or at the
option of Lessor, to the last assignee of Lessee’s interest in this Lease) at
the expiration of the term.  Lessee
shall not be entitled to interest on the security deposit and Lessor shall have
the right to commingle said security deposit with other funds of Lessor.  Should Lessor sell its interest in the
Premises, Lessor may transfer to the purchaser thereof the then unexpended or
unappropriated deposit and thereupon Lessor shall be discharged from any
further liability for such funds.

 

5.             USE

 

5.1          Use.  The Premises shall be used and occupied for
lawful general office or industrial purposes permitted under applicable
ordinances and other Governmental requirements, the covenants, conditions and
restrictions affecting 600 Pine Avenue, as the same may be amended from time to
time, and the Rules and Regulations as Lessor may from time to time reasonably
adopt for the safety, care and cleanliness of the Building and 600 Pine Avenue
or the preservation of good order.  The
Rules and Regulations presently in effect are attached hereto as Exhibit “C”,
Lessor shall not be responsible to Lessee for the nonperformance of any of said
Rules and Regulations, or non compliance with said covenants, conditions and
restrictions, by any other tenant of the Building.

 

5.2          Compliance
With Law.  Lessee
shall at Lessee’s expense, comply promptly with all applicable statutes,
ordinances, rules, regulations, orders and requirements in effect regulating the
use by Lessee of the Premises.  Lessee
shall not use or permit the use of the Premises in any manner that will tend to
create waste or a nuisance or which disturbs other tenants of the Building.

 

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

 

4

 

6.             MAINTENANCE, REPAIRS AND ALTERATIONS

 

6.1          Lessor’s
Obligations.  Lessor
shall cause to be maintained, in good order, condition and repair, the
foundation, structural walls and exterior walls, common windows and doors of
the Building (excluding the interior surface thereof), heating, venting and air
conditioning systems, and any public and common areas in the Building, as well
as all parking areas, driveways, sidewalks, private roads or streets,
landscaping and all other areas located within 600 Pine Avenue other than areas
occupied by other buildings (such nonbuilding areas being herein referred to as
“Common Areas”).

 

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

 

6.3          Alterations
and Additions.

 

(a)           Lessee shall not, without Lessor’s prior written consent
(such consent not to be unreasonably withheld), make any alterations,
improvements, additions or utility installations in, on or about the Premises
unless such work is nonstructural and does not exceed $20,000.00.  For all work Lessee will provide Lessor with
as-built drawings reflecting any changes to the Premises.  As used in this Paragraph 6.3, the term
“utility installations” shall include bus ducting, power panels, fluorescent
fixtures, space heaters, condults and wiring. 
As a condition to giving such consent, Lessor may require that Lessee
(i) agree to remove any such alterations, improvements, additions or utility installations
at the expiration or sooner termination of the term, and to restore the
Premises to their prior condition and/or (ii) provide Lessor, at Lessee’s sole
cost and expense, a lien and completion bond in an amount equal to one and
one-half (1-1/2) times the estimated cost of such improvements, to insure
Lessor against any liability for mechanics’ and materialmen’s liens and to
insure completion of work.

 

(b)           All alterations, improvements and additions to the
Premises shall be performed by Lessor’s contractor for 600 Pine Avenue or other
licensed contractor approved by Lessor, Lessee shall pay, when due, all claims
for labor or materials furnished to or for Lessee at or for use in the
Premises, which claims are or may be secured by any mechanics’ or materialmen’s
lien against the Premises or any interest therein, and Lessor shall have the
right to post notices of nonresponsibility in or on the Premises as provided by
Law.

 

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

 

6.5          Lessor’s
Rights. If Lessee fails to perform Lessee’s obligations under this Article 6,
Lessor may, at its option (but shall not be required to), and without notice to
Lessee, perform such obligations on behalf of Lessee, and the cost thereof,
together with interest thereon at the rate specified in Paragraph 1 2.2(a)
hereof, shall immediately become due and payable as additional rent to Lessor.

 

7.             INSURANCE

 

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

 

7.1          Lessee’s
Liability Insurance. Comprehensive general liability insurance with
respect to the Premises and the operations of or on behalf of Lessee in, on or
about the Premises,  including but not
limited to; personal injury, product liability (if applicable), blanket
contractual, owner’s protective, broad form property damage liability coverage,
host liquor liability and owned and non-owned automobile liability in an amount
not less than $1,000,000 Combined Single Limit. Such policy shall contain (i)
severability of interest, (ii) cross liability, and (iii) an endorsement
stating in substance that “Such Insurance as is afforded by this policy for the
benefit of Lessor shall be primary as respects any

 

5

 

liability or claims arising out of the
occupancy of the Premises by Lessee, or out of Lessee’s operations, and any
insurance carried by Lessor shall be excess and non-contributory”.

 

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

 

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

 

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

 

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

 

7.5          Lessor’s
Rights. If Lessee fails to procure, maintain and/or pay for
at the times and for the durations specified in this Lease, the insurance
required hereunder, or fails to carry insurance required by any governmental
requirement. Lessor may (but without obligation to do so), and without notice
to Lessee, perform such obligations on behalf of Lessee, and the cost thereof,
together with interest thereon at the rate specified in Paragraph 1 2.2(a)
hereof, shall Immediately become due and payable as additional rent to Lessor.

 

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

 

7.7          Mutual
Indemnification. To the fullest extent permitted by law, the parties
hereto shall each defend, indemnify and hold harmless one another from and
against any and all claims arising from the indemnifying party’s use of the
Premises, the building or the common areas, or the conduct of its business or
from any activity, work or thing done, permitted or suffered by the
indemnifying party, its agents, contractors, employees or invitees in or about
the Premises, the building or the common areas, and shall further indemnify and
hold harmless one another from and against any and all claims arising from any
breach or default in the performance of any obligation on the indemnifying
party’s part to be performed hereunder or arising from any act, neglect, fault
or omission of such indemnifying party or of its agents, employees, or invitees
and from and against all costs, attorneys’ fees, expenses and liabilities
incurred in or about such claim or any action or proceeding brought thereon. In
case any action or proceeding be brought against one party by reasons of any
such claim, the other party, upon notice from the first, shall defend the same
at the other’s expense by counsel reasonably acceptable to the first party.

 

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

 

6

 

breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures, or from any other cause, whether such damage or injury
results from conditions arising upon the Premises or upon other portions of the
Building, or from other sources or places, and regardless of whether the cause
of such damage or injury or the means of repairing the same is
inaccessible.  Lessor shall not be
liable for incorporeal hereditaments including interference or obstruction of
light, air or view.  Lessor shall not be
liable for any damages arising from any act or neglect of any other tenant of
the Building or the other portions of 600 Pine Avenue.  Such exemption shall not extend to any acts
of gross negligence or willful misconduct by Lessor.

