Document:

Exhibit 10.9

 

SEVERANCE
AGREEMENT

 

THIS SEVERANCE
AGREEMENT (this “Agreement”) is made and entered into as of September 26, 2003,
by and between National Mercantile Bancorp, a California corporation (the “Company”),
and Robert Bartlett (“Officer”) with reference to the following
facts:

 

A.            Officer is an officer of the Company
and/or one or more subsidiaries of the Company; and

 

B.            In order to induce Officer to remain
employed by the Company and/or its subsidiaries, the Company is willing to
agree to pay severance to Officer under certain circumstances.

 

NOW, THEREFORE, in
consideration of the foregoing and of the respective covenants and agreements
of the parties herein contained, it is agreed as follows:

 

1.             Definitions.  For purposes of this Agreement, the
following terms when used in this Agreement shall have the meanings set forth
below:

 

1.1           “Board”
shall mean the Board of Directors of the Company.

 

1.2           “Cause”
shall mean Officer, after the date of this Agreement, (i) has been
convicted by a court of competent jurisdiction of any felony or any criminal
offense involving dishonesty, breach of trust or misappropriation, or has
entered a plea of nolo  contendere to such an offense; or
(ii) has committed an act of fraud, embezzlement, theft, dishonesty or any
act which would cause termination of coverage under the Company’s Banker’s
Blanket Bond as to Officer (as distinguished from termination of coverage as to
the Company as a whole); or (iii) has committed a willful violation of the
Code of Conduct of any member of the Company Group or any law, rule or
regulation governing the operation of the Company Group which the Board
determines in good faith will likely have or has had a material adverse effect
on the business, interests or reputation of the Company Group or any Member
thereof; or (iv) has willfully refused to perform the duties assigned to
him; or (v) has committed a willful and unauthorized disclosure of
material confidential information regarding the Company Group, which disclosure
the Board determines in good faith will likely have or has had a material
adverse effect on the Company Group or any member thereof.

 

1.3           “Change
of Control” shall mean any transaction or series of related
transactions as a result of which

 

(i)            the Company consummates a reorganization,
merger or consolidation, or sale or other disposition of all or substantially
all of its assets (each a “Business Combination”), in each case unless
immediately following the consummation of

 

 

such Business Combination
all of the following conditions are satisfied: 
(x) Persons, who, immediately prior to such Business Combination,
were the beneficial owners of the Outstanding Voting Securities of the Company,
beneficially own (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, directly or indirectly, more than one-third of the combined
voting power of the then Outstanding Voting Securities of the entity (the “Resulting
Entity”) resulting from such Business Combination (including,
without limitation, an entity which as a result of such transaction owns the
Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries); (y) no Person, other than the Existing
Shareholder Group, beneficially owns (within the meaning of Rule l3d-3), directly
or indirectly, more than 20% of the then outstanding combined voting power of
the Outstanding Voting Securities of the Resulting Entity, except to the extent
that such Person’s beneficial ownership of the Company immediately prior to the
Business Combination exceeded such threshold; and (z) at least
one-half of the members of the board of directors of the Resulting Entity
were members of the Board at the time the Board authorized the Company to enter
into the definitive agreement providing for such Business Combination; or

 

(ii)           any Person acquires beneficial
ownership (within the meaning of Rule 13d-3) of more than 20% of the
combined voting power (calculated as provided in Rule l3d-3 in the case of
rights to acquire securities) of the then Outstanding Voting Securities of the
Company; provided, however, that for purposes of this clause, the
following acquisitions shall not constitute a Change of Control:  (x) any acquisition directly from the
Company, (y) any acquisition by the Company, (z) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any entity controlled by the Company; or (zz) any acquisition by the
Existing Shareholder Group.

 

1.4           “Company
Group” shall mean at any time the Company and each subsidiary of the
Company at such time which is consolidated with the Company for financial
reporting purposes.

 

1.5           “Disability
of Officer” shall mean if Officer is Disabled and such disability
continues for a period of any six months out of a one-year period.  “Disabled”
shall mean Officer’s inability, through physical or mental illness or other
cause, to perform normal and customary duties which Officer is required to
perform for the Company.  In determining
whether Officer is Disabled, the Company may rely upon the written statement
provided by a licensed physician acceptable to the Company.  Officer shall allow examination from time to
time by any licensed physician selected by the Company and agreed to by Officer.  All such examinations will be conducted
within a reasonable time period.

 

1.6           “Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended, or any successor
statute.

 

1.7           “Existing
Shareholder Group” shall mean Carl R. Pohlad, members of the
immediate family of Carl R. Pohlad, and any affiliated Person of Carl
R. Pohlad or any member of his immediate family.

 

2

 

1.8           “Good
Reason” shall mean with respect to Officer (i) Officer being
delegated or assigned material duties by the Board or the Chief Executive
Officer of the Company, by a communication in writing, which are substantially
inconsistent with the position and status held by Officer immediately prior to
the effective date of the Change of Control; or (ii) Officer having had
removed by the Board or the Chief Executive Officer of the Company by a
communication in writing such authority and responsibility which is necessary
to carry out the duties of the position held by Officer immediately prior to
the effective date of the Change of Control; or (iii) Officer having a
substantial and adverse alteration in the nature, status, or prestige of
Officer’s responsibilities due to the action of the Board or the Chief
Executive Officer, which is verifiable by tangible evidence; or (iv) Officer
being forced to relocate permanently to an office more than 25 miles from the
location of the Company’s executive offices as in effect immediately prior to
the effective date of the Change of Control; or (v) Officer having his or
her base compensation reduced by 10% or more from such base compensation in
effect on the date immediately preceding the effective date of the Change of
Control.  Notwithstanding the foregoing,
the loss of one or more titles, and corresponding responsibility(ies), shall
not be deemed to be “Good Reason”
under (i), (ii) or (iii) above provided that the Officer retains at least one
title no less senior than Executive Vice President at the Company or at least
one subsidiary bank of the Company.

 

1.9           “Outstanding
Voting Securities” of any Person means the outstanding securities of
such Person entitling the holders thereof to vote generally in the election of
directors of such Person.

 

1.10         “Person”
shall have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act, which definition shall include a “person” within the meaning of
Section 13(d)(3) of the Exchange Act.

 

1.11         “Without
Cause” shall mean any termination of Officer’s employment by the
Company except for a termination (i) for Cause, (ii) as a result of
the death of Officer, or (iii) as a result of the Disability of Officer.

 

2.             Severance Payment.

 

2.1           Except as provided in Section 2.2, if
(i) Good Reason exists within one year following a Change of Control, and
Officer gives written notice to the Company within 90 days after the occurrence
of such Good Reason that Officer is terminating his or her employment with the
Company for Good Reason, or (ii) the Company terminates Officer’s
employment Without Cause within one year following a Change of Control, the
Company will pay Officer in a lump sum an amount (the “Severance Payment”) equal to six times
Officer’s base monthly salary as in effect at the time of termination or, if
greater, immediately prior to the effective date of the Change of Control.  The Severance Payment shall be reduced by
required deductions for applicable taxes and other withholdings and for any
outstanding obligations owed by Officer to the Company that are then due and
payable, which deductions and withholdings are specifically authorized by
Officer.  The Severance Payment shall be
in lieu of any other severance payments to which Officer would be entitled
under the plans or policies of the Company and any of its subsidiaries.  The Severance Payment will be paid at the
time of termination of the Officer’s employment with the Company.  Each Change of

 

3

 

Control and each Good
Reason following a Change of Control shall give Officer a separate right to
give the notice set forth in the first sentence of this Section 2.

 

2.2           Notwithstanding any other provision
of this Agreement, the Company shall have no obligations to make the Severance
Payment if such Severance Payment is prohibited by applicable federal or state
law, including without limitation Part 359 of the regulations of the Federal
Deposit Insurance Corporation (12 CFR § 359 et
seq.) or any successor provision.

 

2.3           As a condition to the obligation of
the Company to pay the Severance Payment, the Officer must execute and deliver
a release in form and substance satisfactory to the Company releasing the
Company Group and its directors, officers, employees and agents (“Released Parties”) from any and all claims the Officer may
have against the Released Parties, whether such claims are known or unknown,
absolute or contingent, other than claims under this Agreement, claims for
salary and other compensation and benefits accrued prior to termination, and
rights under employee benefit plans.

 

3.             IRC Provisions.  Notwithstanding any other provision of this
Agreement, if the Company reasonably determines that the payment of the
Severance Payment to Officer would be nondeductible by the Company for federal
income tax purposes because of Section 280G of the Internal Revenue Code
of 1986, as amended (the “Code”),
the Severance Payment shall be reduced to an amount which maximizes the
Severance Payment without causing any portion of the same to be nondeductible
by the Company because of Section 280G of the Code.  Any such reduction shall be applied to the
Severance Payment or the other amounts due to Officer in such manner as Officer
may reasonably specify within 30 days following notice from the Company of the
need for such reduction or, if Officer fails to so specify timely, as
determined by the Company.

 

4.             Employee Benefits.  All employee benefits provided by the
Company shall cease upon termination of Officer’s employment, whether for Good
Reason, Without Cause, or for any other reason, and the Company shall have no
further responsibility with respect thereto after such termination; provided,
however, that: (a) nothing contained in this Agreement shall affect any
right Officer may have pursuant to the federal entitlement to continued group
health care coverage as provided in the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”)
or any successor legislation or comparable state law; (b) if Officer is
entitled to receive a Severance Payment pursuant to Section 2 hereof, and if
Officer elects under COBRA to continue to receive any benefits thereunder, the
Company shall reimburse Officer for the amount of such Officer’s COBRA payments
for the first six months after such termination; and (c) nothing shall alter or
modify the post termination rights of Officer under any employee benefit plan
(such as the right to exercise vested options for a specified period under the
Stock Incentive Plan).

 

5.             Term.  The Agreement shall commence on the date set
forth above and shall terminate upon 12 months’ prior written notice to the
Officer.

 

6.             Employment “At Will”.  Neither this Agreement nor the Severance
Payment payable hereunder shall be deemed to limit, replace or otherwise affect
the “at will” nature of

 

4

 

Officer’s employment with
the Company Group.  Officer’s employment
with any member of the Company Group continues to be for an unspecified term
and may be terminated at will at any time with or without cause or notice by
such member of the Company Group or by Officer (but in the case of Officer,
without the written consent of the Company Officer must terminate his
employment with all members of the Company Group).  This employment “at-will” relationship cannot be changed absent
an express intent as set forth in an individualized written employment contract
signed by both Officer and the Chief Executive Officer of the Company.

 

7.             Mitigation.  Officer shall have no obligation to mitigate
damages based upon Officer’s termination pursuant to Section 2 of this
Agreement, and the Severance Payment shall not be reduced as a result of
Officer obtaining other employment within nine months of Officer’s
termination.

 

8.             Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of which,
together, shall constitute one and the same instrument.

 

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

 

10.           Governing Law.  The terms and provisions of this Agreement
shall be governed and construed pursuant to the laws of the State of California
except to the extent governed by federal law.

 

11.           Construction.  Headings at the beginning of each section
are solely for the convenience of the parties and are not a part of this
Agreement.  Whenever required by the
context of this Agreement, the singular shall include the plural and the masculine
shall include the feminine and vice versa. 
This Agreement shall not be construed as if it had been prepared by one
of the parties, but rather as if both parties had prepared the same.  Unless otherwise indicated, all references
to sections are to this Agreement.

 

12.           Integration.  This Agreement represents the entire and
integrated agreement between the Company and Officer regarding the subject
matter hereof and supersedes all prior negotiations, representations or
agreements, either written or oral.

 

13.           Successors and Assigns.  The terms, covenants and conditions herein
contained shall be binding upon and shall inure to the benefit of the heirs,
successors and assigns of the parties hereto.

 

14.           No Waiver.  No waiver by either party of any breach or
default hereunder shall be deemed a waiver of any other breach or default, and
no delay or forbearance by either party hereunder in enforcing any of its
rights or remedies shall be deemed a waiver of any such rights or remedies,
unless such waiver is embodied in a writing signed by the authorized
representative of the party to be bound.

 

5

 

IN WITNESS
WHEREOF, this Agreement has been executed effective on the day and year
hereinabove set forth.

 

	
  THE “COMPANY”

  	
  NATIONAL MERCANTILE BANCORP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ SCOTT A. MONTGOMERY

  	
   

  
	
   

  	
   

  	
  Scott A. Montgomery

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  “OFFICER”

  	
  /s/ ROBERT
  BARTLETT

  	
   

  
	
   

  	
  Robert
  Bartlett

  

 

6Exhibit
10.10

 

LEASE

 

THIS LEASE (“Lease”),
dated for reference purposes only as of November 12, 2003, is made by and
between Century Park, a California Limited Partnership (“Landlord”) and Mercantile
National Bank, N.A., a national bank (“Tenant”), upon the
following terms and conditions:

 

1.                                       Premises and
Basic Lease Information

 

1.1.                              Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord, upon the terms
and conditions set forth in this Lease, those certain premises (the “Premises”)
described in Article 1.1.1 below and diagrammed in Exhibit “A” attached hereto
and hereby made a part hereof, as well as the right to use, in common with
others, the Common Areas (as hereinafter defined).  The Premises are situated in that certain office building (the
“Building”) located at 1880 Century Park East, Los Angeles, California
90067.  The land upon which the Building
is located together with the Building and related facilities and appurtenances
and Common Areas shall hereinafter be referred to as the “Project.”  The terms and conditions of this Lease
include, without limitation, the following:

 

1.1.1                        Premises:                                         Suite  800  consisting
of approximately 13,880 rentable square feet on the 8th
floor of the Building (see the attached Exhibit “A”).  The exact area of the Premises shall be determined by applying
the BOMA method of measurement (ANSI Z65.1-1996) to calculate the square
footage per the final space plan for the Premises.  Should the square footage measured from the space plan vary from
that set forth in this Article 1.1.1, Landlord shall revise all figures in this
Lease that are affected by the square footage, and Landlord and Tenant shall
amend this Lease accordingly.  Landlord
may re-measure the Premises once within twenty (20) days of the Commencement
Date of the Initial Term.  Landlord may
re-measure the Premises thereafter; provided, however that such re-measurement
does affect the economics specified in Article 1.1.4 or Article 1.1.7 herein.

 

1.1.2                        Lease
Term:                            Except
for Tenant’s occupancy of the Temporary Space pursuant to the terms and
conditions of this Lease as set forth in Article 41 of the Lease Addendum, the
term of this Lease (the “Lease Term” or “Term”) shall begin on the later of the
following dates (the “Commencement Date”): (a) April 1, 2004 (the
“Scheduled Commencement Date”) or, where applicable, (b) upon Substantial
Completion of the Tenant Improvements, as defined in the construction agreement
attached hereto as Exhibit “B” and herein incorporated by reference, and, unless terminated pursuant to Article 42 in the Lease
Addendum, shall expire on the last day of the month that is one
hundred twenty (120) months after the first day of the
month after the Commencement Date, unless sooner terminated pursuant to this
Lease.

 

1.1.3                        Holding Over.                    If
Tenant, with or without Landlord’s written consent, remains in possession of
all or any portion of the Premises after the expiration or sooner termination
of the Lease, such holding over (“Holdover”) shall constitute and be construed
as a tenancy from month-to-month only, subject to such terms and conditions
contained herein as may reasonably and logically be construed to apply to the
Holdover, and any and all options or other preferential rights of Tenant shall
be deemed to have lapsed and to be of no further force or effect.  Either party may terminate such
month-to-month tenancy by giving the other party at least thirty (30) days
written notice thereof.  During such Holdover,
Base Rent (as defined below) shall be one hundred fifty percent (150%) of the
Base Rent in effect immediately prior to such Holdover.  Acceptance by Landlord of any Rent after the
expiration or termination of the Lease shall not be deemed to constitute
Landlord’s consent to such Holdover.

 

1.1.4                        Base
Rent:                                     The
base rent (“Base Rent”) for the Premises shall be $2.23 per rentable
square foot ($30,952.40) per month, subject to an annual CPI
adjustment (see Article 3.2; see also Article 41 relating to the payment of
rent in the Temporary Space.).

 

1.1.5                        Additional
Rent: Amounts which are due as Additional Rent by reason of
increases in Estimated Pass-through Costs (as both capitalized terms are
defined in Article 4 below) and all other amounts payable by Tenant pursuant to
the provisions of this Lease.

 

1.1.6                        Base Year:                                     2004
is the Base Year.

 

1.1.7                        Tenant’s
Percentage Share:   4.45%
“Tenant’s Percentage Share” shall be a fraction, the numerator of which shall
be the rentable square footage of the Premises and the denominator of which
shall be 311,400 approximate rentable square feet for the Building.

 

1.1.8                        Security
Deposit:  None

 

1.1.9                        Permitted
Use:                General
offices and uses related thereto that do not conflict with the Building’s
certificate of occupancy, that comply with all applicable codes and statutes,
and that are uses commonly found in similar office buildings in the Project
vicinity.

