Document:

Exhibit 10.5

 

UHS HOLDCO, INC.

 

FORM OF OPTION AGREEMENT 

EVIDENCING A GRANT OF AN OPTION UNDER

THE 2007 STOCK OPTION PLAN

 

This
Option Agreement (this “Agreement”) is made [                      ],
20    , between UHS Holdco, Inc., a Delaware
corporation (the “Company”), and [                      ]
(“Grantee”).  Capitalized terms
used but not defined herein shall have the meanings assigned to such terms in
the Plan (as defined below).

 

1.             Grant
of Option.  Pursuant to
the UHS Holdco, Inc. Stock Option Plan (the “Plan”), the Company
hereby grants to Grantee, as of the date hereof, a stock option (the “Option”)
to purchase from the Company [        ]
shares (the “Shares”) of the Company’s common stock, $0.01 par value per
share (the “Common Stock”), at the exercise price per share of $[          ]
(the “Exercise Price”), subject to the terms and conditions set forth
herein and in the Plan.  Upon certain
events, the number of Shares and/or the Exercise Price may be adjusted as
provided in the Plan.

 

2.             Grantee
Bound by Plan.  The Plan is
incorporated herein by reference and made a part hereof.  Grantee hereby acknowledges receipt of a copy
of the Plan and agrees to be bound by all the terms and provisions
thereof.  The Plan should be carefully
examined before any decision is made to exercise the Option.

 

3.             Exercise
of Option.  Subject to
the terms and conditions contained herein, including Section 7
hereof, and in the Plan, the Option may be exercised, in whole or in part, to
the extent it has become vested, by written notice to the Company at any time
and from time to time after the date of grant. 
The Option may not be exercised for a fraction of a share of Common
Stock.  Options are subject to
cancellation as provided in the Plan.

 

4.             Expiration of Option.

 

(a)           The Option shall not be exercisable in any event ten
years after the date hereof.  Any part of
the Option that is not vested on the Termination Date shall expire and be
forfeited on such date, and any part of the Option that is vested on the
Termination Date shall also expire and be forfeited to the extent not exercised
on or before 90 days following the Termination Date or such shorter period if
such 90-day period would exceed the original term of the Option; provided,
that in the event of the death or disability of the Grantee, any part of the
Option that is vested on the date of the Termination Date shall expire and be
forfeited to the extent not exercised on or before 180 days following the
Termination Date or such shorter period if such 180-day period would exceed the
original term of the Option.

 

(b)           Subject to Section 5(d),
all unvested Performance Vesting Options shall terminate in their entirety,
without any action on the part of the Company, upon the occurrence of a Sale of
the Company.

 

 

5.             Vesting
of Performance Vesting Options.

 

(a)           A portion of the Option granted under this Agreement
representing the right to purchase
[                      ]
Shares (the “Performance Vesting Options”) shall vest in whole or in
part and become exercisable with respect to the Shares prior to the tenth
anniversary of the date hereof upon the attainment of certain goals and upon
certain events as described in this Section 5.

 

(b)           The Performance Vesting Option shall vest and become
exercisable with respect to 16.66% of the Shares (rounded to the nearest whole
share) on each December 31 after the date hereof (a “Performance
Vesting Date”) during the period beginning on the date hereof and ending on
December 31, 20[    ](1) (such period of time is
referred to as the “Performance Vesting Period”), if and only if,
(i) the Grantee remains continuously employed with the Company and/or any
of its Subsidiaries during the period beginning on the date hereof and ending
on the applicable Performance Vesting Date and (ii) the Company’s Adjusted
EBITDA (as defined below) for such fiscal year equals or exceeds the Adjusted
Target EBITDA (as defined below) for such fiscal year; provided, however,
at the end of each fiscal year of the Company during the Performance Vesting
Period, if the sum of the Company’s Adjusted EBITDA for the fiscal year ending
on such Performance Vesting Date and the Company’s Adjusted EBITDA for each of
the previous fiscal years during the Performance Vesting Period equals at least
100% of the sum of the Adjusted Target EBITDA for the fiscal year ending on
such Performance Vesting Date and the Adjusted Target EBITDA for each of the
previous fiscal years during the Performance Vesting Period (such determination
is referred to herein as the “Aggregate Test”), then the Performance
Vesting Options shall vest and become exercisable for the number of Shares
which will result in the aggregate number of Shares which are vested as of the
end of such fiscal year being equal to the greater of (A) the number of
Shares that would have otherwise vested and become exercisable as determined
without regard to the Aggregate Test and (B) the number of Shares which
would have vested if 16.66% of the Shares vested on each Performance Vesting
Date ending on or prior to the Performance Vesting Date which is the last day
of such fiscal year.

 

(c)           Notwithstanding anything contained herein to the
contrary, (i) if the Company or any of it Subsidiaries consummates an
acquisition of another Person, a disposition of the Company or any of its
Subsidiaries to another Person or any similar transaction during any fiscal
year of the Company or (ii) if the accounting policies, procedures or rules to
which the Company is subject change, in either case during the Performance
Vesting Period, then the Adjusted Target EBITDA for the remainder of such
fiscal year after such transaction or the effective date of such change and all
subsequent fiscal years during the Performance Vesting Period will be adjusted
in good faith by the Committee, and each such adjusted and approved Adjusted
Target EBITDA shall be deemed the applicable Adjusted Target EBITDA for such
fiscal year and each such subsequent fiscal years for all purposes hereunder
during the Performance Vesting Period. 
Any such adjustment to the Adjusted Target EBITDA will not 

 

(1)          This will refer to the fifth year after the year
during which grants are made (e.g., for grants made in 2010, insert “15”).

 

2

 

affect
the Adjusted Target EBITDA or the Aggregate Test with respect to any fiscal
years (or a portion of any fiscal year) prior to the consummation of such
transaction.

 

(d)           In the event of a Sale of the Company, so long as
the Grantee remains continuously employed by the Company and/or any of its
Subsidiaries during the period beginning on the date hereof and ending on the
date that such Sale of the Company is consummated [(or if the Grantee is terminated without Cause or the Grantee resigns
for Good Reason in the 30 days period prior to the consummation of such Sale of
the Company, the Grantee shall be deemed to have been continuously employed by
the Company and/or any of its Subsidiaries during the period beginning on the
date hereof and ending on the date that such Sale of the Company is consummated
for purposes of this Section 5(d) only)] the
Performance Vesting Options shall vest and become immediately exercisable with
respect to 100% of the Shares and, subject to Sections 5.10 and 6.4 of the
Plan, shall remain exercisable for a period of 90 days following such Sale of
the Company.

