Document:

Exhibit 10.41

 

LEASE AGREEMENT

 

BY
THIS LEASE dated February 1, 2001, SANTA MARIA BUILDING PARTNERSHIP, a
California general partnership, herein called “Lessor,” leases to COASTAL
RADIATION ONCOLOGY MEDICAL GROUP, INC., a California corporation, herein
called “Lessee,” that certain real property, herein called “the Premises,” in
the City of Santa Maria, County of Santa Barbara, State of California, commonly
known as 316 South Stratford Avenue, Santa Maria, California, and more
particularly described in Exhibit A, attached hereto.

 

ARTICLE 1.  TERM
OF LEASE

 

Original Term

 

Section 1.01.         This Lease shall be for a
term of fifteen (15) years, commencing on February 1, 2001, and ending on January 31,
2016.

 

Extended Term

 

Section 1.02.         Should Lessee perform all the
terms and conditions of this Lease and provided Lessee is not then in default
under the terms of this Lease, Lessee may extend this Lease for two (2) additional,
separate terms of ten (10) years each, commencing on expiration of the
preceding term, by giving Lessor written notice of Lessee’s desire to extend
the term hereof not less than one hundred eighty (180) days prior to expiration
of the preceding term. This option to extend the term of this Lease is personal
to Lessee and may not be transferred by Lessee without Lessor’s prior written
consent.

 

Hold Over

 

Section 1.03.         Should Lessee hold over and
continue in possession of the Premises after expiration of the term of this
Lease or any extension thereof, Lessee’s continued occupancy of the Premises shall
be considered a month-to-month tenancy subject to all the terms and conditions
of this Lease, except that the base rent shall be in an amount equal to 100% of
the last monthly rent. If Lessee fails to surrender the Premises upon the
expiration of this Lease, Lessee shall indemnify and hold Lessor harmless from
all loss or liability, including without limitation, any claims made by any
succeeding tenant founded on or resulting from such failure to surrender.

 

ARTICLE 2.  RENT

 

Base Rent

 

Section 2.01.         For the first
year of the term hereof, Lessee agrees to pay to Lessor a fixed rental for the
use and occupancy of the Premises of Twenty Two Thousand Four Hundred Thirty
Three Dollars ($22,433.00) per month, payable on the first (1st) day of each
and every calendar month commencing on February 1, 2001, at

 

 

316 S. Stratford Avenue, Santa Maria, CA 93454, or
at such other place or places as Lessor may from time to time designate by
written notice delivered to Lessee.

 

Rent Adjustment

 

Section 2.02.         The Base Rent provided for
in Section 2.01 above shall be increased by three percent (3%) one year
after the commencement of the term hereof and annually thereafter on the same
date each calendar year.

 

Base Rent for Extension Terms

 

(a)           In the event Lessee timely
exercises its option to extend the lease term under Section 1.02 above,
then within fifteen (15) days of Lessee’s written notice to Lesior of Lessee’s
exercise of such option, Lessor and Lessee shall meet to establish the Base
Rent for the first year of the Extension Term (“Rent Meeting”). The Base Rent
per square foot of leaseable area in the Premises for the first year of each
extension term shall be the fair market rental value of the Premises,
determined in accordance with the following formula:

 

Vault Sq. Ft. X (Market Rent x 2.67) + Medical Sq. Ft X (Market Rent)

(divided by) total leaseable square footage

 

= Base Rent per square foot

 

As
used in the above formula, “Vault Sq. Ft.” means the total square footage of
the treatment vaults, other than any treatment vaults added at the Lessee’s
cost and expense. “Market Rent” is the current fair market rent per square foot
for medical office space in the City of Santa Maria, California on a triple net
basis. This space will be leased (not subleased) and will be comparable in
size, location and quality to the Premises. “Medical Sq. Ft” refers to all
leaseable space in the Premises other than Vault Sq. Ft. “Total leaseable
square footage” shall be the total leaseable square footage in the Premises
determined by survey.

 

In
the event that the parties cannot agree on the Market Rent for the first year
of an extension term, then within ten (10) days after the Rent Meeting,
Lessor and Lessee shall each specify in writing to the other party its
determination of such Market Rent Rate. If either party fails to submit its
written determination in accordance with this Section, the Base Rent for the
extension term shall be the determination submitted by the other party.

 

(b)           Within ten (10) days
after the parties have exchanged written determinations, Lessor and Lessee
shall mutually select three commercial realtors within the City of Santa Maria
to determine the Market. Rent. Each such realtor shall (i) be
disinterested; (ii) be qualified to determine the fair market rental rates
for real estate similar to the Premises; and (iii) have been actively
engaged in the leasing of comparable medical space in the City of Santa Maria
for a period of not less than five (5) continuous years immediately
preceding his or her appointment. If Lessor and Lessee are unable to mutually
select three such commercial realtors, then either party, 

 

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on behalf of both, may request such appointment by
the President of the local chapter of the California Realtors Association. If
such Association is not then in existence, either party, on behalf of both, may
request such appointment by the presiding judge of the Superior Court of the
Judicial District in which the property is located. Each such realtor shall
submit their respective determinations of Market Rent for the area in writing
to both parties and shall provide the basis for such determination.

