Document:

Exhibit

10.1

 

 

EMPLOYMENT

AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is executed

this 1st day of November, 2002 by and between enherent Corp. (fka PRT Group Inc.), a Delaware

corporation, with its principal place of business at 12300 Ford Rd., Suite 450,

Dallas, Texas, 75234, with all of its direct and indirect subsidiaries, (the

“Employer”) and Robert

D. Merkl, an individual residing at 5419 Ashleigh Road, Fairfax, Virginia 22030

(the “Executive”).

 

RECITALS:

 

A.           Employer is a global information

technology services company.

 

B.             The Executive is experienced in the

information technology services industry and is currently employed by Employer

as Chairman, Chief Executive Officer and President and desires to continue in

those roles for the Employer subject to the conditions hereinafter set forth.

 

C.             Employer believes the Executive

will contribute to the growth and profitability of the Employer and desires to

continue to employ the Executive as Chairman, Chief Executive Officer and

President.

 

D.            Employer agrees that it shall not

require Executive to engage in any conduct, which would violate any of the

Executive’s post-termination obligations to Executive’s former employer arising

under this Agreement.

 

E.              The Executive is willing to make

his services available to Employer on the terms and conditions hereinafter set

forth.

 

AGREEMENT:

 

Therefore, in consideration of the premises, mutual

covenants and agreements of the parties contained herein, and other good and

valuable consideration, the receipt and adequacy of which is hereby

acknowledged, Employer and the Executive hereby agree as follows:

 

1)              Employment.  Commencing on November 1, 2002 (the

“Effective Date”), Employer, in reliance on such representations, shall employ

the Executive and the Executive shall accept employment by Employer, upon the

terms and conditions set forth in this Agreement.

 

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2)              Term:  The term of employment (the “Term”) of this

Agreement shall begin on the Effective Date and, except as otherwise provided

in Sections 8, 9, and 10 shall end on December 31, 2003.  The Term of this Agreement shall be fourteen

(14) months and shall not be further extended without the mutual written

consent of the parties.  After

completion of the term, Executive’s employment will be on an at-will basis

unless otherwise agreed in writing by the parties.

 

3)              Duties:  The Executive will serve as the Chairman, Chief Executive Officer and

President of the Employer.  As Chairman,

CEO and President of the Employer, the Executive shall have the primary

responsibility to manage and direct the day-to-day business of the Employer,

including the generation of income and control of expenses.  In addition, Executive will be responsible for

directing the organization with the objective of providing maximum profit and

return on invested capital; establishing current and long-range objectives,

plans, and policies subject to the approval of the Board Of Directors ( the

Board); and representing the Employer with its major customers, the financial

community and the public. In addition, Executive will be responsible for

establishing current and long-range objectives, plans, and policies subject to

the approval of the Board. The Executive shall perform such duties as may be

reasonably assigned to him by the Board. 

With the consent of the Board, the Executive may (i) devote a reasonable

amount of time and effort to charitable, industry or community organizations,

and (ii) subject further to the provisions of Section 6, the Executive may

serve as a director of other companies.

 

4)              Compensation:  During the Term, Executive shall be

compensated as follows:

 

a)              Salary.  Executive shall be paid an annual salary of

one hundred ninety-two thousand dollars ($192,000) (the “Annual Base Salary”), to be

distributed in equal periodic semi-monthly installments according to Employer’s

customary payroll practices.  Nothing

contained herein shall be construed to prevent Employer from increasing

Executive’s Annual Base Salary more often than annually.  The Annual Base Salary will be reviewed

annually by the Board and increased (but not decreased) if the Board, in their

discretion, determines an increase to be appropriate, based on the types of

factors the Board usually takes into account in reviewing executive level

salaries, including, but not limited to, cost-of-living factors.

 

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b)             Annual Incentive Compensation.  Employer will provide the Executive with a

target bonus opportunity of at least $24,000 per quarter (the “Performance

Bonus”) under the quarterly incentive award plan. The Performance Bonus will be

paid to Executive no later than forty-five days following the end of each

quarter, i.e., May 15, August 15, November 15 and February 15.  Performance Bonus targets will include

revenue, cash and earnings before interest, taxes, depreciation and

amortization (EBITDA) and be agreed to in writing by the parties and attached hereto

as Exhibit 2.

 

c)              Employer will make the Executive

eligible for participation in Stock Acquisition and Retention Program under the

terms and conditions applicable to all other participants, subject to the

approval of the Compensation Committee of the Board of Directors.

 

d)             Certain Additional Payments and

Consideration.  In addition to the

above payments,

 

i)                 Stock Options.  Executive will be eligible to participate in

the Employer Stock Option Plan (“Plan”). All Options are subject to the terms

of the Plan and the Stock Option Award Agreement; provided, however, in the

event of a Termination without Cause of the Executive’s employment by the

Employer all incentive stock options granted shall immediately vest and be

exerciseable as per the terms of Section 9 (b) below. In the event of a Termination

without Cause of the Executive’s employment by the Employer all non-qualified

stock options that have not vested as of the date of the termination, shall

expire, and all non-qualified stock options that have vested shall be

exercisable pursuant to the terms of the Plan and the Stock Option Award

Agreement. All Options will vest in three (3) equal annual installments of

one-third (1/3) each beginning one (1) year from their respective grant date. A

copy of the Plan and form of Stock Option Award Agreement is attached hereto as

Exhibit 1.  If Executive was an employee

of Employer prior to the Effective Date and has already been granted stock

options, all of Executive’s stock options shall have the same terms as the

Options granted hereunder.

 

ii)              Change in Control.  Notwithstanding any other provision of the

Plan to the contrary, while Executive’s Options remain outstanding under the

Plan, a Change in Control (as defined below) of Employer shall occur, then all

Options outstanding at the time of such Change in Control shall vest or expire

as set forth in clause 4.E.i above. 

Those Option that vest shall become immediately exercisable in full,

and, at the option of the Compensation Committee of the Board of Directors,

such Options may be cancelled in exchange for a cash payment or a 

 

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replacement award of equivalent value.  For purposes of this provision as well as

this Agreement, a “Change in Control” of Employer shall occur upon the

happening of the earliest to occur of the following:

 

(a)          any “person” as such term is used

in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (other than

(1) Employer, (2) any trustee or other fiduciary holding securities under an

employee benefit plan of Employer or (3) any corporation owned, directly or

indirectly, by the stockholders of enherent Corp. in substantially the same

proportions as their ownership of the common stock of Employer, is or becomes

the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange

Act of 1934), directly or indirectly, of securities of Employer (not including

in the securities beneficially owned by such person any securities acquired

directly from Employer or its affiliates 

representing fifty-one percent (51%) or more of the combined voting

power of enherent Corp.’s then outstanding voting securities;

 

(b)         during any period of not more than

two (2) consecutive years, individuals who at the beginning of such period

constitute the Board (such board of directors being referred to herein as the

“Employer Board”), and any new director (other than a director designated by a

person who has entered into an agreement with Employer to effect a transaction

described in clause (i), (ii) or (iv) of this Section 5A) whose election by the

Employer Board or nomination for election by Employer’s Stockholders was

approved by a vote of at least two-thirds (2/3) of the directors then still in

office who either were directors then still in office who either were directors

at the beginning of the period of whose election  or nomination for election was previously so approved (other than

approval given in connection with an actual or threatened proxy or election

contest), cease for any reason to constitute at least seventy percent (70%) of

such Employer Board;

 

(c)          the stockholders of Employer

approve a merger or consolidation of Employer with any other corporation, other

than (A) a merger or consolidation which would result in the voting securities

of Employer outstanding immediately prior thereto continuing to represent

(either by remaining outstanding without conversion or by being converted into

voting securities of the surviving or parent entity) fifty one (51%) or more of

the combined voting power of the voting securities of Employer or such

surviving or parent entity outstanding immediately after such merger or

consolidation or (B) a merger or consolidation effected to implement a

recapitalization of enherent Corp. (or similar transaction) in which no

“person” (as 

 

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hereinabove defined) acquires fifty-one (51%) or more of

the combined voting power of enherent Corp.’s then outstanding securities; or

 

(d)         the stockholders of the Employer

approve a plan of complete liquidation of the Employer or an agreement for the

sale or disposition by the Employer of all or substantially all of the

Employer’s assets (or any transaction having a similar effect).

 

5)              Expense Reimbursement and Other

Benefits.

 

a)              Reimbursement of Expenses.  During the term of Executive’s employment

hereunder, Employer, upon the Executive’s submission of proper substantiation

in accordance with Employer’s standard procedure, including copies of all

relevant invoices, receipts or other evidence reasonably requested by Employer,

by the Executive, shall reimburse the Executive for all reasonable expenses

actually paid or incurred by the Executive in the course of and pursuant to the

business of Employer.

 

b)             Employee Benefits.  Executive shall participate in the Employer

Employee Benefits Program.

 

c)              Stock Options.  Executive shall be included as a participant

under the Employer Incentive Stock Option Plan, eligible to be granted options

to acquire shares of Employer’s common stock. 

The number of any options and terms and conditions of options shall be

determined in the sole discretion of the Board, or applicable committee

thereof, and shall be based on several factors, including the performance of

the Employer.

 

d)             Vacation.  During the Term, the Executive will be

entitled to four (4) weeks paid vacation/personal days for each year.  The Executive will also be entitled to the

paid holidays and other paid leave set forth in Employer’s policies.  Vacation days and holidays during any fiscal

year that are not used by the Executive during such fiscal year may not be

carried over and used in any subsequent fiscal year.  Executive will begin to accrue vacation/personal days on the

first day of the month following date of employment at the rate of 1.67 days

per month.  Employer observes ten (10)

holidays each year; six (6) days are designated by Employer (the holiday

schedule is described in Employer’s Summary of Benefits) and four (4) days,

which are selected by Executive.

 

e)              Retirement Plan. Executive is eligible

to participate in the Employer’s 401(k) Savings Plan the first day of the month

coinciding with, or following employment with 

 

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Employer.  The.

Employer has a provision enabling a match of 100% of the first 3% of employee

contributions.

 

6)              Restrictions.

 

a)              Non-competition.  During the Term and for a one (1) year

period after the termination of the Term for any reason, the Executive shall

not, directly or indirectly, engage in or have any interest in any sole

proprietorship, partnership, corporation or business or any other person or

entity (whether as an executive, officer, director, partner, agent, security

holder, creditor, consultant or otherwise) that directly or indirectly (or

through any affiliated entity) engages in competition with the Employer                      (for this purpose, any business

that engages in information technology consulting services or products similar

to those services or products offered by the Employer and which is actively

soliciting the operating units of the clients doing business with Employer at

the time of termination of the Agreement shall be deemed to be in competition

with the Employer provided that such services or products constitute at least

five percent (5%) of the gross revenues of the Employer at the time of

termination of the Agreement); provided that such provision shall not apply to

the Executive’s ownership of or the acquisition by the Executive, solely as an

investment, of securities of any issuer that are registered under Section 12(b)

or 12(g) of the Exchange Act and that are listed or admitted for trading on any

United States national securities exchange or that are quoted on the NASDAQ

Stock Market, or any similar system or automated dissemination of quotations of

securities prices in common use, so long as the Executive does not control,

acquire a controlling interest in or become a member of a group which exercises

direct or indirect control or, more than five percent (5%) of any class of

capital stock of such corporation.

 

b)             Nondisclosure.  During the Term and for a two (2) year

period after the termination of the Term for any reason, the Executive shall

not at any time divulge, communicate, use to the detriment of or for the

benefit of any other person or persons, or misuse in any way, any Confidential

Information (as hereinafter defined) pertaining to the business or the

Employer.  Any Confidential Information

or data now or hereafter acquired by the Executive with respect to the business

of the Employer (which shall include, but not be limited to, information

concerning the Employer’s financial condition, prospects, technology,

customers, suppliers, sources of leads and methods of doing business) shall be

deemed a valuable, special 

 

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and unique asset of the Employer that is received by the

Executive in confidence and as a fiduciary, and Executive shall remain a

fiduciary to the Employer with respect to all such information.  For purposes of this Agreement,

“Confidential Information” means information disclosed to the Executive or

known by the Executive as a consequence of or through his employment by the

Employer (including information conceived, originated, discovered or developed

by the Executive) prior to or after the date hereof, and not generally know,

about the Employer or its or their respective businesses.  Notwithstanding the foregoing, nothing

herein shall be deemed to restrict the Executive from disclosing Confidential

Information that the Executive clearly demonstrates was or became generally

available to the public other than as a result of disclosure by the Executive.

 

c)              Non-solicitation of Employees and

Clients.  During the Term

and for a one (1) year period after the termination of the Term for any reason,

the Executive shall not directly or indirectly, for himself or for any other

person, firm, corporation, partnership, association or other entity, other than

in connection with the performance of Executive’s duties under this Agreement,

(i) solicit for employment or attempt to employ or enter into any contractual

arrangement with any employee or former employee or independent contractor of

Employer, unless such employee or former employee or former independent

contractor, has not been employed by Employer for a period in excess of six (6)

months, (ii) call on or solicit any of the operating units of the clients doing

business with Employer as of the termination of the Term for any reason on

behalf of any person or entity in connection with any business competitive with

the business of Employer, and/or (iii) make known the names and addresses of

such customers (unless the Executive can clearly demonstrate that such

information was or became generally available to the public other than as a

result of a disclosure by the Executive.

 

d)             Ownership of Developments.  All copyrights, patents, trade secrets, or

other intellectual property rights associated with any ideas, concepts,

techniques, inventions, processes, or works of authorship developed or created

by Executive during the course of performing work for Employer or its customers

(collectively, the “Work Product”) shall belong exclusively to Employer and

shall, to the extent possible, be considered a work made by the Executive for

hire for Employer within the meaning of Title 17 of the United States

Code.  To the extent the Work Product

may not be considered work made by the Executive for hire for Employer, the

Executive agrees to assign, and automatically assign at the time of creation of

the 

 

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Work Product, without any requirement of further

consideration, any right, title, or interest that Executive may have in such

Work Product.  Upon the request of

Employer, the Executive shall take such further actions, including execution

and delivery of instruments of conveyance, as may be appropriate to give full

and proper effect to such assignment.

 

e)              Books and Records.  All books, records, and accounts relating in

any manner to the customers of Employer, whether prepared by the Executive or

otherwise coming into the Executive’s possession, shall be the exclusive

property of Employer and shall be returned immediately to Employer on

termination of the Executive’s employment hereunder or on Employer’s request at

any time.

 

f)                Acknowledgment by Executive. The Executive

acknowledges and confirms that (i) the restrictive covenants contained in this

Section 6(f) are reasonably necessary to protect the legitimate business

interest of Employer including the legitimate interests of the Employer, and

(ii) the restrictions contained in this Section 6(f) (including without

limitation the length of the term of the provisions of this Section 6(f) are

not over broad, over long, or unfair and are not the result of overreaching,

duress or coercion of any kind.  The

Executive further acknowledges and confirms that his full, uninhibited and

faithful observance of each of the covenants contained in this Section 6(f)

will not cause him any undue hardship, financial or otherwise, and that

enforcement of each of the covenants contained herein will not impair his

ability to obtain employment commensurate with his abilities and on terms fully

acceptable to him or otherwise to obtain income required for the comfortable

support of him and his family and the satisfaction of the needs of his

creditors.  The Executive acknowledges

and confirms that his special knowledge of the business of the Employer is such

as would cause Employer serious injury or loss if he were to use such ability

and knowledge to the benefit of a competitor or were to compete with the

Employer in violation of the terms of this Section 6(f).  The Executive further acknowledges that the

restrictions contained in this Section 6 are intended to be, and shall be, for

the benefit of and shall be enforceable by, Employer’s successors and assigns.

 

g)             Reformation by Court.  In the event that a court of competent

jurisdiction shall determine that any provision of this Section 6 is invalid or

more restrictive than permitted under the governing law of such jurisdiction,

then only as to enforcement of this Section 6 within the jurisdiction of such

court, such provision shall be interpreted and enforced as if it provided for

the maximum restriction permitted under such governing law.

 

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h)             Extension of Time.  If the Executive shall be in violation of

any provision of this Section 6 then each time limitation set forth in this

Section 6 shall be extended for a period of time equal to the period of time

during which such violation or violations occur.  If Employer seeks injunctive relief from such violation in any

court, then the covenants set forth in this Section 6 shall be extended for a

period of time equal to the pendency of such proceeding including all appeals by

the Executive.

 

i)                 Survival.  The provisions of this Section 6 shall

survive the termination of this Agreement, as applicable.

 

7)              Disability.  If during the Term Executive is unable to

perform his services by reason of illness or incapacity, for a period of sixty

(60) consecutive days or three (3) months out of any six (6) month period.  Employer may, at its option, upon written

notice to Executive, terminate the Term and his employment hereunder.  In the event of disability of the Executive

as defined in this Section 7, employer shall continue to pay seventy-five

percent (75%) of Executive’s then current salary and benefits for the lesser of

one (1) year or the remainder of the Term.

 

8)              Termination for Cause.

 

a)              Employer shall have the right to

terminate the Term and the Executive’s employment hereunder for Cause (as

defined below).  Upon any termination

pursuant to this Section 8, Employer shall pay to the Executive any unpaid

Annual Base Salary through the effective date of termination specified in such

notice.  Employer shall have no further

liability hereunder (other than for reimbursement for reasonable business

expenses incurred prior to the date of termination, subject, however, to the

provisions of Section 5(a)).

 

b)             For purposes hereof, the term

“Cause” shall mean the Executive’s conviction of a felony, the Executive’s

personal dishonesty directly affecting the Employer, willful misconduct (which

shall require prior written notice to the Executive from the Board unless not

curable or such misconduct is materially injurious to Employer), breach of a

fiduciary duty involving personal profit to the Executive or intentional

failure to substantially perform his duties after written notice to the

Executive from the Board (and a reasonable opportunity to cure such failure)

that, in the reasonable judgment of the Board, the Executive has failed to

perform specific duties.

 

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9)              Termination Without Cause.

 

a)              At any time Employer shall have the

right to terminate the Term and the Executive’s employment hereunder by written

notice to the Executive.  Any  demotion resulting in a material

adverse change in the duties, responsibilities or role, or reporting

relationships of the Employee shall be treated as a termination without cause

of the Executive.  If the Executive is a

licensed professional, e.g., Certified Public Accountant or attorney-at-law,

then any situation where the Executive is asked to take, certify or sanction

any course of action which such licensed professional Executive is prohibited

from doing by his/her profession’s rules, regulations, or code of ethics and

such action or refusal to take such action in any way leads to the Executive’s

termination or resignation, then such termination shall be treated as a

Termination Without Cause or Termination for Good Reason as defined herein.

 

Upon any termination pursuant to

this Section 9 (that is not a termination under any of Sections 7, 8, or 10),

Employer shall continue to pay (through Employer’s regularly scheduled payroll)

to the Executive (A) the Annual Base Salary at the date of termination for

eight (8) months and (B) pay, within forty-five (45) days of the last day of

employment, any earned Performance Bonus prorated as of the date of termination.

   Employer shall also continue to pay

the Employer portion of premiums for the same or substantially similar Welfare

Benefits and the Executive shall be entitled to the other benefits set forth in

Section 5(b) and (e) for the remainder of the Term.  In the event such entitlement is not allowed by law, the

Executive shall be entitled to the cash equivalent of that benefit.

 

b)             The Options and any previously

granted or subsequently granted incentive stock options shall immediately vest

and be exercisable pursuant to the terms of the Plan and the Stock Option Award

Agreement, all non-qualified stock options that have not vested as of the date

of the termination, shall expire, and all non-qualified stock options that have

vested shall be exercisable pursuant to the terms of the Plan and the Stock

Option Award Agreement. Said vested stock options shall be exerciseable and may

be sold by Executive subject to no restrictions by Employer (other than those

imposed by the Employer’s then current insider trading policy or by federal and

state securities laws).

 

c)              The Employer shall have no further

liability hereunder (other than for reimbursement for reasonable business

expenses incurred prior to the date of termination,

 

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subject, however, to the provisions of Section 5(a).  The Executive shall be entitled to receive

all severance payments and benefits hereunder regardless of any future

employment undertaken by the Executive.

 

10)        Termination by Executive.

 

a)              The Executive shall at all times

have the right upon thirty (30) days prior written notice to Employer, to

terminate the Term and his employment hereunder.

 

b)             Upon any termination pursuant to

this Section 10 by the Executive without Good Reason (as defined below),  Employer shall pay to the Executive any

unpaid Annual Base Salary through the effective date of termination specified

in such notice.  Employer shall have no

further liability hereunder (other than for reimbursement for reasonable

business expenses incurred prior to the date of termination, subject, however,

to the provisions of Section 5(a)).

 

c)              Upon any termination pursuant to

this Section 10 by the Executive for Good Reason, Employer shall pay to the

Executive the same amounts that would have been payable by Employer to the

Executive under Section 9 of this Agreement as if the Executive’s employment

had been terminated by Employer without Cause. 

Employer shall have no further liability hereunder (other than for

reimbursement for reasonable business expenses incurred prior to the date of

termination, subject, however, to the provisions of Section 5(a)).

 

d)             For purposes of this Agreement,

“Good Reason” shall mean:

 

i)                                         the assignment to the

Executive of any duties inconsistent in any material respect with the

Executive’s position (including status, offices, titles and reporting

requirements), authority, duties or responsibilities as contemplated by Section

3 of this Agreement, or any other action by Employer which results in a

material diminution in such position, authority, duties or responsibilities,

excluding for this purpose an isolated, insubstantial and inadvertent action

not taken in bad faith and which is remedied by Employer promptly after receipt

of notice thereof given by the Executive.

 

ii)                                      any failure by

Employer to comply with any of the material provisions of Section 4 of this

Agreement, other than an isolated, insubstantial and inadvertent failure not

occurring in bad faith and which is remedied by Employer promptly after receipt

of notice thereof given by the Executive; or

 

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iii)                                   in the event that (A)

a Change in Control (as defined in Section 4 hereof) in Employer shall occur

during the Term and (B) prior to the earlier of the expiration of the Term and

six (6) months after the date of the Change in Control, the Term and

Executive’s employment with Employer is terminated by Employer, or new employer

as the case may be, without Cause, as defined in Section 9(b) (and other than

pursuant to Section 7 by reason of the Executive’s death or the Executive’s

disability) or the Executive terminates the Term and his employment for Good

Reason, as defined in Section 11(d)(i) or (ii).

 

11)        Waivers.  It is understood that either party may waive

the strict performance of any covenant or agreement made herein; however, any

waiver made by a party hereto must be duly made in writing in order to be

considered a waiver, and the waiver of one covenant or agreement shall not be

considered a waiver of any other covenant or agreement unless specifically in

writing as aforementioned.

 

12)        Savings Provisions.  The invalidity, in whole or in part, of any

covenant or restriction, or any section, subsection, sentence, clause, phrase

or word, or other provisions of this Agreement, as the same may be amended from

time to time shall not affect the validity of the remaining portions thereof.

 

13)        Governing Law.  This Agreement shall be construed in

accordance with and governed by the laws of the State of Texas without giving

effect to its choice of law provision.

 

14)        Notices.  If either party desires to give notice to

the other in connection with any of the terms and provisions of this Agreement,

said notice must be in writing and shall be deemed given when (a) delivered by

hand (with written confirmation of receipt); (b) sent by facsimile (with

written confirmation of receipt), provided that a copy is mailed by registered

mail, return receipt requested, or (c) when received by the addresses, if sent

by a nationally recognized overnight delivery service) receipt requested), in

each case addressed to the party for whom it is intended as follows (or such

other addresses as either party may designate by notice to the other party, at

the Parent Employer’s or Employer’s then principal executive offices):

 

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If to Employer:                                                                  enherent Corp.

80 Lamberton Road

Windsor, CT 06095

Attn:  Clifford Dickman

 

 

If to Executive:                                                                 Robert D. Merkl

5419 Ashleigh Road

Fairfax, VA  22030

 

15)        Default.  In the event either party defaults in the

performance of its obligations under this Agreement, the non-defaulting party

may, after giving 30 days’ notice to the defaulting party to provide a

reasonable opportunity to cure such default, proceed to protect its rights by

suit in equity, action or law, or, where specifically provided for herein, by

arbitration, to enforce performance under this Agreement or to recover damages

for breach thereof, including all costs and attorneys’ fees, whether settled

out of court, arbitrated, or tried (at both trial and appellate levels).

 

16)        No Third Party Beneficiary.  Nothing expressed or implied in this

Agreement is intended, or shall be construed, to confer upon or give any person

other than Employer, the parties hereto and their respective heirs, personal

representatives, legal representatives, successors and assigns, any rights or

remedies under or by reason of this Agreement.

 

17)        Waiver of Jury Trial.  All parties knowingly waive their rights to

request a trial by jury in any litigation in any court of law, tribunal or

legal proceeding involving the parties hereto or any disputes arising out of or

related to this Agreement.  Any

controversy of claim arising out of this Agreement, its enforcement or

interpretation, or alleged breach default or misrepresentation in connection

with any of its provisions, shall be submitted to binding arbitration before

JAMS-Endispute in accordance with its rules and procedures for arbitration of

employment disputes.  The costs of

arbitration, including but not limited to, the filing fees, shall be paid for

by the Employer.  The Employer shall

also be responsible for payment of its own attorneys’ fees and shall pay the

attorney’s fees of the Employee up to a maximum of twenty-five thousand dollars

($25,000.00).

 

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18)        Successors.  This Agreement shall inure to the benefit of

and be binding upon the Executive and the Executive’s assigns, heirs,

representatives or estate.

 

19)        Indemnification.  In the event of a lawsuit, such as but not

limited to a shareholder suit, after Executive’s departure from the Employer,

or termination of this Agreement for Cause or Termination without Cause, the

Employer shall reimburse, the Executive from all reasonable travel costs and

out-of-pocket expenses incurred by Executive in assisting in the defense of

such post-employment suit.  In addition,

the Employer shall to the fullest extent allowed under its Amended and Restated

Certificate of Incorporation and to the fullest extent permitted by law

indemnify, defend and hold harmless Executive form any reasonable legal fees

incurred in Executive’s assistance in the defense of or damages awarded against

Executive from such post-employment lawsuit.

 

20)        Press Releases.  The executive will be given the opportunity

to review and comment upon any press release announcing his departure from the

Employer.  Employer shall not be

obligated to withdraw or revise such press release as a result of the

Executive’s comments.

 

IN WITNESS WHEREOF, by its appropriate officer, signed this

Agreement and Executive has signed this Agreement, as or the day and year first

above written.

 

	

   

  	

  AGREED

  TO BY:

  	

   

  	

  AGREED

  TO BY:

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  Executive

  	

  Robert D. Merkl

  	

   

  	

  enherent

  Corp.

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Irwin

  Sitkin

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

  Chairman,

  Compensation Committee

  Board of Directors

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

  Date:

  	

   

  	

   

  	

  Date:

  	

   

  	

   

  
											

 

14Exhibit 10.16

 

SECOND

AMENDED AND RESTATED LEASE

 

PACIFIC PLAZA AT TORREY HILLS

 

(Building

A)

 

 

PACIFIC

PLAZA CARMEL VALLEY LLC,

a California limited liability company

 

as

Landlord,

 

and

 

JNI

CORPORATION

 

a

Delaware corporation

 

as

Tenant

 

 

February

27,    2003

 

 

SECOND AMENDED AND RESTATED LEASE

 

THIS SECOND AMENDED AND

RESTATED LEASE (“Second Amended and Restated Lease”), dated for reference and

effective as of the 27th day of February, 2003, is made and entered into by and

between PACIFIC PLAZA CARMEL VALLEY LLC, a California limited company

(“Landlord”), and JNI CORPORATION, a Delaware corporation (“Tenant”), with

regard to the following facts:

 

A.                                   Landlord and Tenant entered into that certain

Office Lease dated July 11, 2000, and that certain  First Amendment to Lease dated November 6, 2001(collectively, the

“ Lease”), for space in the building located at 10955 Vista Sorrento Parkway

(the “Building”) located in the City of San Diego, County of San Diego, State

of California, in that development commonly known as Pacific Plaza at Torrey

Hills (the “Project”), described more particularly on the Legal Description,

attached thereto as Exhibit A.