 

(e)           For purposes of this Section 5, the
following terms have the following meanings:

 

(i)            “Adjusted EBITDA”
means, with respect to the Company and its Subsidiaries, on a consolidated
basis, for any fiscal year, the sum of: (A) the net income for such fiscal
year (before the payment of any dividends and excluding the effect of any
extraordinary gains or losses during such period and the effect of any purchase
accounting adjustments as a result of the acquisition of UHS by the Company), plus
(B)  interest expense, federal, state, foreign and local income,
franchise, and other similar taxes, depreciation and amortization for such
fiscal year, plus (C) any management fees paid to Irving Place
Capital Merchant Manager III, L.P. (formerly known as Bear Stearns Merchant
Manager III, L.P., formerly known as Bear Stearns Merchant Manager III
(Cayman), L.P.) or its Affiliates (collectively, “BSMB”) pursuant to the
Amended and Restated Professional Services Agreement, dated as of February 1,
2008, by and between UHS and Irving Place Capital Merchant Manager III, L.P.
(formerly known as Bear Stearns Merchant Manager III, L.P., formerly known as
Bear Stearns Merchant Manager III (Cayman), L.P.), as amended, modified or
restated from time to time (the “Services Agreement”), any management
fees paid to any other institutional investor that owns shares of Common Stock
and any director fees paid to members of the Board, in each case, during such
fiscal year, plus (D) any non-cash charges to the extent that such
charges will not result in a cash charge in any future period (including any
non-cash expenses relating to the options under FAS 123(R)) during such fiscal
year, plus (E) any fees paid by the Company or UHS to David
Dovenberg, but not to exceed $250,000 in any fiscal year, plus (or
minus) (F) any unusual and non-recurring losses (or gains) for such fiscal
year, minus (G) any non-cash gains during such fiscal year, in each
case, as determined in accordance with United States generally accepted
accounting principles and as set forth on the Company’s financial statements
for such fiscal year which have been approved by the Board.

 

(ii)           “Adjusted Target EBITDA”
means, for any fiscal year of the Company during the Performance Vesting Period,
the Base Target EBITDA (as set forth or 

 

3

 

provided for in Annex I attached hereto)
for such year; provided, that the Committee shall make appropriate
adjustments to any Adjusted Target EBITDA (i) to the extent that there are
material deviations in the amount of capital expenditures actually incurred by
the Company during any fiscal year from the Capital Expenditures Target (as set
forth or provided for in Annex I attached hereto) for such fiscal
year and (ii) in accordance with Section 5(c) above.

 

6.             Vesting of Time Vesting Options.

 

(a)           A portion of the Option granted under this Agreement
representing the right to purchase
[              ]
Shares shall be subject to vesting (the “Time Vesting Options”) in the
manner described in this Section 6.

 

(b)           The Time Vesting Options shall fully vest and become
exercisable with respect to the applicable number of Shares set forth below if
and only if the Termination Date does not occur during the period beginning on
the date hereof and ending on the applicable vesting date determined
below.  The Time Vesting Options shall
cumulatively vest and become exercisable with respect to 16.66% of the Shares
(rounded to the nearest one-thousandth (0.001) of a share of Common Stock) on
each December 31 after the date hereof during the period beginning on the
date hereof and ending on December 31, 20[    ](2).

 

(c)           Upon (i) a Change in Control (as defined below)
or (ii) a Sale of the Company pursuant to clause (ii) of the definition
thereof set forth in the Plan, 100% of any portion of the Time Vesting Options
that is not vested as of the date of such Change in Control or such Sale of the
Company, as applicable, shall become vested and immediately exercisable and,
subject to Sections 5.10 and 6.4 of the Plan, shall remain exercisable for a
period of 90 days following such Change in Control or such Sale of the Company,
as applicable.  For the purposes  hereof, “Change in Control” means any (i) sale
or issuance (or series of sales or issuances) of Common Stock or the right to
acquire Common Stock by the Company or any holders thereof which results in any
Person or group of Affiliated Persons (other than the owners of Common Stock or
the right to acquire Common Stock as of the date hereof and Affiliates of such
Persons) owning and/or having the right to acquire more than 50% of the Common
Stock on a fully diluted basis at the time of such sale or issuance (or series
of sales or issuances), other than in connection with a Public Offering or (ii) merger,
share exchange, reorganization, recapitalization or consolidation to which the
Company is a party (other than a merger in which the Company is the surviving
entity, or a share exchange in which capital stock of the Company is issued,
that does not result in more than 49% of the Company’s outstanding capital
stock possessing the voting power (under ordinary circumstances) to elect a
majority of the Board being owned of record or beneficially by persons or
entities other than the holders of such capital stock immediately prior to such
merger or share exchange).

 

(2)   This will refer to the fifth
year after the year during which grants are made (e.g., for grants made in
2010, insert “15”).

 

4

 

7.             Conditions
to Exercise.  The Option
may not be exercised by Grantee unless the following conditions are met:

 

(a)           The Option has become vested with respect to the
Shares to be acquired pursuant to such exercise;

 

(b)           Legal counsel for the Company must be satisfied at
the time of exercise that the issuance of shares of Common Stock upon exercise
will be in compliance with the Securities Act and applicable United States
federal, state, local and foreign laws; and

 

(c)           Grantee must pay at the time of exercise the full
Exercise Price for the Shares being acquired hereunder in the form elected by
Grantee, plus any withholding tax (which shall be paid only in cash) required
in connection with such exercise, in each case, in accordance with the terms of
the Plan[; provided, that the
Withholding Amount relating to the Options, at the Grantee’s election, shall
reduce the number of Shares (based on the Fair Market Value of such Shares)
that are issuable upon exercise of such portion of the Option; provided,
however, that the number of Shares used to satisfy the Withholding
Amount shall not exceed the minimum withholding tax obligation under applicable
federal and state law in effect at such time].

 

8.             Transferability.  The Option (including the right to receive
the Shares) may not be Transferred or assigned by Grantee, other than by will
or the laws of descent and distribution and, during the lifetime of Grantee,
the Option may be exercised only by Grantee (or, if Grantee is incapacitated,
by Grantee’s legal guardian or legal representative).  In the event of the death of Grantee, the
Option, to the extent it has not vested on the date of death, shall terminate;
and the exercise of the Option, to the extent it has vested as of the date of
death, may be made only by the executor or administrator of Grantee’s estate or
the Person or Persons to whom Grantee’s rights under the Option pass by will or
the laws of descent and distribution.  If
Grantee or anyone claiming under or through Grantee attempts to violate this Section 8,
such attempted violation shall be null and void and without effect, and the
Company’s obligation hereunder shall terminate. 
Any Issued Stock received upon exercise of the Option is subject to the [repurchase right], restrictions on
Transfer and other rights and obligations set forth in the Plan[; provided, that, notwithstanding anything
contained in the Plan, any Shares received by Grantee upon exercise of the
Option shall not be subject to the repurchase rights set forth in Section 5.7
of the Plan].

 

9.             Administration.  Any action taken or decision made by the
Company, the Board, or the Committee or its delegates arising out of or in
connection with the construction, administration, interpretation or effect of
the Plan or this Agreement shall lie within its sole and absolute discretion,
as the case may be, and shall be final, conclusive and binding on Grantee and
all persons claiming under or through Grantee, except as expressly provided in
Grantee’s employment agreement, if any, with the Company or any of its
Subsidiaries.  By accepting this grant or
other benefit under the Plan, Grantee and each person claiming under or through
Grantee shall be conclusively deemed to have indicated acceptance and
ratification of, and consent to, any action taken under the Plan by the
Company, the Board or the Committee or its delegates.

 

5

 

10.           No Rights as Stockholder.  Unless and until a certificate or
certificates representing such shares of Common Stock shall have been issued to
Grantee (or any person acting under Section 7 above), Grantee shall
not be or have any of the rights or privileges of a stockholder of the Company
with respect to shares of Common Stock acquirable upon exercise of the Option.

 

11.           Investment Representation.  Grantee hereby acknowledges that the shares
of Common Stock which Grantee may acquire by exercising the Option shall not be
Transferred in the absence of an effective registration statement for the
shares of Common Stock under the Securities Act and applicable state securities
laws or an applicable exemption from the registration requirements of the
Securities Act and any applicable state securities laws.  Grantee also agrees that the shares of Common
Stock which Grantee may acquire by exercising the Option will not be sold or
otherwise disposed of in any manner which would constitute a violation of any
applicable federal or state securities laws.