 

(c)           The average of the three
written determinations of Market Rent prepared by the realtors so selected
shall be utilized to determine the Base Rent of the Premises for the initial
year of the extension term. The costs of the three realtors’ services shall be
shared equally by the parties. The decision of the realtors shall be binding
upon the Lessor and Lessee.

 

(d)           In the event that the
parties have not agreed on the Market Rent or the realtors have not been
selected and the Market Rent determined before the commencement of the
extension term, Lessee shall continue to pay the same lease rate in effect at
the end of the lease year immediately preceding the commencement of the
extension term. Lessee shall pay such sum as Base Rent until the initial Base
Rent for the extension term is determined, at which time Lessee shall promptly
pay Lessor any additional rent due by reason of any increase in the Base Rent
during the extension term over the Base Rent previously paid by Lessee. If the
Base Rent actually paid by Lessee during this period is ultimately determined
to be more than the revised Base Rent as finally determined as above provided,
any such over payment shall constitute a credit against the revised Base Rent,
and that credit shall be applied to the following month or months until such
credit is exhausted.

 

(e)           The Base Rent as above
determined shall be subject to increase at the end of the first lease year of
the extension term in the same manner as provided in Section 2.02 above.

 

Taxes, Utilities and Operating Expenses as Additional Rent

 

Section 2.03.         In addition to the rent
specified in Sections 2.01 and 2.02 above, Lessee shall pay, as additional
rent, all Utilities, Insurance, Personal and Real Property Taxes and
Operating Expenses directly to the vendor or creditor for such items, or
otherwise as set forth in this Section 2.03. If Lessee fails to pay any
such amount, Lessor may in its sole discretion, advance monies to pay such
items, and demand reimbursement in full from Lessee (referred to as “additional
rent” herein), including without limitation any cost, expense, assessment or
charge, as well as interest as provided in this Lease.

 

Utilities

 

(a)           Lessee shall pay, and hold
Lessor and the property of Lessor including the Premises, free and harmless
from, all charges for the furnishing of gas, water, sewer, electricity,
telephone service, garbage and trash removal and other public utilities during
the entire term of this Lease or any extension thereof. All such charges shall
be paid by 

 

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Lessee directly to the provider of the service and
shall be paid as they become due and payable but in any event before
delinquency.

 

Lessee agrees that Lessor shall not be
liable for damages, by abatement of Rent or otherwise, for failure to furnish
or delay in furnishing any service (including telephone and telecommunication
services) or for diminution in the quality or quantity of any service when the
failure, delay, or diminution is entirely or partially caused by:

 

(i)        Breakage repairs,
replacements, or improvements;

 

(ii)       Strike, lockout, or other
labor trouble;

 

(iii)      Inability to secure
electricity, gas, water, or other fuel at the Building after reasonable effort
to do so;

 

(iv)     Accident or casualty;

 

(v)      Act or default of Lessee or
other parties; or

 

(vi)     Any other cause beyond
Lessor’s reasonable control.

 

Such failure, delay, or diminution shall
not be considered to constitute an eviction or a disturbance of Lessee’s use
and possession of the Premises or relieve Lessee from paying rent or performing
any of its obligations under this Lease. Lessor shall not be liable under any
circumstances for a loss of or injury to property or for injury to or
interference with Lessee’s business, including loss of profits through, in
connection with, or incidental to a failure to furnish any of the utilities or
services under this Section 2.03. Lessor may comply with mandatory or
voluntary controls or guidelines promulgated by any government entity relating
to the use or conservation of energy, water, gas, light, or electricity or the
reduction of automobile or other emissions without creating any liability of
Lessor to Lessee under this Lease as long as compliance with voluntary controls
or guidelines does not materially and unreasonably interfere with Lessee’s use
of the Premises.

 

Personal Property Taxes

 

(b)           Lessee shall pay before they
become delinquent all taxes, assessments and other charges levied or imposed by
any governmental entity on the furniture, trade fixtures, equipment and other
personal property placed by Lessee in, on or about the Premises.

 

Real Property Taxes

 

(c)           Lessee shall pay all real
property taxes and general and special assessments on the Premises, including
any increases in such taxes and assessments, before they become delinquent.

 

The
real property taxes and assessments levied against the Premises for the first
and last years of the term hereof shall be prorated between Lessor and Lessee
for 

 

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purposes
of this section as of 12:01 A.M. on the date of commencement and
termination respectively of this Lease.

 

Lessee
shall have the right, at Lessee’s sole cost and expense, to protest or contest
in good faith the amount of any tax or assessment. As a condition precedent to
Lessee’s right to protest such taxes or assessments, Lessee shall either pay the
disputed amount and file for refund or deposit with Lessor the disputed amount
plus one (1) years interest at the rate then charged by said county plus
any estimated penalty which Lessor may incur by non-payment. Upon such payment
or deposit, Lessor shall cooperate with Lessee in prosecuting such dispute.

 

Operating Expenses

 

(d)           Lessee shall pay all
Operating Expenses attributable to the occupation and use of the Premises.