 

B.                                     Landlord and Tenant desire to further amend

the Lease and restate the Lease in its entirety upon the terms and conditions

set forth herein below.

 

NOW, THEREFORE, FOR VALUABLE

CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED,

LANDLORD AND TENANT HEREBY AGREE AS FOLLOWS:

 

1.                                       Amendment and Restatement of Lease. 

Effective as of the date of this Agreement, Landlord and Tenant agree to

amend the Lease and restate the Lease in its entirety to read as set forth on

the Office Lease attached hereto and made a part hereof.

 

2.                                       Scope of Amendment/Ratification. 

This Second Amended and Restated Lease shall be binding upon and inure

to the benefit of the parties hereto and their respective successors and

permitted assigns. This Second Amended and Restated Lease may not be amended or

modified except by written instrument executed by all the parties hereto.  The Lease, as modified by this Second

Amended and Restated Lease, supercedes any prior understanding, whether oral or

written, by the parties, with respect to the subject matter thereof. Except as

specifically set forth herein, all other terms, covenants, agreements and

provisions of the Lease shall continue and remain in full force and effect, and

the Lease hereby is in all respects ratified and confirmed.  In the event of any conflict between this

Second Amended and Restated Lease and the Lease, the terms and of this Second

Amended and Restated Lease shall control and shall be paramount and the Lease

shall be construed accordingly.

 

3.                                       Counterparts. 

This Second Amended and Restated Lease may be executed in counterparts,

 

[Balance of page intentionally left blank]

 

1

 

and when all counterpart documents are

executed, the counterparts shall constitute a single binding instrument.

 

IN WITNESS WHEREOF, the

parties have executed this Second Amended and Restated Lease as of the date

first above-written.

 

	

  “Landlord”

  	

   

  	

  “Tenant”

  
	

   

  	

   

  	

   

  
	

  PACIFIC PLAZA CARMEL

  VALLEY LLC,

  a California limited liability company

  	

   

  	

  JNI CORPORATION, a

  Delaware corporation,

  
	

  By:

  COAST PACIFIC PLAZA LLC, a California

  	

   

  	

  By:

  	

   

  	

   

  
	

  limited

  liability company, Its Manager

  	

   

  	

  Name:

  	

  John Stiska

  
	

  By:  COAST INCOME PROPERTIES, INC.,

  	

   

  	

  Its:

  	

  Chairman of the Board

  
	

  a California corporation, Its Manager

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  By :

  	

   

  	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

  Thomas G. Blake, President

  	

   

  	

  Name:

  	

  Paul Kim

  
	

   

  	

   

  	

  Its:

  	

  Chief Financial Officer

  
							

 

2

 

BASIC LEASE INFORMATION

OFFICE LEASE

 

	

  Lease Date:

  	

   

  	

  July 11, 2000

  
	

   

  	

   

  	

   

  
	

  Landlord:

  	

   

  	

  Pacific Plaza Carmel

  Valley LLC, a California limited liability company

  
	

   

  	

   

  	

   

  
	

  Managing Agent:

  	

   

  	

  Coast Income Properties,

  Inc., a California corporation

  
	

   

  	

   

  	

   

  
	

  Landlord’s Address:

  	

   

  	

  c/o Coast Income

  Properties,

  Inc.4350 La Jolla Village Drive, Suite 150

  San Diego, California  92122

  
	

   

  	

   

  	

   

  
	

  Tenant:

  	

   

  	

  JNI Corporation, a

  Delaware corporation

  
	

   

  	

   

  	

   

  
	

  Tenant’s Address:

  	

   

  	

  10945 Vista Sorrento

  Parkway

  San Diego, California

  
	

   

  	

   

  	

   

  
	

  Legal Description of Land:

  	

   

  	

  See Exhibit “A”

  
	

   

  	

   

  	

   

  
	

  Premises:

  	

   

  	

  The entire second and

  third floors of a three-story building located at

  10955 Vista Sorrento Parkway, San Diego, California (the

  “Building”), in that development commonly known as Pacific Plaza at Torrey

  Hills (the “Project”). The Building is sometimes herein referred to as

  Building A of the Project.

  
	

   

  	

   

  	

   

  
	

  Rentable Area of the

  Premises:

  	

   

  	

  Approximately 39,045

  rentable square feet.

  
	

   

  	

   

  	

   

  
	

  Rentable Area of the

  Building:

  	

   

  	

  Approximately 57,323

  rentable square feet.

  
	

   

  	

   

  	

   

  
	

  Rentable Area of the

  Project:

  	

   

  	

  Approximately 214,848  rentable square feet.

  
	

   

  	

   

  	

   

  
	

  Usable Area of the

  Premises:

  	

   

  	

  Approximately 34,759

  usable square feet.

  
	

   

  	

   

  	

   

  
	

  Usable Area of the  Building:

  	

   

  	

  Approximately 51,774

  usable square feet.

  
	

   

  	

   

  	

   

  
	

  Permitted Uses:

  	

   

  	

  General office purposes,

  plus approximately twenty percent (20%) computer laboratory/light assembly

  area.

  
	

   

  	

   

  	

   

  
	

  Term:

  	

   

  	

  Six (6) years and two (2)

  months.

  
	

   

  	

   

  	

   

  
	

  Term Commencement Date:

  	

   

  	

  June 1, 2002.

  
	

   

  	

   

  	

   

  
	

  Estimated Improvement

  Completion Date:

  	

   

  	

  June 1, 2003

  

 

3

 

Base Rent:

 

	

  Lease Year

  	

   

  	

  Base Rent

  	

   

  	

  Annual Base Rent

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  1

  	

   

  	

  $2.45 per rentable sq.

  ft./month

  	

   

  	

  $29.45  per rentable sq. ft./year

  
	

  2

  	

   

  	

  $2.50 per rentable sq.

  ft./month

  	

   

  	

  $30.00  per rentable sq. ft./year

  
	

  3

  	

   

  	

  $2.55 per rentable sq.

  ft./month

  	

   

  	

  $30.60  per rentable sq. ft./year

  
	

  4

  	

   

  	

  $2.60 per rentable sq.

  ft./month

  	

   

  	

  $31.20  per rentable sq. ft./year

  
	

  5

  	

   

  	

  $2.65 per rentable sq.

  ft./month

  	

   

  	

  $31.80  per rentable sq. ft./year

  
	

  6

  	

   

  	

  $2.7265 per rentable sq.

  ft./month

  	

   

  	

  $32.75  per rentable sq. ft./year

  
	

     7**

  	

   

  	

  $2.8114 per rentable sq.

  ft./month

  	

   

  	

  $33.74  per rentable sq. ft./year

  

 

	

   

  	

   

  	

  (**Months 73 and 74 only)

  	

   

  	

   

  

 

	

  Base Calendar Year:

  	

   

  	

  2003

  
	

   

  	

   

  	

   

  
	

  Tenant’s  Project Share of

  Project Operating Expenses:

  	

   

  	

  18.2%

  
	

   

  	

   

  	

   

  
	

  Tenant’s Building Share of

  Building Operating Expenses:

  	

   

  	

  68.1%

  
	

   

  	

   

  	

   

  
	

  Security Deposit:

  	

   

  	

  See Section 4.05 and

  Exhibit G, Section 19.02.

  
	

   

  	

   

  	

   

  
	

  Broker:

  	

   

  	

  CB Richard Ellis, Inc.

  representing Landlord, and Kelley Commercial, Inc. representing Tenant.

  
	

   

  	

   

  	

   

  
	

  Business Hours:

  	

   

  	

  7:00 a.m. to 7:00 p.m.,

  Monday through Friday, and 9:00 a.m. to 12:00 noon on Saturdays,

  excluding certain holidays, being those days designated as Federal Holidays

  pursuant to 5 U.S.C. §6103, other than Columbus Day, Martin Luther King Day,

  President’s Day and Veteran’s Day (“Holidays”).

  
	

   

  	

   

  	

   

  
	

  Broker’s Fee paid by:

  	

   

  	

  Pacific Plaza Carmel

  Valley LLC, a California limited liability company.

  
	

   

  	

   

  	

   

  
	

  / / /

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  / / /

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  / / /

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  / / /

  	

   

  	

   

  

 

4

 

The foregoing Basic Lease Information is

hereby incorporated into and made a part of this Lease.  Each reference in this Lease to any of the

terms above shall mean the respective information hereinabove set forth and

shall be construed to incorporate all of the terms provided under the

particular paragraph pertaining to such information.  In the event of any conflict between any Basic Lease Information

and the Lease, the latter shall control.

 

	

  “Landlord”

  	

   

  	

  “Tenant”

  
	

   

  	

   

  	

   

  
	

  PACIFIC PLAZA CARMEL VALLEY

  LLC,

  a California limited liability company

  	

   

  	

  JNI CORPORATION, a

  Delaware corporation,

  
	

  By:  COAST PACIFIC PLAZA LLC, 

  	

   

  	

   

  
	

  a

  California limited liability company,

  	

   

  	

  By:

  	

   

  	

   

  
	

  Its

  Manager

  	

   

  	

  Name:

  	

   

  
	

  By:  COAST INCOME PROPERTIES,

  INC.,

  	

   

  	

  Its:

  	

   

  
	

  a California corporation, Its Manager

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

  By :

  	

   

  	

   

  	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

  Thomas

  G. Blake, President

  	

   

  	

  Its:

  	

   

  
										

 

5

 

TABLE OF CONTENTS

 

Article

 

	

  1.

  	

  PREMISES

  
	

   

  	

  0.1

  	

  Premises

  
	

   

  	

  1.1

  	

  Exhibits

  
	

   

  	

  1.2

  	

  Common Areas

  
	

   

  	

  1.3

  	

  Landlord’s

  Reserved Rights in Common Areas and Project

  
	

   

  	

  1.4

  	

  Rentable Area

  
	

   

  	

  1.5

  	

  Tenant’s Parking

  Entitlements

  
	

   

  	

  1.6

  	

  Condition of Premises

  
	

   

  	

   

  
	

  2.

  	

  TENANT’S IMPROVEMENTS

  
	

   

  	

  0.1

  	

  Plans

  
	

   

  	

  2.1

  	

  Tenant Improvement

  Allowance

  
	

   

  	

  2.2

  	

  Construction

  
	

   

  	

  2.3

  	

  Failure to

  Complete Construction

  
	

   

  	

   

  
	

  3.

  	

  TERM

  
	

   

  	

  0.1

  	

  Commencement of

  Term

  
	

   

  	

  3.1

  	

  Early Occupancy

  
	

   

  	

  3.2

  	

  Notice of Lease

  Dates

  
	

   

  	

  3.3

  	

  Option to Extend

  Term

  
	

   

  	

  3.4

  	

  Days

  
	

   

  	

   

  
	

  4.

  	

  RENT

  
	

   

  	

  0.1

  	

  Base Rent

  
	

   

  	

  4.1

  	

  Additional Rent

  
	

   

  	

  4.2

  	

  Escalation

  
	

   

  	

  4.3

  	

  Late Payment

  
	

   

  	

  4.4

  	

  Security Deposit.

  
	

   

  	

   

  
	

  5.

  	

  INSURANCE

  
	

   

  	

  0.1

  	

  Special Form

  Coverage

  
	

   

  	

  5.1

  	

  Liability Coverage

  
	

   

  	

  5.2

  	

  Worker’s

  Compensation Insurance

  
	

   

  	

  5.3

  	

  Business

  Interruption Insurance

  
	

   

  	

  5.4

  	

  Insurance

  Certificates

  
	

   

  	

  5.5

  	

  Tenant’s Failure

  
	

   

  	

  5.6

  	

  Waiver of Subrogation

  
	

   

  	

  5.7

  	

  Tenant’s

  Property and Fixtures

  
	

   

  	

  5.8

  	

  Indemnification

  
	

   

  	

  5.9

  	

  Earthquake

  and Flood Insurance

  
	

   

  	

  5.10

  	

  Other

  Tenant Insurance Coverage

  
	

   

  	

   

  
	

  6.

  	

  OPERATING EXPENSES

  
	

   

  	

  0.1

  	

  Tenant’s Share

  
	

   

  	

  6.1

  	

  Definition of Operating

  Expenses

  
	

   

  	

  6.2

  	

  Proration

  
	

   

  	

  6.3

  	

  Survival

  
	

   

  	

  6.4

  	

  Estimated Payments

  
				

 

6

 

	

   

  	

  6.5

  	

  Adjustment

  
	

   

  	

  6.6

  	

  Impositions

  
	

   

  	

  6.7

  	

  Services

  and Utilities

  
	

   

  	

   

  
	

  7.

  	

  REPAIRS AND MAINTENANCE

  
	

   

  	

  0.1

  	

  Tenant

  Repairs and Maintenance

  
	

   

  	

  7.1

  	

  Landlord

  Repairs and Maintenance

  
	

   

  	

  7.2

  	

  Inspection of

  Premises

  
	

   

  	

  7.3

  	

  Liens

  
	

   

  	

   

  
	

  8.

  	

  FIXTURES, PERSONAL PROPERTY AND ALTERATIONS

  
	

   

  	

  0.1

  	

  Fixtures and

  Personal Property

  
	

   

  	

  8.1

  	

  Alterations

  
	

   

  	

  8.2

  	

  Removal of Alterations

  
	

   

  	

  8.3

  	

  Minor Alterations

  
	

   

  	

   

  
	

  9.

  	

  USE AND COMPLIANCE WITH LAWS

  
	

   

  	

  0.1

  	

  General Use and

  Compliance with Laws

  
	

   

  	

  9.1

  	

  Signs

  
	

   

  	

  9.2

  	

  Parking Access

  
	

   

  	

  9.3

  	

  Floor Load

  
	

   

  	

  9.4

  	

  Deliveries

  
	

   

  	

   

  
	

  10.

  	

  DAMAGE AND DESTRUCTION

  
	

   

  	

  0.1

  	

  Reconstruction

  
	

   

  	

  10.1

  	

  Rent Abatement

  
	

   

  	

  10.2

  	

  Repair

  Period Notice

  
	

   

  	

  10.3

  	

  Excessive Damage or

  Destruction/Option to Terminate

  
	

   

  	

  10.4

  	

  Uninsured Casualties

  and Other Conditions/Option to Terminate

  
	

   

  	

  10.5

  	

  Waiver

  
	

   

  	

   

  
	

  11.

  	

  EMINENT DOMAIN

  
	

   

  	

  0.1

  	

  Total Condemnation

  
	

   

  	

  11.1

  	

  Partial

  Condemnation

  
	

   

  	

  11.2

  	

  Landlord’s Award

  
	

   

  	

  11.3

  	

  Tenant’s Award

  
	

   

  	

  11.4

  	

  Temporary

  Condemnation

  
	

   

  	

  11.5

  	

  Notice and

  Execution

  
	

   

  	

   

  
	

  12.

  	

  DEFAULT

  
	

   

  	

  0.1

  	

  Events of Default

  
	

   

  	

  12.1

  	

  Landlord’s Remedies

  
	

   

  	

   

  
	

  13.

  	

  ASSIGNMENT

  AND SUBLETTING

  
	

   

  	

  0.1

  	

  Assignment

  and Subletting; Prohibition

  
	

   

  	

  13.1

  	

  Bonus Rental

  
	

   

  	

  13.2

  	

  Scope

  
	

   

  	

  13.3

  	

  Waiver

  
	

   

  	

  13.4

  	

  Release

  
	

   

  	

  13.5

  	

  Recapture

  of Premises

  
	

   

  	

   

  
	

  14.

  	

  HAZARDOUS MATERIALS

  
	

   

  	

  0.1

  	

  Definitions

  
	

   

  	

  14.1

  	

  Use

  
				

 

7

 

	

   

  	

  14.2

  	

  Compliance

  With Laws; Handling of Hazardous Materials

  
	

   

  	

  14.3

  	

  Compliance With

  Insurance Requirements

  
	

   

  	

  14.4

  	

  Indemnity

  
	

   

  	

  14.5

  	

  Notice

  
	

   

  	

  14.6

  	

  Default

  
	

   

  	

  14.7

  	

  Landlord’s Disclosure

  
	

   

  	

   

  
	

  15.

  	

  OFFSET STATEMENT, ATTORNMENT AND

  SUBORDINATION

  
	

   

  	

  0.1

  	

  Estoppel

  Certificate

  
	

   

  	

  15.1

  	

  Attornment

  
	

   

  	

  15.2

  	

  Subordination

  
	

   

  	

  15.3

  	

  Non-Disturbance

  
	

   

  	

   

  
	

  16.

  	

  NOTICES

  
	

   

  	

  0.1

  	

  Notices

  
	

   

  	

   

  
	

  17.

  	

  SUCCESSORS BOUND

  
	

   

  	

  0.1

  	

  Successors

  Bound

  
	

   

  	

   

  
	

  18.

  	

  MISCELLANEOUS

  
	

   

  	

  0.1

  	

  Waiver

  
	

   

  	

  18.1

  	

  Easements

  
	

   

  	

  18.2

  	

  Relocation

  
	

   

  	

  18.3

  	

  No Light, Air or View Easement

  
	

   

  	

  18.4

  	

  Corporate Authority

  
	

   

  	

  18.5

  	

  Accord and

  Satisfaction

  
	

   

  	

  18.6

  	

  Limitation

  of Landlord’s Liability

  
	

   

  	

  18.7

  	

  Time

  
	

   

  	

  18.8

  	

  Attorneys’ Fees

  
	

   

  	

  18.9

  	

  Captions and

  Article Numbers

  
	

   

  	

  18.10

  	

  Severability

  
	

   

  	

  18.11

  	

  Applicable Law

  
	

   

  	

  18.12

  	

  Submission of Lease

  
	

   

  	

  18.13

  	

  Holding Over

  
	

   

  	

  18.14

  	

  Surrender

  
	

   

  	

  18.15

  	

  Rules and

  Regulations

  
	

   

  	

  18.16

  	

  No Nuisance

  
	

   

  	

  18.17

  	

  Broker

  
	

   

  	

  18.18

  	

  Landlord’s

  Right to Perform

  
	

   

  	

  18.19

  	

  Mortgage Protection

  
	

   

  	

  18.20

  	

  Nonliability

  
	

   

  	

  18.21

  	

  Modification for Lender

  
	

   

  	

  18.22

  	

  Recording

  
	

   

  	

  18.23

  	

  Entire Agreement

  
	

   

  	

  18.24

  	

  Additional Lease

  Provisions

  
	

   

  
	

  19.

  	

  ADDITIONAL LEASE PROVISIONS

  
	

   

  	

  0.1

  	

  Right to Lease

  Additional Space in the Building

  
	

   

  	

  19.1

  	

  Right

  of First Offer to Lease Additional Space in Building

  
	

   

  	

  19.2

  	

  Letter of Credit

  
	

   

  	

  19.3

  	

  Conformance to

  Work Letter

  
	

   

  	

  19.4

  	

  Use of Roof

  
	

   

  	

  19.5

  	

  Additional Provisions

  Relating to Rules and Regulations

  
					

 

8

 

	

  EXHIBITS

  
	

   

  	

   

  	

   

  
	

  Exhibit A — Legal Description

  	

   

  	

  Exhibit E — Rules and Regulations

  
	

  Exhibit B — Building Floor Plans

  	

   

  	

  Exhibit F — Letter of Credit

  
	

  Exhibit C — Preliminary Plans

  	

   

  	

  Exhibit G — Addendum to Lease

  
	

  Exhibit D — Work Letter

  	

   

  	

   

  

 

9

 

OFFICE LEASE

 

THIS LEASE (“Lease”), dated

for reference and effective as of the11th 

day of July, 2000, made and entered into by and between PACIFIC PLAZA

CARMEL VALLEY LLC, a California limited company (“Landlord”), and JNI

CORPORATION a Delaware corporation (“Tenant”), for space in the building

located at 10955 Vista Sorrento Parkway (the “Building”) located in the City of

San Diego, County of San Diego, State of California, in that development

commonly known as Pacific Plaza at Torrey Hills (the “Project”), described more

particularly on the Legal Description, attached hereto as Exhibit A, shall be

upon the terms and conditions contained hereinafter.

 

1.                                       PREMISES

 

0.1                                 Premises.     Landlord leases

to Tenant, subject to the provisions of this Lease, the Premises in the

Building as set forth in the Basic Lease Information, the usable space of which

is shown on the Building Floor Plans, attached hereto as Exhibit B.  The rentable square feet of the Premises,

Building and Project shall be as set forth in the Basic Lease Information,

subject however, to adjustment as set forth in Section 1.05.  By entering the Premises, Tenant shall be

deemed to accept the same (subject, however, to the provisions of Section

1.07)  and subject to all applicable

municipal, county, state and federal statutes, laws, ordinances, including

zoning ordinances, and regulations governing and relating to the Tenant’s use,

occupancy or possession of the Premises. 

Tenant acknowledges that the only warranties and representations

Landlord has made in connection with the physical condition of the Premises or

Tenant’s use of the same upon which Tenant has relied directly or indirectly

for any purpose are those expressly provided in this Lease.

 

1.1                                 Exhibits.     The following

Exhibits are attached to this Lease after the signatures and by reference

thereto are incorporated herein:

 

	

  Exhibit A

  	

   

  	

  Legal Description

  
	

   

  	

   

  	

   

  
	

  Exhibit B

  	

   

  	

  Building Floor Plans and

  Site Plan

  
	

   

  	

   

  	

   

  
	

  Exhibit C

  	

   

  	

  Preliminary Plans

  
	

   

  	

   

  	

   

  
	

  Exhibit D

  	

   

  	

  Work Letter

  
	

   

  	

   

  	

   

  
	

  Exhibit E

  	

   

  	

  Letter of Credit

  
	

   

  	

   

  	

   

  
	

  Exhibit F

  	

   

  	

  Addendum to Lease

  

 

1.2                                 Common Areas.     Tenant shall

have, as appurtenant to the Premises and subject to reasonable rules and

regulations from time to time made by Landlord the right to the use of the

following in common (the “Common Areas”):

 

(a)                                  Building Common Areas.  The common stairways and accessways,

lobbies, entrances, stairs, elevators, maintenance and utility service areas

and any passageways thereto, and the common pipes, ducts, conduits, wires and

appurtenant equipment serving the Premises (‘the “Building Common Areas”);

 

(b)                                 Project Common Areas.  The common walkways, sidewalks, landscape

areas, parking spaces and driveways necessary for access to the Project and

Parking Area and fitness center (the “Project Common Areas”); and;

 

(c)                                  Parking Area.  The common area located in the Project parking lot area (“Parking

Area”) as shown on Exhibit “B.”.

 

1.3                                 Landlord’s

Reserved

Rights in Common Areas and Project.     Landlord reserves full control over the

Common Areas to the extent not inconsistent with Tenant’s quiet enjoyment and

use of the Premises.  This reservation

includes but is not limited to right of Landlord, to grant easements and licenses

to others and the right to maintain or establish ownerships of the Building

separate from fee title to the land and other improvements in the Project, to

the extent not inconsistent with Tenant’s quiet enjoyment and use of the

Premises as granted by this Lease. 

Tenant shall, should Landlord so request, promptly join with Landlord in

execution of such documents as may be reasonably appropriate to assist Landlord

to implement any such

 

10

 

action provided Tenant need not execute an

amendment to this Lease or any document which is of a nature wherein liability

is created in Tenant or if, by reason of the terms of such document, Tenant may

be deprived of the quiet enjoyment and use of the Premises as granted by this

Lease.  Landlord reserves the right from

time to time to do any of the following, so long as Landlord does not

materially and unreasonably interfere with Tenant’s use or quiet enjoyment of

the Premises as granted by this Lease, including access to the Premises and

vehicular access to the Parking Area:   (a)   to

install, use, maintain, repair, relocate and replace any pipes, ducts,

conduits, wires and appurtenant meters and equipment for service to the

Building above the ceiling surfaces, below the floor surfaces, within the walls

and in the central core areas;    (b)   to change

the lines of the lot or lots on which the Project stands (“Lot”) and  to redesign and restripe the parking

facilities around the Building and make other reasonable changes and grant

other rights thereto, including without limitation, the granting of easements,

rights of way and rights of ingress and egress and similar rights to users of

parcels in or adjacent to the parcel on which the Building is situated; and

(c)   to alter or relocate any common areas or other facilities.

Notwithstanding the foregoing, Landlord shall not reduce the number of parking

spaces in the Parking Area by more than two percent (2%) without Tenant’s

approval.  Landlord reserves the right

to grant exclusive use to portions of the Parking Area to specific tenants

subject to Tenant’s rights to parking under Section 1.06.  Tenant’s approval rights set forth in this

Section 1.04 shall be effective only for so long as Tenant and any Affiliate

Transferee, in the aggregate, continue to lease at least sixty five percent

(65%) of the Rentable Area in the Building.

 

1.4                                 Rentable Area.     As used in this

Lease, the Rentable Area of the Premises, Building and Project shall be the

square footage designated in the Basic Lease Information.

 

1.5                                 Tenant’s Parking Entitlements.     Tenant shall be

entitled to the exclusive use, without charge, during the Term and any

extension thereof, of a pro rata number of parking spaces in the area of the

Project designated as the Parking Area for the Project as shown on Exhibit B

attached hereto. Landlord shall allocate twenty (20) covered parking spaces of

such number, ten (10) full size spaces and ten (10) compact size spaces, for

Tenant’s exclusive use designated as “Iomega Reserved” in the Parking Area of

the Project.. Tenant shall be entitled to install signage in conformance with

the Tenant’s Improvement Plans indicating such reserved spaces as Tenant’s

parking.  If Landlord shall, pursuant  to Section 1.04, designate any  parking spaces in the Parking Area in close

proximity to the Building’s main entrance for the exclusive use of another

tenant, then Tenant shall be entitled, as a part of its total parking

allocation, to have an equal number of spaces in the same area designated for

Tenant’s exclusive use but any such spaces so designated shall not reduce the

number of covered parking spaces allocated to Tenant.  Landlord shall have no responsibility for policing or otherwise

enforcing parking rights in the Project; provided, however, if Tenant or any

other tenant in the Project should  be

responsible for over-parking, or if any other unauthorized parking in the

Parking Area causes Tenant persistently to be deprived of its rights to use the

Parking Area pursuant to this Lease, then Landlord shall, after written notice

from Tenant, take reasonable action to insure that Tenant’s parking

entitlements pursuant to this Lease are available to Tenant and its invitees.

 

1.6                                 Condition of

Premises.     Landlord warrants and covenants to Tenant

that, as of the Improvement Completion Date: (a) the Building Shell will be

constructed in accordance with Landlord’s Plans, as modified pursuant to the

terms of the Work Letter; (b) the electrical, plumbing or mechanical systems in

the Building (“Building Systems”) shall be new, properly installed and in good

working order; (c) the Building Shell as originally constructed pursuant to

Landlord’s Plans complied with the American’s with Disabilities Act in effect

as of the date of the issuance by the City of San Diego of the building permit

for the Building Shell, except for such noncompliance as shall not have a

material adverse effect on Tenant’s rights or obligations under this Lease or

Tenant’s ability to use the Premises; and (d)  there shall be no Hazardous

Substances located in, on or about the Building or the Premises, except for

such Hazardous Substances brought on the Premises or Project by Tenant pursuant

to the provision of Article 14. 

Landlord further warrants and covenants that as of the date of the

issuance by the City of San Diego of the building permit for the Building

Shell, Landlord’s Plans complied with all applicable required  building codes. Tenant shall notify Landlord

within thirty (30) days after Tenant becomes aware of any breach of the

foregoing warranty and covenant; provided, however, Tenant shall have no

recourse against Landlord for any breach of the foregoing warranty and covenant

that could have been discovered by a visual inspection of the Premises and the

public spaces located within the Building unless Tenant notifies Landlord of

such breach within one hundred twenty (120) days after the Improvement

Completion Date.  With respect to the

covenants and warranties in this Section 1.07,

 

11

 

Landlord shall

repair or replace the defective elements of the Building Shell or Building

Systems at its own cost and not as an Operating Expense within thirty (30) days

after Landlord receives notice of such defect from Tenant; provided, however,

if by the nature of such correction more than thirty (30) days is required to

effect such correction, Landlord shall not be in default hereunder if such

correction is commenced within such thirty (30) days period and is diligently

pursued to completion. So long as Landlord satisfies the covenant set forth in

the preceding sentence, Tenant shall have no other remedy for the failure of

the covenants and warranties set forth in this Section 1.07. Except as

otherwise set forth in this Section 1.07, Landlord makes no representations and

warranties regarding the condition of the improvements in the Premises or their

fitness for Tenant’s intended use. Landlord shall have no obligation to make

any other improvements to the Premises and, to the maximum extent permitted by

law, Tenant hereby agrees to accept the Premises in their “as-is” condition.