 

12.           Rights of Grantee.  Neither this Agreement nor the Plan creates
any employment rights in Grantee and neither the Company nor any of its
Subsidiaries shall have any liability arising out of the Plan or this Agreement
for terminating Grantee’s employment or reducing Grantee’s responsibilities.

 

13.           Notices.  Any notice hereunder to the Company shall be
addressed to the Company’s principal executive office, Attention: General
Counsel, and any notice hereunder to Grantee shall be addressed to Grantee at
Grantee’s last address on the records of the Company, subject to the right of
either party to designate at any time hereafter in writing some other
address.  Any notice shall be deemed to
have been duly given when delivered personally, one day following dispatch if
sent by reputable overnight courier, fees prepaid, or three days following
mailing if sent by registered mail, return receipt requested, postage prepaid
and addressed as set forth above.

 

14.           Binding Effect.  This Agreement shall be binding upon and
inure to the benefit of any successors and assigns to the Company and all
persons lawfully claiming under Grantee.

 

15.           [Non-Competition and Non-Solicitation.

 

(a)           In consideration of the Company’s grant of the
Option hereunder, the Grantee acknowledges that, during the course of the
Grantee’s employment with the Company and its Subsidiaries (the “Term”),
the Grantee shall become familiar with the trade secrets of the Company and its
Subsidiaries and other Confidential Information (as defined below) concerning
the Company and its Subsidiaries (and their respective predecessor companies)
and that the Grantee’s services have been and shall be of special, unique and
extraordinary value to the Company and its Subsidiaries.  Accordingly, the Grantee agrees that during
the Term and thereafter until the end of the first anniversary of the Grantee’s
Termination Date, the Grantee shall not directly or indirectly own any interest
in, manage, control, participate in, consult with, render services for, or in
any manner engage in any Competing Business (as defined below) in the United
States; provided, that the foregoing shall not prohibit Grantee from
owning stock as a 

 

6

 

passive
investor in any publicly traded corporation so long as Grantee’s ownership in
such corporation, directly or indirectly, is less than 2% of the voting stock
of such corporation.  For purposes of
this paragraph, “Competing Business” means any business activity
involving the outsourcing or rental of movable medical equipment and related
services to the health care industry.

 

(b)           During the Term and thereafter until the end of the
second anniversary of the Date of Termination, the Grantee shall not directly
or indirectly through another Person (i) induce or attempt to induce any
employee of the Company or any Subsidiary to leave the employ of the Company or
such Subsidiary, or in any way interfere with the relationship between the
Company or any Subsidiary and any employee thereof, (ii) hire any person
who was an employee of the Company or any Subsidiary at any time within the one
(1) year period before the Grantee’s Termination Date, or (iii) induce
or attempt to induce any customer, supplier, licensee, licensor, franchisee or
other business relation of the Company or any Subsidiary to cease doing
business with the Company or such Subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any Subsidiary, except with the prior written consent of the
Board, which consent will be given at the sole discretion of the Board.]

 

16.           [Non-Disclosure. The Grantee
agrees that during and at all times after the Term, the Grantee will keep
secret all confidential matters and materials of the Company (including its
Subsidiaries and Affiliates), including, without limitation, know-how, trade
secrets, real estate plans and practices, individual office results, customer
lists, pricing policies, operational methods, any information relating to the
Company (including any of its Subsidiaries and Affiliates) products, processes,
customers and services and other business and financial affairs of the Company
(collectively, “Confidential Information”), to which the Grantee had or
may have access and will not disclose such Confidential Information to any
Person other than (i) the Company, its respective authorized employees and
such other Persons to whom the Grantee has been instructed to make disclosure
by the Board, (ii) as appropriate (as determined by the Grantee in good
faith) to perform the Grantee’s duties to the Company or its Subsidiaries, or (iii) in
compliance with legal process or regulatory requirements.  “Confidential Information” will not include
any information which is in the public domain during or after the Term to the
extent that such information is not in the public domain as a consequence of
disclosure by the Grantee in violation of this Option Agreement.]

 

17.           [Intellectual Property, Inventions
and Patents.  The Grantee
acknowledges that all discoveries, concepts, ideas, inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports,
patent applications, copyrightable work and mask work (whether or not including
any Confidential Information) and all registrations or applications related
thereto, all other proprietary information and all similar or related
information (whether or not patentable) which relate to the actual or
anticipated business, research and development or existing or future products
or services of the Company or its Subsidiaries and which are conceived,
developed or made by the Grantee (whether individually or jointly with others)
while employed by the Company or its Subsidiaries (or their respective
predecessors) (“Work Product”), belong to the Company or its
Subsidiaries.  The Grantee shall promptly
disclose such Work Product to the Board and, at the Company’s expense, perform
all 

 

7

 

actions
reasonably requested by the Board (whether during or after the Term) to
establish and confirm such ownership (including, without limitation,
assignments, consents, powers of attorney and other instruments).]

 

18.           [Modification.  The Grantee agrees and acknowledges that the
duration and scope of the covenants described in Section 15, 16
or 17 are fair, reasonable and necessary in order to protect the
goodwill and other legitimate interests of the Company and its Subsidiaries,
that adequate consideration has been received by the Grantee for such
obligations, and that these obligations do not prevent the Grantee from earning
a livelihood.  If, however, for any
reason any court of competent jurisdiction determines that any restriction
contained in Section 15, 16 or 17 are not reasonable,
that consideration is inadequate, such restriction will be interpreted,
modified or rewritten to include as much of the duration, scope and geographic
area identified in Section 15, 16 or 17 as will
render such restrictions valid and enforceable.]

 

19.           [Remedies. The Grantee
acknowledges that the Company will suffer irreparable harm as a result of a
breach of this Option Agreement by the Grantee for which an adequate monetary
remedy does not exist and a remedy at law may prove to be inadequate.  Accordingly, in the event of any actual or
threatened breach by the Grantee of any provision of this Option Agreement, the
Company will, in addition to any other remedies permitted by law, be entitled
to obtain remedies in equity, including without limitation specific
performance, injunctive relief, a temporary restraining order and/or a
permanent injunction in any court of competent jurisdiction, to prevent or
otherwise restrain any such breach without the necessity of proving damages,
posting a bond or other security.  Such
relief will be in addition to and not in substitution of any other remedies
available to the Company.  The existence
of any claim or cause of action by the Grantee against the Company or any of
its Subsidiaries, whether predicated on this Option Agreement or otherwise,
will not constitute a defense to the enforcement by the Company of this Option
Agreement.  The Grantee agrees not to
defend on the basis that there is an adequate remedy at law.]

 

20.          Governing
Law.  The validity, construction,
interpretation, administration and effect of the Plan, and of its rules and
regulations, and rights relating to the Plan and to this Agreement, shall be
governed by the substantive laws, but not the choice of law rules, of the State
of Delaware.  The parties hereto hereby
irrevocably and unconditionally submit to the exclusive jurisdiction of any
Federal court sitting in the State of Minnesota over any suit, action or
proceeding arising out of or relating to this Agreement.  The parties hereby agree that service of any
process, summons, notice or document by U.S. registered mail addressed to any
such party shall be effective service of process for any action, suit or
proceeding brought against a party in any such court.  The parties hereto hereby irrevocably and
unconditionally waive any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.  The parties hereto
agree that a final judgment in any such suit, action or proceeding brought in
any such court shall be conclusive and binding upon any party and may be
enforced in any other courts to whose jurisdiction any party is or may be
subject, by suit upon such judgment.