 

The
term “Operating Expenses” as used in this Lease shall mean all expenses, costs
and fees attributable to Lessee’s use and occupancy of the Premises under this
Lease, including but not limited to:

 

(i)      Miscellaneous operating
costs, maintenance, security services, replacement for normal wear and tear,
repair, re-striping and resurfacing of paving, insurance (including public
liability and property damage, rent continuation, boiler and machinery and
extended coverage insurance), and cleaning of the Premises and all parts
thereof and all furnishings, fixtures and equipment therein. The term “Operating
Expenses” shall include the annual amortization of costs (including financing
at the then prevailing rate, if any) of any improvements, equipment, or devices
required by any governmental authority or incurred as a labor saving measure or
to reduce operation or maintenance expenses with respect to the Premises where
such costs are amortized over the useful life thereof.

 

(ii)     Operating Expenses shall
also include licenses, permits, charges and assessments which are levied,
assessed, imposed or collected by any governmental authority or improvement or
assessment district during any calendar year with respect to the Premises and
Lessee’s use and occupancy of the Premises and the land on which the premises
are located, and any improvements, fixtures, equipment and other property of
Lessor, real or personal, used in connection with the operation or maintenance
of the Premises (computed on a cash basis or as if paid in permitted
installments regardless of whether actually so paid), as well as any tax which
shall be levied or assessed in addition to or in lieu of any tax described in
Sections 2.03 (b) or (c) above (it being acknowledged that because of
the passage of laws which limit increases in property taxes, government
agencies may impose fees, charges, assessments or other levies in connection
with services previously furnished without charge or at a lesser charge and
which were previously paid for in whole or in part, directly or indirectly by
real property taxes), any gross excise tax or other similar tax, and any costs
or expenses of contesting any such taxes, licenses, charges or assessments, but
excluding any federal or state income or gift tax or any franchise, capital
stock, estate or Inheritance taxes.

 

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Late Charges

 

Section 2.04.         If any installment of rent
or other payment required to be paid by Lessee to Lessor is not paid within ten
(10) days of the date on which it is due, a late charge equal to five
percent (5%) of the late payment shall be due from Lessee to Lessor to
compensate Lessor for the additional administrative work caused by such default
and to compensate Lessor for the loss of use of such defaulted payment. The
late charge herein shall be in addition to any other remedy which Lessor may
have hereunder for such default.

 

Interest on Late Payments

 

Section 2.05.         If any payment required to
be paid by Lessee to Lessor is not paid within ten (10) days of the date
on which it is due, such payment shall bear interest at the maximum rate
permitted by law from the date it became due until it is paid by Lessee to
Lessor.

 

ARTICLE 3.  USE
OF PREMISES

 

Permitted Use

 

Section 3.01.         The Premises shall, during
the term of this Lease and any extensions thereof, be used for conducting a
medical and radiation oncology business, for related activities and for no
other purpose without the prior written consent of Lessor.

 

Insurance Hazards

 

Section 3.02.         Lessee shall not commit or
permit the commission of any acts on the Premises nor use or permit the use of
the Premises in any manner that will increase the existing rates for or cause
the cancellation of any fire, liability, or other insurance policy insuring the
Premises or the improvements on the Premises.

 

Waste or Nuisance

 

Section 3.03.         Lessee shall not commit or
permit the commission by others of any waste on the Premises; Lessee shall not
maintain, commit, or permit the maintenance or commission of any nuisance as
defined in Section 3479 of the California Civil Code on the Premises; and
Lessee shall not use or permit the use of the Premises for any unlawful
purpose.

 

Hazardous Materials

 

Section 3.04.         Lessee warrants and
represents that during the term hereof, and any extensions thereof, Lessee
shall not use the Premises in any manner that would be in violation of any
federal, state or local law, ordinance or regulation relating to environmental
conditions on, under or about the Premises, including but not limited to soil
and groundwater conditions. Lessee shall not use, generate, manufacture, produce,
store or dispose of on, under or about the Premises any hazardous materials,
including without limitation, flammable materials, explosives, asbestos,
radioactive materials, 

 

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hazardous wastes, toxic substances or related
injurious materials, whether injurious by themselves or in combination with
other materials, other than such materials as may be necessary for Lessee’s
normal operations on the Premises. Lessee shall not dispose of or permit the
disposal of any hazardous materials into the sewer system serving the Premises.

 

As
used in this Section 3.04, the term “Hazardous Material” shall mean any
hazardous or toxic substance, material, or waste at any concentration that is
or becomes regulated by the United States, the State of California, or any
local gov6rnment authority having jurisdiction over the Building. Hazardous
Material includes:

 

(a)           Any “hazardous substance,”
as that term is defined in the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 (CERCLA) (42 United States Code sections 9601-9675);

 

(b)           “Hazardous waste,” as that
term is defined in the Resource Conservation and Recovery. Act of 1976 (RCRA)
(42 United States Code sections 6901-6992k);

 

(c)           Any pollutant, contaminant,
or hazardous, dangerous, or toxic chemical, material, or substance, within the
meaning of any other applicable federal, state or local law, regulation,
ordinance, or requirement (including consent decrees and administrative orders
imposing liability or standards of conduct concerning any hazardous, dangerous,
or toxic waste, substance, or material, now or hereafter in effect);

 

(d)           Petroleum products;

 

(e)           Radioactive material,
including any source, special nuclear, or byproduct material as defined in 42
United States Code sections 2011-2297g-4;

 

(f)            Asbestos in any form or
condition; and

 

(g)           Polychlorinated biphenyls
(PCBs) and substances or compounds containing PCBs.