The foregoing provisions of this Section 1.07 shall not be deemed to diminish

Landlord’s obligations to construct Landlord’s Work and Tenant’s Improvement

Work as provided in the Work Letter or Landlord’s obligations to repair or

restore the Project, including the Premises, as provided elsewhere in this

Lease.

 

2.                                       TENANT’S

IMPROVEMENTS

 

0.1                                 Plans.     For the

purposes of this Article 2, capitalized terms not otherwise defined elsewhere

in this Lease shall have the meanings set forth in Exhibit “D” attached hereto

(the “Work Letter”). Tenant shall submit to Landlord preliminary plans and

outline specifications identified in Exhibit C (“Preliminary Plans”) for the

construction of the tenant improvements to the Premises (“Tenant’s

Improvements”) in accordance with the Work Letter. Once Landlord has approved

the preliminary plans and outline specifications submitted by Tenant in

accordance with the Work Letter, Tenant shall have final plans and

specifications (“Tenant Improvement Plans”) prepared in substantial conformity

with the Preliminary Plans.  Preparation

and approval of the Tenant Improvement Plans and any changes requested by Tenant

thereto shall be made only in accordance with the Work Letter.  Landlord shall construct Tenant’s

Improvement Work (as defined in the Work Letter) in accordance with the

approved Tenant’s Improvement Plans, all in accordance with the provisions of

the Work Letter.  All costs and expenses

associated with such work, including but not limited to the costs of the

Tenant’s Improvement Work, Tenant’s moving costs (if requested by Tenant and

subject to the limitation of Section 2.02 below), fees of, and other amounts

payable to, Tenant’s Architect and Tenant’s engineers and other building and/or

construction consultants, building permit fees, Landlord’s Contractor’s Fee (as

defined in the Work Letter) and all other costs and expenses chargeable to the

Tenant Improvement Fund pursuant to Exhibit “D” to this Lease (collectively the

“Tenant Improvement Costs”), shall be paid by Landlord from the Tenant

Improvement Fund.

 

2.1                                 Tenant Improvement Allowance.     Landlord shall

provide Tenant with a basic allowance for construction of Tenant’s Improvements

Work and to offset such other Tenant Improvement Costs as Tenant may incur in

connection with this Lease in an amount determined by multiplying the sum of

Thirty Five Dollars ($35.00) times the number of square feet of Usable Area in

the Premises as determined in accordance with Section 1.05 (“Tenant Improvement

Allowance”).  All Tenant Improvement

Costs in excess of the Tenant Improvement Allowance (collectively, the

“Tenant’s Improvement Contribution”) shall be paid by Tenant.  Landlord acknowledges receipt of an initial

contribution to Tenant Improvement Contribution of Two Hundred  Forty-three Thousand Three Hundred Thirteen

Dollars ($243,313). An additional contribution to Tenant’s Improvement

Contribution in excess of the Tenant Improvement Allowance and the initial

contribution to the Tenant Improvement Contribution shall be paid by Tenant to

Landlord fifteen (15) days after Tenant shall have approved a Cost Estimate (as

each term is defined in the Work Letter) and Landlord and Tenant have

thereafter agreed on an estimate of Tenant Improvement Costs. Any additional

contributions to Tenant’s Improvement Contribution to be paid by Tenant

hereunder shall be paid by Tenant to Landlord thirty (30) days after Tenant

shall have approved a Revised Cost Estimate (as such term is defined in the

Work Letter), if same is required. In the event the actual Tenant Improvement

Costs are less than the sum of the Tenant Improvement Allowance and Tenant’s

Improvement Contribution, then Landlord shall pay  to Tenant within ten (10) days after such determination the

amount by which the sum of the Tenant Improvement Allowance and Tenant’s

Improvement Contribution exceeded the actual Tenant Improvement Costs; provided

, however, in no event shall the Landlord be required to pay an amount greater

than the amount of Tenant’s Improvement Contribution. The Tenant Improvement

Allowance and Tenant’s Improvement Contribution are herein collectively

referred to as the “Tenant Improvement Fund”. 

In no event, however, shall amounts paid for

 

12

 

Tenant’s moving costs from the Tenant

Improvement Fund exceed Two Dollars ($2.00) per square foot of Usable Area in

the Premises.

 

2.2                                 Construction.     Landlord shall

cause the Tenant’s Improvement Work in the Premises to be constructed

substantially in accordance with the Tenant’s Improvement Plans and the Work

Letter.  Subject to the provisions of Section 2.04

below, Tenant shall pay all costs of constructing Tenant’s Improvements, except

that Tenant shall first be entitled to receive the Tenant Improvement Allowance

from Landlord in accordance with the terms and conditions of Section 2.02 of

this Lease.

 

2.3                                 Failure

to Complete Construction.     Tenant’s

only remedies for Landlord’s failure to cause Substantial Completion (as

defined in the Work Letter) of the Tenant’s Improvement Work and the Landlord’s

Work (as each term is defined in the Work Letter, and collectively, the

“Improvements”) to occur on or before the Estimated Improvement Completion Date,

as extended pursuant to the Work Letter, shall be as set forth in this Section

2.04.  If Substantial Completion of the

Improvements has not occurred on or before the date which is three (3) months

following the Scheduled Improvement Completion Date, as hereinafter

defined  (the “Termination Option

Date”), Tenant shall have the option to terminate this Lease by the delivery to

Landlord of written notice within ten (10) days after the Termination Option

Date or any one month anniversary of the Termination Option Date until

Substantial Completion of the Improvements occurs.  Tenant shall not be entitled to terminate the Lease for any delay

in completion of the Premises prior to the Termination Option Date.  If it appears that Substantial  Completion of the Improvements may not occur

on or before the Estimated Improvement Completion Date, as extended pursuant to

the Work Letter (the “Scheduled Improvement Completion Date”), Landlord shall

be entitled to incur overtime charges (“Overtime Charges”) with Landlord’s

Contractor and shall use commercially reasonable efforts to accelerate the

completion of Tenant’s Improvement Work to meet the Scheduled Improvement

Completion Date.  If Tenant  fails to submit eighty percent (80%)

complete detailed set of Tenant’s Improvement Plans to the City for plan check

and approval on or before March 3, 2003, or if Tenant fails to submit a

complete and fully detailed set of Tenant Improvement Plans to the City for

plan check and approval on or before March 17, 2003, then Tenant shall

reimburse Landlord within ten (10) days of Landlord’s written request therefore

for all Overtime Charges incurred by Landlord relating to such failure. In the

event Tenant submits a complete and detailed set of Tenant’s Improvement Plans

to the City for plan check and approval on or before March 17, 2003, and the

City does not approve Tenant’s Improvement Plans or does not issues building

permits for Tenant’s Improvements on or before April 14, 2003, then any

Overtime Charges payable to Landlord’s Contractor shall be payable one-half (1⁄2)

by Landlord and one half (1⁄2) by Tenant. 

If Tenant  submits eighty percent

(80%) complete detailed set of Tenant’s Improvement Plans to the City for plan

check and approval on or before March 3, 2003, and a complete and fully

detailed set of Tenant’s Improvement Plans to the City for plan check and

approval on or before March 17, 2003, and the City issues building permits for

Tenant’s Improvements on or before April 14, 2003, then any Overtime Charges

payable to Landlord’s Contractor shall be payable by Landlord. No Overtime

Charges shall be paid from the Tenant Improvement Fund.

 

3.                                       TERM

 

0.1                                 Commencement

of Term.     The Lease shall

be for the Term set forth in the Basic Lease Information, commencing upon Term

Commencement Date.

 

3.1                                 Early Occupancy.     Subject to the

availability of the Premises and the issuance by the City of a temporary

certificate of occupancy, Tenant shall be permitted to move its furniture,

trade fixtures, equipment, machinery, goods and supplies into the Premises

prior to the Improvement Completion Date; 

the period between the date Tenant commences to occupy the Premises and

the Improvement Completion Date being hereinafter referred to as the “Early

Occupancy Period.”  Tenant shall be

permitted to commence to occupy the Premises as soon as Substantial Completion

of the  Improvements occurs and a

temporary certificate of occupancy has been issued by the City..  Such occupancy of the Premises shall be

subject to all the provisions of this Lease, except that Tenant shall not be

required to pay Monthly Base Rent for the Early Occupancy Period; provided,

however, that Tenant shall have provided Landlord proof of Tenant’s insurance

as set forth in Section 5.05; and provided further that Tenant shall pay or

reimburse Landlord for all utilities and services to the Premises during the

Early Occupancy Period. All furniture, materials, work, installations,

equipment and decorations of any nature brought upon or installed in the

Premises prior to the Improvement Completion Date shall be at Tenant’s sole

risk. Neither Landlord nor any party acting on Landlord’s behalf

 

13

 

shall be responsible for any damage or loss

or destruction of such items brought to or installed in the Premises prior to

the Improvement Completion Date unless such damage, loss or destruction results

from Landlord’s gross negligence or intentional misconduct.

 

3.2                                 Notice of Lease Dates.     Within  ten (10) days after Landlord’s written

request, Tenant shall execute a written confirmation of the commencement of the

Term and expiration date of the Term in a form reasonably provided by

Landlord.  Such a notice shall be

binding upon Tenant unless Tenant objects thereto in writing within such ten (10)

day period.

 

3.3                                 Option to Extend Term.      Tenant shall

have the option to extend the Term of this Lease for the entire Premises for

two (2) additional periods of five (5) years each (the “Premises

Options”).  The period of the First

Premises Option is referred to herein as the “First Option Term”, and the

period of the second Premises Option is referred to as the “Second Option

Term.”.  The First Option Term and the

Second Option Term are sometimes hereinafter collectively referred to as the

“Option Term”. Tenant shall have no right or interest  to exercise any Premises Option unless:

(a)   Tenant gives the Landlord written notice of its intent to

exercise the Premises Option no earlier than three hundred thirty (330) days

prior to the end of the Term, or any prior extension thereof, and no later than

two hundred seventy (270) days prior to the end of the Term, or any prior

extension thereof  (the “Extension

Notice”);   (b)   There shall be no uncured Event of

Default on the date the Extension Notice is delivered to Landlord and on the

date the Option Term commences;  (c)

Tenant or an Affiliate Transferee occupies more than fifty percent (50%) of the

Rentable Area of the Premises; and (d)   Tenant has not filed

for or sought protection under any bankruptcy statute. Annual Base Rent during

the First Option Term and during the Second Option Term shall be as set forth

in Section 4.01(b) of the Lease. 

Time is of the essence with respect to Tenant’s exercise of the Premises

Option.  Tenant’s failure to exactly

comply with any of the time or other requirements herein, shall cause the

Premises Option to automatically expire and, in such event, this Lease shall

terminate upon the expiration of the Term. The option to extend the Term

pursuant hereto for the Option Term shall be personal to Iomega Corporation and

shall not be exercisable by or for the benefit of any assignee, subtenant or

other transferee of Iomega Corporation, except that the Premises Option may be

transferred by Iomega Corporation to  an

Affiliate Transferee in connection with a Transfer of the entire Lease to an

Affiliate Transferee and may be exercised by such Affiliate Transferee.

 

3.4                                 Days.     Except for the

Rent payment requirements of Articles 4 and 6, when time periods of ten (10)

days or less are provided in this Lease, unless “calendar days” is expressly

stated, such time periods are to be calculated such that “days” shall mean

business days, regardless of whether “business days” is expressly stated. As

used herein, the term “business day” shall mean each day other than Saturdays

and Sundays and any other day designated as a Federal holiday pursuant to 5

U.S.C. § 6105, other than Columbus Day.

 

4.                                       RENT

 

                                                0.1                                 Base Rent.

 

(a)                                  Initial Term.  The

Annual Base Rent shall be the amount set forth in the Basic Lease Information

payable in equal monthly installments of Monthly Base Rent as set forth in the

Basic Lease Information.  Tenant shall

pay the Monthly Base Rent to Landlord in advance upon the first day of each

calendar month of the Term, except that the Monthly Base Rent for the first

month of the Term shall be payable upon execution of this Lease, at Landlord’s

address or at such other place designated by Landlord in a notice to Tenant,

without any prior demand therefor and without any deduction, abatement (except

for such rental abatement as is otherwise specifically provided for herein) or

setoff whatsoever, in lawful money of the United States of America.  If the Term shall commence or end on a day other

than the first day of a calendar month, then Tenant shall pay, as rent for such

partial calendar month, a pro rata portion of the Monthly Base Rent,

prorated on a per diem basis, with respect to the portions of the fractional

calendar month included in the Term. 

Tenant shall pay rent for the last calendar month of the Term on the

first day of the last calendar month of the Term.  Because Tenant will have paid a full month’s Base Rent for the

first fractional calendar month of the Term if the Term shall commence on a day

other than the first day of a calendar month, Tenant’s Monthly Base Rent for

the first full calendar month of the Term shall be reduced by an amount equal

to the excess of (i) the amount Tenant actually paid as Monthly Base Rent

for the first fractional calendar month of

 

14

 

the Term and (ii) the amount of Monthly

Base Rent that actually accrued with respect to such fractional calendar month.

Upon executing this Lease, Tenant shall pay the first full month’s installment

of the Monthly Base Rent owing hereunder along with Tenant’s Security Deposit

as provided in Section 4.05 below.

 

(b)                                 Option Term.  During the first year of the

each Option Term, if it occurs, Tenant shall pay to Landlord Base Rent equal to

“Market Rent” (as defined below) for the Premises determined as of the

commencement date of the applicable Option Term, as such Base Rent shall be

adjusted annually as set forth in Section 4.03 below.  As used herein, “Market Rent” shall mean the

price that a ready and willing tenant would pay, at commencement of the

applicable Option Term, as monthly base rent to a ready and willing landlord of

similar space in a Class “A” office building in the geographical area known as

Del Mar Heights/Torrey Hills (“Similar Space”), if such Similar Space were

offered for lease on the open market for a reasonable period of time and be the

sum of the fair market annual rental rate per rentable square foot multiplied

by the Rentable Area of the Premises (as set forth in the Basic Lease Information).  Market Rent shall be determined as follows:

(a) as mutually agreed by Landlord and Tenant within ten (10)  days of Landlord’s delivery to Tenant of

Landlord’s opinion of the Market Rent for the first year of the applicable

Option Term (“Landlord Rent Notice”), which shall  be delivered to

Tenant within ten (10) days after Landlord receives Tenant’s written Notice to

Extend; or (b) in the event that Landlord and Tenant are unable to so agree,

the Market Rent shall be determined by concurrent appraisals pursuant to

Section 4.01(c) below.  Tenant

shall have the right to withdraw its Extension Notice by written notice to

Landlord delivered to Landlord within thirty (30) days after delivery to Tenant

of Landlord’s Rent Notice.  In

determining Market Rent, appraisers shall take into account the duration of the

applicable Option Term, the quality and prestige of the Building and Premises,

recent monthly new and  renewal rental

rates for Similar Space imputed to the commencement of the applicable Option

Term, and all relevant economic terms of this Lease, it being the intent that

Market Rent, as so determined, should reflect the total economic package which

would be offered at the time of commencement of the applicable Option Term to a

tenant for the Premises on a new lease or lease renewal basis, or substantially

Similar Space in a building of similar quality and value of tenant improvements

(without consideration of depreciation or amortization on an accounting basis)

and location under a lease with substantially the same terms and provisions as

the applicable terms and provisions of this Lease (“Market for Similar Space”),

without discounting the rent for the creditworthiness of the tenant or for the

real estate leasing commissions. 

Notwithstanding the foregoing, in no event shall the Market Rent as so

determined be less than the Base Rent for the calendar year  immediately preceding the commencement of

the Option Term.  In determining the

rental rate of similar space, the parties and the appraisers shall take into

consideration the following

concessions:   (i)   Rental abatement

concessions, if any, being granted to tenants in connection with Similar

Space;  (ii)  Tenant improvements or allowances provided or

to be provided for the Similar Space on a new lease or lease renewal basis;

and   (iii)   All other monetary concessions not

otherwise excluded above, if any, being granted to tenants in connection with

the Similar Space.

 

For example, if the parties, in applying the

above criteria, determine that (1) leases of comparable space provide a

new or renewal tenant with comparable space at a base rent rate of two dollars

($2.00) per square foot of Rentable Area per month, with four (4) months free

rent, and a thirty dollar ($30.00) per square foot of Usable Area tenant

improvement allowance where the value of existing improvements in the

comparable space is five dollars ($5.00) per square foot of Usable Area, and

(2) the value of the existing improvements in the Premises is ten dollars

($10.00) per square foot of Usable Area, then the Fair Market Rental Value of

the Premises shall not be a base rent of two dollars ($2.00) per square foot of

Rentable Area per month only but shall be the equivalent of a two dollars

($2.00) per square foot of Rentable Area base rent, four (4) months free rent,

and a twenty-five dollar ($25.00) per square foot of Usable Area tenant

improvement allowance or payment in lieu of such allowance.

 

(c)                                  Market Rent Appraisal Procedure.

 

(i)                                     If Tenant rejects the Market Rent proposed by

Landlord in Landlord’s Rent Notice, Landlord and Tenant shall attempt to agree

in good faith upon a single appraiser not later than seven (7) days after the

Landlord receives notice of Tenant’s rejection of Landlord’s proposed Market

Rent (“Tenant’s Rejection Notice”), which date of receipt shall be within

fifteen (15) days after Landlord’s delivery of

 

15

 

Landlord’s Rent Notice.  If Landlord and Tenant are unable to agree

upon a single appraiser within such time period, then Landlord and Tenant shall

each appoint one appraiser not later than fifteen (15) days after Landlord’s

receipt of Tenant’s Rejection Notice.  

Within five (5) days thereafter, the two appointed appraisers shall

appoint a third appraiser.  Landlord and

Tenant shall instruct the appraiser(s) to complete the determination of the

Market Rent not later than fifteen (15) days after all appraisers have been

appointed.  If the two appraisers are

unable to select the third appraiser within such five (5) day period, then

Landlord and Tenant shall be entitled to apply to the MAI for the appointment

of a third appraiser.

 

(ii)                                  If either Landlord or Tenant fails to appoint

its appraiser within the prescribed time period, the single appraiser appointed

shall determine the Market Rent of the Premises for the first year of the

applicable Option Term.  If both parties

fail to appoint appraisers within the prescribed time periods, then the first

appraiser thereafter selected by a party shall determine the Market Rent of the

Premises for the first year of the applicable Option Term.

 

(iii)                               Landlord and Tenant shall each bear the cost

of its own appraiser and the parties shall share equally the cost of the single

or third appraiser, if applicable.  All

appraisers so designated herein shall have at least five (5) years’ experience

in the appraisal of similar office buildings in the San Diego area and shall be

members of professional organizations such as MAI or equivalent.

 

(iv)                              If a single appraiser is chosen, then such appraiser

shall determine the Market Rent of the Premises for the first year of the

applicable Option Term.  Otherwise, the

Market Rent of the Premises for the first year of the applicable Option Term

shall be the arithmetic average of two (2) of the three (3) appraisals which

are closest in amount, and the third appraisal shall be disregarded.  Notwithstanding anything else contained

herein, the Market Rent as so determined shall not be less than the Basic

Annual Rent payable during the year preceding the applicable Option Term.

 

4.1                                 Additional Rent.     All charges

required to be paid by Tenant hereunder, including without limitation, payments

for Operating Expenses and any other amounts payable under this Lease, shall be

considered additional rent for the purposes of this Lease (“Additional Rent”),

and Tenant shall pay Additional Rent as provided in Article 6.  “Rent” shall mean Base Rent and Additional

Rent.

 

4.2                                 Escalation.     Annual Base

Rent for the second year of each Option Term and each and every succeeding year

thereafter during the applicable Option Term shall be increased  by an amount equal to three percent (3%) of

the Annual Base Rent payable for the preceding year.

 

4.3                                 Late Payment.     If any

installment of Rent is not paid promptly on the first of the month or otherwise

when due, the unpaid amounts shall bear interest at the interest rate set forth

in Section 12.02(e)  from the date due

to the date of payment.  In addition,

Tenant acknowledges that the late payment of any installment of Rent will cause

Landlord to incur certain costs and expenses not contemplated under this Lease,

the exact amount of which are extremely difficult or impractical to fix.  These costs and expenses will include,

without limitation, administrative and collection costs and processing and

accounting expenses.  Therefore, if any

installment of Rent is not received by Landlord from Tenant when the

installment is due, Tenant shall pay to Landlord on demand a charge for

administration, collection and accounting expenses equal to five percent (5%)

of the amount of such delinquent amounts due (“Late Charge”) in addition to the

installment of Rent then owing with interest at the interest rate set forth in

Section 12.02(e), regardless of whether or not a notice of default or notice of

termination has been given by Landlord; provided, however, Tenant shall not be

required to pay such Late Charge if such late payment is the first late payment

of Rent by Tenant in the preceding twelve (12) months and the installment of

Rent is paid not more than five (5) days 

after the date same is due.. 

Landlord and Tenant agree that the late payment charge represents a

reasonable estimate of Landlord’s costs and expenses and is fair compensation

to Landlord for its loss suffered by Tenant’s nonpayment of any amounts when

due and payable pursuant to this Lease. 

This provision shall not relieve Tenant from payment of Rent at the time

and in the manner herein specified.

 

4.4                                 Security Deposit.     The Security

Deposit previously delivered to Landlord by Tenant has been returned to Tenant,

receipt of which is acknowledged by Tenant. Except as provided in  Exhibit G, Section 19.02 attached hereto, no

Security Deposit shall be required to be deposited by Tenant.  If a Security Deposit is required by Exhibit

G, Section 19.03, the Security Deposit shall secure Tenant’s obligations under

this Lease to pay rent and other monetary amounts, to maintain the Premises and

repair damages thereto, to

 

16

 

surrender the Premises to Landlord in clean

and sanitary condition and repair upon termination of this Lease as required

pursuant to Section 18.15 below and to discharge Tenant’s other obligations

hereunder.  Landlord may use and

commingle the Security Deposit with other funds of Landlord.  If Tenant fails to perform Tenant’s

obligations hereunder, Landlord may, but without any obligation to do so, apply

all or any portion of the Security Deposit towards fulfillment of Tenant’s

unperformed obligations.  If Landlord does

so apply any portion of the Security Deposit, Tenant, shall immediately pay

Landlord a sufficient amount in cash to restore the Security Deposit to the

full original amount.  In the event that

Landlord shall expend the same in order to cure Tenant’s default hereunder,

Tenant’s failure to forthwith remit to Landlord a sufficient amount in cash to

restore the Security Deposit to the original sum deposited within ten (10) days

after Tenant’s receipt of notice from Landlord that such amounts have been so expended

shall constitute an Event of Default. 

The Security Deposit shall be held by Landlord without liability for

interest on the same.  Upon termination

of this Lease, if Tenant has then performed all of Tenant’s obligations

hereunder, Landlord shall return the Security Deposit to Tenant.  If Landlord sells or otherwise transfers

Landlord’s rights or interest under this Lease, Landlord may deliver the

Security Deposit to the transferee, whereupon Landlord shall be released from

any further liability to Tenant with respect to the Security Deposit.

 

5.                                       INSURANCE

 

0.1                                 Special Form Coverage.     At all times

during the Term, Landlord shall procure and maintain in full force and effect

with respect to the Project (including, but not limited to, the Building and

the Tenant’s Improvements paid for by the Tenant Improvement Allowance), a

policy or policies of special form risk insurance (with extended coverage

endorsement attached, including sprinkler, vandalism and malicious mischief

coverage, and any other endorsements required by the holder of any fee or

leasehold mortgage), naming Tenant as a loss payee, as its interest may appear,

in an amount equal to one hundred percent (100%) of the full insurance

replacement value (replacement cost new, including debris removal, and

demolition) thereof and any other insurance Landlord reasonably deems

necessary, including, but not limited to, boiler and machinery insurance.  If the annual premiums charged Landlord for

such casualty insurance exceed the standard premium rates because the nature of

Tenant’s operations results in increased exposure, then Tenant shall, upon

receipt of appropriate premium invoices, reimburse Landlord for such increased

amount.  Landlord shall also, to the extent

same is available  to the extent same is

available on commercially reasonable terms and at commercially reasonable rates, keep and maintain, by endorsement to its

special form insurance or by a separate policy, rental abatement insurance

insuring against abatement or loss of Rent in case of fire or other casualty

insured against by a standard “special form” policy, in an amount at least

equal to the amount of the Rent payable by Tenant during one (1) year next

ensuing, as reasonably determined by Landlord. At all times during the Term,

Tenant shall procure, pay for and maintain in full force and effect a similar

policy of insurance, naming Landlord as a loss payee as to tenant improvements

only, as its interest may appear, with respect to property of every description

and kind owned by Tenant upon the Premises or the Building, or for which Tenant

is legally liable, including, without limitation, trade fixtures, furniture,

equipment and other personal property, and all tenant improvements owned or

installed by or on behalf of Tenant (but not with respect to those owned

constructed by and owned by Landlord and defined in the Work Letter as Tenant’s

Improvement Work)  insuring one hundred

percent (100%) of the full replacement value of said property and tenant

improvements. Any policy proceeds shall be used for the repair and replacement

of the property damaged or destroyed unless this Lease shall cease  and terminate under the provisions on

excessive damage or destruction set forth in Section 10.04 below. Notwithstanding

anything to the contrary contained in this Section 5.01, Tenant shall reimburse

Landlord within fifteen (15) days after receipt by Tenant of an invoice

therefor, for the cost of  the insurance

provided in this Section 5.01 on any of Tenant’s Improvements in excess of

Thirty Five Dollars ($35) times the number of square feet of Usable Area in the

Premises as determined in accordance with Section 1.05.

 

5.1                                 Liability Coverage.     Within fifteen

(15) days after the execution of this Lease, Tenant shall provide Landlord with

certificates of insurance for all of Tenant’s insurance policies required

hereunder so that Landlord may determine whether Tenant’s insurance policies

are in such forms, amounts and are written by such insurance companies as

required by Landlord.  Tenant shall, at

its own cost and expense, keep and maintain in full force during the Term, a

policy or policies of broad form commercial general liability insurance

(“Tenant’s CGL Policy”) with and cross-liability endorsements (insuring

Tenant’s indemnification obligations under this Lease, including Section 5.09

hereof) written by an insurance company reasonably approved by

 

17

 

Landlord in the form customary to the

locality, insuring Tenant’s activities with respect to the Premises and/or

Building against loss, damage or liability for personal and bodily injury

(including wrongful death) of any person and loss or damage to property

occurring in, upon or about the Premises covering personal and bodily injury in

the amounts of not less than Five Million Dollars ($5,000,000) per person and

Five Million Dollars ($5,000,000) per occurrence and covering property damage

in the amount of not less than One Million Dollars ($1,000,000) per

occurrence.  These limits may be

satisfied by a basic policy and an umbrella policy.  Such insurance shall be with insurance companies with a General

Policy Holder’s rating of at least A- VII as set forth in the most current

issue of Best’s Insurance Guide, and licensed to do business in California. Such

insurance shall have a deductible of no greater than Fifty Thousand Dollars

($50,000).  Tenant’s obligations to

carry the insurance set forth herein 

may be satisfied by coverage under a so-called blanket policy of broad

form commercial general liability insurance with the same endorsements and

coverage for the Premises as described above, as well as coverage of other

premises and properties of Tenant, or in which Tenant has some interest;

provided, however, that Landlord and Managing Agent shall be named as an

additional insured, the coverage afforded Landlord shall not be reduced or

diminished, and the requirements set forth in this Lease are otherwise

satisfied. Landlord shall, at its own cost and expense, keep and maintain in

full force during the Term, a policy or policies of broad form commercial

general liability insurance (“Landlord’s CGL Policy”) with and cross-liability

endorsements (insuring Landlord’s indemnification obligations under this Lease,

including Section 5.09 hereof) in the form customary to the locality, insuring

Landlord’s activities with respect to the Building Common Areas, the Project

Common Areas and the Parking Area 

against loss, damage or liability for personal and bodily injury (including

wrongful death) of any person and loss or damage to property occurring in, upon

or about the  Building Common Areas, the

Project Common Areas and the Parking Area 

covering personal and bodily injury and covering property damage in a

combined single limit of not less than Five Million Dollars ($5,000,000)

combined single limit. These limits may be satisfied by a basic policy and an

umbrella policy. Such insurance shall be with insurance companies with a

General Policy Holder’s rating of at least A- VII as set forth in the most

current issue of Best’s Insurance Guide, and licensed to do business in

California.  Such insurance shall have a

deductible of no greater than Fifty Thousand Dollars ($50,000).  Landlord’s obligations to carry the

insurance set forth herein  may be

satisfied by coverage under a so-called blanket policy of broad form commercial

general liability insurance with the same endorsements and coverage for

the  Building Common Areas, the Project

Common Areas and the Parking Area as described above, as well as coverage of

other premises and properties of Landlord, or in which Landlord has some

interest, provided, however, that Tenant shall be named as an additional insured, the coverage

afforded  shall not be reduced or

diminished, and the requirements set forth in this Lease are otherwise

satisfied.