 

8

 

21.           WAIVER OF RIGHT TO JURY TRIAL. EACH PARTY
HERETO HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY
IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR
ARISING OUT OF THIS AGREEMENT OR THE PLAN, OR THE ENFORCEMENT HEREOF OR
THEREOF.  THE GRANTEE AGREES THAT THIS SECTION 21
IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT THE
COMPANY WOULD NOT HAVE ENTERED INTO THIS AGREEMENT IF THIS SECTION 21
WERE NOT PART OF THIS AGREEMENT.

 

*     *     *    
*     *

 

9

 

IN
WITNESS WHEREOF, the Company and Grantee have executed this Option Agreement as
of the date first above written.

 

	
   

  	
  UHS HOLDCO, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  GRANTEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [                                                  ]

  

 

 

ANNEX I

 

	
  Fiscal Year

  	
   

  	
  Base Target EBITDA

  	
   

  	
  Capital Expenditures Target

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20[    ]

  	
   

  	
  [N/A]
  [$              (3)]

  	
   

  	
  [[N/A]
  [$              ](3)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20[    ]

  	
   

  	
  [N/A]
  [$              (4)]

  	
   

  	
  [N/A]
  [$              (4)]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20[    ]

  	
   

  	
  [N/A]
  [$              (4)]

  	
   

  	
  [N/A]
  [$              (4)]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20[    ]

  	
   

  	
  [N/A]
  [$              (4)]

  	
   

  	
  [N/A]
  [$              (4)]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20[    ]

  	
   

  	
  [N/A]
  [$              (4)]

  	
   

  	
  [N/A]
  [$              (4)]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20[    ]

  	
   

  	
  [N/A]
  [$              (4)]

  	
   

  	
  [N/A]
  [$              (4)]

  

 

(3)          Note: Target to be determined by the Board or
Committee on or prior to the date of grant.

 

(4)          Note: Target may be determined by the Board or
Committee after the date of grant.  In
such case, the applicable target will be so determined by September 30 of
the fiscal year preceding the fiscal year for which the target applies.  Each such determination will be made by the
Board or Committee in its sole discretion, which determination will, subject to
the provisions of Sections 5(c) and 5(e)(ii) of this Agreement, be
final, conclusive and binding on the Grantee and the Company.  The Company will notify the Grantee in
writing of the Board or Committee’s determination promptly following such
determination.Exhibit 10.1

 

THIRD AMENDMENT TO LEASE

 

 

THIS THIRD
AMENDMENT TO LEASE (this “Third Amendment”) is made to be effective as of the ___
day of July, 2010, by and between 617 7th STREET ASSOCIATES, LLC, a Delaware limited
liability company (“Landlord”), and CYBERDEFENDER CORPORATION, a California
corporation (“Tenant”).

 

Recitals

 

A.        Landlord and Tenant entered into that certain Lease dated October
19, 2007, as amended by that certain First Amendment to Lease dated January 30,
2009 and that certain Second Amendment to Lease dated September 30, 2009 (as
amended, the “Lease”), covering certain space consisting of approximately 15,876
square feet of net rentable area on the tenth (10th) floor of the Building (the “Current
Premises”) located at 617 West 7th Street, Los Angeles, California (the
“Building”).

 

B.         Tenant desires to expand the Premises under the Lease to
include the entire rentable area of the third (3rd) floor of the Building consisting of
approximately 15,876 square feet of net rentable area as more particularly
described on Exhibit A attached hereto (the “Third Floor Premises”).

 

C.        Unless otherwise expressly provided herein, capitalized terms
used herein shall have the meanings as designated in the Lease.

 

Agreement:

 

In
consideration of the mutual covenants and agreements contained herein and in
the Lease, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:

 

1.         Expansion of Premises and Use of
Third Floor Premises.  As of the
later of August 1, 2010 or the date by which the Third Floor Improvements (as defined
in the “Third Floor Work Letter” attached hereto as Exhibit
C)
are substantially completed (the “Third Floor Effective Date”), the Premises
shall be expanded to include the Third Floor Premises in addition to the
Current Premises.  The period commencing
on the Third Floor Effective Date and continuing through the remainder of the
Lease Term under the Lease (i.e., March 31, 2020), as the same may be extended,
shall be referred to herein as the “Third Floor Expansion Period”. The Third
Floor Effective Date is anticipated to occur on August 1, 2010 subject to
Section 2 of this Third Amendment.  As of
the Third Floor Effective Date, all references in the Lease (and, where the
context so requires, in this Third Amendment) to the “Premises” shall be deemed
to include the Third Floor Premises and the Current Premises.  The Third Floor Premises shall be included as
part of the Premises, for all purposes, as of the Third Floor Effective Date
upon and subject to all of the terms, covenants and conditions of the Lease (as
amended hereby), and Tenant’s obligation to make rental payments under the
Lease with respect to the Third Floor Premises, as set forth below, shall
commence upon the Third Floor Effective Date. 
After the expansion of the Premises to include the Third Floor Premises
as more fully set forth in this 

 

1

 

Third Amendment, the
Premises will be deemed to consist of 31,752 square feet of net rentable area.

 

Within ten (10) days of request by Landlord, Tenant
shall acknowledge the actual Third Floor Effective Date by executing a Third Floor Effective Date Memorandum
in the form attached hereto as Exhibit B.  For purposes of this Section 1, the Third
Floor Improvements shall be deemed to be “substantially completed” on the date
that the Third Floor Improvements have been substantially completed other than
for any details of construction, mechanical adjustment or any other similar,
non-material matter the non-completion of which does not materially interfere
with Tenant’s use of the Third Floor Premises. 
In the event of any Tenant Delay (as defined in the Third Floor Work
Letter), the date by which the Third Floor Improvements are substantially
completed for purposes of this Section 1 shall be deemed to be the date the
Third Floor Improvements would have been substantially completed absent any
Tenant Delay.

 

The “Permitted Use” for the Third Floor Premises only
shall be general office and sales call center use and such ancillary uses
related thereto to the extent permitted under applicable Laws and consistent
with the uses of a first class office building.

 

2.         Third
Floor Delivery.  If Landlord fails to
deliver possession of the Third Floor Premises to Tenant on or before the anticipated
Third Floor Effective Date (i.e., August 1, 2010) for any reason whatsoever, the
Lease and this Third Amendment shall not be void or voidable, and Landlord
shall not be liable to Tenant for any loss or damage resulting therefrom.  Except for Landlord’s construction of the
Third Floor Improvements pursuant to Exhibit C in a good and workmanlike
manner, Tenant shall accept possession of the Third Floor Premises in their
current “as-is” condition.

 

3.         Construction of Improvements.  Subject to latent defects in the Building
mechanical systems and structure, Landlord shall have no obligation to make any
repairs, improvements, additions or alterations to the Third Floor Premises
(except for the Third Floor Improvements and as otherwise expressly set forth
in the Third Floor Work Letter and Exhibit C-1 thereto) or to provide
any tenant improvement allowance to Tenant in connection therewith.  Without limiting the generality of the
foregoing, the Work Letter attached to the Lease as Exhibit E and the
New Premises Work Letter attached to the Second Amendment to Lease as Exhibit
C shall not apply with respect to the Third Floor Premises. 