 

If,
during the Lease Term (including any extensions), Lessee becomes aware of (i) any
actual or threatened release of any Hazardous Material on, under, or about the
Premises or the Building or (ii) any inquiry, investigation, proceeding,
or claim by any government agency or other person regarding the presence of
Hazardous Material on, under, or about the Premises or the Building, Lessee
shall give Lessor written notice of the release or investigation within five (5) days
after learning of it and shall simultaneously furnish to Lessor copies of any
claims, notices of violation, reports, or other writings received by Lessee
that concern the release or investigation.

 

Lessee
shall, at Lessee’s sole expense and with counsel reasonably acceptable to
Lessor, indemnify, defend, and hold harmless Lessor and Lessor’s shareholders,
directors, officers, employees, partners, affiliates, agents, successors, and
assigns with respect to all losses arising out of or resulting from the release
of any Hazardous 

 

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Material
in or about the Premises or the Building, or the violation of any Environmental
Law, by Lessee or Lessee’s agents, assignees, sublessees, contractors, or
invitees. This indemnification applies whether or not the concentrations of any
such Hazardous Material is material, the concentrations exceed state or federal
maximum contaminant or action levels, or any governmental agency has issued a
cleanup order. This indemnification includes:

 

(1)           Losses attributable to
diminution in the value of the Premises or the Building;

 

(2)           Loss or restriction of use
of rentable space in the Building;

 

(3)           Adverse effect on the
marketing of any space in the Building; and

 

(4)           All other liabilities,
obligations, penalties, fines, claims, actions (including remedial or
enforcement actions of any kind and administrative or judicial proceedings,
orders, or judgements), damages (including consequential and punitive damages),
and costs (including attorney, consultant, and expert fees and expenses)
resulting from the release or violation.

 

This indemnification shall survive the expiration or termination of
this Lease.

 

If
the presence of any Hazardous Material brought onto the Premises or the
Building by Lessee or Lessee’s employees, agents, contractors, or invitees
results in contamination of the Building, Lessee shall promptly take all
necessary actions to remove or remediate such Hazardous Materials, whether or
not they are present at concentrations exceeding state or federal maximum
concentration or action levels, or any governmental agency has issued a cleanup
order, at Lessee’s sole expense, to return the Premises or the Building to the
condition that existed before the introduction of such Hazardous Material.
Lessee shall first obtain Lessor’s approval of the proposed removal or remedial
action. This provision does not limit the indemnification obligation set forth
in Section 3.04.

 

Compliance With Law

 

Section 3.05.         Lessee shall at Lessee’s own
cost and expense comply with all statues, ordinances, regulations, existing use
permits and requirements of all governmental entities, both federal and state
and county or municipal, relating to Lessee’s use and occupancy of the Premises
whether such statutes, ordinances, regulations, and requirements be now in
force or hereinafter enacted. The judgment of any court of competent
jurisdiction, or the admission by Lessee in a proceeding brought against Lessee
by any government entity, that Lessee has violated any such statute, ordinance,
regulation, or requirement shall be conclusive as between Lessor and Lessee and
shall be grounds for termination of this Lease by Lessor. Lessor agrees that
any requirements of the Municipal, State, or Federal authorities which require
alteration of Lessor’s building shall not be the responsibility of Lessee,
unless required because of an act of Lessee or a use of the Premises by Lessee.

 

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ARTICLE 4.  ALTERATIONS AND REPAIRS

 

Maintenance

 

Section 4.01.         Lessee shall at his own cost and
expense keep and maintain all portions of the Premises as well as all
improvements on the Premises and all facilities appurtenant to the Premises,
including but not limited to electrical, plumbing, heating and air
conditioning, sewage systems, roof and outer walls in good order and repair and
in as safe and dean a condition as they were when received by Lessee from
Lessor, reasonable wear and tear excepted.

 

Should
Lessee fail to maintain the Premises as set forth above, Lessor may, at Lessor’s
option, perform or contract for the performance of such maintenance for and on
behalf of Lessee. In such event, Lessee shall promptly on written demand of
Lessor reimburse Lessor for all cost and expense incurred by Lessor in
performing Lessee’s obligations hereunder plus interest at the maximum rate
permitted by law from the date expended by Lessor to the date of repayment by
Lessee.

 

Alterations and Liens

 

Section 4.02.         Lessor and Lessee agree that from time
to time during the term of this Lease, Lessee may desire alterations, changes
and additions in and to the interior of the Premises and to the Building that
are necessary or convenient to the operation of its business at the Premises.

 

Non-structural Changes

 

(a)           Lessee may, at its own expense, make nonstructural changes
to the interior of the Premises (eg. revisions to interior decor, carpeting,
painting, wall covering, etc.) provided that the value of the Premises shall
not be diminished thereby. Further provided, that any non-structural changes
exceeding $5,000 in total cost must first be approved by the Lessor prior to
commencement of such changes.