 

8.             DAMAGE OR DESTRUCTION

 

8.1          Partial
Damage. If the Premises, or so much of the Building as to
cause the Premises to be uninhabitable, are damaged by any casualty, and the
damage (exclusive of any property or improvements installed by Lessee in the Premises)
can be repaired within ninety (90) days without the payment of overtime, Lessor
shall at Lessor’s expense repair such damage (exclusive of any property of
Lessee or improvements installed by Lessee in the Premises) as soon as
practicable and this Lease shall continue in full force and effect.  If the Premises, or so much of the Building
as to cause the Premises to be uninhabitable, are damaged by any casualty, and
the damage (exclusive of any property of Lessee or improvements installed by
Lessee in the Premises) cannot be repaired within ninety (90) days without the
payment of overtime or other premiums, Lessor may, at Lessor’s option, either
(i) repair such damage as soon as practicable at Lessor’s expense, in which
event this Lease shall continue in full force and effect, or (ii) give written
notice to Lessee within thirty (30) days after the date of the occurrence of
such damage of Lessor’s intention to terminate this Lease, in which event this
Lease shall terminate as of the date of the occurrence of such damage.

 

8.2          Damage Near
End of Term.  If the
Premises, or so much of the Building as to cause the Premises to be
uninhabitable, are damaged during the last six (6) months of the term of this
Lease or any renewal thereof, Lessor may, at Lessor’s option, terminate this
Lease as of the date of occurrence of such damage by giving written notice to
Lessee of Lessor’s election to do so within thirty (30) days after the date of
occurrence of such damage; provided, however, that if the term of this Lease
has been extended for any reason whatsoever, Lessor’s right to terminate this
Lease shall only apply during the last six (6) months of the then current term
of this Lease.

 

8.3          Abatement
of Rent: Lessee’s Remedies.

 

(a)           If Lessor is obligated or elects to repair the Premises as
provided above, the rent payable for the period from commencement until
completion of repair shall be abated, in proportion to the degree to which
Lessee’s use of the Premises is impaired; provided, however, that the aggregate
period of abatement hereunder shall not exceed six (6) months.  Except for such abatement, if any, Lessee
shall have no claim against Lessor for any damage suffered by reason of any
such damage, destruction, repair or restoration.

 

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

 

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

 

8.5          Restoration. Lessor’s
obligation to restore shall not include the restoration or replacement of
Lessee’s furnishings, machinery, equipment, trade fixtures or other personal
property or any improvements or alterations made by Lessee to the Premises.

 

9.             PERSONAL
PROPERTY TAXES

 

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

 

7

 

10.          UTILITIES

 

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

 

11.          ASSIGNEMENT AND SUBLETTING

 

11.1        Lessee
shall not voluntarily or by operation of law sublet, assign, transfer, mortgage
or otherwise encumber, or grant concessions, licenses or franchises with
respect to all or any part of Lessee’s interest in this Lease or the Premises
without the prior written consent of Lessor. 
If Lessee desires at any time to assign this Lease or to sublet the
Premises or any portion thereof, it shall first notify Lessor of its desire to
do so and shall submit in writing to Lessor (i) the name of the proposed
sublessee or assignee; (ii) the nature of the proposed sublessee or assignee;
(ii) the nature of the proposed sublessee’s or assignee’s business to be
carried on in the Premises; (iii) the terms and provisions of the proposed
sublease or assignment; (iv) such reasonable financial information as Lessor
may request concerning the proposed sublessee or assignee, including, but not
limited to a balance sheet as of a date within ninety (90) days of the request
for Lessor’s consent, statements of income or profit and loss for the two year
period preceding the request for Lessor’s consent and a written statement in
reasonable details as to the business experience of the proposed sublessee or
assignee during the five (5) years preceding the request for Lessor’s consent;
and (v) the name and address of sublessee’s or assignee’s present or previous
landlord.  Lessor may, as a condition to
granting such consent, require that the obligations of any assignee which is a
subsidiary or affiliate of another corporation be guaranteed by the parent or
controlling corporation.  Any sublease,
license, concession, franchise or other permission to use the Promises shall be
expressly subject and subordinate to all applicable terms and conditions of
this Lease.  Any purported or attempted
assignment, transfer, mortgage, encumbrance, subletting, license, concession,
franchise or other permission to use the Premises contrary to the provisions of
this paragraph shall be void and, at the option of Lessor, shall terminate this
Lease.

 

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

 

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

 

11.4        At any time
within ten (10) days after Lessor’s receipt of the information specified in
Section 1 1.1 above, Lessor may by written notice to Lessee elect (a) to
sublease the Premises or the portion thereof so proposed to be subleased by
Lessee, or to take an assignment of Lessee’s leasehold estate hereunder, upon
the same terms as those offered to the proposed sublessee or assignee, as the
case may be; or (b) disapprove such assignment or subletting.  If Lessor does not act within the twenty
(20) days, such failure to act is deemed a disapproval of such request for
assignment or subletting.

 

11.5        Each
assignee or transferee, other than Lessor, shall assume, all obligations of
Lessee under this Lease and shall be and remain liable jointly and severally
with Lessee for the payment

 

8

 

of the rent, and for the due performance of
all the terms, covenants, conditions and agreements to be performed by Lessee
hereunder; provided, however, that a transferee other than an assignee shall be
liable to Lessor for rent only in the amount set forth in the assignment or
transfer. No assignment shall be binding on Lessor unless such assignee or
Lessee shall deliver to Lessor a counterpart of such assignment and an
instrument in recordable form which 
contains a covenant of assumption by such assignee satisfactory in
substance and form to Lessor, consistent with the requirements of this Section
11.5, but the failure or refusal of such assignee to execute such instrument of
assumption shall not release or discharge such assignee from its liabiility as
set forth above.

 

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

 

12.          DEFAULT: REMEDIES

 

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

 

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

 

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

 

(c)           The failure by Lessee to observe or
perform any of the covenants, conditions or provisions of this Lease (or the
covenants, conditions and restrictions giverning 600 Pine Avenue) to be
observed or performed by Lessee, other than described in Paragraph 12.1 (b)
hereof, where such failure shall continue for a period of thirty (30) days
after written notice thereof from Lessor to Lessee; provided, however, that any
such notice shall be in lieu of, and not in addition to, any notice required
under California Code of Civil Procedure Section 1161; provided further, that
if the nature of Lessee’s default is such that more than thirty (30) days are
reasonably required for its cure, then Lessee shall not be deemed to be in
default if Lessee commences such cure within said thirty (30) days period and
thereafter diligently prosecutes such cure to completion; or

 

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

 

9

 

12.2        Remedies for
Default of Lessee.  In the vent
of any such default, Lessor may at any time thereafter, upon notice and demand
and without limiting Lessor in the exercise of any other right or remedy which
Lessor may have by reason of such default or breach:

 

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

 

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

 

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

 

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

 

(4)  Any other amount necessary to compnesate
Lessor for all the detriment proximately caused by Lessee’s failure to perform
its obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, including, but not limited to; the cost of
recovering  possession of the Premises,
expenses of releasing including necessary renovation and alteration of the
Premises, reasonable attorneys’ fees and any other reasonable cost.  The ”worth of the time of award” of the
amounts referred to in subparagraphs (1) and (2) above shall be computed by
allowing interest at five (5) percentage points above the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award.  The worth at the time of award of the amount
referred to in subparagraph (3) above shall be computed by discounting such
amount at one (1) percentage point above such discount rate.

 

(b)           Require Lessee to make payment of all
rental obligations in cash or by certified cashiers check.