 

4.         Amendment to Exhibit A.  To reflect the addition of the Third Floor
Premises to the Premises, as of the Third Floor Effective Date and continuing
throughout the remainder of the Lease Term (as the same may be extended), Exhibit
A to the Lease shall be amended to also include Exhibit A to this
Third Amendment.

 

5.         Base Monthly Rent – Third
Floor Premises.  Commencing on the Third
Floor Effective Date hereof and continuing each month throughout the remainder
of the Lease Term, in addition to the Base Monthly Rent under the Lease with
respect to the Current Premises, Tenant shall pay Base Monthly Rent under the
Lease with respect to the Third Floor Premises in accordance with Section 3 of
the Lease as follows:

 

2

 

	
  Months

  	
  Base Monthly Rent

  
	
  Third Floor Effective Date – Month 12 of the Third Floor Expansion
  Period *

  	
  $35,059.50

  
	
  Month 13 – 24 of the Third Floor Expansion Period 

  	
  $36,111.29

  
	
  Month 25 – 36 of the Third Floor Expansion Period 

  	
  $37,194.62

  
	
  Month 37 – 48 of the Third Floor Expansion Period 

  	
  $38,310.46

  
	
  Month 49 – 60 of the Third Floor Expansion Period

  	
  $39,459.78

  
	
  Month 61 –  72 of the Third
  Floor Expansion Period

  	
  $40,643.57

  
	
  Month 73 –  84 of the Third
  Floor Expansion Period

  	
  $41,862.88

  
	
  Month 85 –  96 of the Third
  Floor Expansion Period

  	
  $43,118.76

  
	
  Month 97 – 108 of the Third Floor Expansion Period

  	
  $44,412.33

  
	
  Month 109 –  March 31, 2020

  	
  $45,744.70

  

 

*Notwithstanding the foregoing, and on the
express condition that no default (which is not cured within five (5) days
after written notice to Tenant of such default or, if longer, within the
applicable notice and cure period under the Lease) occurs under the Lease,
Tenant shall be entitled to an abatement of Base Monthly Rent with respect to
the Third Floor Premises only for Months 1 through 6 of the Third Floor Expansion
Period and, if and only if Tenant does not exercise the Termination Option (as
defined in Section 9 below), Months 62 and 72, such that the effective Base
Monthly Rent with respect to the Third Floor Premises for such months shall be Zero
Dollars ($0.00).  Notwithstanding such
concession of Base Monthly Rent, Landlord and Tenant agree that Tenant’s
obligation to pay Base Monthly Rent for the Third Floor Premises shall continue
throughout the Third Floor Expansion Period, and in the event that a default
(which is not cured within five (5) days after written notice to Tenant of such
default or, if longer, within the applicable notice and cure period under the
Lease) occurs under the Lease prior to Month 55 of the Third Floor Expansion
Period, then all Base Monthly Rent for the Third Floor Premises not collected
by Landlord during the Third Floor Expansion Period due to the foregoing Base
Monthly Rent abatement shall, as of the date of Tenant’s default, become
immediately due and payable with interest on such sums at the lesser of 15% per
annum or the maximum rate permitted by law from the date such Rent was
originally due to the date of payment.  If
(a) no such default (which is not cured within five (5) days after written
notice to Tenant of such default or, if longer, within the applicable notice
and cure period under the Lease) shall occur prior to Month 55 of the Third
Floor Expansion Period and (b) a default (which is not cured within five (5)
days after written notice to Tenant of such default or, if longer, within the
applicable notice and cure period under the Lease) shall occur on or after
Month 55 of the Third Floor Expansion Period, then the unamortized portion of
such Base Monthly Rent for the Third Floor Premises not collected by Landlord
during the Third Floor Expansion Period due to the foregoing Base Monthly Rent
abatement shall, as of the date of Tenant’s default, become immediately due and
payable with interest on such sums at the lesser of 15% per annum or the
maximum rate permitted by law from the date such Rent was originally due to the
date of payment.  For purposes of the
preceding sentence, such amortization period shall commence at the beginning of
Month 55 of the Third Floor Expansion Period and shall end at the end of Month
108 of the Third Floor Expansion Period (the “Third Floor Amortization
Period”), and the amount of Base Monthly Rent for the Third Floor Premises not
collected by Landlord during the Third Floor Expansion Period due to the
foregoing Base Monthly Rent abatement (with interest thereon) as of Month 55 of
the Third Floor Expansion Period shall be amortized over the 

 

3

 

Amortization Period on a straight-line basis (using interest thereon at
the lesser of 15% per annum or the maximum rate permitted by law).  Landlord’s
right, as described herein, to collect Base Monthly Rent previously abated
during the Third Floor Expansion Period shall be independent of and in addition
to Landlord’s other rights and remedies available to it pursuant to the Lease
or otherwise available at law or in equity. 
Without limiting the foregoing, Landlord shall have the right to “buy
back” from Tenant its right to the abated Base Monthly Rent with respect to
Month 62 (exercisable at anytime prior to Month 62) and Month 72 (exercisable
at anytime prior to Month 72) of the Third Floor Expansion Period on a net
present value basis using a discount rate of nine percent (9%) per annum.  If Landlord so purchases Tenant’s right to
the abated Base Monthly Rent with respect to Months 62 and/or 72 of the Third
Floor Expansion Period, then Tenant shall no longer be entitled to the
applicable Base Monthly Rent abatement.

 

6.         Additional Rent – Third
Floor Premises; Modification of Tenant’s Share.  Commencing on the Third Floor Effective Date
and continuing throughout the remainder of the Lease Term (as the same may be
extended), Landlord shall determine and Tenant will pay Tenant’s Share of
Expense Increases with respect to the Third Floor Premises in accordance with
the terms and provisions of Article 4 of the Lease except that the Base
Year as set forth in Section Q of the Summary of Basic Lease Terms shall be
adjusted to reflect a Base Year of calendar year 2010.  In connection therewith, effective as of the Third
Floor Effective Date, Tenant’s Share as set forth in Section F of the Summary
of Basic Lease Terms shall be increased to 16.51% in total (calculated by
dividing 31,752 into 192,323).  Except as
amended hereby, all rental, including, without limitation, Base Monthly Rent
and Tenant’s Share of Expense Increases, shall be payable in accordance with
the terms and provisions of the Lease.

 

7.         Additional Cash Security
Deposit.  

 

A.        Contemporaneously with
the execution of this Third Amendment, Tenant shall pay to Landlord the amount of
$158,760.00 as an additional security deposit (the “Third Floor Security
Deposit”), which Third Floor Security Deposit will be deemed part of the
Security Deposit held by Landlord pursuant to the terms of the Lease and shall
be subject to all of the terms and conditions of the Lease including, without
limitation, Article 6 of the Lease, as pertains to the Security
Deposit.  Landlord and Tenant acknowledge
and agree that Landlord is currently holding a cash Security Deposit in the
amount of $87,608.00 (the “Tenth Floor Security Deposit”), and that with the
addition of the Third Floor Security Deposit, Landlord will be holding a total
of $246,368.00 as a cash Security Deposit under the Lease (the “Cash Security
Deposit”) in addition to the Letter of Credit (as defined in the Second
Amendment to Lease).  The phrase “which
remaining amount is anticipated to equal $45,745.12” in the last sentence of Section 10.A of the
Second Amendment to Lease shall be deleted; provided, however, the same shall
not affect the potential reduction of the Tenth Floor Security Deposit as set
forth in Section 10.A of the Second Amendment to Lease.