 

Structural Changes

 

(b)           If Lessee desires either (i) interior changes to the
Premises of a structural nature (eg. relocating interior walls); or (ii) changes
to the facade or exterior walls or roof, or (iii) desires the addition of
square footage to the Premises (i.e. addition of Medical square footage or
Vault square footage) then Lessee shall submit detailed plans and
specifications for any proposed alteration or improvement to the Premises for
Lessor’s review and approval. The Lessor shall have the option to approve or
deny the request for structural changes in writing within 30 (thirty) days of
receipt of such request, in the reasonable discretion of the Lessor. The
failure of the Lessor to disapprove or object to such plans and specifications
or any substantial changes therein within said thirty (30) days, shall constitute
Lessor’s disapproval of the same. Subsequent to such approval, minor changes in
work or materials not affecting the general character of the improvements need
not be approved by Lessor but a copy of the altered plans and specifications
reflecting such changes must be promptly given to Lessor. If approved, 

 

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the Lessor shall have the option to pay for the
changes, or not, in its sole discretion. If the Lessor chooses to pay for the
changes, then the parties shall meet immediately to negotiate an adjustment to
the Base Rent to go into effect at the completion of the alterations. If the
Lessor chooses not to pay for the alterations, the Lessee has the option to
proceed with the alterations, in its sole discretion and at its expense,
without paying any amount of rent for the added square footage for the
remaining Original Term, only the expenses attributable to the additional
space.

 

Supervision of Alterations

 

(c)           All structural changes to the Premises involving load
bearing walls which require Lessor’s approval shall be made under the
supervision of a licensed architect or licensed structural engineer in
accordance with the detailed plans and specifications submitted to Lessor as
above provided.

 

Notices of Non-Responsibility

 

(d)           Lessee shall provide Lessor with at least twenty (20) days
written notice prior to commencing any alteration, addition or change to the
Premises requiring Lessor’s approval and Lessor shall have the right to enter
the Premises to post Notices of Non-Responsibility as provided by law.

 

Quality of Work; Ownership

 

(e)           All work with respect to any alteration, addition or
change must be performed in a good and workmanlike manner and diligently
prosecuted to completion to the end that the Premises shall at all times be a
complete unit, except during the period of work. Furthermore, any and all
alterationt, additions, improvements, and fixtures, except furniture and trade
fixtures, made or placed in or on the Premises by Lessee or any other person
shall on expiration or sooner termination of this Lease become the property of
Lessor and remain on the Premises; provided, however, that Lessor shall have
the option on expiration or sooner termination of this Lease of requiring
Lessee, at Lessee’s sole cost and expense, to remove any or all such
alterations, additions, improvements, or fixtures from the Premises (excluding
vaults). All such changes, alterations, and improvements shall be performed and
completed strictly in accordance with the laws and ordinances relating thereto,
and in such a manner as not to impede access to the Premises.

 

Lessee
shall not be the cause or object of any liens or allow such liens to exist,
attach to, be placed on, or encumber Lessor’s or Lessee’s interest in the
Premises, Building, or Real Property by operation of law or otherwise. Lessee
shall not suffer or permit any lien of mechanics, material suppliers, or others
to be placed against the Premises, with respect to work or services performed
or claimed to have been furnished to Lessee or the Premises. If any such lien
attaches or Lessee receives notice of any such lien, Lessee shall cause the
lien to be immediately released and removed of record. Despite any other
provision of this Lease, if the lien is not released and removed within 10
(ten) days after Lessor delivers notice of the lien to Lessee, Lessor may
immediately take all action necessary to release and remove the lien, without
any duty 

 

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to
investigate the validity of it. All expenses (including reasonable attorney
fees) incurred by Lessor in connection with the lien shall be considered
additional rent under this Lease and be immediately due and payable by Lessee.

 

Additional Requirements

 

(f)            If Lessee pays for the changes, the following provisions
shall apply to such changes:

 

(i)      The exterior of the improvements shall be compatible with the
design and appearance of the Premises as it exists at the time of execution of
this Lease.

 

(ii)     All work required in the construction of the structural changes,
including any site preparation work, utility installations as well as actual
construction shall be performed only pursuant to a contract entered into by
Lessee with a competent general contractor and sub-contractors duly licensed as
such under the Laws of the State of California, with proof of adequate
liability and workers compensation insurance.

 

(iii)    The approval by Lessor of any plans and specifications under this
paragraph refers only to the conformity of such plans and specifications to the
general architectural plan for the Building. By approving such plans and
specifications, Lessor assumes no liability or responsibility therefor and for
any defect in any structure constructed from such plans or specifications.

 

Inspection by Lessor

 

Section 4.03.         Lessee shall permit Lessor or his
agents to enter into and upon the Premises during business hours for the
purpose of inspecting the same, or for the purpose of posting notices of
non-responsibility for alterations, additions or repairs or for the purpose of
placing upon the property in which the Premises are located any usual or
ordinary “for sale” signs, without any rebate of rent and without any liability
to Lessee for any loss of occupation or quiet enjoyment of the Premises thereby
occasioned. Lessee shall permit Lessor, at any time within one hundred eighty
(180) days prior to the expiration of this Lease, to place upon the Premises
any usual or ordinary “to let” or “to lease” signs, provided that such entries
made by Lessor hereunder shall not unreasonably interfere with the conduct of
Lessee’s business.

 

Surrender of Premises

 

Section 4.04.         On expiration or sooner termination of
this Lease, or any extensions or renewals of this Lease, Lessee shall promptly
surrender and deliver the Premises to Lessor in as good condition as they are
on at the date of possession, reasonable wear and tear excepted.