 

1.1.10                  Address
For Notices:

 

	
  Tenant (prior to Commencement Date)

  	
   

  	
  Tenant (after Commencement Date)

  
	
   

  	
   

  	
   

  
	
  Mercantile National
  Bank

  	
   

  	
  Mercantile National
  Bank

  
	
  1840 Century Park East

  	
   

  	
  1880 Century Park East,
  Suite 800

  
	
  Los Angeles, CA  90067

  	
   

  	
  Los Angeles, CA 90067

  
	
   

  	
   

  	
   

  
	
  Contact: Mr. Scott A.
  Montgomery

  	
   

  	
  Contact: Mr. Scott A.
  Montgomery

  
	
  Phone:  310/282-6778

  	
   

  	
  Phone: 310/ 282-6778

  
	
   

  	
   

  	
  With a Copy to:

  
	
   

  	
   

  	
  Ted Simpson

  
	
   

  	
   

  	
  Cushman & Wakefield

  
	
   

  	
   

  	
  601 Figueroa Street,
  Suite 4700

  
	
   

  	
   

  	
  Los Angeles, CA 90017

  
	
   

  	
   

  	
  Telephone:  213/955-5100

  

 

1

 

Landlord                                               Century
Park, a California limited partnership, c/o Held Properties, Inc., 1880 Century
Park East, Suite 500, Los Angeles, CA 90067. 
See also Article 25 of this Lease.

 

1.1.11                  Parking
Rights:       Two and One-Half automobile spaces per 1,000 rentable
square feet, currently calculated as Thirty-Five (35)
automobile spaces at the Building’s prevailing parking rates.  See also Article 31 herein.  See
also Article 46 of the Lease Addendum.

 

1.1.12                  Guarantor(s):                      N/A

 

1.1.13                  Broker:
                                                Cushman
& Wakefield of California, Inc.

 

1.2                                 Common
Areas.         The term
“Common Area(s)” as used in this Lease shall mean all areas and facilities in
the Project which are provided and designated from time to time by Landlord for
the general use and convenience of Tenant and other tenants of the Project and
their respective employees and invitees. Common Areas include, without
limitation, the lobby areas, walkways, parking facilities, landscaped areas,
sidewalks, corridors, washrooms (if not part of the Premises), stairways,
elevators, walls, common telephone and electrical closets, loading docks,
plazas, service areas, and all other areas of the Project intended for common
use.  Floors wholly occupied by Tenant
or any other tenant shall not have any facilities which shall be used in common
with other tenants, except for elevators, fire stairs, shafts, utility and
service closets, and similar installations. 
Tenant, its employees and invitees shall have a nonexclusive right to
use the Common Areas, subject to Landlord’s rights and duties as hereinafter
set forth.  Without Tenant’s consent and
without liability to Tenant, so long as Tenant’s access to the Premises and parking area or Tenant’s ability to
conduct business therefrom is not materially impaired and provided that
Landlord uses reasonable effort (including performing such work after normal
business hours, if reasonably required) to minimize any interference with
Tenant’s use and access of the Premises and parking areas during normal
business hours, Landlord shall have the right to do the following:

 

1.2.1                        Establish
and enforce in a nondiscriminatory, consistently applied manner, reasonable
rules and regulations concerning the maintenance, management, use and operation
of the Common Areas;

 

1.2.2                        Temporarily
close any Common Area for maintenance, alterations or improvements;

 

1.2.3                        Select,
appoint and/or contract with any person or entity for the purpose of operating
and maintaining the Common Areas; and

 

1.2.4                        Change, except for the number and location of parking spaces,
the size, use, shape or nature of the Common Area provided that doing so does
not materially affect the existing ingress and egress to the Building, or
change the character of the Building to less than a first class office
building.

 

2.                                       Commencement
Date; Early Entry

 

2.1                                 Except
as set forth in Article 42, this Lease shall not be void or voidable, nor shall
Landlord be subject to any liability as a result of any delay in the
Commencement Date for any reason. 
Except for Tenant Delays, as defined in the Construction Agreement,
payment of rent shall not commence until the Premises are available for occupancy
by Tenant with all work to be performed pursuant to the Construction Agreement
substantially completed and the Department
of Building and Safety has signed the permit card, indicating that occupancy is
permitted.

 

2.2                                 Within
thirty (30) business days after Tenant’s occupancy of the Premises, or as soon
thereafter as possible, the Landlord shall
draft a statement, and the parties hereto shall execute a
written statement setting forth the Commencement Date and the date of
expiration of this Lease; provided, however, the enforceability of this Lease
and the Commencement Date shall not be affected should either party fail or
refuse to execute such statement.

 

2.3                                 Provided
that Tenant or Tenant’s agents do not interfere with or delay the Substantial
Completion of Landlord’s Work in the Premises, or otherwise cause additional
cost or expense to Landlord, Tenant and Tenant’s agents shall be permitted to
enter the Premises up to fourteen (14) days prior to the Commencement Date for
the purpose of installing telephones, cabling, fixtures and equipment.  Such early entry shall be subject to all the
terms of such permission and all the provisions of this Lease which could be
reasonably and logically construed as applying thereto, except that Tenant
shall not be required to pay Rent.

 

3.                                       Base Rent;
Adjustments; General Rent Provisions.

 

3.1                                 Tenant
shall pay to Landlord as Base Rent for the Premises, without prior notice or
demand, the amount specified in Article 1.1.4, in advance, on or before the
first day of each and every calendar month during the Lease Term.  All payments received by Landlord from
Tenant shall be applied to the oldest payment obligation owed by Tenant to
Landlord.

 

3.2                                 Base Rent as
set forth in Section 1.1.4 above shall be increased effective as of each
anniversary of the Commencement Date during the term (“Adjustment Date”) to an
amount which shall be determined by adding to the Base Rent an amount equal to
the Base Rent multiplied by the percentage of increase, if any, of the
“Consumer Price Index for All Urban Consumers, Los Angeles-Anaheim-Riverside,
California, Subgroup All Items (1982-1984=100)”, published by the United States
Department of Labor, Bureau of Labor Statistics (the “CPI”) for the calendar
month which is four (4) months immediately preceding the month in which the
Adjustment Date occurs (the “Adjustment Index”) as compared with the CPI for
the calendar month which is four (4) months immediately preceding the
Commencement Date (the “Base Index”); provided, however, that in no event shall
the adjusted and then current rent be decreased.

 

For example, if (i) the
Base Rent as of the Commencement Date is $1,000; (ii) the Base Index is 300;
(iii) the Adjustment Index for the first Adjustment Date is 315; (iv) the
Adjustment Index for the Second Adjustment Date is 327; and (v) the Adjustment
Index for the third Adjustment Date is 330; the Base Rent shall be increased as
follows:

 

	
  A)

  	
   

  	
  As of the first
  Adjustment Date –  315/300 = 1.05 x
  $1,000 = $1,050

  
	
   

  	
   

  	
   

  
	
  B)

  	
   

  	
  As of the second
  Adjustment Date – 327/300 = 1.09 x $1,000 = $1,090

  
	
   

  	
   

  	
   

  
	
  C)

  	
   

  	
  As of the third
  Adjustment Date – 330/300 = 1.10 x $1,000 = $1,100

  

 

2

 

If the Adjustment
Index is unavailable on the date on which the first installment of Base Rent as
adjusted shall become due, Tenant shall continue to pay the then effective Rent
payable by Tenant until the Adjustment Index is available, and the adjustment,
if any, shall be paid retroactively with Base Rent for the first month in which
the Adjustment Index is available.  If
the Bureau of Labor Statistics ceases to use the 1982-1984 base of 100 as the
basis of calculation for the CPI, then the Base Index and the Adjustment Index
shall be adjusted in accordance with the conversion formula published by the
Bureau of Labor Statistics.  If, at any
time required for the determination of the amount of any adjustment in Base
Rent, the CPI is no longer published or issued, Landlord shall reasonably
select a reliable governmental or other non-partisan publication evaluating the
information theretofore used in determining the CPI.

 

3.3                                 For
any period during the Lease Term which is less than one (1) month, Base Rent,
Additional Rent (defined in Article 4.1), and any other sums which are payable
by Tenant under the Lease (all of which shall be deemed “Rent”) shall be
prorated based upon a thirty (30) day month.

 

3.4                                 Rent
under this Lease shall be paid to Landlord, without deduction, offset or
abatement (except as otherwise may be specifically set forth in this Lease) at
Landlord’s address as specified in Article 1.1.10 above. Landlord shall have
the right to accept all payments of Rent and other payments, whether full or
partial, and to negotiate checks in payment thereof without any waiver of its
rights, irrespective of any conditions to the contrary sought to be imposed by
Tenant.  Rent paid by check shall not be
deemed paid to Landlord until funds clear and the check is honored.  If any noncash payment is not paid by the
bank or other financial institution on which it is drawn, Landlord shall have the
right to require Tenant to make future payments by certified funds.

 

4.                                       Additional
Rent.

 

4.1                                 Computation
of Additional Rent  During
each December of the Lease Term, or as soon thereafter as reasonably practical,
Landlord shall provide Tenant with its good faith written estimate of the
amount, if any, by which the Tax Costs (as defined in Article 4.3 below) and/or
the Operating Costs (as defined in Article 4.4 below) for the coming calendar
year are projected to exceed those of the Base Year (collectively referred to
as “Estimated Pass-through Costs”).  On
or before the first day of each month during the ensuing calendar year, Tenant
shall pay to Landlord as additional rent (“Additional Rent”), in addition to
and at the time provided for payment of Base Rent, one-twelfth (1/12th)
of the amount computed by multiplying Tenant’s Percentage Share by the amount
of the Estimated Pass-through Costs for Taxes and/or one-twelfth (1/12th)
of the amount computed separately with respect to Operating Costs.  In the event that Landlord does not provide
Tenant with such written estimate in December, Tenant shall continue to make
monthly payments of Additional Rent on the basis of the prior year’s Estimated
Pass-through Costs until the first day of the month after Landlord provides
such written estimate to Tenant, at which time Tenant shall commence making
monthly Additional Rent payments based upon the revised Estimated Pass-through
Costs, and additionally shall pay to Landlord a one-time retroactive sum for
each month that has elapsed since December the amount by which the Additional
Rent payable pursuant to the revised Estimated Pass-through Costs exceeds the
amount Tenant paid based on the prior year’s Estimated Pass-through Costs.  Landlord
shall use its commercially best efforts to deliver its written estimate within
six (6) months of the end of the calendar year.  Under no circumstances shall the provisions
of this Article 4 cause the Base Rent to be reduced.  Neither Landlord’s failure to deliver, nor the late delivery of
such statement or statements shall constitute a default by Landlord hereunder,
nor a waiver of Landlord’s right to receive any Additional Rent or to later
collect Additional Rent accrued as provided hereinabove.  The Tax Costs and Operating Costs for the
Base Year shall be deemed to constitute Landlord’s agreed contribution to
Operating Costs and Tax Costs and is neither a representation nor a warranty
that such Base Year costs will reflect actual Operating Costs or Tax Costs for
any succeeding year.  If, during any
calendar year including the Base Year, the Building is less than ninety-five
percent (95%) occupied, then for the purpose of computing Additional Rent due
hereunder, the variable components of the Operating Costs and Tax Costs
actually incurred during such calendar year shall be increased to approximate
the amounts which would have been payable if the Building had been ninety-five
percent (95%) occupied.

 

4.2                                 Reconciliation
of Estimated Pass-through Costs to Actual 
By July 1st of each year, Landlord shall furnish
to Tenant a written statement of reconciliation (the “Reconciliation”), showing
Landlord’s actual Operating Costs and Taxes for the preceding calendar year,
together with a statement of adjustments necessary to reconcile any sums paid
by Tenant hereunder during such calendar year pursuant to Article 4.1 with
those sums actually payable and due hereunder for such calendar year.  Any reference to Landlord’s “actual”
Operating Costs or Tax Costs in this Article 4 shall be deemed to include an
allowance for adjustment to reflect the level of occupancy of the Building to
the extent provided above.  If the
Reconciliation shows that Tenant owes additional sums hereunder, Tenant shall
pay such sums to Landlord within thirty (30) days after receipt of the
Reconciliation.  If the Reconciliation
shows that Tenant overpaid Additional Rent, such overpayment shall be refunded
or credited to Tenant within thirty (30) days after Tenant’s receipt of the
Reconciliation. Landlord’s obligation to reconcile, Tenant’s obligation to pay,
and Landlord’s obligation to credit or refund shall survive the expiration or
sooner termination of the Lease. Landlord’s failure to deliver the
Reconciliation to Tenant as provided herein shall not constitute a default by Landlord
nor waive Landlord’s right to collect all Additional Rent and other sums due
hereunder.  Where only a portion of a
calendar year falls within the Lease Term, Landlord shall reasonably prorate
the estimated (or actual) Operating Costs and/or Tax Costs for such calendar
year.

 

4.3                                 Tax
Costs.  “Tax Costs” shall
mean the sum of the following: any and all real property taxes, assessments
(including, but not limited to, general and special assessments and possessory
interests), charges, surcharges, license and other fees, levies, cost of
improvement bonds and any and all other taxes (other than income, franchise,
inheritance and estate or gift taxes of Landlord) on or relating to all or a
portion of the Project including any legal or equitable interest of Landlord
therein, that may be imposed, levied, assessed or charged for any reason by any
authority having the direct or indirect power to tax including, but not limited
to, the United States or the state, county or city in which the Project is
located, or any other local governmental authority, agency, district or
political subdivision thereof, together with personal property taxes,
assessments, fees and charges (other than those paid by Tenant pursuant to
Article 26 below) and fees of tax consultants and attorneys retained to seek a
reduction, to contest or to act in some other manner in connection with any of
the foregoing Tax Costs, together with any tax, assessment or other amounts
(including, without limitation, commercial rental taxes) imposed, levied or
charged as a substitute for or a supplement to the foregoing.  Except
as provided in Article 48.1 in the Lease Addendum, Tax Costs
shall include increases caused by increases in tax rates as well as increases
caused by additional or increased assessed values for any

 

3

 

reason including transfers of title to the Building or the Project, to
the extent not precluded elsewhere in this Lease.   See also, Paragraph 48 of
the Lease Addendum.

 

4.4                                 Operating
Costs.

 

4.4.1                        Definition
of Operating Costs.                            “Operating
Costs” shall mean the sum of any and all costs, expenses and disbursements of
any kind paid or incurred by Landlord in connection with the management,
operation, security, maintenance, and repair of the Project, calculated in
accordance with the audited financial statements of Landlord, including, but
not be limited to, salaries, wages, benefits and related costs for employees;
management fees, either as charged to Landlord by outside management companies or
not exceeding the amount typically charged by outside management companies if
Landlord or Landlord’s affiliate manages the Project; charges for utilities and
services provided to all tenants in accordance with Article 13.1 herein,
including but not limited to janitorial services, window cleaning, elevator
services, HVAC services, security services (including any taxes thereon); the
cost of insurance as specified in Article 12.6 herein; outside accounting fees;
office supplies; building cleaning supplies and materials; garbage and waste
collection; and a reasonable allowance for depreciation (or amortization) with
respect to machinery and equipment and other capital expenditures and
improvements; provided, however, that the only depreciation (or amortization
and expenditures) includable in Operating Costs shall be a reasonable allowance
for depreciation (or amortization) over the useful life of the improvements, as
determined by Landlord’s accountants to conform with applicable tax laws.  See
Paragraph 49 of the Lease Addendum.

 

4.4.2                        Definition
of Required Alterations      “Required Alterations”
are any changes, alterations or improvements to the Project (excluding those
attributable exclusively to Tenant’s specific use and occupancy of the
Premises, which alterations shall be Tenant’s sole responsibility), including,
but not limited to, the installation or modification of electrical, mechanical,
water sprinkler, or other energy or life safety systems or components, required
by any rule, regulation or law which became enacted and effective after the
Commencement Date.  The capital costs
relating to such Required Alterations, including all related financing costs,
shall be amortized over the useful life of the Required Alterations, as
determined by Landlord’s accountants to conform with applicable tax laws.

 

4.5                                 Audit.               If Tenant disputes
the amount of any Additional Rent due under Article 4, Tenant shall have the
right, after reasonable notice, to inspect Landlord’s accounting records at
Landlord’s accounting office during its normal business hours and, if after
such inspection Tenant still disputes the amount of Additional Rent owed,
Tenant may retain a mutually-acceptable national or regionally-recognized
independent certified public accounting firm to certify to the parties its
determination of the proper amount of Operating Costs and Tax Costs payable by
Tenant.  After such determination has
been made, and if a dispute continues to exist between Tenant and Landlord, an
independent accountant mutually-agreed upon by both Landlord and Tenant may be
retained to determine the amount of any Additional Rent due or credited.  If the certification discloses that the Operating Costs and Tax
Costs charged to Tenant exceed the audited operating costs by more than five
percent (5%), the cost of such certification shall be borne by Landlord.
Otherwise, the cost of the certification shall be borne by Tenant.

 

5.                                       Security
Deposit.                                                [Intentionally Deleted]

 

6.                                       Restrictions
on Use; Compliance with Laws.

 

6.1                                 Tenant
shall use and occupy the Premises only for the specific uses, and those related
thereto, specified in Article 1.1.9 above for no other uses whatsoever.  Tenant shall use and occupy the Premises in
accordance with Article 36, Rules and Regulations.  In addition to the rules and regulations in Article 36, Tenant
shall not: (a) do or permit anything to be done in or about the Premises which
will in any way obstruct or materially interfere with the rights of other
tenants or occupants of the Building or injure or annoy them; (b) use or allow
the Premises to be used for any unlawful purpose; (c) cause or maintain or
permit any nuisance in or about the Premises; (d) cause or permit any hazardous
or toxic waste, substance or material, other than generally used office
materials, to be brought to the Premises or used, handled, stored or disposed
of in or about the Premises; (e) conduct business or other activity in or about
the Premises that places an unreasonable or excessive burden upon the public
and Common Areas or the utility systems of the Project; or (f) commit or suffer
the commission of any waste in or about the Premises.