 

5.2                                 Worker’s Compensation Insurance.     Tenant shall, at its own cost and

expense, keep and maintain in full force during the Term, a policy or policies

of worker’s compensation insurance, in statutory amounts and limits, and

employer’s liability insurance with limits as follows:  bodily injury each accident in the amount of

not less than One Million Dollars ($1,000,000), bodily injury/disease each

employee in an amount not less than One Million Dollars ($1,000,000), and a

bodily injury/disease policy limit of not less than One Million Dollars

($1,000,000).

 

5.3                                 Business Interruption Insurance.     Tenant shall, at its own cost and

expense, keep and maintain in full force during the Term (a) such policy or

policies of business interruption insurance, as Tenant may deem necessary or

appropriate, insuring that the monthly installments of Rent shall be paid to

Landlord for a period of not less than one (1) year if the Premises are

destroyed or inaccessible by a risk not insured against by a standard “special

form” policy Landlord is required to maintain pursuant to the provisions of

Section 5.01 above, and (b) such other policies of insurance insuring such

other risks as Tenant may deem necessary or appropriate.

 

5.4                                 Insurance Certificates.     Tenant shall furnish to Landlord, no more

than ten (10) days prior to the earlier of Tenant’s occupancy of the Premises

(as permitted by Section 3.02) or the Term Commencement Date of this Lease and

thereafter no more than thirty (30) days prior to the expiration of each such

policy, a certificate of insurance issued by the insurance carrier of each

policy of insurance carried by Tenant pursuant hereto. Said certificates shall

expressly provide that such policies shall not be cancellable or subject to reduction

of coverage or otherwise be subject to modification except after thirty (30)

days’ prior written notice to the parties named as additional insureds in this

Article 5.  Landlord and, if Tenant is

notified in writing of the identity of such parties, its successors and

assigns, and any nominee of Landlord holding any interest in the

 

18

 

Premises, including without limitation, any

ground lessor and the holder of any fee or leasehold mortgage, shall be named

as additional insureds under each such policy of insurance maintained by Tenant

pursuant to this Lease. Landlord shall furnish to Tenant within ten (10) after

receipt of Tenant’s written request therefore, which request may be made not

more often than once a calendar year, a certificate of insurance  issued by the insurance carrier of each

policy of insurance carried by Landlord pursuant hereto.

 

5.5                                 Tenant’s Failure.      If Tenant

fails to maintain any insurance required in this Lease, Tenant shall be liable

for any loss or cost resulting from said failure.  Notwithstanding the foregoing, Landlord may at Landlord’s sole

discretion, after notice to Tenant, but shall not be required to, procure said

insurance on Tenant’s behalf and charge Tenant the premium for such

policies.  This Section 5.06 shall not

be deemed to be a waiver of any of Landlord’s rights and remedies under any

other section of this Lease.

 

5.6                                 Waiver of Subrogation.      Any policy or

policies of fire, extended coverage or similar casualty insurance, which either

party obtains in connection with the Premises, the Building or Tenant’s

personal property therein, shall, to the extent the same can be obtained

without unreasonable expense, include a clause or endorsement denying the

insurer any rights of subrogation against the other party to the extent rights

have been waived by the insured prior to the occurrence of injury or loss.  Landlord and Tenant waive any rights of

recovery against  the other for injury

or loss due to hazards covered by insurance containing such a waiver of

subrogation clause or endorsement to the extent of the injury or loss covered

thereby.

 

5.7                                 Tenant’s

Property and Fixtures.     Tenant

shall assume the risk of damage to any furniture, equipment, machinery, goods,

supplies or fixtures which are or remain the property of Tenant or as to which

Tenant retains the right of removal from the Premises.

 

19

 

5.8                                 Indemnification.

 

(a)                                  Except as specifically otherwise provided herein,

to the fullest extent permitted by law, Tenant covenants with Landlord that, Landlord, Landlord’s agents and employees

shall not be liable for any damage or liability of any kind or for any injury

to or death of persons, or damage to property of Tenant or any other person

occurring from any cause whatsoever related to the use, improvement, occupancy

or enjoyment of the Premises by Tenant or any person thereon or holding under

Tenant, unless: (i)  such damage, liability,

injury or death results from the gross negligence or willful misconduct of

Landlord or its employees, agents or contractors;  (ii)   such damage or

injury ,damage, liability, injury or death is covered by the policies of

insurance Landlord is required to maintain under this Lease, or would have been

covered by the policies of insurance Landlord is required to maintain under

this Lease if Landlord had maintained such policies of insurance; or (iii) such

damage, liability, injury or death would have been covered by the policies of

insurance Landlord is required to maintain under this Lease except for the

deductible amount of any  such policy

being  greater than Five Thousand

Dollars ($5,000) and less than Fifty Thousand Dollars ($50,000). Tenant shall

indemnify protect, defend and hold Landlord and its members, officers,

employees, agents, servants, concessionaires, licensees, contractor or invitees

(“Landlord Parties”), the Premises, Building, Project, Lot and Landlord’s related property,

harmless from and against (aa) any and all liability, fines, penalties, losses,

damages, costs and expenses, demands, causes of action, claims or judgments

(collectively, “Claims”) arising from or growing out of any injury to any

person or persons or any damage to any property as a result of any accident or

other occurrence during the Term occasioned in any way as a result of Tenant’s

or Tenant’s Parties’ negligence or willful misconduct in the use, maintenance,

occupation or operation of the Premises during the Term, (bb) all liens, claims

and demands related to the Tenant’s use of the Premises and its facilities

during the Term, or any repairs, alterations or improvements which Tenant may

make or cause to be made upon the Premises, and (cc) from and against all legal

costs and charges, including attorneys’ fees, incurred in and about any of such

matters and the defense of any action arising out of the same or in discharging

the Building, Project, Lot and Landlord’s related property or any part thereof

from any and all liens, charges or judgments which may accrue or be placed

thereon by reason of any act or omission of the Tenant; provided, however, that

Tenant shall not be required to indemnify Landlord; (x)  for any damage or injury arising as a result

of the gross negligence or willful misconduct of Landlord; (y) for any damage

or injury ,damage, liability, injury or death which is covered by the policies

of insurance Landlord is required to maintain under this Lease, or would have

been covered by the policies of insurance Landlord is required to maintain under

this Lease  if Landlord maintained such

policies of insurance; or (z) for any 

damage, liability, injury or death which would have been covered by the

policies of insurance Landlord is required to maintain under this Lease except

for the deductible amount of any such policy being  greater than Five Thousand Dollars ($5,000) and less than Fifty

Thousand Dollars ($50,000). This indemnity shall survive the termination of

this Lease for four (4) years.

 

(b)                                 Landlord shall indemnify, defend and hold

harmless Tenant and its officers, employees, agents, servants, subtenants,

concessionaires, licensees, contractor or invitees  (“Tenant Parties”) from and against all Claims for damage to

property outside the Premises: (i) to the extent that such Claims result from

the gross negligence or willful misconduct of Landlord and its agents,

employees and contractors in connection with their activities in, on or about

the Project or the Building; (ii) to the extent such Claims are is covered by

the policies of insurance Landlord is required to maintain under this Lease,

or  would have been covered by  insurance Landlord is required to obtain

under this Lease if Landlord had maintained such policies of insurance; or

(iii) to the extent such Claims would be covered by the policies of insurance

Landlord is required to maintain under this Lease except for the deductible

amount of any such policy being  greater

than Five Thousand Dollars ($5,000) and less than Fifty Thousand Dollars ($50,000); except, however,

to the extent that any such Claim (aa) is for

 

20

 

damage to Tenant’s

Improvements or Tenant’s personal 

property, fixtures, furniture and equipment in the Premises and is

covered by insurance that  Tenant is

required to obtain under this Lease (or would have been covered had  Tenant carried the insurance required under

this Lease) or (bb) results from the negligent acts, omissions or willful

misconduct of Tenant or Tenant Parties. 

This indemnity shall survive the termination of this Lease for four (4)

years.

 

5.9                                 Earthquake and Flood Insurance.     In addition to any other insurance

policies carried by Landlord in connection with the Project, Landlord may elect

to procure and maintain in full force and effect during the Term, with respect

to the Project, a policy of earthquake/volcanic action and flood and/or surface

water insurance, including rental value insurance against abatement or loss of

rent in the case of damage or loss covered under such earthquake/volcanic and

flood and/or surface water insurance, in an amount up to one hundred percent

(100%) of the full insurance replacement value (including debris removal and

demolition) of the Project improvements.

 

5.10                           Other Tenant Insurance Coverage.     Subject to the limitations set for below

in this Section 5.11,Tenant shall, at Tenant’s own expense, procure and

maintain any other and further insurance coverages that Landlord or Landlord’s

lender may reasonably require.  Subject

to the limitations set forth below this Section 5.11, if requested by Landlord,

the amounts of the foregoing insurance requirements of this Article 5 shall be

reasonably increased in accordance with industry standards or as required by

Landlord’s lender during the Term and during any Option Term. Tenant shall not

be required to obtain or maintain additional insurance coverage or increased

limits of insurance coverage under this Section 5.11 to the extent the premium

costs  of such additional insurance

coverage or increased limits of insurance coverage during the initial Term or

during any Option Term exceeds by more than Fifty Thousand Dollars ($50,000) in

any such period, the premium costs of the insurance coverage required to be

obtained and maintained by Tenant hereunder at the commencement of such period,

as applicable. Landlord shall have the right to review the levels and types of

insurance coverage required to be maintained by Landlord and Tenant under this

Lease at the commencement of each Option Term, if any, and to require modified,

additional or increased insurance coverage (including deductible limits) and to

require Tenant to maintain such additional or increased insurance  coverage during the applicable Option Term.

Landlord shall, within ten (10) days after the date Landlord receives from Tenant

an Extension Notice pursuant to Section 3.04, give Tenant written notice of any

modified or additional insurance coverage or increased limits of insurance

coverage required to be maintained by Landlord and Tenant during the applicable

Option Term.  If Tenant determines that

the  additional insurance coverage or

increased limits of insurance coverage required by Landlord to be maintained by

Landlord or Tenant during the applicable Option Term is not acceptable to

Tenant, Tenant may withdraw the Extension Notice by delivering written notice

thereof to Landlord within ten (10) days after the receipt by Tenant of

Landlord’s notice specifying the insurance overage requirements during the

applicable period.

 

6.                                       OPERATING EXPENSES

 

0.1                                 Tenant’s Share.

 

(a)                                  Tenant’s share of Building Operating Expenses

(“Tenant’s Building Share”) is hereby mutually agreed to be that percentage set

forth in the Basic Lease Information. 

Tenant shall pay as Additional Rent Tenant’s Building Share of Building

Operating Expenses for any calendar year after the Base Calendar Year to the

extent that Building Operating Expenses for such calendar year exceed the

Building Operating Expenses for the Base Calendar Year .

 

(b)                                 Tenant’s share of Project Operating Expenses

(“Tenant’s Project Share”) is hereby mutually agreed to be that percentage set

forth in the Basic Lease Information. 

Tenant shall pay as Additional Rent Tenant’s Project Share of Project

Operating Expenses for any calendar year 

after the Base Calendar Year to the extent that Project Operating

Expenses for such calendar year  exceed

the Project Operating Expenses for the Base Calendar Year.

 

(c)                                  For the purposes of this Article 6 and

determining Tenant’s Share of Building Operating Expenses and Tenant’s Share of

Project Operating Expenses, Landlord and Tenant hereby agree that the Operating

Expenses for the Base Calendar Year shall be the greater of (A) the amount of

Five Dollars and Sixty Five Cents ($5.65) per square feet of Rentable Area in

the Premises, as increased by an amount

 

21

 

determined by multiplying the amount of Five

Dollars and Sixty Five Cents ($5.65) per square feet of Rentable Area in the

Premises by the increase, if any, in the Index (as hereinafter defined) from

the date of this Lease through December 31, 2002, being the amount budgeted by

Landlord for Operating Expenses during the Base Calendar Year (the “Budgeted

Operating Expenses”); or (B) the sum of the actual Operating Expenses incurred

by Landlord during the Base Calendar Year and an amount equal to Twenty-five

Cents ($.25) per square foot of Rentable Area in the Premises (the “Operating

Expense Buffer”). Within sixty (60) days after the date of this Lease, Landlord

shall deliver to Tenant for Tenant’s approval a revised budget for Operating

Expenses for the Base Calendar Year, which shall allocate in a reasonable

manner the foregoing expenses between Building Operating Expense and Project

Operating Expenses.   Tenant shall not

unreasonably withhold or delay Tenant’s approval of Landlord’s budget.  If Tenant disapproves Landlord’s revised

budget, then Tenant shall notify Landlord of the reasons therefor and Landlord

and Tenant shall thereafter negotiate reasonably to agree upon a revised

budget.  If they are unable to so agree

within sixty (60) days after Landlord delivers its proposed revised budget to

Tenant, then the dispute shall be resolved in accordance with the Real Estate

Industry Arbitration Rules of the American Arbitration Association.  After Landlord and Tenant agree on (or

arbitration establishes) a revised budget that allocates Budgeted Operating

Expenses between Building Operating Expenses and Project Operating Expenses:

 

(i)                                     Building Operating Expenses for the Base

Calendar Year shall be the greater of (x) the amount of the Budgeted

Operating Expenses allocated to Building Operating Expenses, or (y) the

sum of the actual Building Operating Expenses incurred by Landlord during the

Base Calendar Year and an amount equal to the portion of the Operating Expense

Buffer that is allocated to the Building Operating Expenses; and

 

(ii)                                  Project Operating Expenses for the Base

Calendar Year shall be the greater of (x) the amount of the Budgeted

Operating Expenses allocated to Project Operating Expenses, or (y) the sum

of the actual Project Operating Expenses incurred by Landlord during the base

Calendar Year and an amount equal to the portion of the Operating Expense

Buffer that is allocated to the Project Operating Expenses.

 

For purposes of the foregoing, the Operating

Expense Buffer shall be allocated between Building Operating Expenses and

Project Operating Expenses in the same proportion that actual Building

Operating Expenses for the Base Calendar Year bears to actual Project Operating

Expenses for the Base Calendar Year. Tenant’s Share of Building Operating

Expenses and Tenant’s Share of Project Operating Expenses payable pursuant to

subsections (a) and (b) above shall thereafter be determined based on the

approved revised budget submitted by Landlord. For the purposes of this Section

6.01, the term “Index” shall mean the Department of Labor, Bureau of Labor

Statistics, Consumer Price Index, Subgroup “Urban Wage Earners and Clerical

Workers (Revised)”, Los Angeles - Long Beach - Anaheim - Riverside Metropolitan

Area (1982-84 = 100).

 

6.1                                 Definition of Operating Expenses.

 

(a)                                  “Building Operating Expenses” shall include

all expenses and costs of every kind and nature which Landlord shall pay or

become obligated to pay because of or in connection with the ownership and

operation of the Building, including, without limitation: (i) all

Impositions as set forth in Article 6; (ii) premiums for insurance maintained

by Landlord pursuant to Article 5; (iii) wages, salaries and related expenses

and benefits of all on-site employees, if any, and off-site employees, if any,

engaged in operation, maintenance and security of the Building, pro rated to

the extent such persons work on other buildings or properties; (iv) all

supplies, materials, tool and equipment rental used in operation of the

Building; (v) all maintenance and repair, waste disposal, janitorial, security

and service costs incurred in connection with the Building; (vi) a property

management fee equal to 3% of the Base Rent (the “Management Fee”); (vii) legal

and accounting expenses, including the cost of audits by certified public

accountants; (viii) repairs, replacements and general maintenance of the

Building (excluding those paid for by proceeds of insurance or other parties

and alterations attributable solely to tenants of the Project Building other

than Tenant); (ix) all interior and exterior maintenance, repair and

replacement costs, including, without limitation, service areas, elevators,

mechanical rooms, plumbing, heating, ventilating and air conditioning (“HVAC”)

equipment and non-structural

 

22

 

roof (all to the

extent related to the interior or exterior of the Building and not related to

replacement of the structural elements of the Building); (x) all other

reasonable operating, management and other expenses incurred by Landlord in

connection with operation of the Building; and (xi) all charges for water and

sewer services not separately metered by a tenant of the Building and used or

consumed in the Building;  (xii) any

other costs, levies or assessments resulting from statutes or regulations

promulgated by any governmental authority in connection with the use or

occupancy of the Building or the Premises; (xiii) personal property taxes

levied on or attributable to personal property used in connection with the

Building; (xiv) freight charges and transportation services attributable

to the operation and/or management of the Building; and (xv) reasonable

accounting, audit, verification and other reasonable consulting fees. Building

Operating Expenses do not include electricity and gas, if any, delivered to the

Building, as well as Tenant’s Premises, which costs are Tenant’s proportionate

or sole responsibility as further defined in Section 6.08.  Notwithstanding the provisions of this

Section 6.02, the following shall not be included within Building Operating

Expenses:

 

(ii)                                  Any depreciation

on the Building;

 

(iii)                               Costs incurred due

to Landlord’s violation of any terms or conditions of this Lease or any other

lease relating to the Building;

 

(iv)                               All principal,

interest, loan fees, and other carrying costs related to any mortgage or deed

of trust and all rental and other payable due under any ground or underlying

lease related to the Building, unless such costs are directly attributable to a

Tenant’s breach or default under this Lease;

 

(v)                                 Any compensation

paid to clerks, attendants, or other persons in commercial concessions operated

by Landlord;

 

(vi)                              Advertising and

promotional expenditures, including charitable contributions;

 

(vii)                           Any costs, fines,

or penalties incurred due to violations by Landlord of any governmental rule or

authority, this Lease or any other lease in the Building or due to Landlord’s

gross negligence or willful misconduct;

 

(viii)                        Costs of

acquisition of sculpture, paintings, or other objects of art;

 

(ix)                                Wages, salaries,

or other compensation paid to any executive employees of Landlord above the

grade of building manager;

 

(x)                                   Real estate

brokers’ leasing commissions;

 

(xi)                                Tenant

improvements or alterations to tenant spaces;

 

(xii)                             The cost of

providing any service directly to and paid directly by any tenant;

 

(xiii)                          All management or

similar fees other than the Management Fee;

 

(xiv)                         Costs associated

with:

 

(A)                              Operation of the

business of the ownership of the Building or the Project or entity that

constitutes Landlord or Landlord’s property manager, as distinguished from the

cost of Building operations, including the costs of partnership or corporate

accounting and legal matters; defending or prosecuting any lawsuit or disputes

with any mortgagee, lender, ground lessor, broker, tenant, occupant, or

prospective tenant or occupant; selling or syndicating any of Landlord’s

interest in the Building or the Project; and disputes between Landlord and

Landlord’s property manager;

 

(B)                                Landlord’s general

corporate or partnership overhead and general administrative expenses,

including the salaries of management personnel other than those who are

primarily engaged in the operation, maintenance, and repair of the Building,

except to the extent that those costs and expenses are included in the

Management Fees;

 

(xvi)                         Costs of:

 

(A)                              Initial

construction of the Building;

 

23

 

(B)                                Reconstruction or

repair of the Building pursuant to Article 10; or

 

(C)                                Modification,

alteration, or repair of any portion of Landlord’s Work or Tenant’s Improvement

Work (as defined in the Work Letter) relating to the Building due to faulty

initial construction;

 

(xvii)                      Expenses incurred

by Landlord for use of any portion of the Building or the Project to

accommodate special events such as shows, promotions, filming, displays,

photography, private events or parties, ceremonies, and advertising.  This exclusion to Building Operating

Expenses shall not include the normal expenses otherwise attributable to

providing Building services, such a lighting, heating, ventilating, and

air-conditioning in the public portions of the Building under normal Building

operations during Business Hours.  This

exclusion shall also not include programs, training, displays, or other events

for training or informing tenants and occupants of the Building on how to cope

with fire, earthquake and life-safety matters.

 

(xviii)                   Any costs or

expenses relating to any provisions of any:

 

(A)                              Development

agreement; owner participation agreement; conditions of governmental building

permits for construction of Landlord’s Work; approvals, or entitlements in

connection with the initial performance of Landlord’s Work  or Tenant’s Improvement Work relating to the

Building; conditional use permits in connection with the performance of

Landlord’s Work or Tenant’s Improvement Work relating to the Building;

easements encumbering all or part of the Building; or

 

(B)                                Other agreement

relating to the initial development, entitlement, construction, or financing of

the Building or the Project, including any initial payments or costs made in

connection with any child-care facilities, traffic demand management programs,

transportation impact mitigation fees, water conservation, sewage treatment,

recycling and housing replacement or linkage fees existing as of the date of

this Lease.

 

(xix)                           Capital

improvement or capital replacement related to the Building (“Capital Costs”),

including:

 

(A)                              Costs incurred by

Landlord that are considered to be capital improvements or capital replacements

under generally accepted accounting and management practices; and

 

(B)                                Rentals and other

related expenses incurred in leasing air-conditioning systems, elevators, and

other equipment ordinarily considered to be capital expenditures (except

equipment, other than motor vehicles, not affixed to the

Building that is used in providing janitorial or maintenance services for the

Building, temporary equipment used for repairs of the Building).

 

(xx)                              All Project

Operating Expenses and costs of every kind and nature which Landlord shall pay

or become obligated to pay because of or in connection with the ownership and

operation of the other buildings in the Project or any surrounding property and

supporting facilities.

 

(xxi)                           Legal, accounting,

audit, verification and other consulting fees relating to the ownership, as

opposed to the operation, of the Building and the Project.

 

(xxii)                        Fees or costs paid

to affiliates or parties related to Landlord to the extent such fees and costs

are in excess of the fees and costs which would have been paid to unrelated

parties for similar services or products;

 

(xxiii)                     Expenditures to

comply with Americans with Disabilities Act in effect or adopted prior to the

Term Commencement Date and expenditures relating to the remediation of

Hazardous Materials in or about the Building as of the Term Commencement Date,

including costs of reporting, and/or monitoring; and

 

24

 

(xxiv)                    Costs and expenses

of any type to the extent such costs and expenses are reimbursed to Landlord

under under any warranties or service contracts.

 

(b)                                 “Project Operating

Expenses” shall include all expenses and costs of every kind and nature which

Landlord shall pay or become obligated to pay because of or in connection with

the ownership and operation of the Project Common Areas and Parking Area,

including, without limitation: (i) all Impositions as set forth in Article 6;

(ii) premiums for insurance maintained by Landlord pursuant to Article 5; (iii)

wages, salaries and related expenses and benefits of all on-site employees, if

any, and off-site employees, if any, engaged in operation, maintenance and

security of the Project Common Areas and Parking Area, pro rated to the extent

such persons work on other buildings or properties; (iv) all supplies,

materials, tool and equipment rental used in operation of the Project Common

Areas and Parking Area; (v) all maintenance and repair, waste disposal,

janitorial, security and service costs incurred in connection with the Project

Common Areas and Parking Areas; (vi) all maintenance and repair, waste

disposal, janitorial, security and service costs incurred in connection with

the Parking Area and the Project Common Areas, including, without limitation,

locker rooms and exercise facilities; (vii) repairs, replacements and

general maintenance of the Parking Area and the Project Common Areas (excluding

those paid for by proceeds of insurance or other parties, alterations

attributable solely to tenants of the Project other than Tenant and those

related to replacement of the structural elements of the Parking Area and the

Project Common Areas); (viii) all other reasonable operating, management and

other expenses incurred by Landlord in connection with operation of the Parking

Area and the Project Common Areas; (ix) all charges for water, electrical, and

sewer services not separately metered by any tenant of the Project and used or

consumed in the Parking Area or the Project Common Areas; (x) any other costs,

levies or assessments resulting from statutes or regulations promulgated by any

governmental authority in connection with the use or occupancy of the Project;

(xi) personal property taxes levied on or attributable to personal property

used in connection with the Project Common Areas and Parking Area; (xii)

freight charges and transportation services attributable to the operation

and/or management of the Project; and (xiii) reasonable accounting, audit,

verification and other reasonable consulting fees.  Project Operating Expenses do not include electricity and gas, if

any, delivered to the Project, which costs are

the responsibility of any tenant of the Project as further defined in Section

6.08.  Notwithstanding the provisions of

this Section 6.02, the following shall not be included within Project Operating

Expenses:

 

(ii)                                  Any depreciation

on the Project Common Areas or Parking Area;

 

(iii)                               Costs incurred due

to Landlord’s violation of any terms or conditions of this Lease or any other

lease relating to the Project;

 

(iv)                               All principal,

interest, loan fees, and other carrying costs related to any mortgage or deed

of trust and all rental and other payable due under any ground or underlying

lease related to the Project, unless such costs are directly attributable to a

Tenant’s breach or default under this Lease;

 

(v)                                 Any compensation

paid to clerks, attendants, or other persons in commercial concessions operated

by Landlord;

 

(vi)                              Advertising and

promotional expenditures, including charitable contributions.

 

(vii)                           Any costs, fines,

or penalties incurred due to violations by Landlord of any governmental rule or

authority, this Lease or any other lease in the Project or due to Landlord’s

gross negligence or willful misconduct.

 

(viii)                        Costs of

acquisition of sculpture, paintings, or other objects of art.

 

(ix)                                Wages, salaries,

or other compensation paid to any executive employees of Landlord above the

grade of building manager.

 

(x)                                   Real estate

brokers’ leasing commissions.

 

(xi)                                Tenant

improvements or alterations to tenant spaces.

 

(xii)                             The cost of

providing any service directly to and paid directly by any tenant.

 

(xiii)                          All management or

similar fees other than the Management Fee.

 

(xiv)                         Costs associated

with:

 

25

 

(A)                              Operation of the

business of the ownership of the Project or the Project or entity that

constitutes Landlord or Landlord’s property manager, as distinguished from the

cost of Project operations, including the costs of partnership or corporate

accounting and legal matters; defending or prosecuting any lawsuit or dispute

with any mortgagee, lender, ground lessor, broker, tenant, occupant, or

prospective tenant or occupant; selling or syndicating any of Landlord’s

interest in the Project Common Areas or Parking Area; and disputes between

Landlord and Landlord’s property manager;

 

(B)                                Landlord’s general

corporate or partnership overhead and general administrative expenses, including

the salaries of management personnel other than those who are primarily engaged

in the operation, maintenance, and repair of the Project Common Areas or

Parking Area, except to the extent that those costs and expenses are included

in the Management Fees;

 

(xvi)                         Costs of:

 

(A)                              Initial

construction of the Project Common Areas or Parking Area;

 

(B)                                Reconstruction or

repair of the Project Common Areas or Parking Area pursuant to Article 10; or

 

(C)                                Modification,

alteration, or repair of any portion of the Project Common Areas or Parking

Area due to faulty initial construction;

 

(xvii)                      Expenses incurred

by Landlord for use of any portion of the Project or the Project Common Areas

or Parking Area to accommodate special events such as shows, promotions, filming,

displays, photography, private events or parties, ceremonies, and

advertising.  This exclusion to Project

Operating Expenses shall not include the normal expenses otherwise attributable

to providing Project services, such a lighting, heating, ventilating, and

air-conditioning in the public portions of the Project under normal Project

operations during Business Hours.  This

exclusion shall also not include programs, training, displays, or other events

for training or informing tenants and occupants of the Project on how to cope

with fire, earthquake and life-safety matters.