 

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ARTICLE 5.  INDEMNITY AND INSURANCE

 

Hold-Harmless Clause

 

Section 5.01.         To the fullest extent permitted by law,
Lessee, on its behalf and on behalf of its successors and assignees, waives all
claims (in law, equity, or otherwise) against Lessor, its officers, directors,
principals, agents, successors, assignees and agent arising out of, knowingly
and voluntarily assumes the risk of, and agrees that Lessor shall not be liable
to Lessee for any of the following acts or failure to act set forth in
paragraphs (a) to (c) below. Lessor shall not be liable under this clause
regardless of whether the liability results from any active or passive act,
error, omission, or negligence of any of the Lessor; or is based on claims in
which liability without fault or strict liability is imposed or sought to be
imposed on any of the Lessor. This exculpation clause shall not apply to claims
against Lessor to the extent that a final judgment of a court of competent
jurisdiction establishes that the injury, loss, damage, or destruction was
proximately caused by Lessor’s fraud, willful injury to person or property, or
violation of law.

 

(a)           The death or injury of any person or persons, including
Lessee or any person who is an employee or agent of Lessee, or by reason of the
damage to or destruction of any property, including property owned by Lessee or
any person who is an employee or agent of Lessee, and caused or allegedly
caused by either the condition of the Premises, or some act or omission of
Lessee or of some agent, contractor, employee, servant, sublessee, or
concessionaire of Lessee on the Premises;

 

(b)           Any work performed on the Premises or materials furnished
to the Premises at the instance or request of Lessee or any agent or employee
of Lessee;

 

(c)           Lessee’s failure to perform any provision of this Lease or
to comply with any requirement imposed on Lessee or the leased Premises by any
duly authorized governmental agency or political subdivision.

 

Liability Insurance

 

Section 5.02.         Lessee shall, at its own cost and
expense, obtain and maintain during the entire term of this Lease and any
renewals or extensions thereof, a broad form comprehensive coverage policy of
public liability insurance issued by an insurance company or companies rated by
Best as A+ or better and authorized to conduct insurance business in the State
of California and insuring Lessee and Lessor against loss or liability caused
by or connected with Lessee’s occupation and use of the Premises under this
Lease in amounts not less than:

 

(a)           $1,000,000.00 combined single limit for injury to or death
as a result of any accident or incident.

 

(b)           $2,000,000.00 for damage to or destruction of any property
of others.

 

12

 

Such
public liability insurance, and property damage insurance shall insure
performance by Lessee of the indemnity provisions of Section 5.01 above. Both
parties shall be named as co-insured, and the policy shall contain cross
liability endorsements, if available. The policy shall be primary insurance for
all claims under it and provide that any insurance carried by Lessor is
strictly excess, secondary, and noncontributing with any insurance carried by
Lessee. Lessee may provide such insurance under a single policy or under one or
more separate policies.

 

Every
three (3) years, Lessor may increase the amount of public liability and
property damage insurance coverage required hereunder, if at that time the
existing coverage is not adequate in the opinion of Lessor’s insurance broker
or lender(s).

 

Fire and Casualty Insurance

 

Section 5.03.         Lessee shall, at Lessee’s sole cost and
expense, at all times during the term hereof, and any extensions thereof, keep
all buildings, improvements and other structures on the Premises insured for
their full replacement cost against loss or destruction by fire and the perils,
including vandalism and malicious mischief, commonly covered under standard
extended coverage endorsements in Santa Barbara County, California. Lessor
shall be named as an additional insured on all such policies and the policies
shall contain a cross-liability endorsement.

 

“Full
replacement cost” as used herein shall mean the actual cost of replacement for
the buildings and other improvements on the Premises, as determined from time
to time by Lessor. Upon notification to Lessee in writing of Lessor’s determination
of full replacement cost, Lessee shall, within thirty (30) days of such written
notice, increase the amount of the insurance carried to the amount stated in
the notice.

 

Business Interruption Insurance

 

Section 5.04.         Lessee shall, at all times during the
term of this Lease and any extensions thereof, maintain at Lessee’s sole cost
and expense a policy of business interruption insurance, ensuring the rent
provided for in this Lease will be paid to Lessor for a period not less than
one (1) year in the event the Premises are destroyed-or damaged so as to render
operation of Lessee’s business impossible or impractical by any casualty
insured against by standard fire and extended coverage insurance.

 

Lessee’s Personal Property

 

Section 5.05.         Lessee shall, at all times during the
term of this Lease and any extensions thereof, maintain at Lessee’s sole cost
and expense an insurance policy issued by a company acceptable to Lessor
insuring for their full insurable value all furniture, fixtures, equipment and
alterations or improvements made to the Premises by Lessee against loss or
destruction by fire and the perils commonly covered under the standard extended
coverage endorsement to fire insurance policies in Santa Barbara County. Any
loss payable under such insurance shall be payable to Lessee and shall be used
to repair or replace such furniture, fixtures, equipment and alterations and
improvements.

 

13

 

Cancellation Clause

 

Section 5.06.         Any policy of insurance required to be
obtained and maintained by Lessee under this Article shall be written by
insurance companies authorized to do business in the State of California. Each
such policy of insurance shall expressly provide that it cannot be cancelled
for any reason or altered in any manner unless at least thirty (30) days prior
written notice has been given to Lessor by the insurance company.