 

6.2                                 Tenant
shall not place a load upon any floor that exceeds 70 pounds per square foot,
without Landlord’s prior written approval. 
Tenant shall not install any equipment, apparatus or device in the
Premises which causes vibrations or excessive noise.

 

6.3                                 Tenant
shall not use the Premises or permit anything to be done in or about the
Premises which in any way conflicts with any law, statute, ordinance or governmental
rule or regulation now in force or which may hereafter be enacted or
promulgated.  With respect to the condition of the Premises,
Tenant shall, at its sole cost and expense, promptly comply with all applicable
laws, statutes, ordinances and governmental rules, regulations and requirements
now in force or which may hereafter be in force and with the requirements of
any board of fire underwriters or other similar body now or hereafter
constituted relating to or affecting Tenant’s
specific nature of use of the Premises and to all building codes requiring modifications to
the Premises due to the improvements made by or for Tenant in the
Premises.  Notwithstanding anything to
the contrary in this Lease, except for grandfathered rights and variances, it shall
be Landlord’s obligation, at Landlord’s cost and expense, to comply with all
applicable laws relating to the Building and the Building’s systems in general,
without regard to specific use, including modifications required to obtain the
necessary building permits for the Work to be performed in accordance with the
Construction Agreement attached hereto as Exhibit B.  Tenant shall not knowingly do or permit
anything to be done in or about the Premises or bring or keep anything therein
which will in any way increase the rate of any insurance upon the Building or
any of its contents, or cause cancellation of said insurance or otherwise
affect said insurance in any manner. 
Tenant shall be responsible for any increase in cost of Landlord’s
insurance caused by or resulting from Tenant’s breach of the obligations
contained herein.

 

6.4                                 Pursuant to
Article 6.1(d) above, other than commonly used business office supplies, Tenant
shall not permit nor use, generate, store, transport or dispense on the
Premises any flammable, radioactive materials, hazardous wastes, chemicals,
environmental poisons, pollutants, contaminants, or other substances
demonstrated as hazardous or toxic pursuant to the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended; the Hazardous
Materials Transportation Act; the Resource Conservation and Recovery Act; the
California Health and Safety Code, or regulations issued

 

4

 

under
any of said acts (collectively, “Applicable Environmental Laws”) without the
prior written consent of Landlord.  Any
such Landlord consent shall be conditioned upon (a) Tenant’s separate written
agreement to handle, store, use and dispose of such materials in accordance
with all applicable environmental laws, and (b) Tenant’s separate written
agreement to indemnify and hold Landlord harmless from any and all liability
including consequential damages directly or indirectly arising out of Tenant’s
storage, use, or disposal of such materials, including without limitation the
cost of any required or necessary repair, clean up or detoxification as a
result thereof.  Tenant’s failure to
provide a separate written agreement to handle, store, use and dispose and to
indemnify Landlord shall not abrogate or eliminate Tenant’s obligations
hereunder.

 

6.5                                 As
used herein, the term “Hazardous Material” means any hazardous or toxic
substance, material or waste which is or becomes regulated by any local
governmental authority, the state in which the Project is located or the United
States government.  The term “Hazardous
Material” includes, without limitation, any material or substance that is (i)
defined as a “Hazardous Substance” under appropriate state law provisions, (ii)
petroleum, (iii) asbestos, (iv) designated as a “Hazardous Substance” pursuant
to Section 311 of the Federal Water Pollution Control Act (33 U.S.C. section
1321), (v) defined as a “Hazardous Waste” pursuant to Section 1004 of the
Federal Resource Conservation and Recovery Act, 42 U.S.C. section 6901 et seq.
(42 U.S.C. section 6903), (vi) defined as a “Hazardous Substance” pursuant to
Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. sections 9601 et seq. (42 U.S.C. section 9601), or (vii)
defined as a “Regulated Substance” pursuant to Subchapter IX, Solid Waste
Disposal Act (Regulation of Underground Storage Tanks), 42, U.S.C. sections
6991 et
seq.

 

6.6                                 Excluding
commonly used business office supplies, as well as any preexisting asbestos and
asbestos containing materials (“ACMs”) in the Building, Tenant shall, at
Tenant’s sole expense and with counsel reasonably acceptable to Landlord,
indemnify, defend and hold harmless Landlord and Landlord’s shareholders,
directors, officers, employees, partners, affiliates, and agents (“Landlord
Indemnities”) with respect to all losses arising out of or resulting from the
release of any Hazardous Material in or about the Premises or the Project, by Tenant, Tenant’s Agents, contractors or invitees
other than Landlord or Landlord’s Indemnitees or the violation
of any Applicable Environmental Law, by Tenant or Tenant’s agents, contractors
or invitees (other than Landlord and Landlord Indemnities) pursuant to Article
6.4(b) above.  This indemnification includes
all losses, liabilities, obligations, penalties, fines, claims, actions
(including remedial or enforcement actions of any kind and administrative or
judicial proceedings, orders or judgments), damages (including consequential
damages and punitive damages) and costs (including attorney, consultant and
expert fees and expenses) resulting from the release of any Hazardous
Substances or violation of any Applicable Environmental Law by Tenant or Tenant’s agents, contractors or invitees
other than Landlord and Landlord’s Indemnitees.  This indemnification shall survive the
expiration or sooner termination of the Lease. (See Lease Addendum Paragraph 50 and 51.)

 

7.                                       Improvements
and Alterations.

 

7.1                                 Alterations,
Additions or Improvements.                       Without the prior written consent of
Landlord, and except for non-structural, cosmetic alterations costing less than
Fifty Thousand Dollars ($50,000) (“Cosmetic Alterations”),
Tenant shall not make nor cause alterations, additions, or improvements in, on
or to any part of the Premises or the Project, except to install freestanding
furniture and floor coverings, where such freestanding furniture does not place
a load on the floor that exceeds 70 pounds per square foot.  Except as provided above, any alterations,
additions or improvements to the Premises desired by Tenant shall be made in
accordance with plans and specifications approved in advance in writing by
Landlord and pursuant to any applicable governmental permits.  Landlord’s approval of Tenant’s plans and
specifications shall not constitute Landlord’s representation or warranty as to
the adequacy of the plans and specifications or their compliance with
applicable laws.

 

7.2                                 Contractors
for Improvements.                       Except for any Cosmetic Alterations,
any alterations, additions or improvements to the Premises desired by Tenant,
other than any specified in the Approved Plans as defined in Exhibit B, if any,
shall be made by Landlord or contractors selected by Landlord for Tenant’s
account.  Landlord’s contractor shall
have all major work items bid by three subcontractors or vendors.  Landlord’s
contractor and Tenant shall mutually approve subcontractors for major work
items (i.e., items that cost more than Thirty Thousand Dollars ($30,000).  Landlord’s contractor shall use its best
efforts to hire such mutually approved qualified subcontractors with the lowest
bids.

 

7.3                                 Landlord’s
Consent to Improvements.                                      Landlord
may impose as a condition to its consent to alterations, additions or
improvements to the Premises desired by Tenant such requirements as Landlord
may reasonably deem necessary including, without limitation, requirements
relating to the manner in which the work is done and the times during which the
work is to be accomplished so long as such
requirements do not impose additional costs.  At Landlord’s request, but at Tenant’s sole
cost and expense, at the expiration or sooner termination of this Lease, Tenant
shall have Landlord’s contractor remove any and all improvements, additions or
personal property that are not typical in
comparable first class buildings in the Premises caused to be
installed by Tenant other than the initial Tenant Improvements described in
Article 7.5 below. At the time Landlord
approves such improvements, Landlord shall specify which improvements it will
require Tenant to remove at the end of the Lease Term.  Landlord’s contractor at Tenant’s sole cost
and expense shall repair any damage done to the Premises in connection with
such removal.

 

7.4                                 Changes to
Structure or Mechanical or Electrical Systems.    Notwithstanding any provision herein that
permits Tenant to make its own alterations, additions or improvements to the
Premises, Tenant shall not make any alterations, additions or improvements to
the Premises which would negatively affect the Building’s structure or its
mechanical or electrical systems, or which would materially interfere with or
disrupt other tenants in the Building or any work then being carried out
therein by Landlord or its contractors.

 

7.5                                 Initial
Tenant Improvements.                                    Landlord
shall construct or have Landlord’s contractor construct the improvements in the
Premises (the “Tenant Improvements”), if any, pursuant to Exhibit B, if
any.  Tenant may install certain movable
personal property (e.g., file systems, furniture) in the
Premises, which Tenant shall remove upon the expiration or earlier termination
of the Lease.

 

7.6                                 Standard for
Improvements.                                          Any
alterations, additions or improvements to the Premises shall be manufactured
and installed in a good, workmanlike, diligent, prompt and expeditious manner
in compliance with all Building specifications, applicable laws and Applicable
Environmental Laws.

 

5

 

8.                                       Repairs and
Maintenance.

 

8.1                                 The Premises
at Tenant’s move-in will be in good operating condition, free of debris and
structurally sound in accordance with industry standards in the Project
area.  By taking possession of the
Premises, Tenant shall be deemed to have conclusively agreed to accept the Premises
as being in good order, condition and repair, subject to “punchlist” items and
latent defects and any representations or
warranties that may be set forth elsewhere in this Lease.  Except as required by Article 20 below and
ordinary wear and tear and subject to
Article 8.2 with regard to any Building Systems in or about the Premises,
Tenant shall, at all times during the Lease Term hereof and at Tenant’s sole
cost and expense, keep the Premises and every part thereof in good condition,
order and repair except repairs resulting from the negligence, recklessness or
willful wrongful act of Landlord or Landlord’s representatives, employees or
other agents (collectively, “Landlord’s Agents”).  Landlord shall have no obligation to alter, remodel, improve, repair,
decorate or paint the Premises or any part thereof, or maintain any nonstandard
items installed in the Premises by or at the request of Tenant, except as
specified in Articles 13 and 20 below or in Exhibit B, if any.  No representations relating to the condition
of the Premises, the Building or the Project have been made by Landlord or
Landlord’s Agents to Tenant, except as may be specifically set forth in this
Lease.

 

8.2                                 Subject
to the provisions of Article 8.1 above and Article 20 below, Landlord shall
maintain the Common Areas, the foundation and structural portions of the
Building (which shall include but not
limited to floor/ceiling slabs, roof, curtain wall, exterior glass and
mullions, columns, beams, shafts (including elevator shafts) parking areas,
plazas, pavement and curbs (collectively, “Building Structures”),
and the plumbing, heating, ventilation and air conditioning (“HVAC”), fire,
life, safety, mechanical and electrical systems (collectively, “Building Systems”) providing the services
and utilities to be furnished by Landlord pursuant to Article 13.1 below, in
good order and condition; provided, however if any maintenance and repairs are
caused by the act, neglect, fault, or omission of any duty by Tenant or
Tenant’s agents, servants, employees, or invitees (collectively, “Tenant’s
Agents”), Tenant shall pay to Landlord the reasonable cost of such maintenance
and repairs.  Landlord shall not be
liable for any failure to make any such repairs or to perform any maintenance
unless such failure persists for an unreasonable time after Tenant gives
written notice to Landlord of the need for such repairs or maintenance.  Notwithstanding anything in this Lease to
the contrary, in the event of an interruption in essential services to the
Premises (defined for these purposes as the failure to provide HVAC service,
electrical service, elevator service, water or restroom facilities) or Tenant’s
access to Premises is materially impaired, and such interruption or impairment
continues for a period of five (5) consecutive days or twenty (20) days in any
one calendar year, Tenant shall be entitled to an abatement of Rent for the
period that such services are not provided where such interruption or
impairment materially interferes with the normal business conduct of Tenant in
the Premises.  If any such interruption
occurs during a period when Tenant is not otherwise required to pay Rent,
Tenant’s free rent period shall be extended for the number of days that the
services were not provided.  Tenant
waives the right to make repairs at Landlord’s expense under any law, statute
or ordinance now or hereafter in effect.

 

9.                                       Liens.              Tenant shall keep
the Project free from any liens arising out of any work performed, materials
furnished or obligations incurred by Tenant. 
If within twenty (20) days following the imposition of any lien and
written notice thereof to Tenant, Tenant does not cause the lien to be released
of record by payment or posting of a proper bond, Landlord shall have, in
addition to all other remedies provided herein and at law or in equity, the
right to cause the lien to be released by such means as it deems proper
including, but not limited to, payment of the claim giving rise to such
lien.  All such sums paid by Landlord
and all expenses incurred in connection therewith shall be considered Additional
Rent and shall be payable to Landlord by Tenant within thirty (30) days after
receipt of notice from Landlord, with interest at the Interest Rate (as defined
in Article 27 below).  Landlord shall
have the right at all times to post and keep posted on the Premises, any
notices permitted or required by law, or which Landlord shall deem proper, for
the protection of Landlord, the Project and by other parties having an interest
therein from mechanic’s and materialmen’s liens.  Tenant shall give Landlord at least 15 business days prior
written notice of commencement of any work on the Premises.

 

10.                                 Assignment
and Subletting.

 

10.1                           Tenant
shall not have the right to assign the Lease, or sublease all or any portion of
the Premises without Landlord’s consent, which
shall not be unreasonably withheld, conditioned or delayed.  If Landlord consents to an assignment or
sublease, such assignment or sublease shall be subject to all the terms and
conditions of the Lease, and on Landlord-approved forms.  Any assignment, sublease or other transfer
without Landlord’s prior written consent shall be void.

 

10.2                           In
determining whether to consent to an assignment or a sublease, Landlord may
consider the nature of the proposed use and business and the financial stature
of the proposed transferee.  In
addition, Landlord reserves the right to condition any such consent upon its
reasonable determination that the proposed assignee’s or subtenant’s use of the
Premises will not adversely materially impact on the Common Areas or utility
systems of the Building.

 

10.3                           Tenant
shall not enter into any proposed assignment, sublease or other transfer of any
interest herein or in the Premises which would (a) detract from the first-class
character or image of the Building, or (b) cause a breach by Landlord of any
loan obligation or agreement, any covenants, conditions, restrictions and lease
obligations of record, or any insurance policy.  (Upon Tenant’s request, Landlord shall provide Tenant with a list
of any existing rights in favor of any other tenant in the Building.)

 

10.4                           Tenant
shall give Landlord fifteen (15) days prior written notice of its intention to
assign, sublease or otherwise transfer its Lease.  Tenant shall submit the following information on
Landlord-approved forms with such notice and with a written request for
Landlord’s consent to any assignment, sublease or transfer: (a) all transfer
and related documents, (b) financial statements or other financial information,
certified by a certified public accountant or
officer of the Company, sufficient to enable Landlord to make an
informed judgment as to the financial capabilities of the proposed transferee,
and (c) such other information, related to the proposed transfer and the
parties involved therein as Landlord reasonably requests in writing.  Landlord, at its option, may void any
transaction that does not comply with provisions of this Article 10.

 

10.5                           If
Landlord does not consent to the proposed sublease or assignment, or other
transfer, within fifteen (15) days,
Tenant shall not complete such proposed assignment or sublease.  On the other hand, if Landlord consents to
such proposed sublease or assignment, or other transfer, Tenant shall be
required to pay Landlord’s reasonable legal and administrative fees not to
exceed $1,000 for any assignment or sublease. 
In addition, if Landlord consents to the proposed

 

6

 

assignment or sublease: (a) any subtenant shall agree
that if Landlord gives such subtenant notice that Tenant is in default under
this Lease, such subtenant shall thereafter make all sublease or other payments
directly to Landlord, which sublease payments will be received by Landlord
without any liability to honor the sublease (except to credit such payments
against sums due under the Lease) and any subtenant shall agree to attorn to
Landlord or its successors and assigns should the Lease be terminated for any
reason, voluntarily, or otherwise, except that in no event shall Landlord or
its successors or assigns be obligated to accept such attornment and (b)
Landlord may require that subtenant not then be in default hereunder in any
respect.

 

10.6                           The
parties acknowledge that Landlord’s economic stake in the Project is
significantly greater than Tenant’s economic stake in this Lease.  Accordingly, the parties have expressly
bargained for the following allocation of any “Profits” (as defined in Article 59 in the Lease Addendum)
to be derived by Tenant from any assignment or subletting or other transfer of
this Lease.  Except in the case of a Permitted Transferee as
defined in Article 10.9 below  (in which case no Transfer Premium is due), in the event Tenant assigns or subleases more than
fifty percent (50%) of the Premises, Tenant shall be required to
pay Landlord fifty percent (50%) of any rent, key money, transfer
consideration, or other premiums of any kind or nature on the sublease,
assignment or transfer in excess of the Base Rent payable by Tenant under this
Lease on a per rentable square foot basis net of Tenant’s costs incurred to
facilitate the transfer (the “Transfer Premium”).  Such payments shall be paid, in the same manner and at the same
time as Tenant receives such Transfer Premium, whether such Transfer Premium is
in the form of an increased rental, a lump sum payment or any other form of
consideration.  If such sublease,
assignment or transfer pertains to a portion of the Premises only, any Transfer
Premium shall be computed on the assumption that Tenant’s Rent and other sums
due hereunder are allocable on a pro rata per square foot basis.  [See
Lease Addendum Article 52]

 

10.7                           The
provisions of this Article 10 shall apply regardless of whether such
assignment, sublease or other transfer is made in compliance with the
provisions of this Lease.  Any payments
made to Landlord pursuant to this Article 10 shall not cure any default under
this Lease arising from such assignment, sublease or transfer. Tenant shall not
artificially structure any sublease, assignment or other transfer or take any
other steps to circumvent or to reduce the amount payable to Landlord under
this Article 10.  The amount payable to
Landlord under this Article 10 shall be the amount that would have been payable
to Landlord had the Tenant not artificially structured the sublease, assignment
or transfer or otherwise tried to circumvent this Article 10.