 

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

 

12.3        Default by
Lessor.  Lessor shall not be in default
of any of the obligations of Lessor under this Lease unless Lessor fails to
perform such obligations within a reasonable time, but in no event less than
thirty (30) days after written notice by Lessee to Lessor specifying wherein
Lessor has failed to perform such obligations; provided, however, that if the
nature of Lessor’s default in such that more than (30) days are required for
its cure, Lessor shall not be in default if Lessor commences such cure within
such thirty (30) day period and thereafter diligently prosecutes the same to
completion.  In the event of any such
default by Lessor, Lessee may pursue any remedy now or hereafter available to
Lessee under the laws of judicial decisions of the State of California, except
that Lessee shall not have the right to terminate this Lease except as
expressly provided herein.  Lessee waives
any right to deduct the expenses of such reparis from the rent and waives,
except as herein provided, any Lessor obligations for tenant abaility of the
Building or Premises.

 

12.4        Late
Charges.  Lessee
acknowledges that the late payment by Lessee to Lessor of rent and other sums
due hereunder will cause Lessor to incur costs not contempated by this Lessee,
the exact amount of which will be extremely difficult to ascertain.  Such costs include, but are not limited to,
processing and accounting charges and late charges which may be imposed on Lessor
by the terms of any mortgage or trust deed covering the Premises.  Accordingly, if any installment of rent or
any other sum due from Lessee shall not be received by Lessor or Lessor‘s
designee within ten (10) days after the same is due, Lessee shall pay to Lessor
a late charge equal to fifteen percent (15%) of such overdue amount monthly
until such overdue amount is paid. 
Lessee acknowledges that such late charge represents a fair and
reasonable estimate of the cost Lessor will incur by reason of a late payment
by Lessee.  Acceptance of such late
charge by Lessor shall in no event constitute a waiver of Lessee’s default with
respect to such overdue amounts, nor prevent Lessor from exercising any of the
other rights and remedies granted hereunder.

 

13.          CONDEMNATION OR RESTRICTION ON USE

 

13.1        Eminent
Domain.  If the whole of the Premises
or so much thereof as to render the balance unusable by Lessee shall be taken
under power of eminent domain, this Lease shalll automatically terminate as of
the date of such condemnation, or as of the date possession is taken by the
condemning authority, whichever is earlier. 
No award for any partial or entire taking shall be apportioned, and
Lessee hereby assigns to Lessor any award which may be made in such taking or
condemnation, together with any and all rights of Lessee now or hereafter
arising in or ot the same

 

10

 

or any part thereof; provided, however, that
nothing contained herein shall be deemed to give Lessor any interest in or to
require Lessee to assign to Lessor any award made to Lessee for its relocation
expenses, the taking of personal property and fixtures belonging to Lessee, the
interruption of or damage to Lessee’s business and/or for Lessee’s unamortized
cost of leasehold improvements.  The
unamortized portion of  the Lessee’s
expenditures for improving the Premises shall be determined by multiplying such
expenditures by a fraction, the numerator 
of which shall be the number of years of the term of this Lease which
shall not have expired at the time of such appropriation or taking, and the
denominator of which shall be the number of years of the term of this Lease
which shall not have expired at the time of improving the Premises.  In no event shall options to renew or extend
be taken into consideration in determining the payment to be made to the
Lessee.  Lessee’s right to receive
compensation or damages  for its
fixtures and personal property shall not be affected in any manner thereby.

 

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

 

13.3        Temporary
Taking.  No temporary taking of the Premises
and/or of Lessee’s rights therein or under this Lease shall terminate this
Lease; and any award made by reason of any 
such temporary taking shall belong entirely to Lessor.

 

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

 

14.          BROKERS

 

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

 

15.          LESSOR’S LIABILITY

 

15.1        The
term “Lessor” as used herein shall mean only the owner or owners at the time in
question of the fee title or a Lessee’s interest in a ground lease of the
Building.  In the event of any transfer
of such title or interest, Lessor herein named (and in case of any subsequent
transfers, the then grantor) shall be relieved from, and after the date of such
transfers of all liability for Lessor’s obligations thereafter to be performed;
provided, however that any funds in the hands of Lessor or the then grantor at
the time of such transfer in which Lessee has an interest shall be delivered to
the grantee.  The obligations contained
in this Lease to be performed by Lessor shall, subject as aforesaid, be binding
on Lessor’s successors and assigns only during their respective periods of
ownership, and no such successor or assignee shall be liable for the
obligations of its predecessor Lessor hereunder.

 

15.2        The
inital Lessor hereunder is a joint venture operating as a California limited
partnership.  In consideration of the
benefits accruing hereunder, Lessee, its successors and assigns, agree that, in
the event of any actual or alleged failure, breach or default hereunder by the
initial Lessor;

 

(a)           The sole and exclusive remedy shall
be against the assets of the partnership;

 

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

 

(c)           No service of process shall be made
against any partner (except as may be necesary to secure jurisdiction of the
partnership);

 

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

 

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

 

(f)            Any judgment taken against  any partner may be vacated and set aside at
any time nunc pro tunc.

 

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

 

11

 

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

 

16.          PARKING

 

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

 

17.          GENERAL PROVISIONS

 

17.1        Estoppel Certificate

 

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

 

(b)           Lessee’s failure to deliver such
statement within such time shall be conclusive upon Lessee that (i) this Lease
is in full force and effect without modification except as may be represented
by Lessor, (ii) there are no uncured defaults in Lessor’s performance and (iii)
not more than one month’s rent has been paid in advance.

 

(c)           If Lessor desires to finance or
refinance the Premises, or any part thereof, Lessee shall deliver to any lender,
bank or financial institution designated by Lessor Lesse’s most recent Form 10K
documents filed with the Securities & Exchange Commission.

 

17.2        Severability.  The invalidity
of any provision of this Lease as determined ny a court of competent jurisdiction,
shall in no way affect the validity of any other provision hereof.

 

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

 

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

 

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

 

17.6        Waivers.   No waiver of any provision hereof shall be
deemed a waiver of any other provisions hereof.  Consent to or approval of any act by one of the parties hereto
shall not be deemed to render unnecessary the obtaining of such party’s consent
to or approval of any subsequent act. 
The acceptance of rent hereunder by Lessor shall not be a waiver of any
preceding breach by Lessee of any

 

12

 

provision hereof, other than the failure of
Lessee to pay the particular rent so accepted, regardless of Lessor’s knowledge
of such preceding breach at the time of acceptance of such rent.

 

17.7        Holding Over. If Lessee holds over after
the expiration or earlier termination of the term hereof without the express
written consent of Lessor, Lessee shall become a tenant at sufferance only at
the then prevailing market rate as determined by Lessor in its sole and
absolute discretion for the space in effect upon the date of such expiration or
earlier termination (subject to adjustment as provided in Article 3 hereof and
prorated on a daily basis), and otherwise upon the terms, covenants and
conditions herein specified, so far as applicable.  Acceptance by Lessor of rent after such expiration or earlier
termination shall not constitute a consent to holdover hereunder or result in a
renewal.  The foregoing provisions of
this Paragraph are in addition to and do not affect Lessor’s right of re-entry
or any other rights of lessor hereunder or as otherwise provided by law.