 

Deposit of Insurance with Lessor

 

Section 5.07.         Lessee shall, prior to taking
possession of the Premises and promptly thereafter when any such policy is
replaced, rewritten, or renewed, deliver to Lessor a true and correct copy of
each insurance policy required by this Article of this Lease or a certificate
executed by the insurance company or companies or their authorized agent
evidencing such policy or policies.

 

Lessor’s Right to Procure Insurance

 

Section 5.08.         If at any time Lessee fails to procure
or maintain the insurance required by this Article, Lessor may obtain that
insurance and pay the premiums on it for the benefit of Lessee. Any amounts
paid by Lessor to procure or maintain insurance pursuant to this section shall
be immediately due and repayable to Lessor by Lessee with the next then due
installment of rent under this Lease. Failure to repay at that time any amount
expended by Lessor shall be considered the same as a failure to pay rent and a
default by Lessee under this Lease.

 

Lessor’s Indemnity

 

5.09.       Lessor expressly
agrees to indemnify, protect, defend and hold Lessee harmless from all claims
arising from any breach or default in the performance of any obligation to be
performed by Lessor under the terms of this Lease and from and against all
costs, loss, damage, legal expenses and liabilities incurred in connection with
such claim or any action or proceeding brought thereon. Notwithstanding
anything to the contrary herein, any claim for indemnity brought by the Lessee
under this provision shall be limited to Lessor’s interest in the Premises, and
Lessee shall not have recourse to any other assets of Lessor or to the assets
of any partner of Lessor for such claim.

 

ARTICLE 6.  SIGNS AND TRADE FIXTURES

 

Installation and Removal of Trade Fixtures

 

Section 6.01.         Lessee shall have the right at any time
and from time to time during the term of this Lease and any renewal or
extension of such term, at Lessee’s sole cost and expense, to install and affix
in, to, or on the Premises such items, herein called “trade fixtures”, for use
in Lessee’s trade or business as Lessee may, in its sole discretion, deem
advisable. Any and all such trade fixtures that can be removed without
structural damage to the Premises or any building or improvement on the
Premises 

 

14

 

shall remain the property of the Lessee and may be
removed by Lessee at any time or times prior to the expiration or sooner
termination of this Lease.

 

Unremoved Trade Fixtures

 

Section 6.02.         Any trade fixtures described in this Article
that are not removed from the Premises by Lessee within ten (10) days after the
expiration or sooner termination, regardless of cause, of this Lease shall be
deemed abandoned by Lessee and shall automatically become the property of
Lessor as owner of the real property to which they are affixed, unless Lessor
notifies Lessee, in writing, of Lessor’s election to have-Lessee remove such
trade fixtures and to repair any damage caused thereby. Upon such election by
Lessor to require Lessee to remove such trade fixtures, Lessee shall have
fifteen (15) days from the date of such notice in which to remove such trade
fixtures and repair any damage caused by such removal. If Lessee fails to
remove such trade fixtures and repair any such damage, Lessor may do so at
Lessee’s sole cost and expense, including any costs of storing such property.
Such costs and expenses, if incurred by Lessor for Lessee’s benefit, shall be
promptly, upon written demand therefor, reimbursed to Lessor by Lessee,
together with interest at the maximum rate permitted by law from the date
expended by Lessor to the date of reimbursement by Lessee.

 

Signs

 

Section 6.03.         Lessee may place and maintain, or
permit any other person to place and maintain any sign on the Premises
providing such sign is in compliance with then existing governmental
regulations. Lessee may not place any decoration, lettering, or advertising
matter on the glass of any exterior show window of the Premises. Lessee shall
maintain such sign at all times during this Lease in good appearance and
repair. On expiration or sooner termination of this Lease, all such signs not
removed from the Premises by Lessee on such expiration or termination of this
Lease may, without liability, be destroyed by Lessor.

 

ARTICLE 7.  DAMAGE, DESTRUCTION OR CONDEMNATION

 

Duty to Repair or Restore

 

Section 7.01.         If any improvements, including the
buildings and other structures, located on the Premises are damaged or
destroyed during the term of this Lease or any extension thereof, the damage
shall be repaired as follows:

 

(a)           If the damage or destruction is caused by a peril against which
fire and extended coverage insurance is required to be carried under this
Lease, Lessee shall repair that damage as soon as reasonably possible and
restore the Premises and improvements to substantially the same condition as
existed before the damage or destruction, regardless of whether the insurance
proceeds are sufficient to cover the actual cost of repair or restoration. If
insurance required to be carried by Lessee under this Lease has lapsed or not
been carried, Lessee shall be solely responsible for the full cost and expense
of necessary repairs and restoration.

 

15

 

(b)           If the damage or destruction is caused by a peril against
which insurance is not required to be carried by this Lease, Lessor, subject to
Lessor’s right to terminate this Lease described in Section 7.02, shall repair
that damage as soon as reasonably possible and restore the Premises to
substantially the same condition as existed before the damage or destruction.

 

(c)           Whether the damage of destruction is caused either by a
peril against which fire and extended coverage insurance is required by this
Lease to be carried or by a peril against which insurance is not required to be
carried by this Lease, Lessee expressly waives any right under Civil Code
Sections 1931-1933 to terminate this Lease fordmage or destruction to the
Premises.