 

10.8                           No
assignment, sublease or other transfer shall release Tenant from any of its
obligations hereunder.  Landlord’s
consent to any one transfer shall apply only to the specific transaction thereby
authorized and such consent shall not waive the duty of Tenant or any
transferee to obtain Landlord’s consent to any other or subsequent transfer, or
modify or limit Landlord’s rights hereunder in any way.  Landlord’s acceptance of Rent directly from
any assignee, subtenant or other transferee shall not be construed as
Landlord’s consent thereto nor Landlord’s agreement to accept the attornment of
any subtenant in the event of any termination of this Lease.  In no event shall Landlord’s enforcement of
any provision of this Lease against transferee be deemed a waiver of Landlord’s
right to enforce any Lease provision against Tenant or other person.

 

10.9                           If
Tenant is a corporation, an unincorporated association or a partnership
(including, without limitation, a limited liability company (“LLC”) or a
limited liability partnership (“LLP”)), any cumulative transfer, assignment or
hypothecation of any stock or interest in such corporation, association or
partnership greater than forty-nine percent (49%) thereof, or any cumulative
transfer, assignment or hypothecation (other than in the ordinary course of
business) of any asset of such corporation, association, partnership, LLC or
LLP greater than forty-nine percent (49%) thereof (“Change in Control”), shall
be deemed an assignment within the meaning and provisions of this Article
10.  The foregoing shall not apply to
corporations, where forty-nine percent (49%) or more of the stock is traded
through a regional, national or over-the-counter exchange.  Provided that the transferee’s use is
permitted under the Lease and provided that Tenant notifies Landlord of its
intention at least thirty (30) days prior to such assignment or sublease, then
notwithstanding anything in this Lease to the contrary, Tenant shall have the
right, without obtaining Landlord’s consent or paying any Transfer Premium, to
do the following: (a) assign this Lease or sublet all or any part of the
Premises to a parent, wholly-owned subsidiary or affiliate of Tenant; (b)
transfer a majority or controlling interest in the Tenant to an entity with a
financial strength sufficient to meet the
obligations set forth in this Lease; (c) assign this Lease or
sublet all or any part of the Premises to an entity into which Tenant is merged
or by which it has been acquired; (d) 
assign this Lease or sublet all or any part of the Premises to an entity
or entities of the Tenant created by the division of Tenant into one or more
separate corporations and/or partnerships (collectively,
a “Permitted Transferee”).

 

10.10                     Notwithstanding
any of the foregoing provisions, covenants and conditions to the contrary, in
the event that this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. 101 et seq. (the “Bankruptcy Code”),
any and all moneys or other consideration payable or otherwise to be delivered
in connection with such assignment shall be paid or delivered to Landlord,
shall be and remain the exclusive property of the Landlord and shall not
constitute property of Tenant or of the estate of Tenant within the meaning of
the Bankruptcy Code. Any and all moneys or other consideration constituting
Landlord’s property under the preceding sentence not paid or delivered to
Landlord shall be held in trust by the bankruptcy trustee in possession or
debtor in possession for the benefit of the Landlord and shall promptly be paid
to or turned over to Landlord.  If
Tenant proposes to assign this Lease pursuant to the provisions of the Bankruptcy
Code to any person or entity who shall have made a bona fide offer to accept an
assignment of this Lease on terms acceptable to Tenant, then notice of such
proposed assignment setting forth (a) the name and address of such person, (b)
all of the terms and conditions of such offer, (c) the adequate assurance
provided by Tenant to assure such person’s future performance under the Lease
including, without limitation, the assurance referred to in Section 365 of the
Bankruptcy Code, or any such successor or substitute legislation or rule
thereto, shall be given to Landlord by Tenant no later than twenty (20) days
after receipt of such bona fide offer by Tenant.  Tenant shall make application to a court of competent
jurisdiction for authority and approval to enter into such assignment and
assumption.  Landlord shall thereupon
have the prior right and option, to be exercised by notice to Tenant given at
any time prior to the effective date of such proposed assignment, to accept an
assignment of this Lease upon the same terms and conditions and for the same
consideration, if any, as the bona fide offer made by such person, less any
brokerage commissions, attorneys’ fees, tenant improvement costs or other
charges which may be payable out of the consideration to be paid by such person
for the assignment of this Lease.  Any
person or entity to which this Lease is assigned pursuant to the provisions of
the Bankruptcy Code shall be deemed without further act or deed to have assumed
all of the obligations arising under this Lease on and after the date of such assignment.  Any such assignee shall upon demand execute
and deliver to Landlord an instrument confirming such assumption.  Subject to this Article 10 and Article 20
below, the Lease

 

7

 

provisions shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.

 

11.                                 Waiver;
Indemnity.

 

11.1                           Tenant, as a
material part of the consideration to Landlord, hereby assumes all risk of
damage to personal property of Tenant, or injury to persons in or about the
Premises, except to the extent caused by
the negligence, recklessness or willful misconduct of Landlord or Landlord’s
Agents.  Notwithstanding
any contrary provision herein, and except to the extent arising from the
negligence, recklessness or willful misconduct of the Landlord, or Landlord’s
Agents, Landlord shall not be liable and Tenant hereby waives all claims
against Landlord for any injury or damage to any person or property or any
other loss (including, but not limited to loss of income), which may be
sustained by the person, goods, wares, merchandise or property of Tenant, or
Tenant’s Agents, or any other person in or about the Premises, the Building, or
the Project by or from any cause whatsoever. 
Without limiting the generality of the foregoing, except to the extent caused by negligence,
recklessness or willful misconduct of the Landlord or Landlord’s Agents,
Landlord shall not be liable for any damage caused by or resulting from: (a)
water leakage of any character from the roof, walls, windows, basement, or any
other portion of the Premises or the Project; (b) fire, steam, electricity, gas
or oil, or by any interruption of utilities or services, or by any tenant, occupant,
or other person; or (c) any other cause whatsoever, in, on or about the
Premises or the Project. 
Notwithstanding any contrary provision in this Lease, Landlord shall not
in any event be liable for consequential damages hereunder.

 

11.2                           Subject to Article
12.7 below, except to the extent that claims arise from the negligence,
recklessness or willful misconduct of Landlord, Tenant shall indemnify and hold
Landlord (as used in this Article 11.2, “Landlord” shall refer to Landlord and
Landlord’s Agents) harmless from and against any and all claims, demands,
losses, damages, liabilities, costs and expenses (including, but not limited
to, reasonable attorney’s fees) arising from Tenant’s use or occupancy of the Premises, from the
conduct of Tenant’s business, from any act or omission, work or thing done,
permitted or suffered by Tenant (or any officer, employee, agent, contractor,
representative, licensee, guest, invitee or visitor thereof) in or about the
Project, or from any default under this Lease by Tenant. If any action or
proceeding is brought against Landlord by reason of any such matter, Tenant
shall, upon notice from Landlord, defend Landlord in such action or proceeding
at Tenant’s expense.  The provisions of
this Article 11 shall survive the expiration or termination of this Lease for a
period of ninety (90) days with respect to any claims or liability arising from
events occurring prior to such expiration or termination.

 

11.3                           Notwithstanding
anything in this Lease to the contrary, except to the extent that claims arise
from the negligence, recklessness or willful misconduct of Tenant, Tenant (as
used in this Article 11.3, “Tenant” shall refer to Tenant and Tenant’s
Agents) shall not be liable for and Landlord shall indemnify Tenant and hold
Tenant harmless from and against all suits, actions, damages, liability and
expense in connection with loss of life, bodily or personal injury or property
damage arising from or out of any occurrence, in, upon, at or from the Project.

 

12.                                 Insurance.

 

12.1                           Throughout
the Lease Term hereof, Tenant shall carry and maintain, at its own expense, the
following types, amounts and forms of insurance:

 

12.1.1                  Commercial
General Liability Insurance.  A
policy of commercial general liability insurance with a combined single limit
of One Million Dollars ($1,000,000) per occurrence with Two Million Dollars
($2,000,000) aggregate coverage, in the name of Tenant (naming, as additional
insureds, Landlord, its management company Held Properties, Inc., and, if
requested by Landlord, any mortgagee, trust deed holder, or secured party with
an interest in this Lease).  Tenant’s
liability coverage shall include, without limitation, all coverage typically
provided by the Broad Form Comprehensive General Liability Endorsement,
including broad form property damage, and premises-operations coverage,
products-completed operations coverage, owners and contractors protective
coverage, and the broadest form of contractual liability coverage, the last of
which shall cover the insuring provisions of this Lease and the performance by
Tenant of the indemnity agreements in Article 11 above. Such policy shall
provide coverage on an occurrence basis. 
The amount of such insurance required hereunder shall be subject to
adjustment from time to time as reasonably requested by Landlord, but Landlord
shall not raise such coverage amounts to an extent where they materially exceed
that customarily carried by prudent tenants in first class office buildings in
the Project area.

 

12.1.2                  Tenant’s
Property Insurance.  Tenant
shall procure and maintain property insurance coverage for: (a) all office
furniture, trade fixtures, office equipment, merchandise and all other items of
Tenant’s property in, on or about the Premises and the Project, including
property installed by, for or at the expense of Tenant and (b) Tenant
Improvements.  Tenant’s property
insurance shall be written on the broadest available “all risk” (special causes
of loss) policy form and shall include an agreed amount endorsement for no less
than one hundred percent (100%) of the full replacement cost (new, without
deduction for depreciation) of the covered items and property.  The property insurance coverage shall
include vandalism and malicious mischief coverage, sprinkler leakage coverage
and earthquake sprinkler leakage coverage.

 

12.2                           Recovery for
Tenant’s Negligence.  All of
the policies that Tenant is required to obtain pursuant to the provisions of
Article 12.1 above shall be issued by companies legally authorized to do
business in California.  Although named
as an additional insured and subject to the provisions of Article 12.7 of this
Lease, Landlord shall be entitled to recover under said policies for any loss
occasioned to it, its servants, agents and employees, by reason of the
negligence, recklessness or willful misconduct of Tenant.

 

12.3                           Delivery of
Certificate, Policy and Endorsements.  Prior to Tenant’s occupancy of the Premises, Tenant shall provide
Landlord with evidence of compliance with Tenant’s insurance requirements under
the Lease, including the endorsements specified in Article 12.1, and, as
available, certified certificates for all insurance policies regarding the
Premises, executed by an authorized agent of the insurer or insurers.  Each insurance policy shall provide that it may
not be modified or canceled without ten
(10) days prior written notice to Landlord (by any means
described in Article 27 below) and to any other additional insureds.  At least ten (10) days prior to the expiration of any of such
policies, Tenant shall furnish Landlord with a renewal or binder therefor.

 

12.4                           Blanket
Insurance.  Tenant may carry
insurance by a combination of primary, excess and umbrella policies, provided
that the policies are absolutely concurrent in all respects regarding the
coverage afforded by the policies.  The

 

8

 

coverage of any excess or umbrella policy must be at least as broad as
the coverage of the primary policy.  All
insurance policies carried by Tenant for Tenant’s Premises and personal
property shall be primary and non-contributory with respect to any other
insurance available to and purchased by Landlord.

 

12.5                           Tenant’s
Failure to Obtain Insurance. 
If Tenant fails to carry any insurance policy required hereunder or to
furnish certificates pursuant hereto, Landlord may, upon no less than ten (10)
business days prior written notice, and without waiving Tenant’s default,
obtain such insurance.  In such case,
Tenant, with the next month’s Rent due hereunder, shall reimburse Landlord for
the cost thereof including interest at the Interest Rate specified in Article
27.

 

12.6                           Landlord’s
Insurance.  During the Lease
Term, Landlord shall procure and maintain property and liability insurance for
the Project in such reasonable amounts, and with such reasonable coverage, as
would be carried by a prudent owner of a similar building in the Project area,
or as any lienholder may require. 
Tenant acknowledges that it shall not be a named insured or an additional
insured in such policies, and that it has no right to receive any proceeds from
any such insurance policies carried by Landlord.  Landlord may but shall not be required to carry insurance
coverage for damages caused by flood or earthquake.

 

12.7                           Waiver of
Subrogation.  Landlord and
Tenant hereby waive all causes of action and rights of recovery against each
other, against all subtenants or assignees of Tenant and against any other
person or entity holding an interest in the Project (together, the “Affected
Parties”) and against the agents, officers and employees of the Affected
Parties for any loss occurring to the property of the Affected Parties
resulting from any of the perils insured against under any and all insurance
policies (including self-insurance) in effect at the time of any such loss or
which, under this Lease, were required to be insured against, regardless of
cause or origin of such loss, including the negligence, recklessness or willful
misconduct of the Affected Parties or the agents, officers or employees of the
Affected Parties.  Landlord and Tenant
shall each use commercially reasonably efforts to cause their respective
insurers to issue an endorsement denying such insurer any rights of subrogation
against the other party.

 

12.8                           Increases in
Premiums due to Tenant’s Use or Occupancy.  If, after Landlord provides notice to Tenant that the insurance
carrier is proposing increased premiums to the Project due to Tenant’s use or
occupancy of the Premises, and Tenant fails to cease the offending use within
ten (10) business days after receipt of such notice, Tenant shall pay said
increases in insurance premiums.

 

13.                                 Services and
Utilities.                         13.1                           Throughout
the Lease Term, Landlord shall provide the following services and utilities
twenty-four (24) hours per day on every day during the Lease Term, unless
otherwise stated below.

 

13.1.1                  Subject to all
governmental rules, regulations and guidelines applicable thereto, Landlord
shall provide heating, ventilation and air conditioning (“HVAC”) to the
Premises in a manner consistent with a first class office building from Monday
through Friday, from 8:00 a.m. to 6:00 p.m. and on Saturday from 9:00 a.m. to
1:00 p.m., except for the celebratory days of the following holidays: New
Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas (collectively “Business Hours”).  
After hours HVAC is currently
available to Tenant at no direct charge for the first five (5) years of the
Lease Term but shall be included in Operating Costs under Article 4.  Thereafter, Landlord may charge Tenant for
after-hours HVAC cost, at Landlord’s actual cost, calculated to include wear
and tear and amortization of equipment and electrical.

 

13.1.2                  Landlord shall
at all times provide electricity to the Premises for lighting and power of not
less than three (3) watts per rentable square foot demand load on a
continuous annualized basis.  Landlord
shall also provide electrical lighting in all Common Areas, parking facilities
or storage areas and replace building standard lamps and ballasts as required.

 

13.1.3                  Landlord shall
provide hot and cold water to the Building’s rest rooms (and, as applicable, to
any sink, refrigerator or dishwasher in the Premises).

 

13.1.4                  Landlord shall
provide passenger elevator service at all times; provided, however, after
Business Hours, Landlord may decrease the availability of passenger elevator
service so long as at least one car services the floor on which the Premises
are located.

 

13.1.5                  Landlord shall
provide non-exclusive freight elevator service to Tenant, subject to reasonable
and non-discriminatory scheduling by Landlord. After Business Hours, Tenant may
be charged at a rate equal to Landlord’s cost of providing such freight
elevator service.

 

13.1.6                  Landlord shall
provide 24-hour security
for the Project in a manner consistent with the security systems, equipment and
procedures maintained in comparable first
class office buildings in the Project area. In addition to Landlord’s covenant to provide 24-hour
security to the Project, Tenant shall have the right to provide to the Premises
its own security system.

 

13.1.7                  Landlord shall
provide normal janitorial services five (5) days per week, similar to that
furnished in comparable first class office buildings in the Project area and in
accordance with the building standard janitorial and cleaning service
specifications.

 

13.1.8                  Landlord shall
provide grounds care, including the sweeping of walkways and parking areas,
removal of rainwater (as may be required) and maintenance of the landscaping in
an attractive manner consistent with other office buildings in the Project
area.

 

13.1.9                  Landlord shall
operate and maintain the Project in accordance with the standards of
maintenance and operation as are customary for other comparable first class
buildings in the Project area.

 

13.1.10            Landlord shall provide
controlled access to the Premises 24 hours a day, every day.

 

13.2                           Without
the prior written consent of Landlord, Tenant shall not use in the Premises any
apparatus, device, machine or equipment that uses excess lighting, heating,
ventilation or air conditioning, electricity or water; nor shall Tenant connect
any apparatus or device to sources of electrical current or water except
through existing electrical outlets or water pipes in the Premises.  If Tenant requires electricity in excess of
the amount provided pursuant to Article 13.1.2 herein, or any other resource in
excess of that customarily supplied for use of similar premises in comparable
first class buildings in the Project

 

9

 

area, Tenant shall first request the consent of Landlord.  As a condition to its consent, Landlord may
cause a separate metering device to be installed in the Premises, at Tenant’s
cost and expense.  Tenant shall promptly
pay the cost of all excess resources consumed within the Premises, together
with any additional administrative expenses incurred by Landlord in connection
therewith.  Any sums payable by Tenant
to Landlord under this Article 13 also shall be considered Additional Rent and
may be included in any installment of Rent thereafter becoming due.  Landlord shall have the same remedies for a
default in payment of such sums as for a default in the payment of Rent.