 

(xviii)                   Any costs or

expenses relating to any provisions of any:

 

(A)                              Development

agreement; owner participation agreement for initial contribution of Landlord’s

Work; conditions of governmental building permits for construction of

Landlord’s Work, approvals, or entitlements in connection with the initial

performance of Landlord’s Work  or

Tenant Improvement Work relating to the Project Common Areas or Parking Area;

conditional use permits in connection with the performance of Landlord’s Work

or Tenant’s Improvement Work relating to the Project Common Areas or Parking

Area; easements encumbering all or part of the Project Common Areas or Parking

Area; or

 

(B)                                Other agreement

relating to the initial development, entitlement, construction, or financing of

the Project or the Project, including any initial payments or costs made in

connection with any child-care facilities, traffic demand management programs,

transportation impact mitigation fees, water conservation, sewage treatment,

recycling and housing replacement or linkage fees existing as of the date of

this Lease.

 

(xix)                           Capital

improvement or capital replacement related to the Project Common Areas or

Parking Area (“Capital Costs”), including:

 

(A)                              Costs incurred by

Landlord that are considered to be capital improvements or capital replacements

under generally accepted accounting and management practices; and

 

26

 

(B)                                Rentals and other related

expenses incurred in leasing air-conditioning systems, elevators, and other

equipment ordinarily considered to be capital expenditures (except equipment,

other than motor vehicles, not affixed to the Project Common Areas or Parking

Area that is used in providing janitorial or maintenance services for the

Project Common Areas or Parking Area , temporary equipment used for repairs of

the Project).

 

(xx)                              All Building

Operating Expenses and costs of every kind and nature which Landlord shall pay

or become obligated to pay because of or in connection with the ownership and

operation of the other buildings in the Project or any surrounding property and

supporting facilities.

 

(xxi)                           Legal, accounting,

audit, verification and other consulting fees relating to the ownership, as

opposed to the operation, of the Project and the Project.

 

(xxii)                        Fees or costs paid

to affiliates or parties related to Landlord to the extent such fees and costs

are in excess of the fees and costs which would have been paid to unrelated

parties for similar services or products;

 

(xxiii)                     Expenditures to

comply with Americans with Disabilities Act in effect or adopted prior to the

Term Commencement Date and expenditures relating to the remediation of

Hazardous Materials in or about the Building as of the Term Commencement Date,

including costs of reporting, and/or monitoring; and

 

(xxiv)                    Costs and expenses

of any type to the extent such costs and expenses are reimbursed to Landlord

under any warranties or service contracts.

 

(c)                                  As used herein,

“Operating Expenses” shall mean Building Operating Expenses or Project

Operating Expenses, as applicable.

 

6.2                                 Proration.     Any Building

Operating Expenses or Project Operating Expenses attributable to a period which

falls only partially within the Term shall be prorated between Landlord and

Tenant so that Tenant shall pay only that proportion thereof which the part of

such period within the Term bears to the entire period.

 

6.3                                 Survival.     Any such sum

payable by Tenant which would not otherwise be due until after the date of the

termination of this Lease, shall, if the exact amount is uncertain at the time

that this Lease terminates, be paid by Tenant to Landlord upon such termination

in an amount to be reasonably determined by Landlord with an adjustment to be

made once the exact amount is known.

 

6.4                                 Estimated Payments.     Prior to the

commencement of each calendar year of the Term, Landlord shall reasonably

estimate the Additional Rent payable by Tenant pursuant to this provision and

Tenant shall pay to Landlord on the first of each month in advance, one-twelfth

(1/12) of Landlord’s estimated amount. 

After the end of each calendar year Landlord shall deliver to Tenant a

statement of Additional Rent paid by Tenant and actual Operating Expenses

incurred by Landlord during such calendar year (a “Reconciliation Statement”)

and there shall be an adjustment made to account for any difference between the

actual and the estimated Operating Expenses for the previous year. Landlord

shall calculate such adjustment within ninety (90) days after the end of the

applicable calendar year . If Tenant has overpaid the amount of Additional Rent

owing pursuant to this provision, Landlord shall refund Tenant the amount of

such overpayment to Tenant within one hundred twenty (120) days after the

expiration of the applicable calendar year. If Tenant has underpaid the amount

of Additional Rent owing pursuant to this provision, Tenant shall pay the

amount of such underpayment to Landlord, as Additional Rent, within thirty (30)

days after receipt of notice from Landlord of such underpayment.

 

6.5                                 Adjustment

 

(a)                                  Notwithstanding any provision herein to the

contrary, in the event the Project and/or Building is not fully occupied

(including because it is not yet constructed) during the Base Calendar Year or

any subsequent calendar year, an adjustment shall be made in computing

Operating Expenses for such calendar year 

so that the same shall be computed for such calendar year as though the

Building and/or Project had been fully occupied during such year.

 

27

 

(b)                                 If Landlord includes any buildings other than

the Building in the Project that were not included in the Project during the

Base Calendar Year or were part of the Project for only a portion of the Base

Calendar Year, Project Operating Expenses for the Base Calendar Year shall be

considered to be increased by the amounts that Landlord would have incurred

during the Base Calendar Year with respect to Project Operating Expenses had

these additional buildings been included in the Project during the entire Base

Calendar Year

 

6.6                                 Impositions.     ”Impositions”

shall collectively refer to all forms of: 

(i) real estate taxes, assessments, impact fees, transit charges,

housing fund assessments, assessment bonds, license fees, license taxes,

business license fees, commercial rental taxes, and improvement bonds in

connection with the Project and/or the Building; (ii) governmental taxes,

levies, fees and charges imposed by any authority having the direct power to

tax, including but not limited to any city, county, state or federal government

or any school, agricultural, lighting, drainage or other improvement or special

assessment district thereof, and all other taxes relating to any legal or

equitable interest in the Premises, Project and/or the Building; (iii) taxes

which may be levied in lieu of real estate taxes; and (iv) other

governmental charges (including, but not limited to, charges for traffic

facilities improvements, water service studies and improvements, and fire

service studies and improvements) or amounts necessary to be expended because

of governmental orders.  “Impositions”

shall include all such governmental obligations, whether general or special,

ordinary or extraordinary, unforeseen as well as foreseen, of any kind and

nature for public improvements, services, benefits, or any other purpose which

are assessed, levied, confirmed, imposed or become a lien upon the Premises,

Project and/or Building or become payable during the Term.

 

(a)                                  Installment

Election.  In the case of any Impositions

which may be evidenced by improvement or other bonds or which may be paid in

annual or other periodic installments, Landlord shall cause such bonds to be

issued or cause such assessment to be paid in installments over the maximum

period permitted by law.

 

(b)                                 Limitation.  Nothing contained in this Lease shall

require Tenant to pay any franchise, estate, inheritance or succession transfer

tax of Landlord, or any income, profits or revenue tax or charge, upon the net

income of Landlord from all sources; provided, however, that if at any time

during the Term under the laws of the United States Government or the State of

California, or any political subdivision thereof, a tax or excise on rent, or

any other tax however described, is levied or assessed by any such political

body against Landlord on account of Rent, or a portion thereof, Tenant shall

pay one hundred percent (100%) of any said tax or excise as Additional Rent.

 

(c)                                  Personal Property

Taxes.  Tenant shall pay or cause to

be paid, prior to delinquency, any and all taxes and assessments levied upon

all trade fixtures, inventories and other personal property placed in and upon

the Premises by Tenant.

 

(d)                                 Impositions on

Tenant Improvements in Excess of Standard Allowance. Tenant  shall, within fifteen (15) days after

receipt by Tenant of an invoice therefor, reimburse Landlord, and not as a part

of Operating Expense, any and all Impositions levied upon the Tenant’s

Improvements in the Premises  to the

extent the cost of such tenant improvements exceed Thirty Five Dollars ($35)

times the number of square feet of Usable Area in the Premises.

 

6.7                                 Services and Utilities.

 

(a)                                  Tenant shall contract directly with the

appropriate utility company for the supply of electricity to the Premises,

which shall be separately metered. 

Landlord shall use its best reasonable efforts to provide HVAC services

during Business Hours.  Landlord shall

also use its best reasonable efforts to provide electrical services to the

Premises with distribution to each floor of the Premises in accordance with

Landlord’s Plans.

 

(b)                                 Landlord, in accordance with Landlord’s

Plans, shall provide facilities for delivery of city water from the regular

Building outlets for drinking, lavatory and toilet purposes.  Tenant shall have the right to add to or

access the water systems for the Building and to provide supplemental water

systems to service the Premises in accordance with Tenant’s Improvement Plans

approved by Landlord.

 

28

 

(c)                                  Landlord shall provide heating, ventilation

and air conditioning (“HVAC”) in accordance with the Project Documents (as

defined in the Work Letter).  Landlord

shall, at all times during the Term, maintain in effect a full service

maintenance contract on the HVAC system in the Building with a reputable HVAC

contractor and a full service maintenance contract on the elevators in the

Building with a reputable elevator maintenance contractor. Landlord shall use

reasonable efforts to have included in such contracts a provision requiring the

contractor to respond to any applicable service failure within two (2) hours of

notification of any such service failure; provided, however, Landlord

shall not be deemed to be in default of the foregoing obligation if such

response time is not generally available on commercially reasonably terms and

conditions in San Diego County.

 

(d)                                 Landlord shall

operate those portions of the Building that Landlord is required to maintain

under Section 7.02 and all portions of the Project Common Areas and the Parking

Area in accordance with a standard of operation commensurate with the general

standard of operation of Class “A” office buildings located in San Diego

County.

 

(e)                                  Landlord shall

provide during the Business Hours, as a Project Operating Expense, utilities

and maintenance to the Project Common Areas and Parking Area.

 

(f)                                    Landlord shall

provide janitorial services in and about the Premises, the  Building Common Areas and the restrooms in

the Project Common Areas serving the Premises on Mondays through Fridays,

except on Holidays.  Landlord shall also

provide window-washing services for the Building in accordance with that

provided to comparable buildings but in no event less than two (2) times per

year.

 

(g)                                 Landlord shall not

be liable for any failure or interruption of any utility or service (a “Service

Failure”), and Tenant shall not be entitled to any reduction or abatement of

Rent on account of any such failure or interruption: (i) unless such failure or

interruption is shown by Tenant to be directly attributable to the gross

negligence or intentional acts of Landlord, its agents, employees or

contractors; or (b) unless Landlord fails to maintain in effect during the Term

a full service maintenance contract on the Building HVAC system and elevators

pursuant to Section 6.08(c) above. In no event shall the foregoing limitation

on Landlord’s liability provided above limit the liability of Landlord

resulting from the failure of Landlord to maintain the insurance policies

Landlord is required to maintain under this Lease, nor to limit the liability

of Landlord to the extent of any deductible amount under any such policy is

greater than Five Thousand Dollars ($5,000) but less than Fifty Thousand

Dollars ($50,000). In the event of any such interruption or failure of any

services or utilities provided in this Lease resulting from the gross

negligence or intentional acts of Landlord, Landlord’s agents, employees  or contractors, Tenant’s sole remedy shall

be the equitable abatement of Base Rent for the duration of the interruption or

failure of such Service Failure, which abatement shall not commence until

Tenant has first provided written notice to Landlord and given Landlord ten (10

) days to cure such interruption or failure; provided, however, Landlord shall

diligently act to cure such interruption during such ten (10) day period.  If a Service Failure creates imminent danger

to human safety or property, Tenant shall be entitled to cure the Service

Failure and Landlord shall reimburse Tenant for the costs incurred by Tenant in

curing such Service Failure.

 

6.8                                 Special Services.

 

(a)                                  Additional Services. In the event Landlord provides any

utilities or services to Tenant requested by Tenant beyond the standard

services set forth in Section 6.08 of this Lease, Tenant shall pay Landlord for

such special services as Additional Rent.

 

(b)                                 Utility Consumption.    As part of the

Improvements of the Work Letter attached hereto as Exhibit D, Landlord shall

install an HVAC override timer with an hourly counter attachment on each floor

of the Premises. Tenant’s activating said override timer to obtain HVAC

services after Normal Operating Hours (as set forth in the Rules and

Regulations attached hereto as Exhibit E) will engage the Building’s package,

condensing and fan coil units. Each quarter, Landlord shall determine the

operating hours that Tenant has obtained HVAC services in excess of the

Building’s Normal Operating Hours (“Excess Operating Hours”).  The total number of Excess Operating Hours

derived will be multiplied by an hourly excess operating hours usage rate (the”

Hourly Excess Operating Hours Usage Rate”) 

and such resulting amount will be billed by Landlord to Tenant quarterly

and shall be paid by Tenant to Landlord as Additional Rent within thirty (30)

days after receipt by Tenant of Landlord’s invoice therefore. Such costs paid

by Tenant  for Excess Operating

 

29

 

Hours shall not be

included in Operating Expenses. Initially, the Hourly Excess Operating Hours

Usage Rate shall be Thirty Dollars ($30.00) per Excess Operating Hour. The

Hourly Excess Operating Hours Usage Rate may be increased annually by Landlord

to reflect increases in costs resulting 

from such excess HVAC utilities usage, as well as the increased

maintenance and repair costs and accelerated reduction of the useful life of

the equipment associated with such Excess Operating Hours.  Any dispute regarding determination of this

actual after-hours costs shall be resolved by a mutually-acceptable,

independent HVAC engineer.

 

6.9                                 Tenant’s Right to Audit Operating Expenses. Landlord agrees to retain the books and records substantiating the

Operating Expenses incurred in each calendar year for a period of at least two

(2) years  after the later of delivery

of the Reconciliation Statement or after completion of any dispute resolution

process applicable to such Reconciliation Statement for that calendar year,

except for records substantiating Operating Expenses for the Base Calendar

Year, which shall be maintained for two (2) years after the termination of the

Term of this Lease. Tenant, or a certified public accountant designated by

Tenant, shall have the right one time per calendar year at Tenant’s expense,

during Landlord’s normal business hours and upon reasonable prior written

notice, to inspect and audit at Landlord’s office, or other location reasonably

designated by Landlord in the County of San Diego, Landlord’s books and records

relating to Operating Expenses. Any discrepancy shall be promptly corrected by

a payment of any shortfall to Landlord by Tenant, or by payment of any

overpayment to Tenant by Landlord, within thirty (30) days after the applicable

audit. In the event Tenant does not contest a statement of Operating Expense

Increases within two (2) years after delivery of the Reconciliation Statement

for the calendar year in which such Operating Expenses are paid, such statement

shall become binding and conclusive on both Landlord and Tenant.  Any information gained from such inspection

or audit shall be confidential and shall not be disclosed other than to carry

out the purposes hereof. If it is determined from Tenant’s audit of such

Operating Expenses that Tenant was overcharged by more than ten percent (10%) ,

such overcharge shall entitle Tenant to credit against its next payment of

Rent, the amount of the overcharge and the reasonable costs of independent

auditors associated with the audit (and, if such credit occurs following the

expiration of the Term, Landlord shall promptly pay the amount of such credit

to Tenant). If the audit determines that the Tenant was overcharged less than

ten percent (10%) , such overcharge shall entitle Tenant to credit against its

next payment of Rent the amount of the overcharge. If the audit shall determine

that Tenant was undercharged for the Additional Rent, Tenant shall promptly pay

the amount of such undercharge to Landlord and Tenant shall pay for all

reasonable costs of independent auditors associated with the audit, which

amount paid by Tenant shall not be included in Operating Expenses.

Notwithstanding anything to the contrary herein, any Operating Expenses

attributable to a period which falls only partially within the term of this Lease

shall be prorated between Landlord and Tenant so that Tenant shall pay only

that portion thereof which the part of such period within the Lease term bears

to the entire period.

 

7.                                       REPAIRS AND MAINTENANCE

 

0.1                                 Tenant Repairs and Maintenance.     Tenant shall, at Tenant’s own expense,

maintain the interior of the Premises in a clean, sanitary and safe condition

and keep and maintain the integrity and quality of the non-structural portions

of the Premises, including, without limitation, all non-structural walls,

ceilings, lights, fixtures, and floor coverings thereof (excluding, however,

the exterior portions of the Building and the structural portions of the

Building to be maintained by Landlord pursuant to Section 7.02 below) in good

repair (reasonable wear and tear excepted). 

Tenant shall be responsible for the cost of any repairs due to damage

caused by Tenant’s negligence or willful misconduct. Notwithstanding the

foregoing, Landlord, and not Tenant, shall be responsible for the performance

of repair and maintenance of those items described in Section 7.02 below.

Tenant waives the right to make repairs at Landlord’s expense under any law,

statute or ordinance now or hereafter in effect (including the provisions of

California Civil Code Section 1942 and any successive sections or statutes of a

similar nature), provided, however, the foregoing shall not prohibit Tenant

from making repairs to the HVAC system in the Building if Landlord fails to

make such repairs within seven (7) days after written notice from Tenant (or,

if more than seven (7) days is reasonably required to complete such repairs,

Landlord has commenced such service during the seven (7) day period and is

diligently pursuing same to completion. Tenant waives all rights to recover any

losses or damages (including interference with or injury to Tenant’s business)

resulting from Landlord’s performing or failure to perform any such repairs or

maintenance, except to the extent of Landlord’s gross negligence or willful

misconduct; it being expressly understood and agreed that Tenant shall be

solely responsible for and look solely to its insurance for any such damage and

losses, except: (a) if caused by Landlord’s gross negligence or willful

misconduct; (b) if such

 

30

 

damage or loss is covered by the policies of

insurance Landlord is required to maintain under this Lease, or would have been

covered by the policies of insurance Landlord is required to maintain under

this Lease if Landlord had maintained such policies of insurance; or (c) such

damage, liability, injury or death would have been covered by the policies of

insurance Landlord is required to maintain under this Lease except for the

deductible amount of any of such policy being 

greater than Five Thousand Dollars ($5,000) and less than Fifty Thousand

Dollars ($50,000).

 

7.1                                 Landlord Repairs and Maintenance.     Landlord shall, as part of the Operating

Expenses, repair and maintain in a clean, sanitary and safe condition, and keep

in good repair  (reasonable wear and

tear excepted) and maintain the integrity and quality of:

(a)                                  The structural portions of the Premises;

 

(b)                                 The “Building Shell” (as defined in the Work

Letter);

 

(c)                                  The exterior portions of the Building and the

Project;

 

(d)                                 All Project Common Areas and Parking Area

described in Section 1.03; and

 

(e)                                  Any defects in the initial construction of

Landlord’s Work that exists as of the Term Commencement Date.

 

7.2                                 Inspection of Premises.     Landlord, at

reasonable times, with twenty-four (24) hour notice except in emergencies when

no notice shall be required, may enter the Premises to complete construction

undertaken by Landlord on the Premises or Building, to inspect, improve, clean

or repair the same, to inspect the performance by Tenant of the terms and

conditions hereof and to affix reasonable signs and displays, show the Premises

to prospective purchasers, tenants and lenders and for all other purposes as

Landlord shall reasonably deem necessary; provided, that Landlord shall show the

Premises to prospective tenants only during the last ten (10) months of the

Term.

 

7.3                                 Liens.     Tenant shall

promptly pay and discharge all claims for work or labor done, supplies

furnished or services rendered at the request of Tenant and shall make good

faith efforts to keep the Premises, the Common Areas, and Building free and

clear of all mechanics’ and materialmen’s liens in connection therewith and

shall discharge of record any such liens or post adequate security or bond

within five (5) days of written notice thereof.  Landlord shall have the right to post or keep posted on the

Premises, or in the immediate vicinity thereof, any notices of

non-responsibility for any construction, alteration or repair of the Premises

by Tenant.  If any such lien is filed,

Landlord may, after Landlord has first provided notice to Tenant and given

Tenant seven (7) days to remove such lien, but shall not be required to, take

such action or pay such amount as may be necessary to remove such lien; and,

Tenant shall pay to Landlord as Additional Rent any such amounts expended by

Landlord within five (5) days after notice is received from Landlord of the

amount expended by Landlord.

 

8.                                       FIXTURES, PERSONAL PROPERTY AND

ALTERATIONS

 

0.1                                 Fixtures and Personal Property.     Tenant, at

Tenant’s expense, may install any necessary trade fixtures, equipment and

furniture in the Premises; provided, that such items are installed and are

removable without material damage to the structure or improvements of the

Building.  Landlord reserves the right

to approve or disapprove of curtains, draperies, shades, paint or other

interior improvements visible from outside the Premises on wholly aesthetic

grounds, provided Landlord exercises such discretion in a manner consistent

with all buildings in the Project.  Such

improvements described in the previous sentence must be submitted for

Landlord’s written approval prior to installation, or Landlord may remove or

replace such items at Tenant’s sole expense. 

Said trade fixtures, equipment and furniture shall remain Tenant’s

property and shall be removed by Tenant upon expiration of the Term, or earlier

termination of this Lease. Tenant shall repair, at Tenant’s sole expense, all

damage caused by the installation or removal of trade fixtures, equipment,

furniture or temporary improvements.  If

Tenant fails to remove the foregoing items within ten (10) days of the

termination of this Lease, Landlord may remove any or all of them from the

Premises and cause them to be stored or, after thirty (30) days written notice

to Tenant, sold in accordance with applicable law, all at Tenant’s expense.

 

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8.1                                 Alterations.     Except as

provided in Section 8.04, Tenant shall not make or allow to be made any

alterations, additions or improvements to the Premises, either at the inception

of this Lease or subsequently during the Term, without obtaining the prior

written consent of Landlord, which consent shall not be unreasonably withheld

or delayed.  Tenant shall deliver to

Landlord full and complete plans and specifications of all such alterations,

additions or improvements, and no such work shall be commenced by Tenant until

Landlord has given its written approval thereof.  Landlord does not expressly or implicitly covenant or warrant

that any plans or specifications submitted by Tenant are safe or that the same

comply with any applicable laws, lawful ordinances, etc.  Further, Tenant shall indemnify and hold

Landlord harmless from any loss, cost or expense, including attorneys’ fees and

costs, incurred by Landlord as a result of any defects in design, materials or

workmanship resulting from Tenant’s alterations, additions or improvements to

the Premises.  All repairs, alterations,

additions, and restoration by Tenant hereinafter required or permitted shall be

done in a good and workmanlike manner and in compliance with all applicable

laws and applicable ordinances, by-laws, regulations and orders of any federal,

state, county, municipal or other public authority and of the insurers of the

Building.  Tenant shall reimburse

Landlord for Landlord’s reasonable charges for reviewing and approving or

disapproving plans and specifications for any alterations proposed by Tenant.  Tenant shall also reimburse Landlord for the

costs of any increased insurance premiums incurred by Landlord to include such

alterations in the Landlord’s special form insurance coverage requirements set

forth in Section 5.01, provided, however, that Landlord shall be required to include the

Tenant’s alterations under Landlord’s special form insurance only to the extent

such insurance is actually obtained by Landlord and such alterations are

insurable under Landlord’s insurance. 

If such Tenant alterations are not or cannot be included in the coverage

of Landlord’s insurance, Tenant shall insure the alterations under Tenant’s all

risk insurance policy or policies as set forth in Section 5.01.  Tenant shall require that any contractors

used by Tenant carry a comprehensive liability insurance policy covering bodily

injury in the amounts of One Million Dollars ($1,000,000) per person and Two

Million Dollars ($2,000,000) per occurrence(Two Million Dollars ($2,000,000)

per person and Three Million Dollars ($3,000,000) per occurrence if the cost of

the alteration, addition or improvement exceeds Two Hundred Thousand Dollars

($200,000) and covering property damage in the amount of One Million Dollars

($1,000,000). The amounts of the foregoing insurance requirements shall be

increased in accordance with industry standards every five (5) years during the

Term, and Landlord and Tenant agree to execute an amendment to this Lease to

such effect. Landlord may require proof of such insurance prior to commencement

of any work on the Premises.  Tenant

shall provide to Landlord a copy of “as-built” plans for any alterations,

additions or improvements constructed by Tenant.

 

8.2                                 Removal of Alterations.     All

alterations, additions and improvements shall remain the property of Tenant

until termination of this Lease, at which time they shall, unless removed by

Tenant within ten (10) days after termination of this Lease, be and become the

property of Landlord.

 

8.3                                 Minor Alterations.     The original

Tenant shall be permitted to make minor alterations, additions or improvements

to the interior improvements of the Premises (“Minor Alterations”) without

Landlord’s prior written consent, but only if:

 

(a)                                  At least fifteen (15) days before

construction has begun, Tenant gives Landlord written notice of the nature and

extent of the intended Minor Alterations, specifying the contractor that Tenant

intends to use, a cost estimate of the proposed Minor Alterations and copies of

all contracts relating thereto (those contracts not available at the time of

Tenant’s notice shall be delivered to Landlord when they become available but

in all events prior to commencement of construction of the Minor Alterations);

 

(b)                                 The proposed alterations, additions or

improvements do not affect the Building Systems, the exterior appearance or the

structural components of the Building;

 

(c)                                  The proposed Minor Alterations do not involve

the installation of stairways, vaults or other equipment or improvements that

would cost more to move or remove than ordinary improvements for general office

use;

 

(d)                                 The proposed Minor Alterations, together with

all other Minor Alterations made without Landlord’s consent under this Section

8.04 within forty-eight (48) months of the proposed alteration, addition or

improvement, do not cost more than $100,000 in the aggregate; and

 

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(e)                                  Tenant provides to Landlord within five (5)

days of Landlord’s request such further information as Landlord may reasonably

request regarding the proposed Minor Alterations.

 

Within twenty (20) days of completion of the

Minor Improvements, Tenant shall deliver to Landlord a copy of as-built

plans for such Minor Alterations, is such Minor Alterations are of a type for

which as-built plans are reasonably available.

 

9.                                       USE

AND COMPLIANCE WITH LAWS

 

0.1                                 General Use and Compliance with Laws.     Tenant shall

only use the Premises for the Permitted Uses specified in the Basic Lease

Information and for no other use without the prior written consent of

Landlord.  Tenant shall, at Tenant’s

sole cost and expense, use the Premises, Project, Building, Project Common

Areas and Parking Area in compliance with all of the requirements of municipal,

county, state, federal and other applicable governmental authorities now in

force, or which may hereafter be in force, pertaining to the Premises, Project,

Building and Parking Area and secure any necessary permits for Tenant’s

particular use of the Premises and shall faithfully observe, in the use of the

Premises, Project, Building, Project Common Areas and Parking Area, all

municipal, county, state, federal and other applicable governmental entities’

requirements which are now in force, or which may hereafter be in force.  Tenant, in Tenant’s use and occupancy of the

Premises, shall not subject the Premises to any use which would tend to damage

any portion thereof or which shall in any way increase the existing rate of any

insurance on the Building or any portion thereof or cause any cancellation of

any insurance policy covering the Building or portion thereof.  Tenant shall not do or permit to be done

anything which would obstruct or interfere with the rights of or injure other

tenants or occupants of the Project.