 

B.         Commencing on the first year anniversary of the Third Floor
Effective Date and on each anniversary of the Third Floor Effective Date
thereafter until and including the seventh (7th) anniversary thereof, Tenant may reduce
the amount of the Third Floor Security Deposit by $16,145.14, provided that no
Event of Tenant’s Default has occurred under the Lease and no default under the
Lease then exists.

 

4

 

8.     Right of First Offer.

 

A.        If Tenant is not and has not been in
default of any term or provision of this Lease, has not exercised the
Termination Option and has not assigned this Lease or sublet in the aggregate
more than twenty-five percent (25%) of the Premises or agreed to do so in the
future, commencing on the date this Third Amendment is fully executed by Tenant
and Landlord, Tenant shall have a right of first offer (the “Right of First
Offer”) to lease all rentable space contiguous to the Premises on the second (2nd)
and fourth (4th)
floors of the Building (the “ROFO Space Area”) pursuant to the terms of this
Section 8.  For purposes hereof, (i) if
the Premises does not then contain any portion of the second (2nd) floor of the Building, then the entire
rentable area of the second (2nd) floor shall be considered “contiguous” to the
Premises (so long as the Premises then contains the entire rentable space
located on the third (3rd)
floor of the Building), and (ii) if the Premises does not then contain any
portion of the fourth (4th)
floor of the Building, then the entire rentable area of the fourth (4th) floor shall be considered
“contiguous” to the Premises (so long as the Premises then contains the entire
rentable space located on the third (3rd)
floor of the Building).  For purposes
hereof, (a) if the Premises does then contain any portion of the second (2nd) floor of the Building, then
only the portions of the second (2nd)
floor of the Building that are actually contiguous to the portions of the
Premises then located on the second (2nd)
floor shall be considered “contiguous” to the Premises, and (b) if the Premises
does then contain any portion of the fourth (4th) floor of the Building, then
only the portions of the fourth (4th) floor of the Building that are actually
contiguous to the portions of the Premises then located on the fourth (4th)
floor shall be considered “contiguous” to the Premises.  The Right of First Offer of Tenant contained
herein shall be subject and subordinate to any rights of refusal, offer,
renewal, expansion or extension or any other similar preferential rights  existing under any other tenant leases for
the Building as of the date of this Lease.  Tenant shall have no such Right of First
Offer if the existing tenant of the applicable ROFO Space (defined below) is
interested in extending or renewing its lease for such ROFO Space or entering
into a new lease for the same.

 

B.         Landlord shall give Tenant written
notice of the availability for leasing of all or any portion of the ROFO Space
Area (the “Offer Notice”) as and when such ROFO Space Area becomes “available
for leasing”, specifying the material terms on which Landlord proposes to lease
to Tenant the ROFO Space Area or applicable portion thereof (a “ROFO Space”)
and shall offer to Tenant the opportunity to lease such ROFO Space on the terms
specified on the Offer Notice.  The
notice shall set out the Base Monthly Rent, tenant improvement allowance (if
any) and other terms and conditions upon which Landlord would at that time
offer to other possible tenants of the ROFO Space.  As to any of the ROFO Space Area which is
currently subject to an existing lease, such ROFO Space shall be deemed to become
“available for leasing” when such existing lease expires or on such earlier
date that Landlord elects to begin to market and offer such ROFO Space to other
prospective tenants.  As to any of the
ROFO Space Area which is not now subject to an existing lease, such ROFO Space
shall be deemed to become available for leasing when Landlord elects to begin
to market and offer such ROFO Space to other prospective tenants.

 

5

 

C.        Tenant shall have ten (10) business days after the date of
giving of the Offer Notice in which to accept such offer by written notice to
Landlord.  Upon such acceptance by
Tenant, the applicable ROFO Space shall be leased to Tenant on the terms set
forth in the Offer Notice and on the additional terms and provisions set forth
in this Lease (except to the extent inconsistent with the terms set forth in
the Offer Notice), and the parties shall promptly (and in all events within ten
(10) business days after delivery of Tenant’s acceptance) execute a lease
amendment or other written agreement containing the terms of the Offer Notice
and containing or incorporating all other terms and provisions of the Lease not
inconsistent with the terms of said Offer Notice, except as the parties may
otherwise mutually agree; provided, however, that the failure of the parties to
execute such a lease amendment or other agreement shall not impair the validity
or the legally binding nature of Tenant’s leasing of the ROFO Space pursuant to
its acceptance of the offer set forth in the Offer Notice, and Tenant’s written
acceptance of such offer shall be sufficient to cause the parties to be
mutually bound by Tenant’s leasing of such ROFO Space on the terms set forth in
the Offer Notice and on the additional terms and provisions set forth in the
Lease (except to the extent inconsistent with the terms set forth in the Offer
Notice).  The term with respect to the
ROFO Space shall begin on the date the ROFO Space becomes available for
occupancy by Tenant (which shall include completion of improvements to be
performed by Landlord, if any, as specified in the Offer Notice) (the “ROFO
Commencement Date”) and shall be for the term set forth in the Offer Notice (or
where no such term is specified in the Offer Notice, the term with respect to
the ROFO Space shall end upon the expiration or earlier termination of the
Lease Term (including all extensions thereof)). 
Tenant shall accept the ROFO Space in its “AS IS” condition, and
Landlord shall have no obligation to make any repairs, improvements, additions
or alterations to the ROFO Space or to provide any tenant improvement allowance
to Tenant (except for any tenant improvement allowance, if any, expressly set
forth in the Offer Notice, and except as otherwise expressly set forth in the Offer
Notice).  Without limiting the generality
of the foregoing, the Termination Option shall not apply with respect to the
ROFO Space except as otherwise expressly set forth in the Offer Notice.

 

D.        If Tenant does not accept Landlord’s offer within the
allotted time, the Right of First Offer with respect to such ROFO Space shall
become null and void and of no force or effect, and Landlord shall be free to
lease such ROFO Space to any other party on any terms. 

 

9.         Amended Right to
Terminate.  Section 13 of the Second
Amendment to Lease shall be deleted in its entirety and replaced with the
following:

 

“           13.       Option to Terminate. 
Tenant shall have the one-time option to terminate this Lease (the
“Termination Option”) with respect to the portions of the Premises located on
the third (3rd) floor and the tenth (10th) floor (i.e., only the Current
Premises and the Third Floor Premises) (the Termination Premises”), with such
termination to occur effective March 31, 2016 (the “Termination Date”),
provided Tenant gives Landlord written notice of its election to so terminate
no later than June 30, 2015 and provided Tenant is not in default under the
Lease at the time of the giving of such notice.  On the date Tenant delivers written notice to
Landlord of its election to terminate this Lease with respect to the
Termination Premises only, Tenant shall pay Landlord an amount equal to Four
Hundred Seventy-One Thousand Four Hundred Seventy-

 

6

 

Five Dollars ($471,475.00) (the “Termination Fee”).  The remaining Tenth Floor Security Deposit (as
defined in the Third Amendment to Lease) shall be applied towards the
Termination Fee.  As of the Termination
Date: (1) all Base Monthly Rent, Additional Rent and other sums payable by
Tenant under the Lease with respect to the Termination Premises shall be paid
through and apportioned as of the Termination Date; (2) neither party shall
have any rights, liabilities or obligations under the Lease with respect to the
Termination Premises for the period accruing after the Termination Date, except
those which, by the provisions of this Lease, expressly survive the termination
of the Lease; and (3) Tenant shall surrender the Termination Premises in the
condition required under the Lease.  Tenant’s
option to terminate as set forth in this Section is personal to the Tenant
named herein..”