 

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

 

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

 

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

 

17.11.     Subordination.  This
Lease shall, at Lessor’s option, be either superior or subordinate to mortgages
or deeds of trust on the Premises, whether now existing or hereinafter
created.  Lessee shall, upon written
demand by Lessor, execute such instruments as may be required from time to time
to subordinate the rights and interest of Lessee under this Lease to the lien of
any mortgage or deed of trust on the Building. 
Notwithstanding any such subordination,so long as Lessee is not in
default, hereunder, this Lease shall not be terminated or Lessee’s quiet
enjoyment of the Premises disturbed in the event such mortgage or deed of trust
is foreclosed.  In the event of such
foreclosure,  Lessee shall thereupon
become a Lessee of, and attorn to, the successor, in, interest to Lessor on the
same term, and conditions as are contained in the Lease.

 

17.12.     Attorneys Fees.  If either party hereto brings an action to enforce the terms
hereof or declare the rights of the parties hereunder, the prevailing party in
any such action, on trail or appeal shall be entitled to recover from the other
party the reasonable costs and attorneys frees incurred in connection with such
action.  For purposes of this provision,
in any action or proceeding instituted by Lessor based upon any default or
alleged default by Lessee hereunder. 
Lessor shall be deemed the prevailing party if  (i) judgment is entered in favor of Lessor of  (ii) prior to trail or judgment Lessee shall
pay all or any portion of the rent and charges claimed by Lessor, eliminate the
condition(s), cease the act(s) or otherwise cure the omission(s) claimed by
Lessor to constitute a default by Lessee hereunder. Any expenses incurred in
collecting sums due, whether action is brought or not, and any attorneys fees
incurred in collecting payment will be charged to Lessee.

 

17.13      Lessor’s Access. 
Lessor and Lessor’s agents shall have the right to enter the Premises
with reasonable notice at reasonable times for the purpose of inspecting the
same, showing the same to prospective purchasers, lessees, or lenders, and
making such alterations, repairs, improvements or additions to the Premises or
to the Building as Lessor may deem necessary or desirable.  Lessor may at any time place on or about the
Building any ordinary “For Sale” signs and Lessor may at any time during the
last one hundred eighty (180) days of the term hereof place on or about the
Building any ordinary “For Sale”, “For Lease” or similar signs, all without
rebate of rent or liability to Lessee.

 

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

 

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

 

17.16      Entire Agreement.  This Lease, the Exhibits hereto which by this reference are
incorporated herein as though set forth in full herein, covers in full each and
every agreement of every kind or nature whatsoever between the parties hereto
concerning the Premises and the Building and all preliminary negotiations and
agreements of whatsoever kind or nature are merged herein.  Lessor has made no representatives or
promises whatsoever with respect to the Premises or the Building, or

 

13

 

the design configuration of the 600 Pine
Avenue, except those contained herein, and no there person form or corporation
has at any time had any authority from Lessor to make any representations or
premises on behalf of Lessor.  If any
such representations or premises have been made by others.  Lessee hereby waives all right to rely
thereon.  No verbal agreement or implied
covenant shall be held to vary the provisions hereof any statute, law or custom
to the contrary notwithstanding.

 

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

 

17.17.     Signs.  No sign,
placard, picture, advertisement, name or notice shall be inscribed, displayed,
printed or affixed to or near any part of the outside or inside of the Building
without the written consent of Lessor first had and obtained and without full
compliance with all governmental requirements. 
Lessor shall have the right to remover any such sign, placard, picture,
advertisement, name or notice without, to and at the expense of Lessee.  All approved signs shall be installed at
Lessee’s sole cost and expense.  Lessee
further agrees to maintain any such approved signs, as may be approved by
Lessor, in good condition and repair at all times.  Lessee shall not place any sign on a vehicle or movable or
non-movable object in or on street adjacent to the Building.

 

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

 

17.19      Memorandum of Lease.  Lessee may prepare a memorandum of lease which shall be signed by
Lessor, provided said momorandum meets with Lessor's approval, which will not
be unreasonably withheld.  Lesseef may
record said memorandum of lease with the Santa Barbara County Recorder,
provided a conformed copy is furnished to Lessor.  Lessee shall be responsible for all costs in preparing and
recording the memorandum of lease. 
Concurrently with the execution with the execution of such Memorandum
Lessee shall execute and deliver to Lessor a Quitclaim Deed to be held by
Lessor pending termination of this Lease.

 

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

 

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

 

As an exception to the
provision of Section 17.21, Lessee consents to the disclosure of the terms of
this Lease to any lender, bank or financial institution designated by Lessor,
and Lessor consents to the disclosure of the terms of this Lease to the
Securities and Exchange Commission (SEC) if required as part of any reports
which Lessee must provide to the SEC.

 

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

 

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

 

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

 

14

 

17.25      Force e Majeure. Notwithstanding any of the items set forth
above, Lessor shall bear no liability, of whatever kind, to Lessee if, despite
Lessor’s exercise of due diligence, Lessor’s carrying out of its obligations as
defined herein is prevented or delayed by legal action or by the exercise of
governmental authority, whether Federal, State, County, or other or by force
majeure, strikes, riots, acts of God, war, adverse weather conditions, fire,
unavoidable casualties, or acts of third parties beyond Lessor’s control.

 

17.26      Meaning. The provisions
and language of this Agreement shall be interpreted in accordance with the
plain meaning thereof and shall not be construed for or against any of the
parties hereto, as all parties have participated in, and have approved, the
drafting of this document.

 

18.          ADJACENT CONSTRUCTION

 

18.1        Lessor
specifically reserves the right to construct an additional building (the “New
Building”) adjacent to the existing Building on the Property owned by Lessor,
but Lessor shall carry out any such construction activities so as to not
prevent Lessee’s access or unreasonably disrupt or interfere with its quite
possession and enjoyment to the leased Promises. Lessor shall not be entitled
to use any portion of the existing parking area for construction staging or
storage purposes without the consent of Lessee. Should Lessor elect to exercise
the right reserved hereunder, then:

 

18.2        Lessor
shall use its best efforts to cause the newly constructed improvements, and the
land on which they are separated, to be separately assessed, and shall pay any
increase in real estate taxes or assessments that are attributable to such land
and improvements; and

 

18.3        Lessor shall
pay (a) any increase in Building Operating Costs attributable to the New
Building or the construction thereof and (b) its prorata share, based on the
percentage that the number of usable square feet in the New Building bears to
the combined usable square footage of the New Building and the leased Premises
and the number of usable square feet in the New Building, of any Building
Operating Costs attributable to the common use of any facilities or
improvements by Lessee and the owner/or occupants of any such New Building.

 

19.          ACCEPTANCES OF PREMISES

 

19.1        Lessee
shall receive the Premises in an “ AS IS” condition, including the existence of
nails and screws inserted into the walls by a prior lessee of the Premises. All
existing electrical power and other utilities will be in good working condition
upon tender of possession of the Premises by Lessor to Lessee.

 

20.          EQUIPMENT ALLOWANCE

 

Lessor shall provide to
Lessee an allowance of $ 80,000 towards the purchase of equipment Lessee needs
to operate its facility. Lessor shall act as agent for Lessee to purchase
certain equipment designated by Lessee from the current tenant of the Building
with the use of the $ 80,000 equipment allowance. The equipment to be purchased
with the $ 80,000 allowance is in addition to the fixed, in-place equipment and
fixtures at the Premises.