 

9.1                                 Signs.     Tenant shall

not install any sign on the Premises, Building or Project unless Tenant

receives prior written approval from Landlord for such sign; provided, however,

that Tenant may, if Tenant or an Affiliate Transferee (as defined in Section

13.01) leases sixty five (65%) or more of the Building, install one (1)

identifying logo sign on the top west fascia of the Building and an identifying

sign on a non-exclusive basis, on a monument sign on the Project and in a

location reasonably acceptable to Tenant and Landlord, so long as such signs

conform to all laws, statutes, regulations, restrictions and zoning, is designed by Wieber Nelson

Design and is first approved by all required governmental agencies and by

Landlord, which Landlord approval shall not be unreasonably withheld. Tenant

shall also have the right  to a listing

on any  interior floor lobby signage for

the Building in accordance with the Work Letter, which signage shall be

designed by Wieber Nelson Design.  Such

directory signage shall be used exclusively for the display and location of

Tenant  and no advertising matter.  Any sign placed by Tenant on the Premises,

Project or Building shall be installed at Tenant’s sole cost and expense, and

shall contain only Tenant’s name, or the name of any affiliate of Tenant

actually occupying the Premises. Tenant shall remove any such sign upon

termination of this Lease and shall return the affected portion of the Premises

to their condition prior to the placement or erection of said sign.

 

9.2                                 Parking Access.     In addition to

the general obligation of Tenant to comply with laws and without limitation thereof,

Landlord shall not be liable to Tenant nor shall this Lease be affected if any

parking privileges appurtenant to the Premises are impaired by reason of any

moratorium, initiative, referendum, statute, regulation, or other governmental

decree or action which could in any manner prevent or limit the parking rights

of Tenant hereunder.  Any governmental

charges or surcharges or other monetary obligations imposed relative to parking

rights with respect to the Premises, Project and Building shall be considered

as Impositions and shall be payable by Tenant under the provisions of Article 6

hereinabove.  Tenant hereby acknowledges

that Tenant shall not use in excess of Tenant’s pro rata share of the Project’s

total parking spaces.

 

9.3                                 Floor Load.     Tenant shall

not place a load upon any floor of the Premises which exceeds the load per

square foot which such floor is designed to carry and which is then allowed by

law.

 

9.4                                 Deliveries.     All deliveries

to and from the Premises shall be made in such a manner and during such time

periods reasonably specified by Landlord so as to cause the minimum amount of

interference with the business of other tenants; provided, however, deliveries

to Tenant’s loading dock identified on Tenant’s Plans, if any, may be made at

any time..

 

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10.                                 DAMAGE AND DESTRUCTION

 

0.1                                 Reconstruction.     If (a) the

Premises (including the Tenant’s Improvements) are damaged or destroyed,

(b) any Common Areas of the Project providing access to the Premises are

damaged to the extent that Tenant does not have reasonable access to the

Premises, or (c) damage occurs to the Building or the Common Areas such

that Tenant does not have use of the parking entitlements described in Section

1.06 or such that the Building is no longer provided with HVAC, elevator

service, running water, sewage, electrical service or security systems, in each

case, during the Term by any cause not attributable to Tenant, its agents or

employees, (each such event, a “Casualty”), then, unless Landlord or Tenant

terminates this Lease pursuant to Section 5.04 below, or Landlord terminates

this Lease pursuant to Section 5.05 below, Landlord shall promptly and

diligently reconstruct the Premises to the extent necessary to restore Landlord’s

Work and Tenant’s Improvement Work in the Premises as described in Exhibit D,

and Tenant shall be obligated for the restoration of all of the items specified

as Tenant’s Work in said Exhibit D in the event of such reconstruction, as well

as Tenant’s other leasehold improvements (but not with respect to those

improvements owned by Landlord), trade fixtures and other personal property on

the Premises. Landlord shall use commercially reasonable efforts to prosecute

all claims for insurance proceeds to which Landlord may be entitled pursuant to

the policies of insurance maintained by Landlord pursuant to Section 5.01.

 

10.1                           Rent Abatement.     If any portion

of the Premises is damaged or destroyed during the Term to the extent that such

portion is rendered unusable by Tenant, it is agreed that, except as

hereinafter provided, Tenant shall look solely to Tenant’s business

interruption insurance for any damages or losses arising from substantial

interference with the operation of Tenant’s business by reason of such damage

or destruction. Rent shall abate during the first twelve (12) months following

the date of such damage or destruction to the extent of any proceeds received

by Landlord from rental abatement insurance maintained by Landlord pursuant to

Section 5.01 hereof. Rent shall be abated proportionately.

 

10.2                           Repair Period Notice.     Landlord shall,

within sixty (60) days after the date of the Casualty, provide written notice

to Tenant indicating the anticipated period for repairing the Casualty (the

“Repair Period Notice”).  The Repair

Period Notice shall be accompanied by a certified statement executed by the

contractor retained by Landlord to complete the repairs or, if Landlord has not

retained a contractor, a licensed contractor not affiliated with Landlord,

certifying the contractor’s opinion about the anticipated period for repairing

the Casualty.  The Repair Period Notice

shall also state, if applicable, Landlord’s election either to repair or to

terminate the Lease under Section 10.01.

 

10.3                           Excessive Damage or Destruction/Option to Terminate.     If the Repair

Period Notice states that Landlord determines that the Building or Common Areas

cannot, with reasonable diligence, be fully repaired or restored by Landlord

within two hundred seventy (270) days after the date of the damage or

destruction, Landlord or Tenant may terminate this Lease effective as of the

date of the  damage or destruction by

delivery to the other party of written notice thereof within ten (10) days of

the Repair Period Notice.  Landlord’s

determination, pursuant to the Repair Period Notice, shall be binding upon

Tenant.  If Landlord states in the

Repair Period Notice that the Building can be fully repaired or restored within

the two hundred seventy (270) day period, or if Landlord states in the Repair

Period Notice that such repair or restoration cannot be made within said

period, but neither Landlord nor Tenant elects to terminate within ten (10)

days of the date of the Repair Period Notice, this Lease shall remain in full

force and effect and Landlord shall diligently repair and restore the damage as

soon as reasonably possible. Notwithstanding the foregoing, if the Repair Period Notice states that

Landlord determines that the Building can be fully repaired or restored within

the two hundred seventy (270) day period, but the Building has not been fully

repaired or restored within three hundred sixty (360) days after the date of

the damage or destruction then Landlord, at its option , may either (a)

terminate this Lease; or (b) abate the rental due under this Lease one (1) day

for each day of delay in repairing or restoring the Building, such rental to be

abated pro-rata based on the portion of the Premises not available for

occupancy by Tenant.

 

10.4                           Uninsured Casualties and Other Conditions/Option to

Terminate.     Notwithstanding

anything contained herein to the contrary, (a) in the event of damage to or

destruction of all or any portion of the Building, which is not fully covered

by the insurance proceeds received by Landlord under the insurance policies

required under Article 5 hereinabove (provided that any deductible shall be

ignored in determining whether any damage or destruction is covered), Landlord

may terminate this Lease effective as of the date of the damage or destruction

by written notice to Tenant, given within thirty (30) days after the date of

notice to Landlord that said damage or destruction is not so covered; (b) in

the event of damage to or destruction of all

 

34

 

or any portion of

the Building, which is due to the acts or omissions of Tenant, its agents,

employees or contractors, Landlord may terminate this Lease effective as of the

date of the damage or destruction by written notice to Tenant, given within

thirty (30) days after the date of a Landlord’s determination that said damage

or destruction was due to the acts or omissions of Tenant, its agents,

employees or contractors; or (c) in the event sufficient proceeds of insurance

maintained by Landlord pursuant to the terms of this Lease are unavailable to

Landlord to reconstruct and restore the Premises in the event of damage to or

destruction of all or any portion of the Building because they have been

applied by any lender against payment of an existing loan on the Project or

Building, Landlord may terminate this Lease effective as of the date of the

damage or destruction by written notice to Tenant, given within forty-five (45)

days after the date of notice to Landlord that any such lender intends to apply

any of the insurance proceeds against payment of an existing loan on the

Project or Building. If Landlord does not elect to terminate this Lease, the

Lease shall remain in full force and effect and Landlord shall promptly

commence reconstruction and restoration of Landlord’s Work and Tenant’s

Improvement Work in the Premises as described in Exhibit D and shall diligently

repair or rebuild Landlord’s Work and Tenant’s Improvement Work to

substantially the condition in which it existed immediately prior to such

damage or destruction.

 

10.5                           Waiver.     With respect to

any destruction which Landlord is obligated to repair or may elect to repair

under the terms of this Article 10, Tenant hereby waives all rights to

terminate this Lease pursuant to rights otherwise presently or hereafter

accorded by law to tenants, except as expressly otherwise provided herein.

 

11.                                 EMINENT DOMAIN

 

0.1                                 Total Condemnation.     If the whole of

the Premises is acquired or condemned by eminent domain, inversely condemned or

sold in lieu of condemnation, for any public or quasi-public use or purpose

(“Condemned”), then the Term shall terminate as of the date of title vesting in

such proceeding, and Rent shall be adjusted as of the date of such termination.  Tenant shall immediately notify Landlord of

any such occurrence.

 

11.1                           Partial Condemnation.     If any part of

the Premises is partially Condemned, and such partial condemnation renders the

Premises unusable for the business of the Tenant, as reasonably determined; or

in the event a substantial portion of the Building, the Parking Area or the

Project Common Areas is Condemned, and such partial condemnation renders the

Premises unusable for the business of the Tenant, as reasonably determined,

then the Term shall terminate as of the date of title vesting in such

proceeding and Rent shall be adjusted to the date of termination.  If such condemnation is not sufficiently

extensive to render the Premises unusable for the business of Tenant, as reasonably

determined, or less than a substantial portion of the Building, the Parking

Area or the Project Common Areas is Condemned, then Landlord shall, at

Landlord’s cost, promptly restore the Premises, the  Building, the Parking Area or the Project Common Areas, as

applicable, to a condition comparable to its condition immediately prior to

such condemnation less the portion thereof lost in such condemnation, and this

Lease shall continue in full force and effect except that after the date of

such title vesting the Base Rent and Tenant’s Share of Operating Expenses shall

be appropriately reduced as reasonably determined by Landlord.

 

11.2                           Landlord’s Award.     If the Premises

are wholly or partially Condemned, then, subject to the provision of Section

11.04 Landlord shall be entitled to the entire award paid for such

condemnation, and Tenant waives any right or claim to any part thereof from

Landlord or the condemning authority.

 

11.3                           Tenant’s Award.     Tenant shall

have the right to claim and recover from the condemning authority, but not from

Landlord, such compensation as may be separately awarded or recoverable by

Tenant in Tenant’s own right on account of any and all costs or loss incurred

by Tenant, including, without limitation, removing Tenant’s merchandise,

furniture, fixtures, leasehold improvements and equipment to a new location.

 

11.4                           Temporary Condemnation.     If the whole or

any part of the Premises shall be Condemned for any temporary public or

quasi-public use or purpose of less than one hundred twenty (120) days, this

Lease shall remain in effect and Tenant shall be entitled to receive for itself

such portion or portions of any award made for such use with respect to the

period of the taking which is within the Term. 

If a temporary condemnation remains in force at the expiration or

earlier termination of this Lease, Tenant shall pay to Landlord a sum equal to

the reasonable cost of performing any obligations required of Tenant by this

Lease with respect to the surrender of the Premises, including without

limitation, repairs and maintenance, and upon such payment

 

35

 

such obligations shall be deemed

satisfied.  If a temporary condemnation

is for an established period which extends beyond the Term, the Lease shall

terminate as of the date of occupancy by the condemning authority, and the

damages shall be as provided in Sections 11.03 and 11.04  hereinabove and Rent shall be adjusted to

the date of occupancy.

 

11.5                           Notice and Execution.     Landlord shall,

immediately upon service of process in connection with any condemnation or

potential condemnation, give Tenant notice in writing thereof.  Tenant shall immediately execute and deliver

to the Landlord all instruments that may be required to effectuate the

provisions of this Article.

 

12.                                 DEFAULT

 

0.1                                 Events of Default.     The occurrence

of any of the following events shall constitute an “Event of Default” on the

part of Tenant:

 

(a)                                  Payment.  Failure to pay any

installment of Base Rent, Additional Rent or other monies due and payable hereunder

upon the date when said payment is due, continuing for a period of five (5)

days after written notice by Landlord to Tenant.

 

(b)                                 Performance.  Default in the performance of

any of Tenant’s covenants, agreements or obligations hereunder (except default

in the payment of Rent, Additional Rent or other monies), where such failure is

curable and continues uncured for ten (10) days after notice by Landlord to

Tenant, provided that if the nature of the default cannot be reasonably cured

within ten (10) days, Tenant shall not be deemed in default if it shall

commence curing the default within such ten (10) day period and diligently

prosecutes same to completion;

 

(c)                                  Assignment.  A general assignment by

Tenant for the benefit of creditors or any Unauthorized Assignment as defined

below in Article 13;

 

(d)                                 Bankruptcy.  The filing of a voluntary

petition by Tenant, or the filing of an involuntary petition by any of Tenant’s

creditors seeking the rehabilitation, liquidation or reorganization of Tenant

under any law relating to bankruptcy, insolvency or other relief of debtors;

 

(e)                                  Receivership.  The

appointment of a receiver or other custodian to take possession of

substantially all of Tenant’s assets or of this leasehold;

 

(f)                                    Insolvency, Dissolution, Etc.  Tenant

shall become insolvent or unable to pay its debts, or shall fail generally to

pay its debts as they become due; or any court shall enter a decree or order

directing the winding up or liquidation of Tenant or of substantially all of

its assets; or Tenant shall take any action toward the dissolution or winding

up of its affairs or the cessation or suspension of its use of the Premises;

 

(g)                                 Attachment.  Attachment, execution or

other judicial seizure of substantially all of Tenant’s assets or this leasehold;

or

 

(h)                                 Hazardous Materials Release.  Any

on-site or off-site material contamination of any portion of the Project or

violation of any Health and Safety Laws as set forth in Article 14; or any

failure to remedy any on-site or off-site contamination, whether material or

not, within three (3) days of Tenant having notice of such contamination, or if

more than three (3) days is reasonably required to remedy such contamination,

any failure of Tenant to commence to remedy such contamination within such three

(3) day period and to diligently prosecute such remedy to completion.

 

12.1                           Landlord’s Remedies.

 

(a)                                  Abandonment.  If Tenant vacates or abandons

the Premises and an uncured Event of Default exists, this Lease shall continue

in effect, Landlord shall not be deemed to have terminated this Lease other

than by written notice of termination from Landlord, and Landlord shall have

all of the remedies of a landlord provided by Section 1951.4 of the Civil Code

of the State of California.  At any time

subsequent to vacation or abandonment of the Premises by Tenant, Landlord may

give notice of termination and shall thereafter have all of the rights

hereinafter set forth.

 

36

 

(b)                                 Termination.  Following the occurrence of

any Event of Default, Landlord shall have the right, so long as the default

continues, to terminate this Lease by written notice to Tenant setting forth:

(i) the default; (ii) the requirements to cure it; and (iii) a demand for

possession, which shall be effective three (3) days after it is given or upon

expiration of the times specified in Section 12.01 hereinabove, whichever is

later.

 

(c)                                  Possession.  Following termination under

subsection (b), without prejudice to any other remedies Landlord may have by

reason of Tenant’s default or of such termination, Landlord may then or at

anytime thereafter, (i) peaceably re-enter the Premises, or any part thereof,

upon voluntary surrender by Tenant or expel or remove Tenant therefrom and any

other persons occupying them, using such legal proceedings as are then

available; (ii) repossess and enjoy the Premises, or relet the Premises or any

part thereof for such term or terms (which may be for a term extending beyond

the Term) at such rental or rentals and upon such other terms and conditions as

Landlord in its sole discretion shall determine, with the right to make

reasonable alterations and repairs to the Premises; and (iii) remove all

personal property therefrom and, at Landlord’s option, retain all or any of such

personal property (and title thereto shall thereupon vest in Landlord without

compensation to Tenant) or dispose of all or any of such personal property, in

any manner, without compensation to Tenant. 

In the event Landlord removes all or any of Tenant’s personal property

pursuant to the foregoing provisions, Tenant shall pay to Landlord, upon

demand, the actual expense of such removal and disposition and the cost of

repairing any damage to the Premises resulting from such removal.

 

(d)                                 Recovery.  Following termination under

subsection (b), Landlord shall have all the rights and remedies of a landlord

provided by Section 1951.2 of the Civil Code of the State of California.  The amount of damages which Landlord may recover

following termination under subsection (b) shall include: (i) the worth at the

time of the award of the unpaid rent and other amounts which had been earned at

the time of termination; (ii) the worth at the time of the award of the amount

by which the unpaid rent which would have been earned after termination until

the time of the award exceeds the amount of such rental loss that Tenant proves

could have been reasonably avoided; (iii) the worth at the time of the award of

the amount by which the unpaid Rent for the balance of the Term after the time

of award exceeds the amount of rental loss Tenant proves could be reasonably

avoided; and (iv) any other amount necessary to compensate Landlord for all

detriment proximately caused by Tenant’s failure to perform its obligations

under this Lease.  The “worth at the

time of the award” of the amount referred to in (i) and (ii) above shall be

computed by allowing interest thereon at the Default Rate (as set forth

below).  The “worth at the time of the

award” of the amount referred to in (iii) above shall be computed by

discounting such amount at the Default Rate (as set forth below).

 

(e)                                  Additional Remedies.  In

addition to the foregoing remedies, Landlord shall, so long as this Lease is

not terminated, have the right to remedy any default of Tenant to maintain or

improve the Premises without terminating this Lease, to incur expenses on

behalf of Tenant in seeking a new subtenant, or to cause a receiver to be

appointed to administer the Premises and new or existing subleases, and to add

to the Rent payable hereunder all of Landlord’s reasonable costs in so doing,

with interest at the lower of the prime rate of interest at the time of said

default charged by Wells Fargo Bank N.A. plus three percent (3%) or the maximum

lawful rate (the “Default Rate”).

 

(f)                                    Other.  If Tenant causes or threatens

to cause a breach of any of the covenants, agreements, terms or conditions

contained in this Lease, Landlord shall be entitled to retain all sums held by

Landlord, by any trustee or in any account provided for herein, to enjoin such

breach or threatened breach, and to invoke any right and remedy allowed at law

or in equity or by statute or otherwise as though re-entry, summary proceedings

and other remedies were not provided for in this Lease.  As used in this Article, the term

“threatens” is limited to delivery to Landlord of a written statement by Tenant

indicating Tenant’s intent to cause a breach or Tenant’s anticipation of its

uncured default in the performance of, any of the covenants, agreements, terms

or conditions contained in this Lease.

 

(g)                                 Cumulative.  Each right and remedy of

Landlord provided for in this Lease shall be cumulative and shall be in

addition to every other right or remedy provided for in this Lease or now or

hereafter existing at law or in equity or by statute or otherwise.  The exercise or beginning of the exercise by

Landlord of any one or more of the rights or remedies provided for in this

Lease, or now or hereafter existing at law or in equity or by statute or

otherwise, shall not preclude the simultaneous or later exercise by Landlord of

any or all other rights or remedies provided for in this Lease or now or

hereafter existing at law or in equity or by statute or otherwise.

 

37

 

(h)                                 No Waiver.  No failure by Landlord to

insist upon the strict performance of any term hereof or to exercise any right

or remedy consequent upon a breach thereof, and no acceptance of full or

partial payment of Rent during the continuance of any such breach shall constitute

a waiver of any such breach or of any such term.  Efforts by Landlord to mitigate the damages caused by Tenant’s

breach of this Lease shall not be construed to be a waiver of Landlord’s right

to recover damages under this Article 12. Nothing in this Article 12 affects

the right of Landlord to indemnification by Tenant in accordance with Article 5

hereinabove for liability arising prior to the termination of this Lease for

personal injuries or property damage.

 

13.                                 ASSIGNMENT

AND SUBLETTING

 

0.1                                 Assignment and Subletting; Prohibition.     Except as

hereinafter provided in this Section 13.01, Tenant shall not assign,

mortgage, pledge, hypothecate or otherwise transfer, this Lease, in whole or in

part, or any interest therein, nor sublet or permit occupancy by any party

other than Tenant of all or any part of the Premises (each of the foregoing is

hereinafter sometimes referred to as a “Transfer”), without the prior written

consent of Landlord in each instance, which may not be unreasonably withheld or

delayed; provided, however, Tenant acknowledges and agrees that it shall not be

unreasonable for Landlord to take into consideration in connection with a

proposed Transfer such factors as (a) the impact on parking in the Project; (b)

the impact of possible noise or odors generated by the proposed use; and (c)

the image of the project in the community. 

As material consideration for this Lease, Tenant hereby agrees to

provide the following written materials to Landlord regarding any proposed

Transfer and the proposed transferee (the “Transferee”) for Landlord’s

approval:  (i) the proposed

Transfer agreement to Landlord for Landlord’s approval; (ii) financial

statements of the Transferee for the three (3) years prior to the proposed

Transfer, which financial statements shall be audited if the Transfer

contemplates the release of Tenant from any of its obligations under this

Lease, or otherwise audited, if available, or certified by the transferee as being true

and correct and prepared in accordance with generally acceptable accounting

principles, consistently applied; (iii) detailed summaries of the

Transferee’s business operation; (iv) a detailed credit report of the

Transferee; and (v) banking references for the Transferee.  Landlord shall have the right to review the

written material submitted by Tenant regarding such Transfer for a period of

fifteen (15) business days following Landlord’s receipt of such material to

consent or decline to consent to such Transfer. No Transfer by Tenant shall

relieve Tenant of any obligation under this Lease, including Tenant’s

obligation to pay Base Rent and Additional Rent hereunder.  Any purported Transfer contrary to the

provisions hereof without Landlord’s consent (“Unauthorized Transfer”) shall be

void.  The consent by Landlord to any

Transfer shall not constitute a waiver of the necessity for such consent to any

subsequent Transfer.  As Additional Rent

hereunder, Tenant shall reimburse Landlord for actual legal and other expenses incurred

by Landlord in connection with any request by Tenant for Landlord’s consent to

the Transfer up to Two Thousand Dollars ($2,000) per proposed Transfer.  Such amount shall be reimbursed by Tenant to

Landlord within ten (10) days following the submission to Tenant of a copy of

the written invoice from Landlord’s counsel itemizing such costs and fees

payable by Landlord with respect to any request by Tenant for Landlord’s

consent to such a Transfer, whether or not Landlord ultimately approves such

Transfer.  Tenant shall have the right,

subject to the foregoing obligations to deliver the relevant written materials

to Landlord, but without the requirement of Landlord’s consent, to enter into

an assignment of this Lease or a sublease of the Premises to any subsidiary

corporation of Tenant, Tenant’s parent corporation, to any corporation or other

entity that controls, is controlled by or under common control with Tenant or

to any corporation, partnership or other entity succeeding to substantially all

of the assets of Tenant as a result of a consolidation or merger, or to a

corporation, partnership or other entity to which all or substantially all of

the assets of Tenant have been sold (“Affiliate Transferee”), provided any

Affiliate Transferee that is an assignee (but not any sublessee) executes an

instrument in form and content reasonably acceptable to Landlord assuming all

of Tenant’s obligation under the Lease.

 

13.1                           Bonus Rental.     If for any

assignment or sublease other than to an Affiliate Transferee, Tenant receives

rent or other consideration, either initially or over the term of the

assignment or sublease, in excess of the Rent called for hereunder, or in case

of the sublease of a portion of the Premises, in excess of such Rent fairly

allocable to such portion, after appropriate adjustments to assure that all

other payments called for hereunder are appropriately taken into account,

Tenant shall pay to Landlord promptly after its receipt by Tenant, as

Additional Rent hereunder, fifty percent (50%) of the excess of each such

payment of rent or other consideration received by Tenant, after the recovery

by Tenant of Tenant’s reasonable actual

 

38

costs

of assigning the Lease or subletting the Premises, including real estate

commissions, tenant improvements, other normal leasing costs and attorney fees.

 

13.2                           Scope.     The prohibition

against Unauthorized Transfers contained in this Article shall be construed to

include a prohibition against any Transfer by operation of law.  If this Lease or any interest therein be

assigned, or if the underlying beneficial interest of Tenant is transferred, or

if the Premises or any part thereof be sublet or occupied by anybody other than

Tenant, Landlord may collect rent from the assignee, subtenant or occupant and

apply the net amount collected to the Rent herein reserved and apportion any

excess rent so collected in accordance with the terms of the immediately

preceding paragraph, but no such assignment, subletting, occupancy or

collection shall be deemed a waiver of this covenant, or the acceptance of the

assignee, subtenant or occupant as tenant, or a release of Tenant from the

further performance by Tenant of covenants on the part of Tenant herein

contained.  Except as set forth in

Section 13.01, no assignment or subletting shall affect the continuing primary

liability of Tenant (which, following assignment, shall be joint and several

with the assignee), and Tenant shall not be released from performing any of the

terms, covenants and conditions of this Lease.

 

13.3                           Waiver.     Notwithstanding

any Transfer, or any indulgences, waivers or extensions of time granted by

Landlord to any Transferee, or failure by Landlord to take action against any

Transferee, Tenant waives notice of any default of any Transferee and agrees

that Landlord may, at its option, proceed against Tenant without having taken

action against or joined such Transferee, except that Tenant shall have the

benefit of any indulgences, waivers and extensions of time granted to any such

Transferee.

 

13.4                           Release.     Whenever

Landlord conveys its interest in the Project and/or Building, Landlord shall be

automatically released from the further performance of covenants on the part of

Landlord herein contained, and from any and all further liability, obligations,

costs and expenses, demands, causes of action, claims or judgments arising from

or growing out of, or connected with this Lease after the effective date of

said release.  The effective date of

said release shall be the date Landlord transfers title of the Project to the

new owner and the new owner assumes Landlord’s obligations under this Lease in

writing.  If requested, Tenant shall

execute a form of release and such other documentation as may be required to

further effect the provisions of this Section 13.05

 

13.5                           Recapture of Premises.     In the event

Tenant proposes to enter into a Transfer, other than a Transfer with to an

Affiliate Transferee, which Transfer, when taken together with all previous

transfers other than to Affiliate Transferees, relates to more than forty nine

percent (49%) of the rentable square feet of the Premises (the “Subject Space”)

and is for the entire then remaining balance of the Term, or substantially all

of the remaining balance of the Term, then Tenant shall notify Landlord in

writing (the “Availability Notice”) if Tenant wishes to Transfer the Subject

Space.  Landlord shall have the option,

by written notice to Tenant (the “Recapture Notice”) within ten (10) days after

receiving any Availability Notice, to recapture the Subject Space as described

below.  A timely Recapture Notice

terminates this Lease and Tenant’s obligations regarding the Subject Space for

the remaining term of the Lease and as of the date sixty (60) days after

Landlord delivers the Recapture Notice to Tenant.  If Landlord declines to or fails timely to elect to recapture the

Subject Space, Landlord shall have no further right under this Section 13.06 to

the Subject Space unless Tenant fails to Transfer the Subject Space within one

hundred fifty (150) days after Landlord receives the Availability Notice or it

becomes available again after Transfer by Tenant. To determine the new Base

Rent under the Lease if Landlord recaptures the Subject Space, the original

Base Rent under the Lease shall be multiplied by a fraction, the numerator of

which is the square feet of Rentable Area of the Premises retained by Tenant

after Landlord’s recapture and the denominator of which is the total square

feet of Rentable Area of the Premises before Landlord’s recapture.  The Additional Rent, to the extent that it

is calculated on the basis of the square feet of Rentable Area within the

Premises, shall be reduced to reflect Tenant’s proportionate share based upon

the square feet of Rentable Area of the Premises retained by Tenant after

Landlord’s recapture.  Notwithstanding

the foregoing, Landlord’s right to recapture the Premises pursuant to this

Section 13.06 shall not apply to a Transfer during the initial five (5) year

term of this Lease.