 

10.       Temporary Space.

 

A.        Tenant currently
occupies on a temporary basis Suite 401 (consisting of approximately 4,742
square feet of net rentable area located on the fourth floor of the Building)
and Suite 404 (consisting of approximately 2,395 square feet of net rentable
area located on the fourth floor of the Building) and desires to occupy on a
temporary basis Suite 605 (consisting of approximately 2,168 square feet of net
rentable area located on the sixth floor of the Building) (collectively,
the “Temporary Space”).  Tenant shall have the right to
continue to lease, on a temporary basis, the Temporary Space on the terms and
conditions contained herein.  The term of
such lease (the “Temporary Space Term”) shall be deemed to have commenced on
February 1, 2010 with respect to Suites 401 and 404 and on the date this Third
Amendment is fully executed by Landlord and Tenant with respect to Suite 605
and shall continue until the date which is ten (10) days after the Third Floor
Effective Date (the “Temporary Space Expiration Date”) or the earlier
termination of the Lease. Tenant agrees
and acknowledges that it is currently in possession of Suite 401 and Suite 404 and
agrees to accept the entire Temporary Space in its current “as is”
condition, and Landlord shall have no obligation to make any repairs,
improvements, additions or alterations to the Temporary Space.

 

B.         Tenant shall use the
Temporary Space solely for the Permitted Use under the Lease, and for no other
purposes whatsoever.  Subject to the
foregoing limitation on use, during the Temporary Space Term, the Temporary
Space will be deemed a portion of the “Premises” for all purposes under the
Lease, including, without limitation, Tenant’s insurance and indemnity
obligations under the Lease; provided, however, that no Base Monthly Rent or
Common Operating Expenses with respect to the Temporary Space shall be due and
payable during the Temporary Space Term. 
On or before the Temporary Space Expiration Date or the earlier
termination of the Lease, Tenant shall vacate the Temporary Space and surrender
the same to Landlord, broom clean and otherwise in the same condition in which
Tenant took occupancy thereof, ordinary wear and tear excepted.  Without limiting the generality of the
foregoing, Landlord shall have the right to require that Tenant remove all data
cabling and wiring installed by Tenant in the Temporary Space and all
improvements and alterations constructed by Tenant in the Temporary Space (if
any) on or prior to the Temporary Space Expiration Date or the earlier
termination of the Lease, and repair any damage caused by such removal.  In the event that Tenant fails to vacate the
Temporary Space on or before the Temporary Space Expiration 

 

7

 

Date or the
earlier termination of the Lease, Tenant shall be deemed a tenant at sufferance
and Landlord shall have all rights and remedies under the Lease (including, without
limitation, Section 19.4 of the Lease) and all rights and remedies under law or
at equity, including the right to file suit under California law for possession
of the Temporary Space, and to recover damages incurred by Landlord as a result
of such holding over by Tenant.  The 150%
holdover amount set forth in Section 19.4 of the Lease shall be applied against
an annual Base Monthly Rental rate of $26.50 per square foot of net rentable
area.  No holdover by Tenant or payment
by Tenant after the expiration of the Temporary Space Term or the earlier
termination of the Lease shall be construed to extend the Temporary Space Term
or prevent Landlord from immediate recovery of possession of the Temporary
Space by summary proceedings or otherwise. 
If Landlord is unable to deliver possession of the Temporary Space to a
new tenant, or to perform improvements for a new tenant, as a result of
Tenant’s holdover, such failure shall constitute a event of default hereunder,
and Tenant shall be liable to Landlord for, and shall protect Landlord from and
indemnify and defend Landlord against, all losses and damages, including any
claims made by any succeeding tenant resulting from such failure to vacate, and
any consequential damages that Landlord suffers from the holdover.

 

11.       Signage.  Subject to Section 19.1 of the Lease, Tenant
shall have the right to install at its sole cost a Building standard exterior
plaque denoting the name of Tenant at a location determined by Landlord next to
the Building entrance (on either the right or left side thereof as determined
by Landlord).  Such plaque shall not
exceed the size of the exterior plaque denoting “The Chicago School of
Professional Psychology” located next to the Building entrance.  The exact size, coloring, materials, design
and lettering of such plaque shall be subject to Landlord’s prior written
approval, which approval may be withheld in Landlord’s sole discretion.  All costs associated with installing,
maintaining and removing such signage will be at Tenant’s sole cost and
expense.  The signage rights
granted to Tenant under this Section 11 are personal to Tenant, shall not be
transferable in the event of any assignment, subletting or other transfer of
Tenant’s interest in this Lease and shall be in effect only during such times
that Tenant occupies at least one (1) full floor of the Building.

 

12.       Supplemental HVAC.  Tenant’s use of the supplemental HVAC unit
serving the Third Floor Premises shall be separately metered for electricity
and condenser water use (by E-Mon D-Mon meter or otherwise) and the actual cost
incurred by Landlord with respect to such electricity and condenser water shall
be paid by Tenant within fifteen (15) days of receipt of an invoice from
Landlord therefor.  Tenant’s use of such
supplemental HVAC shall not be subject to the after-hours HVAC charges set
forth in the third sentence of Section 10.2 of the Lease

 

13.       Brokers.  Neither Landlord nor Tenant has dealt with
any broker or agent in connection with the negotiation or execution of this Third
Amendment other than CB Richard Ellis, Inc., which has acted as Landlord’s
broker, and Stone-Miller, which has acted as Tenant’s broker.  Tenant and Landlord shall each indemnify the
other party against all costs, expenses, attorneys’ fees, and other liability
for any commissions or other compensation claimed by any other broker or agent
claiming the same by, through, or under the indemnifying party.

 

14.       Time of the Essence.  Time is of the essence with respect to Tenant’s
execution and delivery of this Third Amendment to Landlord.

 

8

 

15.       Binding Effect.  Except as modified by this Third Amendment,
the terms and provisions of the Lease shall remain in full force and effect,
and the Lease, as modified by this Third Amendment, shall be binding upon the
parties hereto, their successors and assigns. 
This Third Amendment shall become effective only after the full
execution and delivery hereof by Landlord and Tenant.

 

16.       Ratification of Lease.  All of the terms and provisions of the Lease,
as herein amended and supplemented, are hereby ratified and confirmed, and
shall remain in full force and effect.

 

[Remainder of page
left intentionally blank]

 

9

 

EXECUTED as of the
day and year first above written.

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  617 7TH STREET
  ASSOCIATES, LLC,

  
	
   

  	
  a Delaware limited
  liability company

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  617 Partners, LP, a
  Colorado

  
	
   

  	
   

  	
   

  	
  limited partnership

  
	
   

  	
   

  	
   

  	
  Its:

  	
  Manager

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  AVF Management, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  a Colorado limited
  liability company

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Voting Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  CYBERDEFENDER
  CORPORATION,

  
	
   

  	
  a California
  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
										

 

10

 

EXHIBIT A

 

DEPICTION OF THIRD FLOOR PREMISES

 

[attached]

 

A-1

 

EXHIBIT B

 

THIRD FLOOR EFFECTIVE DATE MEMORANDUM

 

	
  LANDLORD:

  	
  617 7th STREET ASSOCIATES, LLC

  
	
   

  	
   

  
	
  TENANT:

  	
  CYBERDEFENDER
  CORPORATION

  
	
   

  	
   

  
	
  THIRD AMENDMENT DATE:

  	
  July     ,
  2010

  
	
   

  	
   

  
	
  THIRD FLOOR PREMISES:

  	
  617 West 7th Street, Third Floor

  

 

The “Third
Floor Effective Date” under the Third Amendment is hereby established as                             .