 

21.          HAZARDOUS SUBSTANCES

 

At the expiration of the
lease term, Lessee shall surrender possession of the Premises to Lessor free of
Hazardous Materials resulting from or attributable to Lessee’s use and
occupancy of the Premises during the terms of this lease in concentrations that
exceed permissible limits established by applicable laws, ordinances and
regulations. Lessee shall obtain, at its expense, a Phase I Environmental
report to be delivered to Lessor at the end of the term certifying the Premises
are free from Hazardous Materials. Lessee shall indemnity, defend and hold
Lessor free and harmless from and against (a) all costs and expense of
complying with requirements of cognizant governmental agencies, including the
costs of (i) any required or necessary remediation, cleanup, or detoxification
of the Premises, (ii) the repair of any damage to the Premises caused in
connection therewith or as a result thereof, and (iii) the preparation of any
disclosure or other required plans, which such actions are required or
necessary during or following the lease of the Property, (b) any fines and/or
penalties imposed or sought to be imposed by any such governmental agencies,
(c) any claims, liabilities, demands, losses, costs, expenses, litigation
liabilities, damages and recoveries with respect to injuries or damages to
persons or to Property, in each case to the full extent that such actions,
fines, penalties, or claims are necessitated by or are attributable to
Premises, or the use, generation, storage, release or disposal of Hazardous
Materials by Lessee upon, in or from the Premises during the term of this
Lease, and (d) any attorneys’ fees and related costs incurred by Lessor as the
result of a default by Lessee in the performance of its obligations hereunder.
The indemnification obligation of Lessee hereunder shall survive and shall
extend to claims arising after the termination of this Lease.

 

21.1        For the purpose
of this section, Hazardous Materials shall include, but not be limited to,
substances defined as “hazardous substances”, “hazardous materials” or “toxic
substances” in the

 

15

 

Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sec.
9061, et seq.: Hazardous Materials Transportation Act, 49 U.S.C. Sec.
1801; and Resource Conservation and Recovery Act, 42 U.S.C. Sec.6901 et seq.;
and those substances defined as hazardous wastes” in Sec. 25117 of the
California Health and Safety Code or as “hazardous substances” in Section 25316
of the California Health & Safety Code; and in the regulations and
publications promulgated pursuant to said laws.

 

21.2        Lessor shall
provide Lessee with reasonable access to the Premises following the expiration
of the terms of this Lease for the purpose of carrying out any of the actions
or work required to be performed by lessee under this Section 21 during any
period in which Lessor is performing any refurbishing or renovations
preparations to the renting of the Building to a successor tenant. Should
Lessee’s work extend beyond the period required by Lessor for any such
refurbishing or renovations, Lessee shall pay rent to Lessor at the hold-over rate
set forth in this Lease to the extent that Lessee’s continuing activities, if
any, under this Section 21 Interfere with the actual possession and use of the
Building by a successor tenant.

 

22.          SAME USE AND PRACTICE

 

Without modifying any of the
terms and provisions hereinabove, Lessor and Lessee agree that Lessee intends
to us the Premises for substantially identical purposes as the uses conducted
on the Premises by the prior tenant, including with limitation, manufacturing
processes, supplies, and materials used. Finished products may vary or be
different at the option of Lessee as well as raw materials and processes used
in the operations.

 

23.          EXHIBITS

 

Exhibits A, B, C and D are
attached hereto and made a part hereof. Exhibit D is a Schedule of Machinery
Equipment and Fixtures purchased by Lessor from Mentor Corporation at the time
that Lessor acquired the Building.

 

16

 

[GRAPHIC]

 

17

[GRAPHIC]

 

18

 

[GRAPHIC]

 

19

 

RULES
AND REGULATIONS ATTACHED

AND MADE A PART OF THIS LEASE

 

1.     No sign, placard, picture, advertisement,
name or notice shall be inscribed, displayed or printed oR affixed on or to any
part of the outside of the Building without the written consent of Lessor first
had and obtained and Lessor shall have the right to remove any such sign,
placard, picture, advertisement, name or notice without notice to and at the
expense of Lessee

 

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

 

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

 

2.     No Lessee shall obtain for use upon the
Premises ece, drinking water, towel and other similar services or accept
barbering or bootblacking services on the Premises, except from persons
authorized by the Lessor and at the hours and under regulations fixed by the
Lessor.

 

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

 

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

 

5.

 

6.     Lessee shall not overload the floor of the
Premises or in any way deface the Premises or any part thereof.

 

7.     Lessee shall not use, keep or permit to be
used or kept any foul or noxious gas or substance in the Premises, or permit or
suffer the Premises to be occupied or used in a manner offensive or
objectionable to the Lessor or other occupants or the Building by reason of
noise, odors and/or vibrations, or interfere in any way with other Lessees or
those having business therein, nor shall any animals or birds be brought in or
kept in or about the Premises of the Building.

 

8.     No cooking shall be done or permitted by
any Lessee on the Premises; however, the preparation of coffee, tea, hot
chocolate and similar items by Lessee for its employees and business visitors
shall be permitted.  Nor shall the
Premises be used for washing clothes, for lodging, or for any improper,
objectionable or immoral purposes.

 

9.      Lessee shall not use or keep in the
Premises or the Building any kerosene, gasoline or inflammable or combustible
fluid or material, or use any method of healing or air conditioning other than
that supplied by Lessor.  Any permitted
corrosive, flammable or other special wastes shall be handled for disposal as
directed by Lessor.

 

10.   Lessor will direct electricians as to where
and how telephone and telegraph wires are to be introduced.  No boring or cutting for wires will be
allowed without the consent of Lessor. 
The location of telephones, call boxes and other office equipment
affixed to the Premises shall be subjected to the approval of Lessor.

 

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

 

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

 

20

 

13.

 

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

 

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

 

16.   Requirements of Lessee as to any matters
within Lessor’s obligations pursuant to the Lease will be attended to only upon
application at the Lessee’s address for notices.  Employees of Lessor shall not perform any work or do anything
outside of their regular duties unless under special instructions from the
Lessor, and no employee will admit any person (Lessee or otherwise) to any
office without specific instructions from the Lessor.

 

17.

 

18.   Lessor shall have the right, exercisable
without notice and without liability to Lessee, to change the name and street
address of the Building of which the Premise are a part.

 

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

 

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

 

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

 

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

 

23.

 

24.

 

25.

 

26.

 

27.   Lessee shall not install any radio or
television antenna, loudspeaker or other device on the roof or exterior walls
of its Premises.

 

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

 

21

EXHIBIT
D

SCHEDULE
OF MACHINERY, EQUIPMENT & FIXTURES

 

Note:          All numerical references relate to the floor map attached
hereto.

 

The following is a list of
those items of machinery, equipment & fixtures, which are to be left in the
designated room.  Those rooms not listed
will have all machinery, equipment & fixtures removed.