 

39

 

14.                                 HAZARDOUS MATERIALS

 

0.1                                 Definitions.

 

(a)                                  Health and Safety Laws.     ”Health and

Safety Laws” means any and all federal, state or local laws, ordinances, rules,

decrees, orders, regulations, court decisions and other authority relating to

hazardous substances, hazardous materials, hazardous waste, toxic substances,

materials or wastes, environmental conditions on, under or about the Premises,

or soil and ground water conditions, including, but not limited to, the

Comprehensive Environmental Response, Compensation and Liability Act of 1980

(“CERCLA”), as amended, 42 U.S.C. § 9601, et seq., the Resource Conservation

and Recovery Act (“RCRA”), 42 U.S.C. § 6901, et seq., the Hazardous Materials

Transportation Act, 49 U.S.C. §1801, et seq., the Federal Water Pollution

Control Act of 1972, 33 U.S.C. § 1251, et. seq., the Safe Drinking Water Act,

42 U.S.C. § 300f, et seq., the Toxic Substances Control Act (“TSCA”), 15 U.S.C.

§ 2601, et seq., the Federal Insecticide, Fungicide, and Rodenticide Act

(“FIFRA”), 7 U.S.C. § 136, et seq., the Federal Hazardous Substances Control

Act, 15 U.S.C. § 1261, et seq., the Noise Control Act of 1972, 42 U.S.C. §

4901, et seq., the Occupational Safety and Health Act (“OSHA”), 29 U.S.C. §

651, et seq., the California Hazardous Waste Control Act, Cal. Health and

Safety Code § 25100, et seq., the Carpenter-Presley-Tanner Hazardous Substances

Account Act, Cal. Health and Safety Code § 25300, et seq., the Safe Drinking

Water and Toxic Enforcement Act of 1986 (“California Proposition 65”), Cal.

Health and Safety Code § 25249.5, et seq., the Porter-Cologne Water Quality

Control Act, Cal. Water Code § 13000, et. seq., any amendments to the

foregoing, and any similar federal, state or local laws, ordinances, rules, decrees,

orders or regulations.

 

(b)                                 Hazardous Materials. 

“Hazardous Materials” means any chemical, compound, material, substance

or other matter that: (i) is defined as a hazardous substance, hazardous

material, hazardous waste or toxic substance, material or waste under any

Health and Safety Law, including, but not limited to, those substances,

materials or wastes regulated now or in the future under any statutes or

regulations; (ii) is controlled or governed by any Health and Safety Law or

gives rise to any reporting, notice or publication requirements thereunder, or

gives rise to any liability, responsibility or duty on the part of Tenant or

Landlord with respect to any third person hereunder; or (iii) is flammable or

explosive material, oil or any other petroleum-based substance, freon,

asbestos, urea formaldehyde, radioactive material, nuclear medicine material,

drug, vaccine, bacteria, virus, hazardous waste, toxic substance, or related

injurious or potentially injurious material (by itself or in combination with

other materials).

 

(c)                                  Off-Site Contamination.  The

term “Off-Site Contamination” shall mean the presence of any Hazardous

Materials, associated in any way with Tenant’s, its successors’ or assigns’ use

or occupation of the Premises, transported, arranged for disposal of, or

disposed of by Tenant or any third party on behalf of Tenant or its agents,

employees or officers to any site or location other than the Premises.

 

(d)                                 On-Site Contamination.  The

term “On-Site Contamination” shall mean the presence of any Hazardous Materials

in, on or under any portion of the Premises.

 

14.1                           Use.     Tenant shall

not allow any Hazardous Material to be used, generated, manufactured, released,

stored or disposed of on, under or about, or transported from, the Premises,

unless:  (a)  such use is specifically disclosed to and approved by Landlord in

writing prior to such use; and (b) such use is conducted in compliance with the

provisions of this Article 14. 

Landlord’s consent may be withheld in Landlord’s sole discretion, and,

if granted, may be revoked at any time. 

Landlord may approve such use subject to reasonable conditions to

protect the Premises and Landlord’s interests. 

Landlord may withhold approval if Landlord determines that such proposed

use involves a material risk of a release or discharge of Hazardous Materials

or a violation of any Health and Safety Laws or that Tenant has not provided

reasonable assurances of its ability to remedy such a violation and fulfill its

obligations under this Article 14.  Notwithstanding the foregoing, Landlord hereby consents to

Tenant’s use, storage or disposal of products containing small quantities of

Hazardous Materials, which products are of a type customarily found in offices

and households (such as aerosol cans containing insecticides, toner for copies,

paints, paint remover and the like), provided that the Tenant shall handle,

use, store and dispose of such Hazardous Materials in a safe and lawful manner

and shall not allow such Hazardous Materials to contaminate the Premises.

 

14.2                           Compliance With Laws; Handling of Hazardous Materials.     Tenant shall

strictly comply with, and shall maintain the Premises in compliance with, all

Health and Safety Laws.  Tenant shall

obtain, maintain

 

40

 

in effect and comply with the conditions of

all permits, licenses and other governmental approvals required for Tenant’s

operations on the Premises under any Health and Safety Laws, including, but not

limited to, the discharge of appropriately treated Hazardous Materials into or

through any sanitary sewer serving the Premises.  At Landlord’s request, Tenant shall deliver copies of, or allow

Landlord to inspect, all such permits, licenses and approvals.  All Hazardous Materials removed from the

Premises shall be removed and transported by duly licensed haulers to duly

licensed disposal facilities, in compliance with all Health and safety

Laws.  Tenant shall be responsible for

the proper disposal of any mercury-containing fluorescent lighting fixtures

installed by Tenant, or by Landlord at Tenant’s request, which are not a

building standard type lighting fixture. Tenant shall perform any monitoring,

testing, investigation, clean-up, removal, detoxification, preparation of

closure or other required plans and any other remedial work required by any

governmental agency or lender or reasonably recommended by Landlord’s

environmental consultants as a result of (a) any release or discharge or

potential release or discharge of Hazardous Materials and resulting in On-Site

Contamination or Off-Site Contamination or (b) any violation or potential

violation of Health and Safety Laws that, in the case of (a) or (b) is by

Tenant or any successor or sublessee of Tenant or their respective agents, contractors,

employees, licensees or invitees (collectively, “Remedial Work”).  Landlord shall have the right to intervene

in any governmental action or proceeding involving any Remedial Work, and to

approve performance of the work, in order to protect Landlord’s interests.

Landlord shall have the right to require Tenant to provide an Standard

ASTM E 1527-93 Phase I (cost not to exceed $3,000.00) Environmental

Clearance Report prepared for Landlord’s approval at the time Tenant vacates

the Premises.  Tenant shall not enter

into any settlement agreement, consent decree or other compromise with respect

to any claims relating to Hazardous Materials without notifying Landlord and

providing ample opportunity for Landlord to intervene.

 

14.3                           Compliance With Insurance Requirements.     Tenant shall

comply with the requirements of Landlord’s and Tenant’s insurers regarding

Hazardous Materials and with such insurers’ recommendations based upon prudent

industry practices regarding management of Hazardous Materials.

 

14.4                           Indemnity.     Tenant shall

indemnify, protect, defend and hold Landlord (and its partners and their

respective officers, directors, employees and agents), the Premises, Building,

Parking Areas, and all other areas of the Project harmless from and against any

and all liabilities, demands, penalties, fines, claims, suits, judgments,

actions, investigations, proceedings, costs and expenses (including attorneys’

fees and court costs) arising out of or in connection with any breach of any

provisions of this Article 14, directly or indirectly arising out of any

liability of Tenant under any Health and Safety Law or associated with any

On-Site Contamination or any Off-Site Contamination which is caused, suffered

or permitted to be brought upon, kept, used, discharged, deposited or leaked in

or about the Premises or any other portion of the Project by Tenant or any of

Tenant’s assigns, agents, employees, contractors or invitees or by anyone in

the Premises other than Landlord, Landlord’s agents, employees or contractors,

including, but not limited to, the use, generation, storage, release, disposal

or transportation of Hazardous Materials by Tenant, or any successor or

sublessee of Tenant, or their respective agents, contractors, employees,

licensees, or invitees, on, under or about the Premises during the Term, and

including, but not limited to, all consequential damages and the cost of any

Remedial Work.  Any defense by Tenant

pursuant to this Article shall be by counsel reasonably acceptable to

Landlord.  Neither the consent by

Landlord to the use, generation, storage, release, disposal or transportation

of Hazardous Materials nor the strict compliance with all Health and Safety

Laws shall excuse Tenant from Tenant’s indemnification obligations pursuant to

this Article 14.  The foregoing

indemnity shall be in addition to and not a limitation of the indemnification

provisions of Section 5.09 of this Lease. 

Tenant’s obligations pursuant to this Section 14.05 shall survive the

termination or expiration of the Lease.

 

14.5                           Notice.     Each party to

this Lease shall notify the other party, in writing, as soon as reasonably

possible, and in any event within five (5) business days after, any of the

following: (a) a party has knowledge, or it has reasonable cause to believe,

that any Hazardous Material has been released, discharged or is located on,

under or about the Premises or Project, whether or not the release or discharge

is in quantities that would otherwise be reportable to a public agency; (b) a

party receives any order of a governmental agency requiring any Remedial Work

pursuant to any Health and Safety Laws; (c) a party receives any warning,

notice of inspection, notice of violation or alleged violation, or a party

receives notice or knowledge of any proceeding, investigation of enforcement

action, pursuant to any Health and Safety Laws; or (d) a party receives notice

or knowledge of any claims made or threatened by any third party against that

party or the Premises relating to any loss or injury resulting from Hazardous

Materials or from violation of any Health

 

41

 

and Safety Law.  If the potential risk of any of the foregoing events is material,

the party having notice of such event shall deliver immediate verbal notice to

the other party, in addition to written notice as set forth above.  Landlord and Tenant agree to deliver to one

another copies of all test results, reports and business or management plans

required to be filed with any governmental agency pursuant to any Health and

Safety Laws.

 

14.6                           Default.     The material

release or discharge of any Hazardous Material other than as permitted by law

or the in violation of any Hazardous Materials Law by Tenant or any successor

or sublessee of Tenant shall be a material default by Tenant under the

Lease.  In addition to or in lieu of the

remedies available under the Lease as a result of such default, Landlord shall

have the right, without terminating the Lease, to require Tenant to suspend its

operations and activities on the Premises until Landlord is reasonably

satisfied that appropriate Remedial Work has been or is being adequately

performed; Landlord’s election of this remedy shall not constitute a waiver of

Landlord’s right thereafter to declare a default and pursue other remedies set

forth in the Lease.

 

14.7                           Landlord’s Disclosure.     Pursuant to

the requirements of California Health and Safety Code Section 25359.7, Landlord

hereby notifies Tenant that Landlord does not know, and does not have

reasonable cause to believe, that any release of any Hazardous Material has

come to be located on or beneath the Premises, Building or Project.

 

15.                                 OFFSET STATEMENT, ATTORNMENT AND SUBORDINATION

 

0.1                                 Estoppel

Certificate.     Within

ten (10) days after request therefor by either party, the other party shall

deliver to the requesting party, in recordable form, a certificate certifying

(if such be the case, or otherwise setting forth any exceptions thereto) that

(a) this Lease is in full force and effect; (b) the date of Tenant’s most

recent payment of Rent, or setting forth any exceptions (c) that the certifying

party has no defenses or offsets outstanding, or stating those offsets or

defenses claimed by the certifying party; (d) that to the certifying

party’s knowledge, the requesting party has no defenses or offsets outstanding,

or stating those offsets or defenses claimed by the other party; and

(e) and any other information reasonably requested.  Tenant’s failure to deliver said certificate

in time shall be conclusive upon Tenant that: (i) this Lease is in full force

and effect, without modification except as may be represented by Landlord; (ii)

there are no uncured defaults in Landlord’s performance and Tenant has no right

of offset, counterclaim or deduction against Rent hereunder; and (iii) no more

than one period’s Base Rent has been paid in advance.  Landlord’s failure to deliver said certificate in time shall be

conclusive upon Landlord that:  (x) this

Lease is in full force and effect, without modification except as may be

represented by Tenant; (y) there are no uncured defaults in Tenant’s

performance; and (z) Tenant’s representation as to the amount of Base Rent

that has been paid in advance is correct. 

Failure of a party to deliver such a certificate to the other party

within ten (10) days following Landlord’s request therefor shall be deemed such

party’s acknowledgment of the correctness of the statements made in the

foregoing sentence and that the requesting party’s mortgagee(s) and/or

purchaser(s) may rely on said statements.

 

15.1                           Attornment.     Tenant shall,

in the event any proceedings are brought for the foreclosure of, or in the

event of exercise of the power of sale under any mortgage or deed of trust made

by the Landlord, its successors or assigns, encumbering the Premises, or any

part thereof, or in the event of termination of a ground lease, if any, and if

so requested, attorn to the purchaser upon such foreclosure or sale or upon any

grant of a deed in lieu of foreclosure and recognize such purchaser as the Landlord

under this Lease.

 

15.2                           Subordination.     The rights of

Tenant hereunder are and shall be, at the election of the mortgagee, subject

and subordinate to the lien of such mortgage, or the lien resulting from any

other method of financing or refinancing, now or hereafter in force against the

Project, Building and/or Parking Area, and to all advances made or hereafter to

be made upon the security thereof; provided, however, no such subordination

shall be effective unless and until Tenant shall have received a

non-disturbance agreement in a recordable, commercially reasonable form to the

effect that neither this Lease nor any of the rights of Tenant hereunder shall

be terminated or subject to termination by any trustee’s sale, any action to

enforce the security, or by any proceeding or action in foreclosure unless an

uncured Event of Default shall exist. 

If requested, Tenant agrees to execute whatever documentation may be

required to further effect the provisions of this Article.

 

42

 

15.3                           Non-Disturbance.      Within ten

(10) days after execution of this Lease, Landlord shall deliver to Tenant with

respect to each mortgage, deed of trust, ground lease or other monetary lien or

encumbrance in force against the Project as of the date hereof, a

non-disturbance agreement from the mortgagee, ground lessor, beneficiary of the

deed of trust or other lienholder in a commercially reasonable form. If

Landlord, after commercially reasonable efforts, is unable for any reason to

deliver such non-disturbance agreements within such period, Tenant’s sole

remedy shall be to cancel this Lease by delivering written notice thereof to

Landlord  within five (5) days of the

expiration of such ten (10) days period.

 

16.                                 NOTICES

 

0.1                                 Notices.     All notices

required to be given hereunder shall be in writing (except for notice required

pursuant to Section 12.01(b) and shall be (i) personally delivered, in which

even they shall be deemed received on the date of delivery, (ii) sent by

certified mail, postage prepaid, return receipt requested, or by a professional

courier company which provides a receipt evidencing delivery, in which event

they shall be deemed received on the date of delivery as evidenced by the

receipt; or (iii) sent by telecopy.  Any

notice, request, demand, direction or other communication sent by cable, telex

or telecopy must be confirmed within forty-eight (48) hours by letter mailed or

delivered in accordance with the foregoing. 

The Landlord’s and Tenant’s addresses for written notices required to be

given hereunder shall be the addresses set forth in the Basic Lease

Information, or at such other place designated by advance written notice

delivered in accordance with the foregoing.

 

17.                                 SUCCESSORS BOUND

 

0.1                                 Successors

Bound.     This Lease and

each of its covenants and conditions shall be binding upon and shall inure to

the benefit of the parties hereto and their respective heirs, successors and

legal representatives and their respective assigns, subject to the provisions

hereof.   Whenever in this Lease a

reference is made to the Landlord, such reference shall be deemed to refer to

the person in whom the interest of the Landlord shall be vested and Landlord

shall have no obligation hereunder as to any claim arising after the transfer

of its interest in the Premises, subject to the provisions of Section 13.05.

Any successor or assignee of the Tenant who accepts an assignment or the

benefit of this Lease and enters into possession or enjoyment hereunder shall

thereby assume and agree to perform and be bound by the covenants and

conditions thereof.  Nothing contained

in this Section 17.01 shall be deemed in any manner to give a right of

assignment to Tenant without the written consent of Landlord.

 

18.                                 MISCELLANEOUS

 

0.1                                 Waiver.     No waiver of

any default or breach of any covenant by either party hereunder shall be

implied from any omission by either party to take action on account of such

default if such default persists or is repeated, and no express waiver shall

affect any default other than the default specified in the waiver, and then

said waiver shall be operative only for the time and to the extent therein

stated.  Waivers of any covenant, term

or condition contained herein by either party shall not be construed as a

waiver of any subsequent breach of the same covenant, term or condition.  The consent or approval by either party to

or of any act by either party requiring further consent or approval shall not

be deemed to waive or render unnecessary their consent or approval to or of any

subsequent similar acts.

 

18.1                           Easements.  Landlord reserves the right to

(i) subdivide or alter the boundaries of the Project and (ii) grant easements

on the Project and dedicate for public use portions thereof without Tenant’s

consent; provided, however, that no such subordination, alteration, grant or

dedication shall materially unreasonably interfere with Tenant’s use of the

Premises pursuant to the terms of this Lease. From time to time, and upon

Landlord’s demand, Tenant shall execute, acknowledge and deliver to Landlord,

in accordance with Landlord’s instructions, any and all documents, instruments,

maps or plats necessary to effectuate Tenant’s covenants hereunder.

 

18.2                           Relocation.     Intentionally

deleted.

 

18.3                           No Light, Air or View Easement.     Any diminution

or shutting off of light, air or view by any structure which may be erected on

lands adjacent to or in the vicinity of the Building shall in no way affect

this Lease or impose any liability on Landlord.

 

43

 

18.4                           Corporate Authority.     Tenant hereby

covenants and warrants that: (i) Tenant is a duly authorized and existing

corporation; (ii) Tenant is qualified to do business in the State of

California; (iii) Tenant has full right and authority to enter into this Lease;

and (iv) each of the persons executing on behalf of Tenant is authorized to do

so.  Concurrently with the execution of

this Lease, Tenant shall deliver to Landlord an original certificate of the

secretary of Tenant certifying the adoption of resolutions by the board of

directors of Tenant approving the terms and conditions of this Lease and

authorizing the persons executing  this

Lease to execute same for and on behalf of Tenant.

 

18.5                           Accord and Satisfaction.     No payment by

Tenant or receipt by Landlord of a lesser amount than the Rent herein

stipulated shall be deemed to be other than on account of the Rent, nor shall

any endorsement or statement on any check or any letter accompanying any check

or payment as Rent be deemed an accord and satisfaction, and Landlord may

accept such check or payment without prejudice to Landlord’s right to recover

the balance of such Rent or pursue any other remedy provided in this Lease.

 

18.6                           Limitation of Landlord’s Liability.     The obligations

of Landlord under this Lease shall not constitute personal obligations of the

individual members, partners, directors, officers, or shareholders of Landlord

or any member of Landlord, and in consideration of the benefits accruing

hereunder to Tenant and notwithstanding anything contained in this Lease to the

contrary, Tenant hereby covenants and agrees for itself and all of its

successors and assigns that the liability of Landlord for its obligations under

this Lease shall be limited solely to, and Tenant’s and its successors’ and

assigns’ sole and exclusive remedy shall be against  Landlord’s Interest in the Project (as hereinafter defined) and

Tenant, its successors and assigns shall not seek recourse against the

individual member, partners, directors, officers or shareholders of Landlord or

any member of Landlord, or any of their personal assets for such satisfaction.

 

(a)                                  If Landlord is in default of this Lease, and

as a consequence, Tenant recovers a money judgment against Landlord, the

judgment shall be satisfied only out of the interest of Landlord in the

Project, including without limitation, proceeds of sale received on execution

of the judgment and levy against the right, title, and interest of Landlord in

the Project, insurance proceeds, rent or other income from the Project

receivable by Landlord or out of the consideration received by Landlord from

the sale or other disposition of all or any part of Landlord’s right, title and

interest in the Project (“Landlord’s Interest in the Project”).   Notwithstanding the foregoing, if Landlord

is in default of this Lease and, as a consequence, Tenant recovers a money

judgment against Landlord, which is not satisfied within ten (10) days after

written demand by Tenant, then Tenant shall have the right to record a lien

against the Building or Project for the unsatisfied amount of the judgment.

 

(b)                                 If Landlord, or a member of Landlord, is a

limited liability company, a partnership or joint venture, the member or

partners of such entity shall not be personally liable and no partner of

Landlord shall be sued or named as a party in any suit or action, or service of

process be made against such partner of Landlord, except as may be necessary to

secure jurisdiction of the partnership or joint venture or to the extent

liability is caused by willful and intentional misconduct or fraud.  If Landlord, or member of Landlord, is a

corporation, the shareholders, directors, officers, employees, and/or agents of

such corporation shall not be personally liable and no shareholder, director,

officer, employee or agent of Landlord shall be sued or named as a party in any

suit or action, or service of process be made against any shareholder,

director, officer, employee, or agent of Landlord, except as may be necessary

to secure jurisdiction of the corporation. 

No partner, shareholder, director, employee or agent of Landlord shall

be required to answer or otherwise plead to any service of process and no

judgment will be taken or writ of execution levied against any partner,

shareholder, director, employee, or agent of Landlord.

 

(c)                                  Each of the covenants and agreements of this

Section 18.07 shall be applicable to any covenant or agreement either expressly

contained in this Lease or imposed by statute or by common law.

 

18.7                           Time.     Time is of the

essence of every provision hereof.

 

18.8                           Attorneys’ Fees.     In any action

or proceeding which the Landlord or the Tenant may be required to prosecute to

enforce its respective rights hereunder, the less prevailing party therein

agrees to pay all costs incurred by the more prevailing party therein,

including reasonable attorneys’ fees, to be fixed by the court, and said costs

and attorneys’ fees shall be made a part of the judgment in said action.

 

44

 

18.9                           Captions and Article Numbers.     The captions,

article numbers and table of contents appearing in this Lease are inserted only

as a matter of convenience and in no way define, limit, construe or describe

the scope or intent or such sections or articles of this Lease nor in any way

affect this Lease.

 

18.10                     Severability.  If

any term, covenant, condition or provision of this Lease, or the application

thereof to any person or circumstance, shall to any extent be held by a court

of competent jurisdiction to be invalid, void or unenforceable, the remainder

of the terms, covenants, conditions or provisions of this Lease, or the

application thereof to any person or circumstance, shall remain in full force

and effect and shall in no way be affected, impaired or invalidated.

 

18.11                     Applicable Law.     This Lease, and

the rights and obligations of the parties hereto, shall be construed and

enforced in accordance with the laws of the State of California.

 

18.12                     Submission of Lease.  

The submission of this document for examination and negotiation does not

constitute an offer to lease, or a reservation of, or option for leasing the

Premises.  This document shall become

effective and binding only upon execution and delivery hereof by Landlord and

Tenant.  No act or omission of any

employee or agent of Landlord or of Landlord’s broker or managing agent shall

alter, change, or modify any of the provisions hereof.

 

18.13                     Holding Over.     Should Tenant,

or any of its successors in interest, hold over the Premises, or any part

thereof, after the expiration of the term of this Lease, unless otherwise

agreed to in writing, such holding over shall constitute and be construed as

tenancy from month-to-month only, at a monthly rent equal to one hundred fifty

percent (150%) of the Base Rent owed during the final year of the Term of this

Lease as the same may be extended from time to time, plus Additional Rent,

provided, however, if Tenant give written notice to Landlord of a desire to

hold over in the Premises not later than sixty (60) days prior to the

expiration of the Term, as extended, then for the first sixty (60) days of such

holding, which holding shall be deemed permitted by Landlord and lawful and not

a default under the provisions of this Lease provided Tenant has complied with

the notice provisions of this Section 18.14 an all other provisions of this

Lease, the monthly rent shall be one hundred twenty-five percent (125%) of the

Base Rent owed during the final year of the Term on this  Lease, as same may be extended from time to

time, plus Additional Rent for such period. 

This inclusion of the preceding sentence shall not be construed as

Landlord’s permission for Tenant to holdover, except as herein permitted.

 

18.14                     Surrender.     Upon the

expiration or earlier termination of this Lease, Tenant shall surrender the

Premises to Landlord in good order, condition and repair, except for reasonable

wear and tear or as otherwise provided in Articles 8, 10, and 11.  Tenant shall not commit or allow any waste

or damage to be committed on any portion of the Premises, Building or

Project.  All property that Tenant is

required to surrender shall become Landlord’s property upon the termination of

this Lease.

 

18.15                     Rules and Regulations.     At all times

during the Term, Tenant shall comply with rules and regulations (“Rules and

Regulations”) for the Project, as set forth in Exhibit E (and such amendments

as Landlord may reasonably adopt, provided same are enforced by Landlord in a

consistent and non-discriminatory manner) attached hereto and by this reference

made a part hereof; and. provided further such Rules and Regulations shall not

materially diminish Tenant’s rights under this lease.

 

18.16                     No Nuisance.     Tenant shall

conduct its business and control its agents, employees, invitees and visitors

in such a manner as not to create any nuisance, or unreasonably interfere with,

annoy or disturb any other tenant or Landlord in its operation of the Project.

 

18.17                     Broker.     Tenant warrants

that it has had no dealings with any real estate broker or agent, other than

the Tenant’s Broker and Landlord’s broker, each set forth in the Basic Lease

Information, in connection with the negotiation of this Lease, and that it

knows of no other real estate broker or agent who is entitled to any commission

or finder’s fee in connection with this Lease. 

Tenant agrees to indemnify and hold harmless Landlord from and against

any and all claims, demands, losses, liabilities, lawsuits, judgments, costs

and expenses (including, without limitation, attorneys’ fees and costs) with

respect to any leasing commission or equivalent compensation alleged to be

owing on account of Tenant’s dealings with any real estate broker or agent

other than Tenant’s Broker or Landlord’s Broker.  Landlord shall pay any commission owing to Tenant’s 

 

45

 

Broker and any commission owing to Landlord’s

Broker in connection with this Lease, in accordance with a separate agreement

between such brokers and Landlord.

 

18.18                     Landlord’s Right to Perform.     Upon Tenant’s failure to perform any

obligation of Tenant hereunder, including without limitation, payment of

Tenant’s insurance premiums, charges of contractors who have supplied materials

or labor to the Premises, etc., Landlord shall have the right to perform such

obligation of Tenant on behalf of Tenant and/or to make payment on behalf of

Tenant to such parties, provided Landlord has first provided written notice to

Tenant and given Tenant ten (10) days to perform such obligation (unless

another cure period is provided herein). 

Tenant shall reimburse Landlord the reasonable cost of Landlord’s

performing such obligation on Tenant’s behalf, including reimbursement of any

amounts that may be expended by Landlord, plus interest at the rate of three

percent (3% ) over the prime rate as announced, from time to time, by Bank of

America, N.A. per annum, as Additional Rent.

 

18.19                     Mortgage Protection.     Landlord shall

not be in default under the terms of this Lease, or by law, unless Landlord

fails to perform the obligations required of Landlord within a reasonable time,

but in no event later than ten (10) days after written notice by Tenant to

Landlord and to the holder of any first mortgage or deed of trust covering the

Premises whose name and address shall have theretofore been furnished to Tenant

in writing specifying wherein Landlord has failed to perform such

obligation.  If, however, the nature of

Landlord’s obligation is such that more than ten (10) days are required for

performance, Landlord shall not be in default exist if Landlord commences

performance within such ten (10) day period and diligently prosecutes the same

to completion.  Should Landlord be deemed

to be in material default of this Lease, and If any such default materially

interferes with Tenant’s business operation in the Premises, Tenant may give

Landlord and the holder of any first mortgage or deed of trust covering the

Premises a second written notice specifying exactly the nature of the

Landlord’s failure and its impact on Tenant’s business operation in the

Premises and the further remedial action deemed necessary by Tenant.  If such remedial action is not undertaken

within thirty (30) days of such second written notice, Tenant shall be entitled

to terminate this Lease, but in no event earlier than thirty (30) days after

the second notice to Landlord and the holder of any first mortgage or deed of

trust covering the Premises. 

Notwithstanding the foregoing, Tenant shall not be entitled to terminate

this Lease as a result of Landlord’s default if Landlord is making diligent and

reasonable efforts to perform the obligations required of Landlord under this

Lease.  Nothing herein contained shall

be interpreted to mean that Tenant is excused from paying any rent due

hereunder as a result of any default by Landlord.