 

13.3                           Except as
provided otherwise in this Lease, Landlord shall not be in default or be liable
for any damages directly or indirectly resulting from any interruption of
utilities or services caused by: (a) the installation or repair of any
equipment in connection with the furnishing of utilities or services; (b) acts
of God or the elements, labor disturbances of any character, any other
accidents or any other conditions beyond the reasonable control of Landlord, or
due to repairs or improvements to the Premises or the Project; or (c) the
limitation, curtailment, rationing or restriction imposed by any governmental
agency or service or utility supplier on use of water or electricity, gas or
any other form of energy or any other service or utility whatsoever serving the
Premises or the Project.  .

 

14.                                 Estoppel
Certificate                                     Within
twenty (20) days after any
written request from Landlord, Tenant shall execute and deliver to Landlord a
certificate (the “Estoppel Certificate”) provided by Landlord’s current or
prospective lender or prospective purchaser stating: (a) that this Lease is
then in full force and effect and has not been modified (or if modified,
setting forth all modifications or attaching all amendments to the Lease), (b)
the then current Base Rent and the date to which said Rent has been paid, and
(c) whether or not Landlord is then under default of this Lease and if so, the
nature of such default and date notice of default was given Landlord. Landlord
and Tenant intend that any existing or prospective lender or any prospective
purchaser or assignee of Tenant may rely on such Estoppel Certificate.  Failure of Tenant to provide, within five (5) days after notice and opportunity to
cure, Landlord with a Estoppel Certificate as provided above
shall be a default under the Lease.

 

15.                                 Subordination;
Requirements of Lenders.

 

15.1                           This Lease
shall be subject and subordinate at all times to (a) all ground leases or
underlying leases which may now exist affecting all or any portion of the
Project, and (b) the lien of any mortgage or deed of trust which may now exist
affecting all or any portion of the Project.

 

15.2                           If any
ground lease or underlying lease terminates for any reason or any mortgage or
deed of trust is foreclosed or a deed in lieu of foreclosure is made for any
reason, then Tenant shall, notwithstanding any subordination, attorn to and
become the tenant of the successor-in-interest.   It shall be a condition to any future subordination of this
Lease that the ground lessor, air space lessor, or mortgagee or beneficiary
requesting such subordination shall agree that so long as Tenant is not in
default under this Lease as defined
Article 17, Tenant’s possession of the Premises shall not be
disturbed as a result of such termination, foreclosure or deed in lieu of
foreclosure. Tenant shall execute and deliver, within thirty (30) days of
demand by Landlord, any additional, commercially reasonable documents
evidencing the priority or subordination of this Lease and the attornment of
Tenant with respect to any such ground leases or underlying leases or the lien
of any such mortgage or deed of trust. [See
Article 44 of the Lease Addendum.]

 

16.                                 Access by
Landlord.

 

16.1                           Landlord
(and its agents, contractors and employees) reserves the right, without
abatement of Rent, to enter the Premises at reasonable times and after
reasonable advance notice (except in cases of emergency) to inspect it, to
supply janitorial services and any other service to be provided by Landlord to
Tenant hereunder, to show the Premises to any prospective purchaser,
beneficiary, mortgagee, to post notices of non-responsibility, to make any
alteration, improvement or repair to the Premises required by law or consented
to by Tenant, or, during the last six (6) months of the Lease Term, to show it
to prospective tenants.  For the purpose
of making any alterations, improvement or repair to the Premises or any portion
of the Project, Landlord may erect, use and maintain scaffolding, pipes,
conduits and other necessary structures in and through the Project and the
Premises where reasonably required by the character of the work to be performed
and in conformance with good construction practices, provided that entrance to
the Premises shall not be blocked thereby, and provided further that Landlord
works expeditiously and uses its best efforts to minimize any interference with
Tenant’s use of and access to the Premises. 
At Tenant’s election, Tenant may accompany Landlord and all persons
entering under the authority or right of Landlord, during any such entry.  Tenant hereby waives any claim for damages
or abatement of Rent for any injury or inconvenience to or interference with
Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises,
and any other loss occasioned thereby, except as otherwise set forth in the
Lease or to the extent arising from the negligence, recklessness or willful
misconduct of Landlord or Landlord’s employees, agents, representatives,
contractors, or invitees.

 

16.2                           For
each of the aforesaid purposes, Landlord shall at all times have and retain a
key to all of the doors in, upon and about the Premises, excluding Tenant’s
vaults and safes, and Landlord shall have the right to use any and all means
which Landlord may deem reasonably necessary or proper to open said doors in
any emergency, and any such entry to the Premises or portions thereof by
Landlord shall not under any circumstances be construed or deemed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or an
eviction, actual or constructive, of Tenant from the Premises or any portion
thereof. If at any time during the Lease Term Tenant wishes to re-key its
Premises, all such re-keying shall be done by Landlord with locks and hardware
supplied by Landlord all at Tenant’s sole cost and expense.

 

17.                                 Default by
Tenant.

 

17.1                           The
occurrence of any of the following shall constitute a breach of the Lease, and
a default if not cured by Tenant after notice and a reasonable opportunity to
cure such breach:

 

17.1.1                  Failure by
Tenant to pay Rent or any amount due hereunder when such amount becomes payable
in accordance with this Lease, or to duly, promptly and completely perform any
obligation of Tenant under Articles 14 or 15 above, and continuation of such
failure for a period of three (3) business days after receipt of the written
statutory notice from Landlord to Tenant specifying the nature of such failure.

 

10

 

17.1.2                  Failure by
Tenant in the due, prompt and complete performance or observance of any other
express or implied covenant, agreement or obligation of Tenant contained in
this Lease, and the continuation of such failure for a period of thirty (30)
days after written notice from Landlord to Tenant specifying the nature of such
failure; provided, however, that if any such failure cannot reasonably be cured
within such period, Tenant shall not be deemed to be in default hereunder if
Tenant promptly commences such cure within such period and thereafter
diligently pursues such cure to completion.

 

17.1.3                  Tenant’s
abandoning the Premises, which shall mean for these purposes, Tenant’s absence
for a period of more than two (2) weeks from the Premises while otherwise in
default of this Lease as described in this
Article 17.

 

17.1.4                  Tenant,
its assignee, sublessee, other transferee, successor or any guarantor of this
Lease gives to Landlord any financial statement or representation which proves
to be materially false or materially misleading.

 

17.1.5                  The insolvency
of Tenant; the making by Tenant of any assignment for the benefit of creditors;
the filing by or against Tenant of a petition to have Tenant adjudged bankrupt
or of a petition for reorganization or arrangement under any law relating to
bankruptcy, insolvency or creditors’ rights in general (unless in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days);
the appointment of a trustee or receiver to take possession of all or a
substantial part of Tenant’s assets or of Tenant’s interest under this Lease,
where such seizure is not discharged within sixty (60) days.  The occurrence of any of the acts or events
referred to in this Article with respect to any Guarantor of this Lease shall
also constitute a default hereunder.

 

17.1.6                  The attachment,
execution or other judicial seizure of a substantial portion of Tenant’s assets
or of Tenant’s interest in this Lease, where such seizure is not discharged
within sixty (60) days.

 

17.2                           The notices
referred to in Article 17.1.1 and 17.1.2 above shall be in lieu of, and not in
addition to, any notice required under Section 1161 et seq. of the California
Code of Civil Procedure.

 

18.                                 Remedies of
Landlord.

 

18.1                           In the
event of Tenant’s default under this Lease as provided in Article 17 above,
Landlord, at Landlord’s option, and without limiting Landlord in the exercise
of any other right or remedy Landlord may have on account of such default, and
without any further demand or notice, may terminate this Lease, recover
possession of the Premises and/or, to the extent permitted by California Civil
Code Section 1951.3 or any other law, remove all persons and property from the
Premises, which property shall be stored by Landlord at a warehouse or
elsewhere at the risk, expense and for the account of Tenant.

 

18.2                           On
termination of this Lease as provided in Article 18.1 above, Landlord shall be
entitled to recover from Tenant the aggregate of:

 

18.2.1                  The worth at the
time of the award of the unpaid Rent, as defined in Article 3.2, late charges
and interest earned as of the date of the termination hereof;

 

18.2.2                  The worth at the
time of the award of the amount by which the unpaid Rent, late charges,
interest and other amounts due hereunder, which would have been earned after
the date of termination hereof until the time of the award, exceeds the amount
of such unpaid Rent, late charges and interest that Tenant proves could have
been reasonably avoided by Landlord mitigating its damages;

 

18.2.3                  The worth at the
time of the award of the amount by which the unpaid Rent for the balance of the
term hereof after the time of the award exceeds the amount of such unpaid Rent,
interest and late charges that Tenant proves could have been reasonably avoided
by Landlord mitigating its damages; and

 

18.2.4                  Any other amount
necessary to compensate Landlord for the detriment proximately caused by
Tenant’s uncured default under this Lease, including but not limited to
brokerage commissions and advertising expenses, expenses incurred for removing
and storing any of Tenant’s property remaining on the Premises, expenses of
remodeling the Premises for a new tenant and any special concessions made to
obtain a new tenant.

 

18.3                           For the
purposes of this Article 18, the “time of the award” shall mean the date upon
which the judgment in any action brought by Landlord against Tenant by reason
of such default is entered or such earlier date as the court may determine; the
“worth at the time of award” (referred to in Articles 18.2.1 and 18.2.2) shall
be computed by including interest at the Interest Rate and late charges set
forth in Article 27 below; and the “worth at the time of award” (referred to in
Article 18.2.3) shall be computed by applying the discount rate of the Federal
Reserve Bank of San Francisco at the time of the award plus one percent (1%)
per annum.

 

18.4                           Nothing
in this Article 18 shall be deemed to alter Landlord’s right to indemnification
under the indemnification clause or clauses contained in this Lease for claims
or liabilities arising from events occurring prior to the termination of this
Lease.

 

18.5                           Notwithstanding
anything to the contrary set forth herein, Landlord’s reentry into the Premises
to perform acts of maintenance or preservation of, or in connection with
efforts to relet the Premises, or any portion thereof, or the appointment of a
receiver upon Landlord’s initiative to protect Landlord’s interest under this
Lease shall not terminate Tenant’s right to possession of the Premises or any
portion thereof and, until Landlord does elect to terminate this Lease, this
Lease shall continue in full force and Landlord may pursue all its remedies
hereunder including, without limitation, the right to recover from Tenant as
they become due hereunder all Rent and other charges required to be paid by
Tenant under the terms of this Lease.

 

18.6                           If
Tenant abandons the Premises, or if Landlord elects to reenter or take possession
of the Premises pursuant to any legal proceeding or pursuant to any notice
provided by law, and until Landlord elects to terminate this Lease, Landlord
may, from time to time, without terminating this Lease, recover all Rent as it
becomes due under Article 18.5 above, subject to interest and late charges as
set forth in Article 27, and/or relet the Premises or any part thereof for the
account of and on behalf of Tenant, on any terms, for any term (whether or not
longer than the Lease Term) and at any rental rate as Landlord in its
reasonable discretion may deem advisable, and Landlord may make any alterations
and repairs to the Premises in connection therewith.  In the event that Landlord shall elect to so relet the Premises
on behalf of Tenant, then base rent and additional rent received by Landlord
from such reletting shall be applied:

 

11

 

18.6.1                  First, to
reimburse Landlord for the reasonable costs and expenses of such reletting
(including, without limitation, legal and other costs and expenses of
repossessing the Premises, removing persons and property therefrom, obtaining
new tenants, brokerage fees, costs of preparing the Premises for occupancy by
such new tenants, and, if Landlord maintains and operates the Premises, the
costs thereof).

 

18.6.2                  Second, to the
payment of any indebtedness of Tenant to Landlord other than Base Rent,
adjustments to Base Rent, Additional Rent and other sums due and unpaid
hereunder.

 

18.6.3                  Third, to the
payment of Rent and other sums due and unpaid hereunder; the residue, if any,
shall be held by Landlord and applied in payment of other or future obligations
of Tenant to Landlord as they may become due and payable.

 

18.7                           Should
the rent received from such reletting, when applied in the manner and order
indicated above, be less than the total amount owing from Tenant pursuant to
this Lease, then Tenant shall pay such deficiency to Landlord, and if Tenant
does not pay such deficiency within five (5) days of its receipt of written
notice, Landlord may bring an action against Tenant for recovery of such
deficiency or pursue its other remedies hereunder or under California Civil
Code Section 1951.8, California Code of Civil Procedure Section 1161 et seq.,
or any similar, successor or related provision of law.

 

18.8                           All
rights, powers and remedies of Landlord under the Lease and any other agreement
between Landlord and Tenant shall be cumulative and not alternative and shall
be in addition to all rights, powers and remedies given to Landlord at law or
in equity.  The exercise of any one or
more of such rights or remedies shall not impair Landlord’s right to exercise
any other right or remedy, including, without limitation, any and all rights and
remedies of Landlord under California Civil Code Section 1951.8, California
Code of Civil Procedure Section 1161 et seq., or any similar, successor or
related provision of law.

 

18.9                           [Intentionally Deleted]

 

18.10                     If Tenant
abandons the Premises and leaves behind any items of personal property, then
Landlord shall store such property at Tenant’s cost and expense at a warehouse
or any other location at the risk of Tenant, and Tenant’s property shall be
released only upon Tenant’s payment of any and all moving and storage charges,
as well as any expense or damages incurred as a result of the removal, moving
and storage of such property, together with all sums due and owing under this
Lease. If Tenant does not reclaim such property within the period permitted by
law, Landlord may sell such property in accordance with law and apply the
proceeds of such sale to any sums due and owing hereunder, or retain said
property, granting Tenant credit against sums due and owing hereunder for the
reasonable value of such property.

 

18.11                     To the extent
permitted by law, Tenant and Landlord each hereby waive all provisions of, and
protection under, any decisions, statutes, rules, regulations and other laws of
the State of California to the extent same are inconsistent and in conflict
with specific terms and provisions of this Article 18.

 

19.                                 Default by
Landlord; Limitation of Liability.

 

19.1                           Landlord
shall not be deemed to be in default hereunder unless Landlord does not perform
its material obligations under the Lease after written notice of Landlord’s
breach by Tenant to Landlord and to such other parties whose names and
addresses are furnished to Tenant.  The
notice shall specify that Landlord has failed to perform such obligations;
provided, however, that if the nature of such obligations is such that more than
thirty (30) days are reasonably required for their cure, Landlord shall not be
deemed to be in default hereunder if Landlord or any such other party(ies)
commences such cure within such thirty (30) day period and thereafter
diligently pursues such cure to completion.

 

19.2                           If Landlord
is in default hereunder and, as a consequence thereof, Tenant recovers a
judgment against Landlord, such judgment may be satisfied only out of the
right, title and interest of Landlord in the Project and out of the rent or other
revenue receivable by Landlord from the Project, or out of the proceeds
receivable by Landlord from the sale or other disposition of all or any portion
of Landlord’s right, title and interest in the Project. Neither Landlord nor
any of the partners of Landlord shall be personally liable for any deficiency
or otherwise.

 

20.                                 Damage and
Destruction.

 

20.1                           If the
Project (whether or not including the Premises) is damaged by an insured
casualty (or a casualty for which Landlord is required to insure under the
terms of this Lease) occurring more than six (6) months prior to the expiration
of this Lease and any extensions thereof, Landlord shall forthwith repair same,
or cause same to be repaired, to the extent that insurance proceeds are made
available to Landlord therefor and provided that such repairs can, in
Landlord’s reasonable opinion, be made within one hundred eighty (180) days
from the date of such damage  under the
laws and regulations of the federal, state and local governmental authorities
having jurisdiction thereof.  Landlord
agrees to repair any casualty damage as long as the uninsured portion of such
casualty damage does not exceed $15.00 per rentable square foot.

 

20.2                           If (a)
the Premises or the Project is damaged by an uninsured casualty which costs
more than $15.00 per rentable square foot to repair, (b) the casualty repair
requires more than one hundred eighty (180) days to complete without payment of
overtime or other premium or (c) if the Premises, or the Project is damaged by
a casualty as described in Article 20.1 above within the last six (6) months of
this Lease and any extensions thereof, then Landlord shall have the option
within thirty (30) days from the date of such damage
either to (1) notify the Tenant of its election to continue the Lease, in which
event Landlord shall thereafter repair such damage; or (2) notify the Tenant of
its election to immediately terminate this Lease, in which event this Lease
shall be so terminated.  Landlord shall
refund to Tenant any Rent previously paid for any period of time subsequent to
the earlier of such termination or untenantability of the Premises.  Notwithstanding any contrary provision
herein, Landlord shall not be required to repair any casualty damage to the
property of Tenant or to repair or replace any paneling, decorations, railings,
floor coverings, alterations, additions, fixtures or improvements installed on
the Premises by or at the expense of Tenant. 
To the extent permitted by law,
Tenant hereby waives the provisions of Section 1932, subdivision 2, and Section
1933, subdivision 4, of the Civil Code of California, and any similar law,
statute or ordinance now or hereafter in effect.