 

FIRST
FLOOR

 

1.             Products Return Lab

Sink,
shelves and related plumbing

 

2.             Men’s restroom

All
items

 

3.             Women’s restroom

All
items

 

3A.          Hallway Cabinets

All
items

 

4.             Hallway closet

Honeywell
security system, electrical panels, shelving

 

5.             Hallway closet

Water
heater, electrical panels, shelving

 

6.             Men’s restroom

All
items

 

7.             Women’s restroom

All
items

 

8.             Showers

All
items

 

9.             Gel Dipping Room

HEPA
filters

 

10.           HEPA Utility Room

All
HEPA filters and electrical

 

10A.        Packaging Room

Laminar
flow wall

 

1

 

 

[GRAPHIC]

 

2

 

[GRAPHIC]

 

3

 

SCHEDULE
OF MACHINERY, EQUIPMENT & FIXTURES

 

BLOCKHOUSE AREA

 

A.            Incoming
Storage Fencing and canopy

 

B.            Hazardous
Pad

Hazardous pad and sump,
fencing and canopy

 

C.            Storage
Sheds

Will be left

 

D.            Blockhouse

Explosion proof walls and
plugs, T-Beam loader,

ventilation system

 

BACK OF BUILDING

 

E.             Chiller/air
handling system, Eto shed

 

LEFT SIDE OF BUILDING

 

F.             DCI

Shed, fencing and plad

 

G.            Eto
Scrubber

Fencing, pad and retaining
wall

 

H.            Chiller
and transformer for Main Assembly Room Addition

 

GENERAL

 

I.              All
window coverings, including mini-blinds and sun screens

 

J.             All
HVAC with related ducting, including package units on roof

 

K.            Sprinkler
system

 

4

 

 

11.           New
Dipping Production Room 

Solutions bench, regulator
valves & filters

 

12.           Specials
Dipping Room

HEPA filters

 

13.           RTV
Dipping Room

HEPA filters

 

14.           Special
Products Room

Laminar flow wall, sink and
attached plumbing

 

15.           General
Production Room

Laminar flow wall

 

16.           Oven
Room

Ducting

 

17.           Entry
to Main Assembly Room

Right side supply cabinet,
sink and plumbing

 

18.           Main
Assembly Room

Laminar flow wall

 

19.           Main
Assembly Room Addition

Vertical downflow HEPA
filters

 

20.           Special
Products Utility Room

HEPA filters

 

21.           General
Production Utility Room

HEPA filters

 

22.           Main
Assembly Utility Room

HEPA filters, electrical
panels

 

23.           Micro
Lab

L-shaped counter and sinks

 

24.           Rubber
Processing Room 1

Downflow laminar wall

 

25.           Back
Dock Area

Power station, room
parameter control system

 

26.           Rubber
Processing Room 2

Transformer, electrical
panels against back wall

 

2

 

27.           QA
Lab

Sink and dishwasher and
related plumbing

 

28.           Sterilization
Control Room

Eto control and units

 

29.           General
Production/Airation Chambers

Airation chambers and air
handling system

 

30.           Shell
storage

Wall shelves

 

31.           Xerox
Room

Sink and shelves

 

32.           Cafeteria

Center module containing
counters and sinks

 

33.           Vault

Fire proof vault with
cabinets

 

SECOND FLOOR

 

34.           Men’s
restroom

All items

 

35.           Women’s
restroom

All items

 

36.           Sales
& Marketing Area

Counter/cabinet with sink

 

37.           Main
Electrical Room

All items

 

39.           Telephone
Room

Wiring

 

40.           Conference
Room

Conference Table

 

3

 

GUARANTY

 

As a material inducement to
and in consideration of PINE AVENUE ASSOCIATES, a California limited
partnership (hereinafter referred to as “Lessor”) entering into a Lease dated
July 1, 1994,(hereinafter referred to as "the lease"), with McGhan
Medical Corporation, a corporation (hereinafter referred to as “Lessee”),
pursuant to which Lessor leased to Lessee, and Lessee leased from Lessor,
premises located at 600 Pine Avenue, Santa Barbara, California, INAMED
CORPORATION (hereinafter referred to as “Guarantor”) unconditionally guarantees
and promises to and for the benefit of Lessor that Lessee shall perform the
provisions of the Lease that Lessee is to perform.

 

Guarantor’s obligations are
independent of Lessee’s obligations.  A
separate action may be brought or prosecuted against any Guarantor whether the
action is brought or prosecuted against any other Guarantor or Lessee, or all,
or whether any other Guarantor or Lessee, or all, are joined in the action).

 

The provisions of the Lease
may be altered, affected, modified, or changed by agreement between Lessor and
Lessee at any time, or by course of conduct, without the consent of or without
notice to Guarantor, and this Guaranty shall thereafter and thereupon guarantee
the e performance of the Lease as so altered, affected, modified, or
changed.  Assignment of the Lease (as
permitted by the Lease) shall not affect this Guaranty.

 

This Guaranty shall not be
released, modified, or affected by Lessor’s failure or delay to enforce any of
its rights or remedies under the Lease, whether pursuant to the terms thereof
or at law or in equity.

 

If Lessee defaults under the
Lease, Lessor can proceed immediately against Guarantor or Lessee, or both, or
Lessor can enforce against Guarantor or Lessee, or both, any rights that it has
under the Lease, or pursuant to applicable laws.  If the Lease terminates and Lessor has any rights it can enforce
against Lessee after termination, Lessor can enforce those rights against
Guarantor without giving previous notice to Lessee or Guarantor, or without
making any demand on either of them.

 

1

 

Guarantor waives the right
to require Lessor to (1) proceed against Lessee; (2) proceed against or exhaust
any security that Lessor holds from Lessee; or (3) pursue any other remedy in
Lessor’s power.  Guarantor waives any
defense by reason of any disability of Lessee, and waives any other defense
based on the termination of Lessee’s liability from any cause.  Until all of Lessee’s obligations to Lessor
have been discharged in full,  Guarantor
has no right of subrogation against Lessee. 
Guarantor waives its right to enforce remedies that Lessor now has, or
later may have against Lessee. 
Guarantor walves any right to any participate in any security now or
later held by Lessor.  Guarantor walves
all presentments, demand for performance, notices of nonperformance, protests, notices
of protest, notices of dishonor, and notices of acceptance of this Guaranty,
and waives all notices of the existence, creation, or incurring or new of
additional obligations.

 

If Lessor disposes of its
interest in the Lease, “Lessor”, as used in this Guaranty, shall mean Lessor’s
successors.  This Guaranty may be
assigned by Lessor or any assignee of Lessor without consent or notice to
Guarantor.

 

If Lessor is required to
enforce Guarantor’s obligations by legal proceedings, Guarantor shall pay to Lessor
all costs incurred, including, without limitation, reasonable attorneys’ fees.

 

The obligations of Lessee
under the Lease to execute and deliver estoppel statements, as therein
provided, shall be deemed to also require the Guarantor hereunder to do and
provide the same relative to Guarantor.

 

Guarantor’s obligations
under this Guaranty shall be binding on Guarantor’s personal representatives,
heirs, successors, and assigns.

 

Notwithstanding anything in
this Guaranty to the contrary, the maximum liability of Guarantor under this
Guaranty shall be equal to twelve (12) months of Rent, including both the
initial Annual Rent and the Additional Rent, as those terms are defined in the
Lease.  For purposes of determining the
maximum liability hereunder, the initial Annual Rent shall be determined on the
bases of the Initial Annual Rent payable in the year in which the breach
occurs.  For example, if the breach
occurs in the year when the Initial Annual Rent is payable in monthly
installments of $50,000 the maximum liability for the Initial Annual Rent
(excluding any Additional Rent) shall be $600,000 (12x$50,000).  The Additional Rent for such twelve (12)
months shall be added thereto.