 

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  617 7TH STREET
  ASSOCIATES, LLC,

  
	
   

  	
  a Delaware limited
  liability company

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  617 Partners, LP, a
  Colorado

  
	
   

  	
   

  	
   

  	
  limited partnership

  
	
   

  	
   

  	
   

  	
  Its:

  	
  Manager

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  AVF Management, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  a Colorado limited
  liability company

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Voting Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  CYBERDEFENDER
  CORPORATION,

  
	
   

  	
  a California
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
											

 

B-1

 

EXHIBIT C

 

WORK
LETTER

 

This
Work Letter (the “Third Floor Work Letter”) constitutes part of the Third
Amendment to Lease dated as of July     , 2010
between 617 7th STREET ASSOCIATES, LLC, a Delaware limited
liability company (“Landlord”), and CYBERDEFENDER CORPORATION, a California
corporation (“Tenant”).

 

 

1.         Work Letter.  This Third Floor Work Letter sets forth the
terms and conditions relating to the construction of the Third Floor
Improvements (defined below) to be performed in the Third Floor Premises by
Landlord.  Except as otherwise set forth
in this Third Floor Work Letter, Landlord shall construct the Third Floor
Improvements at Landlord’s sole cost and expense.

 

2.         Third Floor Improvements.  The improvements described on the detailed
space plan attached hereto as Exhibit C-1 (the “Space Plan”) are
hereinafter called the “Third Floor Improvements”.

 

3.         Governmental Requirements.  If Landlord determines at any time that
changes in the Third Floor Improvements are required as a result of Laws, or
are required at the insistence of any governmental entity or agency whose
approval may be required with respect to the Third Floor Improvements, or are
required as a result of unanticipated conditions encountered in the course of
construction, then Landlord shall promptly (a) advise Tenant of such
circumstances and (b) cause revised plans reflecting such changes to be
prepared and submitted to Tenant for Tenant’s information.  Tenant shall not have the right to disapprove
any such changes necessitated by applicable Laws or as a condition of any
required governmental approvals or consents or as a result of unanticipated
conditions, but to the extent Tenant identifies to Landlord any concerns
arising out of any such requirements, conditions or changes described in this
sentence, Landlord and Tenant shall cooperate reasonably, diligently and in
good faith to discuss possible changes in the nature or scope of the Third
Floor Improvements that might minimize or avoid the effects of such Laws,
conditions or changes, it being understood and agreed that in no event shall
any delays caused by any such changes (including any changes to address Tenant’s
concerns regarding any such requirement, condition or change in Landlord’s sole
discretion) be considered Tenant Delays hereunder.

 

4.         General Contractor.  Landlord shall have the right to select the
general contractor and all subcontractors used in connection with the
construction of the Third Floor Improvements. 
Landlord shall independently retain the general contractor to construct the
Third Floor Improvements.  Landlord shall
endeavor to provide Tenant with its estimated construction schedule for the
Third Floor Improvements which shall include, without limitation, the estimated
date of early access pursuant to Section 8 of this Third Floor Work
Letter.  Landlord shall further endeavor
to notify Tenant’s Construction Liaison (defined below) by email or by
telephone at least twenty-four (24) hours in advance of any construction status
meeting, and Tenant’s Construction Liaison shall be permitted, but not
required, to attend any such construction status 

 

C-1

 

meetings.  “Tenant’s Construction Liaison” shall be
Kevin Harris whose telephone number is (213) 689-8631 x127 and email address is
kevin@cyberdefender.com.  Tenant may not
change Tenant’s Construction Liaison without Landlord’s prior written consent,
which consent shall not be unreasonably withheld.  Landlord’s efforts to notify Tenant of the
estimated construction schedule (including, without limitation, the estimated
date of early access pursuant to Section 8 of this Third Floor Work Letter) and
construction status meetings as set forth above shall be as an accommodation
only, and Landlord shall have no liability if it fails to give Tenant notice of
any such schedule (or changes thereto) or meetings.

 

5.         Default.  Notwithstanding anything herein to the
contrary, Landlord shall not be obligated to continue constructing the Third
Floor Improvements during the continuance of an uncured default under the
Lease, and Landlord’s obligation to do the same shall only resume when and if
such default is cured.  Any delay
resulting from Landlord discontinuing the construction of the Third Floor
Improvements during the continuance of an uncured default by Tenant under the
Lease shall be a Tenant Delay (as defined below).

 

6.         Tenant Delay.  If Landlord is delayed in the performance of
the Third Floor Improvements as a result of the acts or omissions of Tenant or
Tenant’s Agents including, without limitation, changes requested by Tenant to
the Space Plan and/or the Third Floor Improvements, Tenant’s failure to comply
with any of its obligations under the Lease or this Third Floor Work Letter,
the specification of any materials or equipment with long lead times or the
inclusion in the Third Floor Improvements of specialty improvements with
construction times longer than those for standard office improvements (each
such delay, a “Tenant Delay”), the Third Floor Improvements shall be deemed to
be substantially completed on the date that Landlord could reasonably have been
expected to have substantially completed the Third Floor Improvements absent
any such delay.  Tenant shall be
responsible for all costs reasonably incurred by Landlord as a result of a
Tenant Delay or any changes requested by Tenant to the Space Plan and/or the
Third Floor Improvements.

 

7.         Cleaning.  Upon completion of the Third Floor
Improvements, Landlord shall clean the Third Floor Premises at Landlord’s sole
cost and expense prior to delivery of the Third Floor Premises to Tenant.

 

8.         Early Access.  So long as such early access does not
interfere with Landlord’s construction of the Third Floor Improvements, Tenant
and Tenant’s agents shall have the right to access the Third Floor Premises
approximately two (2) weeks prior to the substantial completion thereof for the
purpose of installing its furniture, equipment, data, telecommunications
systems and trade fixtures or otherwise preparing the Third Floor Premises for
occupancy.  Such access shall be subject
to all of the terms of the Lease except the obligation to pay Base Monthly Rent
or Common Operating Expenses with respect to the Third Floor Premises
only.  To the extent the substantial
completion of the Third Floor Improvements shall be delayed as a direct result
of Tenant’s activities in the Third Floor Premises during such early access,
such delay shall be deemed a Tenant Delay.

 

9.         Restoration.  If Landlord so requests, Tenant shall, prior
to the expiration or sooner termination of this Lease, remove any non-standard
improvements to the Third Floor Premises and repair all damage caused by such
removal.  If the Third Floor Premises are
not so 

 

C-2

 

surrendered at the
termination of the Lease (as amended hereby), Tenant shall be liable to
Landlord for all costs incurred by Landlord in returning the Third Floor
Premises to the required condition, plus interest on all costs incurred at the
Agreed Interest Rate.

 

10.       Further Expansions.  This Third Floor Work Letter shall not be
deemed applicable to any additional space added to the Premises at any time or
from time to time, whether by any options under the Lease or otherwise, or to
any portion of the original Premises or any additions to the Premises in the
event of a renewal or extension of the Lease Term, whether by any options under
the Lease or otherwise, unless expressly so provided in the Lease or any
amendment or supplement to the Lease.

 

C-3

 

EXHIBIT
C-1 TO THIRD FLOOR WORK LETTER

 

SPACE
PLAN

 

[attached]

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