 

18.20                     Nonliability. 

Landlord shall not be in default hereunder or be liable for any damages

directly or indirectly resulting from, nor shall the rental herein reserved be

abated by reason (unless otherwise provided herein) of (i) the interruption of

use of the Premises as a result of the installation of any equipment in

connection with the Premises or Building or (ii) any failure to furnish or

delay in furnishing any services required to be provided by Landlord when such

failure or delay is caused by accident or any condition beyond the reasonable

control of Landlord or by the making of necessary repairs or improvements to

the Premises or to the Building, or the governmental or third-party supplier

limitation, curtailment, rationing or restriction 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 Building.  Landlord shall use reasonable efforts to expeditiously remedy any

interruption in the furnishing of such services.

 

18.21                     Modification for Lender.  If,

in connection with obtaining construction, interim or permanent financing for

the Project or the Building, the lender shall require reasonable modifications

in this Lease as a condition to such financing, Tenant will not unreasonably

withhold, delay or defer its consent thereto, provided that such modifications

do not increase the obligations of Tenant hereunder or materially and adversely

affect the leasehold interest hereby created or Tenant’s rights hereunder.

 

18.22                     Recording. 

Neither Landlord nor Tenant shall record this Lease without the consent

of the other.  Either party may, at its

sole cost and expense, record a short form memorandum of this Lease in a form

reasonably acceptable to the other party.

 

18.23                     Entire

Agreement.     This Lease sets

forth all covenants, promises, agreements, conditions and understandings

between Landlord and Tenant concerning the Premises, Project and Building, and

there are no covenants, promises, agreements, conditions or understandings,

either oral or written, between Landlord and Tenant other than as are herein

set forth.  Except as herein otherwise

provided no subsequent 

 

46

 

alteration, amendment, change or addition to

this Lease shall be binding upon Landlord or Tenant unless reduced to writing

and signed by Landlord and Tenant.

 

47

 

18.24                     Additional Lease Provisions.     Additional

Lease Provisions, if any, are set forth on Exhibit G, attached hereto.

 

IN WITNESS WHEREOF, the parties have executed this Lease as of the date

first above-written.

 

	

  “Landlord”

  	

  “Tenant”

  
	

   

  	

   

  
	

  PACIFIC

  PLAZA CARMEL VALLEY LLC,

  	

  JNI

  CORPORATION, a Delaware corporation,

  
	

  a

  California limited liability company

  	

   

  
	

  By:COAST

  PACIFIC PLAZA LLC, a California 

  	

   

  
	

        limited

  liability company, Its Manager

  	

  By:

  	

   

  	

   

  
	

        By:COAST

  INCOME PROPERTIES, INC., 

  	

  Name:

  	

   

  	

   

  
	

              a California

  corporation, It’s Its Manager

  	

  Its:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

              By:

  	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

  Thomas G.Blake, President

  	

  Its:

  	

   

  	

   

  
							

 

48

 

 

EXHIBIT A

 

 

LEGAL DESCRIPTION

 

 

[ATTACHED]

 

 

A - 2

 

EXHIBIT B

 

BUILDING PLANS AND SITE PLAN

 

 

[ATTACHED]

 

 

B - 1

 

EXHIBIT C

 

 

PRELIMINARY PLANS

 

 

[TO BE ATTACHED WHEN PREPARED AND APPROVED PURSUANT TO

THE WORK LETTER]

 

 

C - 1

 

EXHIBIT D

 

 

WORK LETTER

 

 

[ATTACHED]

 

 

D - 1

EXHIBIT E

 

RULES AND REGULATIONS

 

 

1.                                       The sidewalks, entrances, lobby, elevators,

stairways and public corridors shall be used only as a means of ingress and

egress and shall remain unobstructed at all times.  The entrance and exit doors of all suites are to be kept closed

at all times except as required for orderly passage to and from a suite.  Loitering in any part of the Building or

obstruction of any means of ingress or egress shall not be permitted.  Doors and windows shall not be covered or

obstructed.

 

2.                                       Plumbing fixtures shall not be used for any

purposes other than those for which they were constructed, and no rubbish,

newspapers, trash or other substances of any kind shall be thrown into

them.  Walls, floors and ceilings shall

not be defaced in any way and no one shall be permitted to mark, drive nails,

screws or drill into, paint, or in any way mar any Building surface, except

that pictures, certificates, licenses and similar items normally used in

Tenant’s business may be carefully attached to the walls by Tenant in a manner

to be reasonably prescribed by Landlord. 

Upon removal of such items by Tenant any damage to the walls or other

surfaces, except minor nail holes, shall be repaired by Tenant.

 

3.                                       No awning, shade, sign, advertisement or

notice shall be inscribed, painted, displayed or affixed on, in or to any

window, door or balcony or any other part of the outside or inside of the

Building or the demised premises unless provided by Landlord or approved by

Landlord in writing.  No window displays

or other public displays shall be permitted without the prior written consent

of Landlord.  All tenant identification

on public corridor doors beyond building standard will be installed by Landlord

for Tenant but the cost shall be paid by Tenant.  No lettering or signs other than the name of Tenant will be

permitted on public corridor doors with the size and type of letters to be

prescribed by Landlord.  All requests

for listing on the Building directory shall be submitted to the office of

Landlord in writing.  Landlord reserves

the right to approve all listing requests. 

Any change requested by Tenant of Landlord of the name or names posted

on directory, after initial posting, will be charged to Tenant.

 

4.                                       The cost of any special electrical circuits

for items such as copying machines, computers, microwaves, etc., shall be borne

by Tenant unless the same are part of the building standard improvements.  Prior to installation of equipment Tenant

must receive written approval from Landlord.

 

5.                                       The weight, size and position of all safes

and other unusually heavy objects used or placed in the Building shall be

prescribed by Landlord and shall, in all cases, stand on metal plates of such

size as shall be prescribed by Landlord. 

The repair of any damage done to the Building or property therein by

putting in or taking out or maintaining such safes or other unusually heavy

objects shall be paid for by Tenant.

 

6.                                       All freight, furniture, fixtures and other

personal property shall be moved into, within and out of the Building at times

designated by and under the supervision of Landlord and in accordance with such

regulations as may be delivered from the Landlord’s property manager and shall

not interfere with any other tenant’s conduct of business or quiet enjoyment of

the Project.  In no event will Landlord

be responsible for any loss or damage to such freight, furniture, fixtures or

personal property from any cause.

 

7.                                       No improper noises, vibrations or odors will

be permitted in the Building.  No person

will be permitted to bring or keep within the Building any animal (other than a

service animal for persons with a disability as defined in the American With

Disabilities Act), bird or bicycle or any toxic or flammable substances without

Landlord’s prior permission.  No person

shall throw trash, refuse, cigarettes or other substances of any kind any place

within or out of the Building except in the refuse containers provided

therefor. Tenant shall not be permitted to materially interfere in any way with

tenants or those having business with them. 

Landlord reserves the right to exclude or expel from the Building any

person who, in the judgment of Landlord, is intoxicated or under the influence

of liquor or drugs or who shall in any manner do any act in violation of the

rules and regulations of the Project.

 

8.                                       All rekeying of office doors or changes to

the card access system, after occupancy, will be at the expense of Tenant.  Tenant shall not rekey any doors or change

the card access system in any way without making prior arrangements with

Landlord.

 

9.                                       Tenant will not use the balconies, if any,

for storage, barbecues, drying of laundry or any other activity which would

detract from the appearance of the Building or Project or interfere in any way

with the use of the Building or Project by other tenants.

 

E - 1

 

10.                                 If Tenant uses the Premises after regular

business hours or on nonbusiness days, Tenant shall lock any entrance doors to

the Building used by Tenant or take such other steps as are necessary to secure

the Building’s doors immediately after entering or leaving the Building.

 

11.                                 Tenant shall provide and cause all Tenant’s

employees to use protective floor mats under all desk chairs used in the

Premises.

 

12.                                 If Tenant requires telegraphic, telephonic,

burglar or of similar services, it shall first obtain, and comply with,

Landlord’s instructions in their installation.

 

13.                                 Tenant shall not waste electricity, water or

air conditioning and agrees to cooperate fully with Landlord to assure the most

effective operation of the Building’s heating and air conditioning.

 

14.                                 Landlord reserves the right, exercisable

without notice and without liability to Tenant, to change the name and street

address of the Building, if required by governmental authority.

 

15.                                 Tenant shall not retail any goods on the

Premises except for goods intended to be sold to Tenant’s employees.

 

16.                                 Tenant shall not install any radio or

television antenna, loudspeaker or other device on the roof or exterior walls

of the Building without the written consent of Landlord. Tenant shall not

interfere with radio or television broadcasting or reception from or in the

Building elsewhere.  Tenant shall not

install, maintain or operate upon the Premises any vending machine without the

written consent of Landlord. 

Canvassing, soliciting and distribution of handbills or any other

written material, and peddling in the Building are prohibited, and each tenant

shall cooperate to prevent same.

 

17.                                 Tenant shall not use in any space or in the

public halls of the Building any hand trucks except those equipped with rubber

tires and side guards or such other material-handling equipment as Landlord may

approve.  Tenant shall not bring any

other vehicles of any kind into the Building.

 

18.                                 Tenant shall not use in excess of Tenant’s

pro rata share of the Project’s total parking spaces.  Tenant shall not park its vehicles in any parking areas

designated by Landlord as areas for parking by visitors to the Project or in

any other undesignated areas or parking areas assigned to other tenants.  Tenant shall not leave vehicles in the

Project parking areas overnight nor park any vehicles in the Project parking

areas other than automobiles, motorcycles, motor driven or nonmotor driven

bicycles or four-wheeled trucks. 

Landlord may, in its sole discretion, designate separate areas for

bicycles and motorcycles.

 

19.                                 Tenant shall not use Project’s or Building’s

interior or exterior common areas to conduct its business or as a waiting room.

 

20.                                 Landlord may waive any one or more of these

Rules and Regulations for the benefit of Tenant or any other tenant, but no such

waiver by Landlord shall be construed as a waiver of such Rules and Regulations

in favor of Tenant or any other tenant, nor prevent Landlord from thereafter

enforcing any such Rules and Regulations against any or all of the tenants of

the Project.

 

21.                                 Tenant shall be deemed to have read these

Rules and Regulations and to have agreed to abide by them as a condition to his

occupancy of the Premises and shall be responsible for the observance of all

the rules by Tenant’s employees, agents, clients, customers, invitees and

guests.

 

E - 2

 

EXHIBIT F

 

LETTER OF

CREDIT

 

IRREVOCABLE

STANDBY LETTER OF CREDIT

 

	

  Number:

  	

                                           

  
	

  Date:

  	

                                           

  
	

  Amount:

  	

                                           

  
	

  Expiration:

  	

                                           

  

 

 

	

  Beneficiary:

  	

  Account Party:

  
	

   

  	

   

  
	

  PACIFIC PLAZA CARMEL VALLEY LLC

  	

                                                            

  
	

  4350 La Jolla Village Drive, Suite 150

  	

                                                            

  
	

  San Diego, CA 92111

  	

                                                            

  

 

We issue our Irrevocable Letter of Credit No.

        in favor of PACIFIC PLAZA CARMEL

VALLEY, a California limited liability company, its successors and assigns for

the amount of

                                      

Dollars

($                       ).

We undertake to honor your draft for any sum or sums not to exceed a total of

                                          

Dollars

($                       )

in favor of said beneficiary when accompanied by the following: a letter from

the manager of PACIFIC PLAZA CARMEL VALLEY LLC stating that PACIFIC PLAZA

CARMEL VALLEY LLC is authorized to draw upon this Letter of Credit according to

the terms of the lease agreement with the Account Party as “Tenant”.

 

It is a condition of this Letter of Credit that it shall remain

enforceable against us for a period of sixty-nine (69) months without

amendment.

 

The draft must be marked “Drawn under

                            

Letter of Credit No.                           

dated

                                  ,

        .

 

There are no conditions of this Letter of Credit. Except so far as

otherwise stated, this Letter of Credit is subject to the Uniform Customs and

Practice for Documentary Credits (1983 Revision, International Chamber of

Commerce, Publication No. 400).

 

 

	

   

  	

                                                       

  	

   

  
	

   

  	

                                                       

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  
					

 

F - 1

 

EXHIBIT G

 

ADDENDUM TO LEASE

 

19.     ADDITIONAL LEASE PROVISIONS

 

19.01                     Right to Lease Additional Space in the Building.

 

(a)                                  During the period from February 1, 2003,

though September 30, 2003 (the “Expansion Period”), Tenant shall have the right

to lease the entire first floor of the Building (the “Expansion Space”) on the

terms and conditions of this Section 19.01(a). 

At anytime during the Expansion Period that the Expansion Space is

available and Landlord has not leased all or any portion of the Expansion Space

to another tenant (or executed a letter of intent to lease all or any portion

of such space from a qualified prospective tenant), then, subject and subordinate

only to those expansion and renewal rights set forth in the lease as described

in Section 19.01(h) below,  Tenant shall

have the right  (the “Expansion Right”),

by written notice delivered to Landlord (“Tenant’s Expansion Notice”), to lease

the Expansion Space for the balance of the initial Term at the same rental rate

and on substantially the same applicable terms and conditions as provided in

this Lease.  If Tenant elects to lease

the Expansion Space pursuant to Tenant’s Expansion Notice then Landlord and

Tenant shall promptly thereafter, but in all events within ten (10) days

thereafter, enter into a written lease for the Expansion Space on the terms and

conditions provided above in this Section 19.01(a).

 

(b)                                  Provided Tenant has not previously elected

to exercise the Expansion Right by delivering to Landlord the Tenant’s

Expansion Notice in accordance with Section 19.01(a), and the Expansion Space

is available then, subject and subordinate only to those expansion and renewal

rights set forth in the lease as described in Section 19.01(h) below, Tenant

shall have a right of first refusal (the “Tenant’s Right of First Refusal”) to

lease  the Expansion Space on the terms

and conditions set forth below in this Section 19.01(b). In the event Landlord

receives a bona-fide executed  letter of

intent to lease all or any portion of such space from a qualified prospective

tenant (“Prospective Tenant”), which Landlord intends to counter-execute

(“Expansion Space Lease Offer”), the Landlord shall give written notice to

Tenant of such Expansion Space Lease Offer (“Landlord’s Expansion Space Option

Notice”), which shall include a description of the material terms Expansion

Space Lease Offer and shall designate whether the Prospective Tenant’s

Expansion Space Lease Offer is for all or any portion of the Expansion Space

(the “Designated Space”).  Landlord’s

Expansion Space Option Notice shall constitute an offer to lease such

Designated Space to Tenant: (i) for the term, at the same rental rate and on

substantially the same applicable terms and conditions as provided as in the

Expansion Space Option Notice; or (ii) 

for the term and on substantially the same applicable terms and

conditions as provided as in the Expansion Space Option Notice  but at the rental rate provided in this

Lease. Tenant shall, within three (3) business days after receipt of Landlord’s

Expansion Space Option Notice, deliver to Landlord written notice (“Tenant’s

Expansion Space Lease Notice”) of Tenant’s election to either (i) decline to

lease the Expansion Space, or (ii) commit to lease the Expansion Space on

either of the terms described above in this Sction 19.01(b). If Tenant does not

respond within such three (3) business day period, Tenant shall be deemed to

have declined to lease the Expansion Space. If 

Tenant elects to lease the Expansion Space pursuant on the terms set

forth in Landlord’s Expansion Space Option Notice then Landlord and Tenant

shall promptly thereafter, but in all events within ten (10) days thereafter,

enter into a written lease for the Expansion Space.  Such lease shall be similar in form to this Lease in relevant

material terms and conditions, adjusted to reflect the Expansion Space and

the  Expansion Space Option Notice

..  If Tenant fails to give Landlord

notice of Tenant’s commitment to lease the Expansion Space described in

Landlord’s Expansion Space Option Notice within the three (3) business day

period, or if Tenant accepts such offer within the three (3) business day

period but Landlord and Tenant are unable, despite their good faith efforts, to

reasonably agree upon the other material terms and conditions of the lease of

the Expansion Space and execute a lease therefor within the ensuing ten (10)

day period, then Landlord may lease the all or any portion of the Expansion

Space to another tenant.

 

(c)                                  Notwithstanding Section 19.01(b) above, if

Landlord is prepared to lease the Expansion Space to a third party on terms and

conditions which are substantially less favorable to Landlord

 

G - 1

 

than those stated in Landlord’s Expansion Space Option Notice for the

Expansion Space, Landlord shall be required to give Tenant a second notice

(“Landlord’s Supplemental Expansion Space Option Notice” ) offering to lease

the Expansion Space to Tenant on  the

same terms and conditions Landlord is prepared to accept from such third

party.  Tenant shall have three (3)

business days after receipt of Landlord’s Supplemental Expansion Space Option

Notice to accept such modified terms and conditions and, in case of such

acceptance, the parties shall proceed in accordance with Section 19.01(b) to

execute a lease of the Expansion Space. 

If Tenant does not accept the terms and conditions in Landlord’s Supplemental

Expansion Space Option Notice, Landlord may then lease the Expansion Space to

such third party on  terms and

conditions not less favorable  to

Landlord than those offered to Tenant in Landlord’s Supplemental Expansion

Space Option Notice.

 

(d)                                 If Tenant does not elect to exercise Tenant’s

Right of First Refusal to lease any Expansion Space in the manner provided in

Sections 19.01(b) above, Tenant shall be deemed to have waived its Right of

First Refusal for the Expansion Space.

 

(e)                                  In the event Tenant does not commit to lease

the Expansion Space pursuant to Landlord’s Expansion Space Option Notice and

Landlord has not entered into a binding lease of the Expansion Space with a

Prospective Tenant within sixty (60) days after the date of Landlord’s

Expansion Space Option Notice, then Tenant’s Right of First Refusal Offer to

lease the Expansion Space shall again apply to such Expansion Space and

Landlord shall not lease such Expansion Space to a third party without first

complying with the procedures set forth in Section 19.01(b).

 

(f)                                    If Tenant does not exercise the Expansion

Right or Tenant’s Right of First Refusal to lease with respect to a Expansion

Space in the Building as provided herein, and Landlord enters into a binding

lease of all or any portion of such Expansion Space in the Building with a

third party during the time periods allowed under this Section 19.01, then the

Expansion Right and Tenant’s Right of First Offer to lease shall terminate and

be of no further force or effect as to such Expansion Space.

 

(g)                                 The Expansion Right and Tenant’s Right of

First Refusal  to Lease provided in this

Section 19.01 is personal to Iomega Corporation and can not be transferred to,

or exercised, by any other person or entity.

 

(h) Tenant acknowledges and agrees that the Expansion Option, as well

as Tenant’s’s Right of First Refusal, granted to Iomega Corporation pursuant to

this Section 19.01, as well as the Right of First Offer to Lease granted to

Tenant pursuant to  Section 19.02 is

subject to and subordinate to the expansion rights granted by Landlord to Cisco

Systems (“Cisco”) pursuant to that certain Office Lease dated April 6, 2001, by

and between Landlord and Cisco (the “Cisco Lease”), pursuant to which Cisco

leased a portion of the Project, during the term and subject to the limitations

of the Cisco Lease

 

19.02                     Right of First Offer to Lease Additional Space in Building.

 

(a)                                  If at any time during the term of this Lease,

Landlord desires to lease to a third party a then vacant portion of the

Building then Landlord shall give written notice to Tenant of the rental rate

and other material terms of such offer upon which Landlord is willing to lease

such vacant space in the Building (“Landlord’s Lease Notice”).  Landlord’s Lease Notice shall constitute an

offer to lease such vacant space (the “Specific Space”) to Tenant at the rental

rate and upon the terms and conditions contained in Landlord’s Lease Notice.

Tenant shall have twenty (20) days after receipt of Landlord’s Lease Notice in

which to accept such offer.  Tenant

shall accept such offer, if at all, only by written notice (“Tenant’s Lease

Notice”) delivered to Landlord in which Tenant shall agree to lease the

Specific Space from Landlord at the rental rate and upon the terms and

conditions contained in Landlord’s Lease Notice (but subject to the other

applicable provisions contained in this Lease) or on other terms and conditions

acceptable to Landlord and Tenant.  If

Tenant accepts such offer within the twenty (20) day period, Landlord and

Tenant shall enter into a written lease within ten (10) days thereafter for the

Specific Space.  If Tenant fails to give

Landlord notice of Tenant’s acceptance of the offer contained in Landlord’s

Lease Notice within the twenty (20) day period, then Tenant’s right of first

 

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offer as provided in this Section 19.02 (the “Right of First Offer to

Lease”) shall be deemed satisfied as to the Specific Space, and  Landlord thereafter shall have the right to

lease such Specific Space to third parties or to accept offers from third

parties to lease such vacant space without further obligation to Tenant, but

subject to the limitations expressed in Sections 19.02(b) through 19.02(c)

below.

 

(b)                                 Notwithstanding Section 19.02(a) above, if

Landlord is prepared to lease the Specific Space to a third party on terms and

conditions which are materially more favorable to such third party than those

stated in Landlord’s Lease Notice for the Specific Space, Landlord shall be

required to give Tenant a second notice (“Landlord’s Supplemental Lease

Notice”) offering to lease the Specific Space to Tenant on  the same terms and conditions Landlord is

prepared to accept from such third party. 

Tenant shall have three (3) business days after receipt of Landlord’s

Supplemental Lease Notice to accept such modified terms and conditions and, in

case of such acceptance, the parties shall proceed in accordance with Section

19.02(a) to execute a lease of the Specific Space.  If Tenant does not accept the terms and conditions in Landlord’s

Supplemental Lease Notice, Landlord may then lease the Specific Space to such

third party on those same terms and conditions without further obligations to

Tenant.  For purposes of this Section

19.02, terms and conditions shall be considered “materially more favorable” if

either one of the following is true:

 

(i)                                     The net effective rent (after taking into

account basic rent, additional rent and other sums payable to Landlord, less

tenant improvement costs, allowances, inducements, concessions and other transaction

costs) is less than ninety-five percent (95%) of the net effective rent

proposed by Landlord to Tenant for the Specific Space.

 

(ii)                                  The term (after taking into account all

options to extend, renew and/or terminate) is more than twenty percent (20%)

more or less than the term proposed by Landlord to Tenant for the Specific

Space.

 

(c)                                  If Landlord does not enter into a binding

lease of the Specific Space with a third party within one hundred twenty (120)

days after delivery of a Landlord’s Lease Notice therefor, or within one

hundred twenty (120) days after delivery of a Landlord’s Supplemental Lease

Notice, Tenant’s Right of First Offer to Lease shall again apply to such

Specific Space and Landlord shall not lease such Specific Space to a third party

without first complying with the procedures set forth in this Section 19.02.

 

(d)                                 The Right of First Offer to Lease provided in

this Section 19.02 is personal to the Iomega Corporation and can not be

transferred to, or exercised, by any other person or entity.

 

19.03                       Letter of Credit.       In addition to the Security Deposit, if any,

and as additional security hereunder, in the event Tenant fails, at any time

during the Term (including any Extensions) to maintain cash or cash equivalent

reserves of at least Ten Million Dollars ($10,000,000) (the “Cash

Requirement”), then  Tenant shall,

within ten (10) days after the date the Cash Requirement fails to be satisfied,

deliver to Landlord written notice thereof and a letter of credit in an amount

equal to six (6) times the then effective Monthly Rent. The letter of credit

shall be substantially in the form and of the substance of Exhibit F attached

hereto, and issued by Union Bank of California or another financial institution

reasonably acceptable to Landlord. 

Tenant shall be entitled to replace any such letter of credit with a new

letter of credit that satisfies such conditions, and upon delivery of such

replacement letter of credit by Tenant to Landlord, Landlord shall deliver the

old letter of credit to Tenant and cooperate with Tenant in terminating the old

letter of credit, including by authorizing a full exoneration and release of

the letter of credit.  Landlord shall be

entitled to draw on the letter of credit if Tenant has not replaced the letter

of credit and the letter of credit is due to expire within ten (10) days and

before the end of the Term. If Landlord so draws on the letter of credit, then

Landlord shall hold the letter of credit proceeds as an additional security

deposit; provided, however, that if Tenant subsequently delivers a letter of

credit meeting the requirements set forth above, then Landlord shall

immediately release such proceeds to Tenant. 

Upon any default by Tenant which has not been cured within the

applicable time period after any notice required by this Lease, including

specifically but without limitation Tenant’s obligation to pay rent or abide by

any of its obligations under this Lease, Landlord shall be entitled to draw

upon said letter of credit in the amount of the default(s) by the issuance of

Landlord’s sole written demand to the issuing 

financial

 

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institution. Any such draw shall be without waiver of any rights

Landlord may have under this Lease or at law or in equity as a result of the

default. In the event that Tenant can demonstrate by the delivery to Landlord

of its audited financial statements prepared in accordance with generally

accepted accounting principles, consistently applied, that Tenant has

reestablished the Cash Requirement, then, upon written request of Tenant,

Landlord shall deliver the letter of credit to Tenant and cooperate with Tenant

in terminating the letter of credit, including by authorizing a full

exoneration and release of the letter of credit; provided, however, if at any

subsequent time Tenant shall fail to maintain the Cash Requirement  Tenant shall give written notice thereof to

Landlord and cause a replacement letter of credit to be delivered to Landlord

in an amount equal to six (6) times the then effective Monthly Rent, and on

other terms of, the original letter of credit. Tenant shall submit to Landlord

annually during the Term (including any Extension) on or before the first day

of the fourth (4th) calendar month of Tenant’s fiscal year, Tenant’s audited

financial statements for the preceding fiscal year prepared in accordance with

generally accepted accounting principles, consistently applied.

 

19.04                     Conformance

to Work

Letter.     Landlord

and Tenant shall comply with their respective obligations under the Work

Letter.

 

19.05                     Use of Roof.     For so long as

Tenant and any Affiliate Transferee, in the aggregate, leases at least sixty

five percent (65%) of the Usable Area in the Building, Tenant shall be entitled

to install, maintain and operate on the roof of the Building, for the purpose

of Tenant’s business, a limited number of telecommunications, satellite and

other devices that make use of the electromagnetic spectrum

(“Telecommunications Devices”) as Landlord may approve in writing, subject to

the following requirements and subject always to compliance with all covenants

or restrictions of record as of the date hereof, applicable laws, building

codes, regulations and ordinances.  All

such Telecommunication Devices shall be located in an area of the roof not

greater than three hundred (300) square feet, reasonably specified by

Landlord.  Prior to installing any

Telecommunications Devices on the roof of the Building, Tenant shall provide

prior written notice to Landlord of Tenant’s desire to install such

Telecommunications Devices on the roof of the Building, together with plans and

specifications for the installation of such Telecommunications Devices.  Landlord shall review such plans and specifications

within ten (10) days after receiving such plans and specifications from Tenant,

and within such period notify Tenant if Landlord approves the installation of

such Telecommunications Devices or disapproves the installation of such

Telecommunication Devices, and if Landlord disapproves the installation of such

Telecommunication Devices, the reasons therefor.  Landlord may withhold its approval to the installation of

Telecommunications Devices on the roof of the Building if such

Telecommunication Devices are visible from other locations in the Project or

the surrounding areas, pose any material risk to the physical integrity of the

Project or adversely affect the appearance of the Building from surrounding

areas. Landlord may condition it’s approval of any Telecommunications Devices

on Tenant installing any walkways, screening or other devices or material

requested by Landlord. Tenant shall be responsible for any installation and

maintenance costs of any such Telecommunication Devices, as well as any damage

to the Building, including without limitation the roof, arising out of or

related to the installation or use by Tenant of any such Telecommunications

Device.

 

19.06                     Additional Provisions Relating to Rules and

Regulations.    Notwithstanding

the Rules and Regulations set forth in Exhibit “E” to this Lease, Landlord

agrees: (a) unless required by governmental authority (without any instigation

by Landlord or Landlord’s representatives), not to change the name and street

address of the Building during the Term; (b) to give Tenant written notice forthwith

of information of which Landlord, its employees or representatives becomes

aware of a proposal or plan to change the street address of the Building during

the Term; (c) Tenant may maintain in the Premises a limited number of vending

machines for goods intended to be sold to employees of Tenant; (d) Tenant shall

not be required to provide and cause all Tenant’s employees to use protective

floor mats under all desk chairs used in the Premises; and (e) Landlord shall

provide bike racks in the number and in the location provided in Landlord’s

Plans.

 

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