 

2

 

Venue in any action or proceeding
shall exclusively lie in Santa Barbara County, California.

 

IN WITNESS, WHEREOF, the
undersigned Guarantor has executed this Guaranty on this 1st day of July 1994.

 

	
   

  	
  INAMED CORPORATION

  
	
   

  	
  By 

  	
  /s/ Donald K. McGhan

  	
   

  
	
   

  	
  Donald K. McGhan,

  
	
   

  	
  President and Chairman

  
	
   

  	
   

  
	
   

  	
  3800 Howard Hughes
  Perkway,

  
	
   

  	
  Suite 900

  
	
   

  	
   

  
	
   

  	
  Las Vegas, NV 89109

  

 

3

 

EXHIBIT B

[GRAPHIC]

 

 

 

[GRAPHIC]

 

 

 

[GRAPHIC]

 

 

[MCGHAN LOGO]

 

February 18, 2000

 

Pine Avenue Associates, Ltd.

c/o Bermant Development Company

5383 Hollister Avenue, Suite 150

Santa Barbara, California 93111

 

Re:                             Lease,
dated July 1, 1994 (as amended November 15, 1999, the “Lease”) between Pine
Avenue  Associates, Ltd. (“PAA”), as
lessor, and McGhan Medical Corporation (“McGhan”), as lessee, for premises
(the  “Premises”) located at 600 Pine
Avenue, Goleta, California

 

Ladies and Gentlemen:

 

Pursuant to Section 11.1 of the Lease, McGhan
hereby requests PAA’s consent to the sublease of part of the Premises on the
following terms and conditions:

 

1.     Sublessee:  Agility Communications, Inc., a Delaware
corporation (“Agility”).

 

2.              Subleased Premises:  That portion of the second floor of 600 Pine Avenue shown on
Exhibit “A” annexed hereto, together with a later demise of the existing
first-floor “clean room” and the existing first-floor machine shop, together
with a prorata share of the common areas.

 

3.     Term:  April 15, 2000 through July 31, 2006.

 

4.              Use:  General
office and research and development purposes, provided, however, that Agility
will be subject to the same restrictions on use as McGhan is under the
Lease.  In addition, if Agility wishes
to use the premises for storage or processing of any toxic or hazardous
materials, pesticides, solvents, flammable products or any “red label”
merchandise, it must first obtain PAA’s consent to such use in each instance.

 

5.              Base Rent:  $219,240
for the first year (plus $1.40 per sq. ft. for the machine shop and “clean
room”), adjusted each year per the Consumer Price Index, not less than 2% or
more than 6%.

 

6.              Net Charges: 
Direct passthrough of the Lease charges, prorated for Agility’s portion
of the building.

 

7.              Utilities and Janitorial:  To be provided by Agility at its expense.

 

 

8.                                      Parking: 45 nonexclusive spaces.

 

9.                                      Condition:  “As is”
with no tenant finish by McGhan.

 

10.                               Security: Cash security deposit of $18,270, plus an
“evergreen” irrevocable letter of credit in the amount of $128,412.

 

11.                               Miscellaneous: 
Agility has requested that PAA’s consent confirm the following matters,
and PAA’s countersignature on this letter shall be deemed to be PAA’s agreement
thereto:

 

(a)                                 The waiver of
subrogation set forth in Section 17.20 of the Prime Lease shall also apply as
between Agility and PAA;

 

(b)                                 Agility,
without PAA’s prior written consent (but upon ten [10] days’ notice to McGhan
and PAA, may assign the Sublease to  (i)
a corporation controlling, controlled by or under common control with Agility
(provided that such corporation’s net worth after the transfer is equal to or
greater than Agility's net worth on the date hereof);  (ii)
by operation of law to any party with whom Agility shall merge (provided that
the merged entity’s net worth is equal to or greater than the net worth of
Agility on the date hereof); or (iii)  a
purchaser of all or substantially all of Agility's assets, provided that
the  purchaser’s net worth after the
transfer is equal to or greater than the net worth of Agility on the date
hereof;

 

(c)                                  A sale of all
of Agility’s capital stock shall not be deemed an assignment, subletting or
other transfer of the Sublease, provided, however, that the purchaser’s and
Agility’s combined net worth after such transaction shall be at least that of
Agility prior to such transaction; and

 

(d)                                 A transfer of
Agility’s stock on a public exchange shall not, by itself, constitute a change
of control of Agility.

 

(e)                                  Consent of PAA
to the Sublease is conditioned upon receipt of consent of the guarantor under
the Lease, Inamed Corporation, a Delaware corporation, substantially in the
form of Exhibit “B” annexed hereto.

 

(f)                                    Notwithstanding
anything to the contrary in this consent, PAA’s consent to the Sublease does
not in any way release or modify any of McGhan’s obligations under the
Lease.  McGhan remains directly and
primarily liable to PAA as Lessee under the Lease.

 

13.                               Transfer
Consideration: PAA shall be entitled to all Transfer Consideration
(as such term is defined in Section 11.6 of the Lease) received by McGhan as a
result of the Sublease, except that McGhan shall be allowed to retain an amount
equal to twelve and one-half ($.125) cents per sq. ft. of space in the Premises
per month.

 

 

Enclosed is the information
concerning Agility described in items (iv) and (v) of Section 11.1 of the
Lease.  Please call if you have any
questions concerning the foregoing.

 

	
   

  	
  Very truly yours,

  
	
   

  
	
   

  	
  MCGHAN
  MEDICAL CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Heinz

  	
   

  
	
   

  	
  David Heinz, Director of
  Facilities

  
	
   

  	
   

  
	
  enclosures

  	
   

  
	
   

  	
   

  
	
  cc:

  	
  Neil D. Karbank, Esquire

  
	
   

  	
   

  
	
  ****************************

  
								

 

The
foregoing sublease is hereby consented to:

 

Pine
Avenue Associates, Ltd.

 

	
  By: 

  	
  /s/ Jeff C. Bermant

  	
   

  	
  Date: 

  	
  2/24/00

  

 

 

 

Agility Communications, Inc

Profit and Loss

January through December 1999

 

	
   

  	
   

  	
  Jan — Dec, ‘99

  	
   

  
	
  Ordinary Income/Expense

  	
   

  	
   

  	
   

  
	
  Income

  	
   

  	
   

  	
   

  
	
  Dividend Income

  	
   

  	
  36,393.66

  	
   

  
	
  AF SBIR 1

  	
   

  	
  47,900.00

  	
   

  
	
  Army SBIR 1

  	
   

  	
  31,108.10

  	
   

  
	
  Army STTR 1

  	
   

  	
  10,467.00

  	
   

  
	
  Total Income

  	
   

  	
  125,868.76

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Gross Profit

  	
   

  	
  125,868.76

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Expense

  	
   

  	
   

  	
   

  
	
  Accounting

  	
   

  	
  517.75

  	
   

  
	
  Automobile Expense

  	
   

  	
  2,336.49

  	
   

  
	
  Bank Service Charges

  	
   

  	
  1,329.40

  	
   

  
	
  Computer Exp< $2000

  	
   

  	
  1665.19

  	
   

  
	
  Computer Support & Maintenance

  	
   

  	
  23,018.82

  	
   

  
	
  Conferences & Shows

  	
   

  	
  5,000.00

  	
   