 

20.3                           Until
the Premises are restored, Rent shall be abated in the proportion that the area
of the Premises rendered unusable by Tenant bears to the total area of the
Premises.  Except for abatement of Rent,
Tenant shall have no claim against the Landlord for any damage suffered by
reason of (a) any damage to the Premises, (b) such repairs, or (c) any inconvenience,

 

12

 

interruption, annoyance, loss of business, or continued expense of
operation caused by such damage or repair, except to the extent resulting from
the negligence, recklessness or willful misconduct of Landlord, its employees
agents, representatives, contractors or invitees.

 

20.4                           Should
the Premises be damaged or destroyed by fire or other casualty insured under a
standard fire and casualty insurance policy (or which could be insured under a
standard fire and casualty insurance policy), Landlord shall within forty-five (45) days of the date of the casualty,
notify Tenant in writing of Landlord’s good faith estimate of the time
necessary to repair and rebuild the Premises. 
If such estimate sets forth a period of one hundred eighty (180) days or
less, Landlord shall, except as otherwise provided herein this Article, repair
and/or rebuild the same with reasonable diligence.  Landlord’s obligation hereunder shall be limited to the Building
and Tenant Improvements originally provided by Landlord at the Commencement
Date, and any alterations provided by Landlord that Landlord has not requested
Tenant to remove upon expiration of the Lease Term.

 

21.                                 Eminent
Domain.

 

21.1                           If the
entire Premises, or enough thereof so as to render the balance thereof not
reasonably usable for the conduct of Tenant’s business, is taken or
appropriated by a governmental agency under the power of eminent domain or
conveyed in lieu thereof, either party hereto may terminate this Lease by
serving written notice upon the other party hereto within thirty (30) days
thereafter.  If any substantial part of
the Project excluding the Premises is taken or appropriated by a governmental
agency under the power of eminent domain or conveyed in lieu thereof, Landlord
may so terminate this Lease.  In either
event, Landlord shall receive (and Tenant shall assign to Landlord upon demand
by Landlord) any income, Rent, award or any interest therein which may be paid
in connection therewith, and Tenant shall have no claim for any part of any sum
so paid, whether or not attributable to the value of the unexpired Lease Term;
provided, however, that nothing herein shall prevent Tenant from pursuing a
separate award in connection with the taking of Tenant’s removable tangible
personal property placed in the Premises solely at Tenant’s expense, for
Tenant’s relocation costs and for loss of goodwill.

 

21.2                           If a
part of the Premises is so taken, appropriated or conveyed by a governmental
agency, and neither party hereto elects to terminate this Lease, then Base Rent
and Additional Rent payable hereunder shall be abated in the proportion that
the portion of the Premises so taken, appropriated or conveyed bears to the
area of the entire Premises.

 

21.3                           Notwithstanding
anything to the contrary contained in this Article 21, if the temporary use or
occupancy of any part of the Premises (for a period not to exceed 60 days) is
taken or appropriated by a governmental agency under the power of eminent
domain or conveyed in lieu thereof during the Lease Term, this Lease shall be
and remain unaffected by such taking, appropriation or conveyance and Tenant
shall continue to pay in full all Rent payable by Tenant.  In the event of any such temporary taking,
appropriation or conveyance, Tenant shall be entitled to receive that portion
of any award that represents compensation for loss of this use or occupancy of
the Premises during the Lease Term, and Landlord shall be entitled to receive
the balance of such award.  To the extent
that it is inconsistent with the above, each party hereto hereby waives the
provisions of Section 1265.130 of the California Code of Civil Procedure
allowing either party to petition a court to terminate this Lease in the event
of a partial taking of the Premises.

 

22.                                 Sale by
Landlord.                                                            If
Landlord sells or transfers all or any portion of the Project including the
Premises, Landlord shall, upon consummation of the sale or transfer, be
released from any liability relating to its obligations or covenants thereafter
to be performed or observed under this Lease, and Tenant agrees to look solely
to Landlord’s successor-in-interest with respect to such liability.  If Landlord transfers or credits any
security deposit or prepaid Rent to Landlord’s successor-in-interest, then upon
such transfer Landlord shall be discharged from any further liability therefor.

 

23.                                 Surrender of
Premises.                         Upon
the expiration or sooner termination of the Lease, Tenant shall surrender to
Landlord the Premises broom clean and free of debris, with all repairs,
changes, alterations, additions and improvements thereto, in good order,
condition and repair, ordinary wear and tear and damage from insured casualty
excepted.  At Tenant’s sole cost and expense,
Tenant shall upon expiration or sooner termination of the Lease: (a) remove its
personal property from the Premises; (b) remove any improvements to the
Premises caused to be installed by Tenant that Landlord may require Tenant to
remove pursuant to Article 7.3; and (c) repair any damage caused by the removal
of any such property or improvements. 
If Tenant leaves any personal property at the Premises, Landlord may
remove such personal property and dispose of it, at Tenant’s expense.

 

24.                                 Quiet
Enjoyment.                                                            So
long as Tenant is not in default hereunder, Tenant shall have the right to the
quiet peaceful enjoyment and possession of the Premises and the use of the
Common Areas during the Lease Term, subject to the terms and conditions of this
Lease.

 

25.                                 Notices.    Any notice, demand or other
communication to be given under the provisions of this Lease shall be in
writing to the appropriate address set forth in Article 1.1.10 (or such address
furnished by either party hereto to the other party hereto in writing) and
shall be (a) personally served, (b) mailed by United States registered or
certified mail, return receipt requested, postage prepaid, (c) sent by a
nationally recognized courier service (e.g. Federal Express) for next day
delivery, to be confirmed in writing by such courier or (d) sent by electronic
facsimile with appropriate provisions for confirmation of receipt.  Service by mail shall be deemed complete on
the day of actual delivery as shown by the addressee’s registered or certified
mail receipt or at the expiration of the third business day after the date of
mailing, whichever first occurs. 
Service by personal service or courier shall be deemed complete on
receipt.  Service by electronic
facsimile shall be deemed complete on confirmation of receipt if received prior
to the close of business, and on the next business day if received after the
close of business.

 

26.                                 Personal
Property Taxes.                Tenant
shall pay before delinquency all taxes, assessments, license fees and other
charges (collectively, “Tenant’s Taxes”) that are levied and assessed against
Tenant’s trade fixtures and other personal property installed or located in or
on the Premises that become payable during the Lease Term.  On demand by Landlord, Tenant shall furnish
Landlord with satisfactory evidence of such payments.  If any taxes on Tenant’s personal property are levied against
Landlord or Landlord’s property, or if the assessed value of the Building is
increased by the inclusion of a value placed on Tenant’s personal property or
above-standard leasehold improvements, Tenant, on demand, shall immediately
reimburse Landlord for any such taxes. 
Landlord shall have the right to pay these taxes regardless of the
validity of the levy.

 

13

 

Notwithstanding the foregoing, Landlord agrees to: (a) notify Tenant in
writing prior to paying any taxes under this Article 26 on Tenant’s behalf
(“Landlord’s Tax Notice”), and (b) not pay any such taxes on Tenant’s behalf if
Tenant notifies Landlord in writing within five (5) business days after it
receives Landlord’s Tax Notice that Tenant, in good faith, disputes that the
assessed taxes are properly due and owing by Tenant, provided that Tenant
diligently pursues such dispute with the appropriate taxing authority in good
faith within thirty (30) days from notice.

 

27.                                 Interest and
Late Charges.                                               Any
Rent, Additional Rent or other amount not paid by Tenant to Landlord when due
hereunder shall bear interest from the due date until paid, unless otherwise
specifically provided herein, at a rate (the “Interest Rate”) equal to the
lesser of (a) the rate per annum announced from time to time by Bank of
America, N.A. as its prime rate (or, if such bank fails to announce such rate,
then the prime rate announced by the Chase Manhattan Bank, USA, N.A.) plus two
(2) percentage points, or (b) the maximum rate permitted by law.  The payment of such interest shall not
excuse or cure any such default by Tenant under this Lease.  In addition to such interest, if any Rent,
Additional Rent or other amount is not paid within ten (10) days of when due, a
late charge equal to five percent (5%) of such amount shall be assessed against
Tenant, which late charge Tenant hereby agrees is a reasonable estimate of the
damages Landlord would suffer as a result of Tenant’s late payment.  The parties agree that it would be
impracticable and extremely difficult to fix Landlord’s actual damages in such
event.  Such interest and late charges
are separate and cumulative and are in addition to and shall not diminish or
substitute for any or all of Landlord’s rights or remedies under any other
provision of this Lease.

 

28.                                 Collection
Agency and Attorneys’ Fees.                          Tenant
shall pay the costs incurred by Landlord if Landlord uses a collection agency
or attorneys to collect any moneys unpaid by Tenant or to enforce the terms of
this Lease. In any action to enforce or interpret this Lease, including any
suit by Landlord for the recovery of Rent or possession of the Premises, the
non-prevailing party shall pay to the prevailing party its actual attorneys’
fees.  The prevailing party will be
determined by the court, arbitrator or arbitration panel before whom the action
was brought based upon an assessment of which party’s major arguments or
positions could fairly be said to have prevailed. Any attorneys’ fees and other
costs and expenses incurred by the prevailing party in enforcing a judgment
under this Lease shall be recoverable separately from and in addition to any
other amount included in such judgment in favor or the prevailing party.

 

29.                                 Light and
Air.                   Tenant
covenants and agrees that no diminution of light, air or view by any structure
that may hereafter be erected shall entitle Tenant to any reduction of Rent
under this Lease, result in any liability of Landlord to Tenant, or in any
other way affect this Lease or Tenant’s obligations hereunder.

 

30.                                 Signs and
Directory.

 

30.1                           Without
the prior written consent of Landlord, Tenant shall not place, construct or
maintain any sign, advertisement, awning, banner or other decoration on or
visible from, or otherwise use, the exterior of the Premises or any other
portion of the Project.  All door signs
on the exterior of the Premises must be installed by Landlord, at Tenant’s sole
cost and expense or as part of any tenant improvement allowance, that the
Landlord provides for installation of improvements to the Premises, and must
conform to standards of the Project as to size, style, placement, color and
number of the names, and other matters as reasonably determined by Landlord.  In the event that Tenant violates the
foregoing, Landlord may remove the sign without any liability, and may charge
Tenant the expense incurred, including but not limited to the cost incurred for
the repair of the wall, door surface or other area on which the sign was mounted.

 

30.2                           Landlord
shall place, construct and maintain a directory in the Building lobby and in
such other locations, if any, as Landlord, in its sole discretion, may
determine, which directory(ies) shall be for the display of the business names
of Building tenants and their respective suite numbers.  Landlord shall have the sole right to
determine and change from time to time the type of such directory(ies) and all
common Project signage, including, but not limited to, size of letters, style,
color content and placement.  Tenant
shall have the right at Landlord’s cost to three (3) lines per directory per
1,000 rentable square feet of the Premises, but listings on such directory(ies)
shall be limited to professional personnel of Tenant located principally at the
Premises.  Tenant shall notify Landlord
in writing of the business names that it desires to include on any such
directory and shall, upon demand by Landlord, pay the cost associated with any
subsequent changes to such names on the directory.

 

31.                                 Parking.                                               Subject
to applicable rules and regulations any other charges, fees and taxes to be
collected by Landlord, or other parking operator, Tenant shall have the right,
but not the obligation, throughout the Lease Term to lease the number of
parking spaces in the parking facility that serves the Building at such parking
rate(s) and upon such other terms as may be specified in Article 1.1.11.  Notwithstanding anything to the contrary
contained herein, Tenant shall be obligated to lease at least fifty percent (50%)
of the parking spaces designated in Article 1.1.11 for the entire Lease
Term.    Tenant may lease additional
parking spaces on an “as available” monthly basis.  If Tenant desires to relinquish any of the spaces that Tenant is
leasing, Tenant shall give not less than thirty (30) days notice thereof to
Landlord.  Tenant may not sell, assign
or transfer its parking rights hereunder, except pursuant to a permitted
sublease or assignment of this Lease. 
Except as may otherwise be specifically provided elsewhere in this
Lease, Tenant shall not be entitled to any designated, reserved, assigned or
valet parking. Landlord reserves the right to establish and alter, from time to
time, on a non-discriminatory basis, all parking rates, rules and regulations,
provided said rates shall be comparable to rates charged by other similar
buildings in the Project area.  Tenant
may purchase validation stickers at the prevailing rate then charged by the
Project. See also Article 46 of the Lease
Addendum.

 

32.                                 Brokerage
Fees.     Landlord shall have no
obligation to pay commissions or fees to any real estate broker, finder or
intermediary other than Tenant’s Broker, if any, listed in Article 1.1.13 and
Held Properties, Inc., who represents Landlord.  Landlord and Tenant each warrant that with respect to this Lease
neither has dealt with any other real estate broker, finder or
intermediary.  To the extent that Tenant
breaches the foregoing, any commissions or fees payable with respect to this
Lease shall be paid exclusively by Tenant, and Landlord shall have no
obligation of any kind with respect to such commissions or fees.  Landlord agrees to pay a commission to
Tenant’s Broker pursuant to a separate agreement.

 

33.                                 Relocation
Right.                                                 [Intentionally Deleted]

 

34.                                 Authority.                                        If
Tenant is a corporation, trust or partnership, each individual executing this
Lease on behalf of Tenant represents and warrants that he or she is duly
authorized to so execute and deliver this Lease, and within ten (10) days

 

14

 

after its execution shall deliver to Landlord satisfactory evidence of
such authority.  If Tenant or Guarantor
is a corporation, it shall, upon demand, also deliver satisfactory evidence of
(a) good standing in California, and in Tenant’s or Guarantor’s state of
incorporation, (b) qualification to do business in California, and (c) a
corporate resolution duly certified by the secretary of Tenant or Guarantor
authorizing execution and delivery of this Lease or Guarantee, as the case may
be, by the parties who have signed it on behalf of Tenant or Guarantor.

 

35.                                 Miscellaneous.

 

35.1                           If
either Landlord or Tenant waives the performance of any term, covenant or
condition contained in this Lease, such waiver shall not be deemed to waive any
other breach of the same or of any other term, covenant or condition contained
herein.  Furthermore, the acceptance of
Rent by Landlord shall not constitute a waiver of any preceding breach by
Tenant of any term, covenant or condition of this Lease, other than the failure
of Tenant to pay the particular Rent so accepted, regardless of Landlord’s
knowledge of such breach at the time of Landlord’s acceptance of such
Rent.  Failure by Landlord to enforce
any of the terms, covenants or conditions of this Lease for any length of time
shall not be deemed to waive or to affect the right of Landlord to insist
thereafter upon strict performance by Tenant. 
Landlord’s or Tenant’s waiver of any term, covenant or condition of this
Lease may only be made by a written document signed by the waiving party.

 

35.2                           Any
voluntary or other early surrender of this Lease by Tenant, mutual termination
hereof or prior termination hereof by Landlord shall not work a merger, and
shall, at the option of Landlord, terminate all or any existing subleases or
sub-tenancies.  If Landlord elects to
assume any sublease or enter into a lease with any subtenant, such assumption
shall not relieve Tenant of any remaining liability under this Lease.

 

35.3                           This
Lease shall not be recorded; and no memorandum of lease shall be recorded
without Landlord’s prior written consent.

 

35.4                           Rent,
Additional Rent and all other sums payable under this Lease must be paid in
lawful money of the United States of America.

 

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

 

35.6                           Nothing
contained in this Lease shall be construed to create the relationship of
principal and agent, partnership, joint venture or any other relationship
between the parties hereto, other than the relationship of Landlord and Tenant.

 

35.7                           Any
provision of this Lease that proves to be invalid, void or illegal shall in no
way affect, impair or invalidate any other provision hereof, and such other
provisions shall remain in full force and effect.

 

35.8                           The
term “Premises” shall be deemed to include (unless, based on the context, such
meaning would clearly be unintended) the space hereby demised and all
improvements on or at any time hereafter constructed or built in such space.

 

35.9                           The
term “Tenant” or any pronoun used in place thereof shall indicate and include
the masculine or feminine, the singular or plural number, individual, firms or
corporations, and any Tenant’s successor in interest.

 

35.10                     The section
headings herein are for convenience of reference only and shall in no way
define, increase, limit or describe the scope or intent of any provision of
this Lease.

 

35.11                     If this Lease
is entered into by co-tenants, the obligations of such co-tenants hereunder
shall be joint and several.

 

35.12                     Time is of
the essence of this Lease and all of its provisions.

 

35.13                     The laws of
California shall in all respects govern this Lease.  The parties acknowledge that the laws of California may change by
virtue of legislative enactment or judicial decision.  The parties further acknowledge that they have entered into this
Lease based on the laws of California at the time of the execution of this
Lease, and each hereby expressly waives any future rights, benefits, or
advantages derived from or as a result of any future changes in the law of
California to the extent not inconsistent with the terms of the Lease.  In any action or proceeding arising
therefrom, Tenant hereby consents to (a) the jurisdiction of any competent
court within the state of California, (b) service of process by any means
authorized by the laws of the state of California, and (c) trial without a jury
except for actions primarily based upon personal injury.

 

35.14                     This Lease
contains the entire agreement of the parties hereto with respect to the subject
matter hereof and supersedes any previous negotiations, and may not be
modified, except by a written document executed by the parties hereto.  There have been no representations or
understandings made between the parties other than those set forth in this
Lease.  Without limiting the generality
of the foregoing, Tenant specifically acknowledges and agrees that neither
Landlord nor any broker, agent or representative thereof has made any warranty
or representation with respect to the tenant mix of the Building, the identity
of prospective tenants or other tenants of the Building, profitability or
suitability of the Premises for Tenant’s use, the state of repair of the
Project and the Premises, or the amount and extent of provided services, except
as otherwise specifically set forth herein.