  
	
  Consultants

  	
   

  	
  26,806.00

  	
   

  
	
  Dues and Subscriptions

  	
   

  	
  1,424.54

  	
   

  
	
  Employee Benefits

  	
   

  	
  8,222.02

  	
   

  
	
  Equipment Rental

  	
   

  	
  3,346.70

  	
   

  
	
  Freight

  	
   

  	
  500.00

  	
   

  
	
  Furniture & Equipment

  	
   

  	
  3,023.56

  	
   

  
	
  Insurance

  	
   

  	
  5,134.60

  	
   

  
	
  Interest Expense

  	
   

  	
  38.98

  	
   

  
	
  Legal

  	
   

  	
  58,057.34

  	
   

  
	
  Licenses and Permits

  	
   

  	
  12,240.12

  	
   

  
	
  Marketing Research

  	
   

  	
  22,200.00

  	
   

  
	
  Materials & Supplies

  	
   

  	
  20,708.32

  	
   

  
	
  Office Supplies

  	
   

  	
  7,301.20

  	
   

  
	
  Miscellaneous

  	
   

  	
  1,175.16

  	
   

  
	
  Outside Services

  	
   

  	
  200.00

  	
   

  
	
  Payroll Expenses

  	
   

  	
  23,820.11

  	
   

  
	
  Postage and Delivery

  	
   

  	
  1,407.84

  	
   

  
	
  Printing and Reproduction

  	
   

  	
  446.57

  	
   

  
	
  Promotion

  	
   

  	
  5,642.57

  	
   

  
	
  Recruiting

  	
   

  	
  76,575.61

  	
   

  
	
  Rent

  	
   

  	
  35,450.28

  	
   

  
	
  Repair & Maintenance

  	
   

  	
  693.45

  	
   

  
	
  Salaries

  	
   

  	
  258,129.27

  	
   

  
	
  Sales tax paid

  	
   

  	
  3,700.96

  	
   

  
	
  Telephone

  	
   

  	
  10,520.72

  	
   

  
	
  Training

  	
   

  	
  240.00

  	
   

  
	
  Travel & Ent

  	
   

  	
  35,882.75

  	
   

  
	
  Web Site & Internet

  	
   

  	
  2,076.00

  	
   

  
	
  Total Expense

  	
   

  	
  658,832.32

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Net Ordinary Income

  	
   

  	
  -532,963.56

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Net Income

  	
   

  	
  -532,963.56

  	
   

  

 

 

Agility Communications, Inc

Balance Sheet

As of December 31, 1999

 

	
   

  	
   

  	
  Dec 31, ‘99

  	
   

  
	
  ASSETS

  	
   

  	
   

  	
   

  
	
  Current Assets

  	
   

  	
   

  	
   

  
	
  Checking/Savings

  	
   

  	
   

  	
   

  
	
  Montecito Bank & Trust

  	
   

  	
  22,746.69

  	
   

  
	
  Montecito B&T- Debit Card

  	
   

  	
  3,008.56

  	
   

  
	
  Dryfus Govt Cash Mgmt

  	
   

  	
  13,606,393.66

  	
   

  
	
  Total Checking/Savings

  	
   

  	
  13,632,148.91

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Other Current Assets

  	
   

  	
   

  	
   

  
	
  Prepaids

  	
   

  	
  439,610.50

  	
   

  
	
  Advances

  	
   

  	
  1,748.86

  	
   

  
	
  Total Other Current Assets

  	
   

  	
  441,359.36

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Current Assets

  	
   

  	
  14,073,508.27

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fixed Assets*

  	
   

  	
   

  	
   

  
	
  Computer Equipment

  	
   

  	
  52,712.10

  	
   

  
	
  Computer Software

  	
   

  	
  27,389.21

  	
   

  
	
  Manufacturing Equipment

  	
   

  	
  2,779.63

  	
   

  
	
  Test Equipment

  	
   

  	
  9,072.37

  	
   

  
	
  Total Fixed Assets

  	
   

  	
  91,953.31

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Other Assets

  	
   

  	
   

  	
   

  
	
  CD-Pine LOC

  	
   

  	
  184,626.00

  	
   

  
	
  Deposits

  	
   

  	
  31,184.30

  	
   

  
	
  Total Other Assets

  	
   

  	
  215,810.30

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL ASSETS

  	
   

  	
  14,381,271.88

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  LIABILITIES & EQUITY

  	
   

  	
   

  	
   

  
	
  Liabilities

  	
   

  	
   

  	
   

  
	
  Current Liabilities

  	
   

  	
   

  	
   

  
	
  Accounts Payable*

  	
   

  	
   

  	
   

  
	
  Accounts Payable

  	
   

  	
  21,917.80

  	
   

  
	
  Total Accounts Payable

  	
   

  	
  21,917.80

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Current Liabilities

  	
   

  	
  21,917.80

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Liabilities

  	
   

  	
  21,917.80

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Equity

  	
   

  	
   

  	
   

  
	
  Capital Stock

  	
   

  	
   

  	
   

  
	
  Preferred Series B

  	
   

  	
  14,000,002.86

  	
   

  
	
  Founders

  	
   

  	
  4,000.00

  	
   

  
	
  Series A

  	
   

  	
  888,002.11

  	
   

  
	
  Capital Stock - Other

  	
   

  	
  312.67

  	
   

  
	
  Total Capital Stock

  	
   

  	
  14,892,317.64

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Net Income

  	
   

  	
  -532,963.56

  	
   

  
	
  Total Equity

  	
   

  	
  14,359,354.08

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL LIABILITIES & EQUITY

  	
   

  	
  14,381,271.88

  	
   

  

 

* Equipment Purchase Commitments of
$2,100,750 will accure when we receive equipment.

Accounts Payable doesn't Include Equipment
Purchase Commitments of $2,100,750.

 

 

GUARANTOR’S CONSENT TO SUBLEASE

 

The undersigned, INAMED CORPORATION, a Delaware corporation (“Guarantor”),
executed and delivered to Pine Avenue Associates, Ltd., a California limited
partnership (“PAA”), a written Guaranty, dated July 1, 1994 (the “Guaranty”),
guaranteeing all of the obligations of McGhan Medical Corporation, a California
corporation (“McGhan”) under that certain Lease, dated July 1, 1994 (as amended
November 15, 1999, the “Lease”), between PAA, as lessor, and McGhan, as lessee,
for premises located at 600 Pine Avenue, Goleta, California.

 

Guarantor hereby consents in all respects to
the Sublease, dated January 28, 2000 (the “Sublease”), between McGhan, as
sublessor, and Agility Communications, Inc., a Delaware corporation, as
sublessee, for a part of the premises demised under the Lease, and to any and
all other amendments, modifications and supplements to the Lease.

 

Guarantor hereby represents and warrants to
PAA that the Guaranty remains in full force and effect and guarantees all of
McGhan’s obligations under the Lease (after giving effect to such sublease and
all amendments, modifications and supplements of the Lease).

 

	
  GUARANTOR:

  
	
   

  
	
  INAMED
  CORPORATION

  
	
  a Delaware corporation

  
	
   

  
	
  By:

  	
  /s/ Richard G. Babbitt

  	
   

  
	
   

  
	
  Name:R.BABBITT

  
	
   

  
	
  Title:Chairman/CEO

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