 

35.15                     If any
guarantee of this Lease is required by Landlord, such guarantee shall be in the
form and content attached hereto or, if none, as supplied and/or approved by
Landlord.

 

35.16                     The words
“person” and “persons” as used herein shall include individuals, firms,
partnerships, associations and corporations.

 

35.17                     The language
in all parts of this Lease shall be construed simply according to its fair
meaning, and not strictly for or against Landlord or Tenant.  Any reference to any Article herein shall be
deemed to include all subsections thereof unless otherwise specified or
reasonably required from the context. 
Any reference to “days” or “months” herein shall refer to calendar days
or months, respectively, unless specifically provided to the contrary.  Unless clearly inconsistent with the
context, any reference herein to the “term hereof” or “the Lease Term” shall
refer to the term of this Lease as the same may be extended pursuant to any
extension option(s) contained herein. 
The terms “herein”, “hereunder” and “hereof” as used in this Lease shall

 

15

 

mean “in this Lease” and “under this Lease” or “of this Lease”
respectively, except as otherwise specifically set forth in this Lease.

 

35.18                     All exhibits
and the addendum referred to in this Lease are incorporated herein as a part
hereof.

 

35.19                     Tenant hereby
acknowledges and agrees that the exterior walls of the Building and the area
between the demising walls of premises and the finished ceilings and floors of
the Premises and the slab of the floor above or below have not been demised
hereby and that the use thereof, together with the right to install, maintain,
use, repair and replace pipes, ducts, conduits and wires leading through,
under, above or alongside the Premises, is hereby reserved unto Landlord.

 

35.20                     The submittal
of this Lease by Landlord or its agent or representative for examination or
execution by Tenant does not constitute an option or offer to lease the
Premises upon the terms and conditions contained herein or a reservation of the
Premises in favor of Tenant.  This Lease
shall become effective only upon the execution hereof by Landlord and Tenant
and delivery of a fully executed counterpart hereof to Tenant.

 

35.21                     Tenant
warrants and represents that neither its execution of this Lease nor its
performance hereunder will violate any agreement, instrument, contract, law,
rule or regulation by which Tenant is bound. 
Tenant shall indemnify Landlord against any loss, cost, damage or
liability including, without limitation, reasonable attorneys’ fees and related
costs arising out of Tenant’s breach of this warranty and representation.

 

36.                                 Rules and
Regulations.  Tenant shall
observe and comply with the rules and regulations set forth in this Article 36
and any and all reasonable modifications thereof and additions thereto
established in writing by Landlord written notice of which has been given to
Tenant.  Landlord shall not be
responsible for the non-observance of, or noncompliance with, any of said rules
and regulations by any other tenant or occupant of the Building, but Landlord
shall use its reasonable efforts to enforce the rules and regulations in a
non-discriminatory and consistent manner. 
In the event of any conflict between said rules and regulations and
other provisions hereof, the latter shall control.

 

36.1                           Tenant
shall not obstruct, encumber or use any sidewalks, entrance, passages, courts,
elevators, vestibules, stairways, corridors or halls or Common Area for any
purpose other than ingress and egress to and from the Premises or the Building.

 

36.2                           Tenant shall
neither attach any awning or other projection to the outside walls or windows
of the Building, nor attach or hang any curtains, blinds, shades, drapes or
screen to, in or on any window or door of the Premises without the prior
written consent of Landlord.  Such
awnings, projections, curtains, blinds, shades, drapes, screens and other
fixtures must be of a quality, type, design, color, material, installation and
general appearance approved by Landlord. 
All electrical fixtures hung in offices or spaces along the window
perimeter of the Premises must be of a quality, type, design, bulb color, size
and general appearance approved by Landlord and must be installed by Landlord
at Tenant’s cost.

 

36.3                           Tenant
shall not cover or obstruct the sashes, sash doors, skylights, windows, and doors
that admit light or air into the interior Common Areas, nor shall any articles
be placed on the windowsills of the Project.

 

36.4                           No
articles or signs shall be placed in front of or affixed to any part of the
exterior of the Building, nor placed in public portions thereof without the
prior written consent of Landlord.

 

36.5                           The
water and janitorial closets and other plumbing fixtures shall not be used for
any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown or stored
therein.  All damages resulting from any
misuse of the fixtures shall be borne by Tenant to the extent caused by Tenant
or Tenant’s agents, servants, employees, contractors, visitors or licensees.

 

36.6                           Except for Cosmetic Alterations, Tenant
shall not mark, paint, drill into or in any way deface any part of the Premises
or the Project, or string any wires except with the prior written consent of
Landlord and as Landlord may direct. Notwithstanding the foregoing, Landlord
hereby consents to the hanging of normal office decorations.

 

3.67                           No
animal (except for seeing-eye dogs or other ADA-approved animals), bird of any
kind, or bicycles shall be brought into or kept in or about the Premises or the
Building.

 

36.8                           Prior
to leaving the Premises for the day, Tenant shall use its best efforts to
conserve energy and electricity, including but not limited to drawing or
lowering window coverings and extinguishing all lights.

 

36.9                           Tenant
shall not make, or permit to be made, any unseemly or disturbing noises or
smells, or disturb or interfere with occupants of or visitors to the Building
or neighboring buildings.  Tenant shall
not throw anything out of the doors, windows or skylights or down the
passageways.  Tenant shall at all times
keep the doors closed from Tenant’s suite into the Common Areas of the Project
except upon prior written approval of Landlord.

 

36.10                     Tenant shall
not permit any principal, agent, servant, employee, contractor, visitor or
licensee to smoke any tobacco products or any non-tobacco products.  No smoking of any substance will be allowed
in the Building at any time.  Landlord
reserves the right to exclude or expel from the Building any person who, in
Landlord’s judgment, is smoking any tobacco or non-tobacco products.  If, in Landlord’s judgment, Tenant, or
Tenant’s principals, agents, servants, employees, contractors, visitors or
licensee continue to smoke after adequate warning continues to smoke any
tobacco or non-tobacco product, then Landlord may provide Tenant with a notice
of default and give Tenant 30 days to cure or quit the premises.

 

36.11                     Neither
Tenant nor any of Tenant’s agents, servants, employees, contractors, visitors
or licensees shall at any time bring or keep upon the Premises any inflammable,
combustible or explosive fluid, chemical or substance except in such small
quantities and in original manufacturer’s containers as may reasonably be
required for the proper operation and maintenance of Tenant’s office equipment.  All quantities of the inflammable,
combustible or explosive fluids, chemicals or substances shall be stored as per
guidelines set forth on their containers in a safe manner. After use, any
hazardous wastes shall be disposed of by certified hazardous waste methods in
accordance with the manufacturers’ instructions.

 

36.12                     Landlord
shall deliver keys to Tenant upon Tenant’s occupancy.  Tenant shall not place any additional locks, bolts or mail slots
of any kind upon any of the doors or windows, nor shall Tenant change any existing
locks or the mechanism thereof without Landlord’s prior written consent.  Upon the termination of the tenancy, Tenant
must turn over to Landlord all

 

16

 

keys for the Premises or the Project and, in the event of the loss of
any keys so furnished, Tenant shall pay to Landlord the cost thereof.

 

36.13                     Delivery or
removal of any safes, freight, furniture, fixtures, bulky matter or heavy
equipment of any description must take place during the hours which Landlord or
its agent may reasonably determine from time to time, upon previous notice to
the Landlord and in a manner and at times reasonably prescribed by Landlord,
and the persons employed by Tenant for such work are subject to Landlord’s
reasonable prior approval.  Landlord
reserves the right to prescribe the weight and position of all safes, or other
extra heavy equipment or furniture or improvements so as to distribute the
weight or to require reinforcing at the cost of Tenant.  Landlord reserves the right to inspect all
safes, freight or other bulky articles to be brought into the Building and to
exclude from the Building all safes, freight or other bulky articles which
violate any of these Rules and Regulations of this Lease, normal office
equipment excluded.

 

36.14                     Tenant shall
not occupy or permit any portion of the Premises to be occupied in a way that
is not otherwise permitted by and consistent with Article 1.1.9, or is not
generally consistent with the character and nature of all other tenancies in
the Building.

 

36.15                     Tenant shall
not purchase janitorial or maintenance or other like service from any company
or persons not approved by Landlord, except that Landlord’s approval shall not
be required in connection with any maintenance or other like service that does
not affect the structure or other major systems of the Building.  Landlord shall approve a sufficient number
of sources of such services to provide Tenant with a reasonable selection, but
only in such instances and to such extent, as Landlord in its judgment
considers consistent with security and proper operation of the Building.

 

36.16                     Landlord
shall have the right to prohibit any advertising or business conducted by
Tenant referring to the Building which, in Landlord’s opinion, tends to impair
the reputation of the Building or its desirability as a first class office
building, and upon notice from Landlord, Tenant shall refrain from or cease
such advertising.

 

36.17                     Outside of
Business Hours, Landlord reserves the right to exclude from the Building all
persons who are not otherwise authorized by Tenant to enter the Premises.

 

36.18                     Tenant’s
interior designers and installers of Tenant’s decoration, furniture, carpentry,
wall coverings, and window coverings, shall, while in the Building or elsewhere
in the Project, be subject to and under the control and direction of the
Building manager (but not as agent or servant of said manager or of Landlord).

 

36.19                     If the
Premises is or becomes infested with vermin as a result of the use or any
misuse or neglect by Tenant, its agents, servants, employees, contractors,
visitors or licensees, then Landlord shall forthwith at Tenant’s expense cause
the same to be exterminated by licensed exterminators to the satisfaction of
Landlord and, as necessary, from time to time thereafter.

 

36.20                     Tenant shall
make requests for services at and as instructed by the office of the Building.

 

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

 

36.22                     No air
conditioning unit(s) shall be installed or used by Tenant without Landlord’s
written consent.

 

36.23                     No hand
trucks or dollies, except those equipped with rubber tires and side guards, may
be used in any space in the Project, either by Tenant or by jobbers or others.
Tenant shall not permit its customers, clients or invitees to wait in the
public corridors of the Building. 
Tenant shall not permit its employees to loiter or smoke in the interior
Common Areas.

 

36.24                     Tenant,
Tenant’s agents, servants, employees, contractors, licensees or visitors shall
not park or stop any vehicles in any driveways, service entrances, or areas
posted as “No Parking” or “No Stopping.”

 

36.25                     Landlord
shall install and maintain for the Premises, at Landlord’s sole cost and
expense, such safety equipment as may be mandated by applicable governmental
authority.

 

36.26                     Tenant shall
not use the name of the Building for any purpose other than as the address of
the Tenant’s business in the Premises, nor shall Tenant use any picture of the
Building in its advertising, stationery or in any other manner without the
prior written permission of Landlord. 
Landlord expressly reserves the right at any time to change name of the
Building or Project without in any manner being liable to Tenant therefor.

 

37.                                 Compliance
with Laws.                    Landlord
shall pay the cost of any repairs, capital additions, replacements or take any
other actions necessary to cause the Building to comply with governmental laws,
statutes or regulations that are in effect, applicable to and enforced with
respect to the Building and/or the Premises as of the Commencement Date,
including but not limited to American with Disabilities Act (“ADA”).

 

38.                                 Good Faith.                                   Without
regard to any references to the terms “sole” or “absolute”, except for matters
which could adversely affect the Building’s plumbing, HVAC or electrical
systems, or its exterior appearance (in which case Landlord shall have the
right to act in its sole and absolute discretion, exercised in good faith), any
time the consent of Landlord or Tenant is required, such consent shall not be
unreasonably withheld or delayed. 
Whenever the Lease grants Landlord or Tenant the right to take action,
exercise discretion, establish rules and regulations or make allocations or
other determinations, Landlord and Tenant shall act reasonably and in good
faith and take no action which might result in the frustration of the
reasonable expectations of a sophisticated tenant or landlord concerning the
Lease.

 

17

 

IN WITNESS WHEREOF, the
parties hereto have executed this Lease as of
                                         ,
2003.

 

	
  LANDLORD

  	
  TENANT

  
	
   

  	
   

  
	
  Century Park,

  	
  Mercantile National
  Bank, N.A., a National Bank

  
	
  a California limited
  partnership

  	
   

  
	
  By:

  	
  Held Properties, Inc.

  	
   

  
	
  Its:

  	
  Management Company

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Joel R. Delman

  	
   

  	
  Scott A. Montgomery

  
	
  Its:

  	
  Director of Leasing

  	
  Its:

  	
  President and Chief
  Executive Officer

  
						

 

18

 

LEASE ADDENDUM

 

This
Addendum is attached to and made a part of that certain office lease (this
“Lease”) dated November 12, 2003 between Century Park, a California limited
partnership, as Landlord (“Landlord”) and Mercantile
National Bank, N.A., a National Bank, as Tenant (“Tenant”)
relating to the premises (“Premises”) known as Suite 800 consisting of approximately 13,880 rentable square feet on the 8th
floor of the Building located at 1880 Century Park East, Los Angeles,
California.  The provisions set forth
below shall supersede any inconsistent provisions set forth in the Lease.  Except as otherwise provided below,
capitalized items used below shall have their respective meaning set forth in
the Lease.

 

39.                                 Option to Renew.    Provided that Tenant is
not in default under this Lease and provided that the Lease has not been
terminated as a result of Tenant’s default or other acts or failures to act by
Tenant, Tenant shall have an option to renew the Lease for two additional five (5) year terms (each
an “Extended Term”). 
Tenant shall provide Landlord with at least six (6) months but not more
than twelve (12) months prior written notice indicating its intention to
exercise such option to renew.  The
rights contained in this Article 39
shall be personal to the originally named Tenant and may not be assigned nor
transferred except with Landlord’s written consent.

 

39.1                           The
monthly base rent during the Extended Term shall be an amount equal to the
Prevailing Rate (as hereinafter defined) at the time of the commencement of the
Extended Term for space leased within the previous six months that are
Comparable Transactions, as defined below. 
The term “Prevailing Rate” shall mean the monthly rent per rentable
square foot that Landlord has accepted in contemporaneous transactions between nonaffiliated
parties for non-expansion, renewal and non-equity tenants of comparable
creditworthiness, for comparable space, comparable use and comparable lease
terms (collectively, “Comparable Transactions”) in the Building.  If there are no Comparable Transactions in
the Building, then the Prevailing Rate shall be prevailing fair market rental
value for Comparable Transactions in the Project area.  In any determination of Comparable
Transactions, appropriate consideration shall be given to the rental rates,
abatement provisions or other concessions, brokerage commissions, if any, that
actually have been paid by Landlord (or other landlords) in similar
transactions, length of the lease term, size and location of the premises being
leased, building standard tenant improvement allowances, if any, and other
generally applicable conditions of tenancy. 
The intent is that Tenant will obtain the same rent and other economic
benefits that Landlord would otherwise give in Comparable Transactions and that
Landlord will make and receive the same economic payments and concessions that
Landlord would otherwise make and receive in Comparable Transactions.

 

39.2                           If
Landlord and Tenant are unable to agree on the Prevailing Rate, then Landlord
and Tenant shall agree upon, and jointly appoint, one arbitrator who shall be
an active real estate broker in the Project area over the most recent 5-year
period.  If the Landlord and Tenant fail
to agree upon and appoint an arbitrator, then the appointment of the arbitrator
shall be made by the Presiding Judge of the Superior Court, or if he or she
refuses to act, by any judge having jurisdiction over the parties.  Within five (5) business days after said
appointment, Landlord and Tenant may submit to the arbitrator (with a copy to
the other party) any market data and additional information that such party
deems relevant to the determination of the Prevailing Rate and the other party
may submit a reply in writing within five (5) business days thereafter.  The determination of the arbitrator shall be
limited solely to the issue of whether Landlord’s or Tenant’s submitted
Prevailing Rate is the closest to the actual fair market rent for the Premises,
taking into account the criteria of Comparable Transactions.  Neither Landlord nor Tenant may consult with
such arbitrator as to his or her opinion of the fair market rent prior to the
appointment or resolution of the issue regarding Prevailing Rate for the
Premises.

 

39.3                           Within
fifteen (15) days of being appointed, the arbitrator shall decide whether the
parties shall use Landlord’s or Tenant’s submitted Prevailing Rate, and shall
so notify Landlord and Tenant.  The
decision of the arbitrator shall be binding upon the Landlord and Tenant.  The cost of the arbitration shall be paid by
the Landlord and Tenant equally.

 

39.4                           Rent
during the Extended Term shall continue to be subject to adjustment based upon
Tenant’s pro-rata share of increases in Recurring Operating Costs except that
the new base year shall be the calendar year in which the Extended Term
commences.

 

39.5                           If
Tenant fails to exercise in a timely manner the option to renew herein
provided, said option to renew shall expire and have no further force and
effect.  Tenant’s exercise of said
option to renew shall not operate to cure any uncured default by Tenant under
this Lease, nor to extinguish or impair any rights or remedies of Landlord
arising by virtue of such default.  If
the Lease or Tenant’s right to possession of the Premises terminates in any
manner whatsoever before Tenant exercises the option to renew herein provided,
such option to renew shall terminate; or if Tenant has assigned the Premises to
an unaffiliated, independent third party, then immediately upon such
assignment, the transferability of the option to renew shall be reasonably
approved by Landlord, provided Tenant notifies Landlord in writing at the time
of such assignment of its desire to transfer the option provided hereunder.

 

40.                                 Tenant Improvements.                        In the event Tenant does not use the entire
allowance, Tenant shall have the right to use up to $15.00 per usable square
foot as a rent credit amortized over the first sixty (60) months of the Lease
Term.

 

41.                                 Temporary Space.     As of January 1,
2004, Landlord will provide Tenant with temporary space on the entire twelfth
(12th) floor of the Building (the “Temporary Space”) under the
terms and conditions of this Lease except that rent shall be paid as follows:
Rent for the Temporary
Space occupied by Tenant will be abated for the first sixty (60) days following
Tenant’s occupancy in the Temporary Space.  If,
after two months, Tenant continues to occupy the Temporary Space and until
such time as the Tenant Improvements in the Premises are Substantially Complete
and Tenant has vacated the Temporary Space, Tenant shall pay rent (“Temporary Space
Rent”) in the amount of $15,268.00 per month for each month (or on a per diem
basis for any partial month) after the end of the second month of occupancy
that Tenant continues to occupy the Temporary Space.  Landlord shall provide the Temporary Space free of debris and
broom clean with all Building Systems fully operative.

 

19

 

42.                                 Option to Terminate.

 

42.1                           Option to Terminate (Ground Floor).                                           Landlord will use its best efforts to reach and
execute, by April 1, 2004, an agreement with Krueger International (the “Ground
Floor Tenant”) an agreement to amend the Ground Floor Tenant’s lease to reduce
its space, which reduced space will become the subject of a lease (the “Ground
Floor Lease”) between Tenant and Landlord. 
If Landlord and Ground Floor Tenant fail to execute such amendment of
the Ground Floor Tenant’s Lease by April 1, 2004, or if Landlord fails to
deliver the Ground Floor Premises by October 1, 2004, Tenant shall have an option
to terminate this Lease; this Lease shall become a month-to-month lease, which
Tenant may terminate upon thirty (30) days prior written notice.  

 

42.2                           Option to Terminate (Premises).                If Landlord or
Landlord’s contractor is unable to deliver Premises with all Tenant
Improvements installed, except for punchlist items and decorative and design issues, by August 31, 2004, Tenant shall have an
option to terminate the Lease.  In such
case, Tenant shall have thirty (30) days to deliver to Landlord a notice of termination
of the Lease.  If Tenant elects to
terminate the Lease, Tenant shall have until February 28, 2005 to vacate the Temporary Space.  (See
also, Paragraph III.J of the Construction Agreement)

 

42.3                           Option to Terminate (Fifth Year Anniversary).                                      At
any time prior to the date nine months prior to the fifth (5th) anniversary
date of the Commencement Date, Tenant
shall have the option, with written notice to Landlord, to terminate the
Lease.  The Premises subject to the
termination notice shall be referred to as the “Canceled Premises.”  The termination shall be effective as of the
day before the fifth (5th) anniversary date of the Commencement
Date.  Tenant’s delivery of the
Termination Notice to Landlord shall be accompanied by an amount equal to the
Lease Termination Fee, which will be equal to the unamortized Tenant
Improvement Allowance and leasing commissions plus three (3) months Base Rent, which
amount shall be Three Hundred Sixty-Two Thousand One Hundred Sixty-Two Dollars
($362,162.00)

 

43.                                 Signage.

 

43.1                           Tenant’s Monument Sign.   Tenant shall have the
non-exclusive right to have its name (including its logo) displayed, at
Landlord’s sole cost and expense, on a monument sign located in the front of
the Building (the “Monument Sign”).   Such signage shall be no smaller than any other
tenant’s sign.  Until the Monument Sign has been installed, Tenant
shall have the right at Tenant’s cost and expense to have a temporary sign to
be installed at a mutually agreed location that is visible by a passing vehicle
from Century Park East.

 

43.2                           Requirements. 
Tenant’s right to maintain its name on the Monument Sign shall be
subject to the following requirements:

 

a.                                       All expenses in connection with the
construction, installation and maintenance of Tenant’s sign shall be paid by
Landlord.

 

b.                                      The design, size, location, materials, colors
and lighting of the Monument Sign shall be determined by Tenant and Landlord.

 

c.                                       Landlord shall have the right to relocate,
redesign or reconstruct the Monument Sign from time to time so long
as the Monument Sign is visible by a passing vehicle, as described in
sub-section (e).

 

d.                                      The cost of graphics related to Tenant’s
portion of sign will be part of the Tenant Improvement Allowance.

 

e.                                       The
Monument Sign shall be visible by a passing vehicle on Century Park East.

 

44.                                 Non-Disturbance.                                                Landlord shall use its best efforts to secure
as soon as commercially possible a commercially reasonable Non-Disturbance
Agreement from the Lender, the form of which shall be provided to Tenant prior
to lease execution.

 

45.                                 Proposition 13.             [See Article 48.1]

 

46.                                 Parking.                                               Tenant
shall have the right, during the Lease Term or any extension thereof, to lease
two and one-half (2.5) parking spaces per every 1,000 rentable square foot
leased, at the then current prevailing rates. 
However, the parking rates shall not be increased during the first
twelve (12) months of the Lease Term. 
Tenant shall be entitled to lease twenty-five percent (25%) of such
parking spaces as “VIP Call-Down” spaces. 
Tenant shall receive a twenty percent (20%) discount on parking
validation sticker books purchased in quantities of Five Thousand Dollars
($5,000.00) or more.

 

47.                                 Option to
Negotiate for Additional Space.                   Subject to the rights of existing
tenants that have been granted as of the date hereof, Tenant shall have an
option during the Lease Term to negotiate for additional space (“ONAS”) on the eighth (8th) floor
(“ONAS Space”) by giving Landlord written notice of Tenant’s desire for
additional space.  Provided that Tenant
is not in default under the Lease, and subject to availability of eighth (8th)
floor, Landlord shall offer ONAS Space to Tenant (subject to Tenant’s right of
renewal set forth in this Lease) at a prevailing rent and base year determined
in the same manner as during the Extended Term as set forth in Article 39; provided, however, that if Tenant
exercises its option in the first year of the Lease Term, the terms and
conditions for the ONAS Space shall be the same as those contained in this
Lease.  Tenant shall have a period of
ten (10) business days in which to either accept or reject Landlord’s
offer.  If Tenant does not timely accept
the ONAS Space specified in Landlord’s notice, Landlord may lease the ONAS
Space to any third party.  If Tenant
exercises the ONAS, Landlord and Tenant promptly shall execute and deliver an
amendment to this Lease reflecting the

 

20

 

terms of the ONAS Space.
This ONAS shall be personal to Tenant or any entity described in Article 10 and
may not be assigned nor otherwise transferred to any assignee or sub-tenant
without Landlord’s consent.

 

48.                                 Exclusions
from Tax Costs.                                            Notwithstanding
anything in this Lease to the contrary, the following items shall be excluded
from the definition of Tax Costs.

 

48.1                           Any
increases in Tax Costs resulting from a reassessment due to a sale or change of
ownership in the Project occurring during the Initial Lease Term, except for change in ownership
resulting from a non-voluntary foreclosure sale, deed in lieu of foreclosure or
similar transfer of interest.

 

48.2                           Tax
Costs for the Base Year and any subsequent year shall be calculated without
taking into account any decreases in real estate taxes that may be obtained in
connection with Revenue and Taxation Code Section 51 (“Proposition 8”).

 

48.3                           Any
excess profits taxes, franchise taxes, gift taxes, capital stock taxes,
inheritance and succession taxes, estate taxes, federal and state income taxes
and other taxes to the extent applicable to Landlord’s general or net income
(as opposed to rents or receipts);

 

48.4                           Any Tax
Costs based on taxes on tenant improvements in any space in the Building based
upon an assessed level in excess of Building standard improvements, to the
extent that the related taxes are separately designated on the tax bill;

 

48.5                           Any Tax
Costs based on penalties incurred as a result of Landlord’s negligence,
inability or unwillingness to pay, and/or to file any tax or informational
returns with respect to, any real property taxes when due, and any additional
costs arising as a result of Landlord’s failure to pay taxes in the maximum
number of installments;

 

48.6                           Any Tax
Costs based on increase of, or reassessment in, real property taxes and
assessments resulting from major alterations, improvements, modifications or
renovations to the Project, to the extent that the related taxes are separately
designated on the tax bill;

 

48.7                           Any
costs or expenses incurred by Landlord for personal property taxes, leasehold
taxes in lieu thereof, or taxes or assessments levied in lieu thereof, or in
addition thereto;

 

48.8                           Any
other taxes or assessments charged or levied against Landlord that are not
directly incurred as a result of the operation of the Building.

 

49.                                 Exclusions
from Operating Costs.        Notwithstanding
anything in this Lease to the contrary, the following items shall be excluded
from the definition of Operating Costs:

 

49.1.                        Costs
incurred for repairs or other work to the Project occasioned by fire, windstorm
or other insurable casualty or by the exercise of eminent domain or any
expenditures for which Landlord is reimbursed.

 

49.2                           Marketing
costs, advertising costs, promotional expenses, leasing commissions, attorneys’
fees, space planning costs, and other costs and expenses incurred in connection
with any lease, sublease and/or assignment negotiations and transactions with
current or prospective tenants or other occupants of the Building.

 

49.3                           Costs
incurred for renovating or otherwise improving or decorating, painting or
redecorating space for other tenants or occupants of the Building.

 

49.4                           The
cost incurred for special services or utilities separately chargeable to other
tenants.

 

49.5                           Depreciation
and amortization except as provided above.

 

49.6                           Expenses
incurred for services or other benefits that are not offered to Tenant but
which are provided to another tenant or occupant of the Building.

 

49.7                           Legal
fees and related costs, together with any damages awarded by a court of law or
arbitration panel to Tenant or any other tenants, or any repair and maintenance
costs incurred by Landlord due to the violation by Landlord or any tenant of
the terms and conditions of any lease in the Building.

 

49.8                           Overhead
and profit increment paid to subsidiaries or affiliates of Landlord for
services on or to the Project, to the extent that the costs of such services
exceed competitive costs of such services for similar buildings in the Project
area.

 

49.9                           Interest
on debt or amortization payments on any mortgage or mortgages, and rental under
any ground or underlying lease or leases, or other financing costs, including
points, commitment fees, or legal costs related thereto.

 

49.10                     Landlord’s
in-house accounting or legal costs, general overhead and executive salaries,
except for salaries of project manager, project engineer or other employees to
the extent directly related to the operation and management of the Project.

 

49.11                     Any
compensation paid to clerks, attendants or other persons in commercial
concessions operated by Landlord.

 

49.12                     All items and
services for which Tenant reimburses Landlord or pays directly to third
parties.

 

49.13                     Any costs,
fines or penalties incurred due to violations by Landlord of any governmental
rule or authority, or due to Landlord’s negligence, recklessness or willful
misconduct.

 

49.14                     Costs
incurred for sculpture, paintings or other objects of art.

 

49.15                     Rentals and
other related expenses incurred in leasing air-conditioning systems, elevators
or other equipment ordinarily considered of a capital nature, except equipment
which is used in providing janitorial services and which is not affixed to the
Building.

 

21

 

49.16                     Costs
incurred in the testing, encapsulation or other treatment or removal of
asbestos, Hazardous Materials as defined herein, or other substances considered
detrimental to the health or the environment of occupants of the Building
including, without limitation, the cost and expense incurred by or on behalf of
Landlord in removing and disposing any cooling or chilling system and the
chemicals used in the HVAC system from either (1) the Building or (2) another
tenant’s premises within the Building or
(3)_Tenant’s Premises.

 

49.17                     The value of
any lost income to Landlord of any office space in the Project that is utilized
for the management of the Building.

 

49.18                     Costs
incurred by Landlord to remedy any defects in the design, installation,
construction, or materials used in any part of the Project.

 

49.19                     Costs
incurred by Landlord in compliance with the Americans with Disabilities Act
(the “ADA”) or statutes, laws regulations or other legislation of similar
import.

 

49.20                     Costs of
Landlord’s charitable or political contributions.

 

49.21                     Insurance
premiums to the extent any tenant causes Landlord’s existing insurance premiums
to increase or requires Landlord to purchase additional insurance, to the
extent that any related premiums are separately designated on the insurance
bill.

 

49.22                     Increases in
reserves not presently being maintained for future expenses.

 

49.23                     Costs
associated with the ownership of the Project or Landlord or Landlord’s property
manager, as distinguished from the cost of Building operations, including the
costs of partnership or corporate accounting (other than partnership tax
preparation) and legal matters, selling or syndicating any of Landlord’s
interest in the Project; and disputes between Landlord and Landlord’s property
manager.

 

49.24                     Maintenance
to or replacement of any utility, mechanical or other system solely dedicated
to the single use of any other tenant.

 

49.25                     Costs
relating to any areas leased on a triple net basis.

 

49.26                     Premiums for
earthquake or flood insurance, unless included in recalculating the Operating
Costs for the Base Year, or other costs relating to expansion in scope of
services or addition of new services not included in the Base Year.

 

49.27                 Costs of items
considered capital repairs, replacements, improvements and equipment under
generally accepted accounting principles consistently applied or otherwise
(“Capital Items”) except for (i) the annual amortization (amortized as provided
in Article 4.4) of costs, including financing costs, if any, incurred by
Landlord after the Commencement Date for any capital improvements installed or
paid for by Landlord and required by any new (or change in) laws, rules or
regulations of any governmental or quasi-governmental authority which are
enacted after the Commencement Date; (ii) 
the annual amortization (amortized as provided in Article 4.4) of costs,
including financing costs, if any, of any equipment, device or capital
improvement purchased or incurred as a labor-saving measure or to affect other
economics in the operation or maintenance of the Building (provided the annual
amortized costs does not exceed the actual cost savings realized and such
savings do not redound primarily to the benefit of any particular tenant.

 

50.                                 Tenant
acknowledges that Landlord has advised Tenant that the Building contains or,
because of its age, is likely to contain asbestos-containing materials (“ACMs”).  If Tenant undertakes any alterations,
additions, or improvements to the Premises, as permitted by Article 7, Tenant
shall, in addition to complying with the requirements of Article 7, undertake
the alterations, additions, or improvements in a manner that avoids disturbing
ACMs in the Building.  If ACMs are
likely to be disturbed in the course of such work, Tenant shall notify Landlord, and Landlord shall, at its sole cost,
encapsulate or remove the ACMs in accordance with an approved asbestos-removal plan
and otherwise in accordance with all applicable Environmental Laws, including
giving all notices required by Health and Safety Code sections 2591-25919.7.

 

51.                                 Landlord has removed or has caused to be removed all accessible, friable
ACMs in the Premises. 
Landlord shall use its best efforts to comply with all Applicable
Environmental Laws in the Premises, and throughout the Project during the Lease
Term. Landlord shall, at Landlord’s sole expense and with counsel reasonably
acceptable to Tenant, indemnify, defend and hold harmless Tenant and Tenant’s
shareholders, directors, officers, employees, partners, affiliates and agents
(“Tenant Indemnitees”) with respect to all losses arising out of or resulting
from the release of any Hazardous Material in or about the Premises or the
Project, or the violation of any Applicable Environmental Laws, existing prior
to the Commencement Date or brought onto the Premises or Project by Landlord,
or Landlord’s agents, employees, contractors or invitees (other than Tenant and
Tenant Indemnitees).  This
indemnification includes all losses, liabilities, obligations, penalties,
fines, claims, actions (including remedial or enforcement actions of any kind
and administrative or judicial proceedings, orders or judgments), damages
(including consequential damages and punitive damages), and costs (including
attorneys, consultants or experts fees and expenses) resulting from the release
or violation. This indemnification shall survive the expiration or sooner
termination of the Lease.

 

52.                               Profits (Article 10.6).                          For the purposes of Article 10.6, “Profits” shall mean the gross revenue
received from the assignee or sublessee during the assignment or the sublease
term with respect to the space covered by the assignment or sublease (“Transferred
Space”) less: (i) the gross revenue paid to Landlord by Tenant during the
period of the assignment or sublease term with respect to the Transferred
Space; (b) any improvement allowance or other economic concession (planning
allowance, moving expenses, etc.) paid by Tenant to sublessee or assignee; (c)
brokers’ commissions; (d) attorneys’ fees; (e) costs of advertising the space
for sublease or assignment; (f) unamortized cost of initial and subsequent
improvements to the Premises by Tenant; and (g) any other costs actually paid
in assigning or subletting the Transferred Space or in negotiating or
effectuating the assignment or sublease.

 

22

 

IN WITNESS WHEREOF, the
parties hereto have executed this Lease as of November 19, 2003.

 

 

	
  LANDLORD

  	
  TENANT

  
	
   

  	
   

  
	
  Century Park,

  	
  Mercantile National
  Bank, N.A., a National Bank

  
	
  a California limited
  partnership

  	
   

  
	
  By:Held Properties,
  Inc.

  	
   

  
	
  Its:Management Company

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ JOEL R. DELMAN

  	
   

  	
  By:

  	
  /s/ SCOTT A. MONTGOMERY

  	
   

  
	
   

  	
  Joel R. Delman

  	
   

  	
  Scott A. Montgomery

  
	
  Its:

  	
  Director of Leasing

  	
  Its:

  	
  President and Chief
  Executive Officer

  
						

 

23

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