 

Termination of Lease for Certain Losses

 

Section 7.02.         (a) 
Notwithstanding any other provision of this Lease, if any improvements
located on the Premises are damaged or destroyed to such extent it will cost
more than $100,000.00 to repair or replace them, and the damage or destruction
is caused by a peril against which insurance is not required to be carried by
this Lease, Lessor may terminate this Lease by giving Lessee written notice of
the termination. The notice must be given within sixty (60) days after the
occurrence of the damage or destruction.

 

(b)           Lessee or Lessor shall have the right to terminate this
Lease under either of the following circumstances:

 

(i)      If the Premises are damaged or destroyed from any cause
whatsoever, insured or uninsured, and the laws then in effect do not permit the
repair or restoration of the Premises provided for in this Article; or

 

(ii)     If the Premises are damaged or destroyed from any cause
whatsoever, insured or uninsured, during the last year of the term of this
Lease or any extension thereof (provided Lessee has not elected before the date
of damage or destruction to extend the term of this Lease in accordance with Section
1.02).

 

(c)           Either party may terminate this Lease by giving written
notice of termination to the other party not later than fourteen (14) days
after the right to terminate accrues, and such termination shall be effective
as of the date of the notice of termination. In the event of a termination
under subsection (b), Lessee shall not be entitled to collect any insurance
proceeds attributable to insurance policies covering the Premises or
improvements except those proceeds attributable to Lessee’s personal property
and trade fixtures.

 

(d)           If this Lease is terminated pursuant to either subsection (a)
or (b) above, the rent and other sums payable by Lessee to Lessor under this
Lease shall be prorated as of the termination date. If any such sums have been
paid in advance by Lessee, Lessor shall refund them to Lessee for the unexpired
period for which the payment has been made.

 

16

 

Time for Construction of Repairs

 

Section 7.03.         Any and all repairs and restorations of
improvements required by this Article shall be commenced by Lessor or Lessee,
as the case may be, within a reasonable time after the occurrence of the damage
or destruction requiring the repairs or restoration; shall be diligently
pursued after being commenced; and shall be completed within a reasonable time
after the loss. If Lessor is required under this Lease to perform the repairs
and restoration, Lessor shall cause the repairs and restoration to be completed
within 180 days after the occurrence of the event causing destruction or Lessee
shall have the right to terminate this Lease, unless the delays are caused by
events outside the control of Lessor.

 

Insurance Proceeds

 

Section 7.04.         If the damage or destruction is caused
by a peril against which fire and extended coverage insurance is required to be
carried and maintained under this Lease by Lessee, the proceeds of insurance
shall be paid directly to the parties for the purpose of making the necessary
repairs to the Premises as required under this Lease.

 

Abatement of Rent

 

Section 7.05.         In the event of repair, replacement or
restoration as herein provided, the Base Rent payable under this Lease shall be
abated proportionately with the degree to which Lessee’s use of the Premises is
impaired, from the date of the damage until completion of repairs plus one (1) calendar
month. Lessee shall not be entitled to any compensation of damages for loss in
the use of all or part of the Premises and/or for any inconvenience or
annoyance occasioned by such damage, repair, replacement or reconstruction.

 

Total Condemnation

 

Section 7.06.         Should, during the term of this Lease
or any renewal or extension thereof, title and possession of all of the
Premises be taken under the power of eminent domain by any public or
quasi-public agency or entity, this Lease shall terminate as of 12:01 A.M. on
the date actual physical possession of the Premises is taken by the agency or
entity exercising the power of eminent domain and both Lessor and Lessee shall
thereafter be released from all obligations, except those specified in Section 7.10
of this Lease, under this Lease.

 

Termination Option for Partial Condemnation

 

Section 7.07.         Should, during the term of this Lease
or any extension thereof, title and possession of only a portion of the
Premises be taken under the power of eminent domain by any public or
quasi-public agency or entity, Lessee may, at Lessee’s option, terminate this
Lease if more than 35 percent of the floor space or more than 55 percent in
value of the Premises is taken under the power of eminent domain. Lessee shall
exercise its option by giving written notice to Lessor within 30 days after
actual 

 

17

 

physical possession of the portion subject to the
eminent domain power is taken by the agency or entity exercising that power.
This Lease shall terminate as of 12:01 A.M. on the date the notice is deemed
given to Lessor but the rent specified in Article 2 of this Lease shall be
reduced in the manner specified in Section 7.08 below from the date of taking
to the date of termination of the lease.

 

Partial Condemnation Without Termination

 

Section 7.08.         Should Lessee fail to exercise the
option described in Section 7.06 of this Lease or should the portion of the Premises
taken under the power of eminent domain be insufficient to give rise to the
option described in Section 7.07 of this Lease, then; in that event:

 

(a)           This Lease shall terminate as to the portion of the
Premises taken by eminent domain as of 12:01 A.M. on the day, herein called the
“date of taking,” actual physical possession of that portion of the Premises is
taken by the agency or entity exercising the power of eminent domain;

 

(b)           The rent specified in Article 2 of this Lease shall, after
the date of taking, be reduced by an amount that bears the same ratio to the
rent specified in Article 2 of this Lease as the square footage floor space of
the portion of said premise taken under the power of eminent domain bears to
the total square footage floor space of the Premises as of the date of this
Lease; and

 

(c)           Lessor, at Lessor’s own cost and expense, will remodel and
reconstruct the building remaining on the portion of the Premises not taken by
eminent domain into a single efficient architectural unit as soon after the
date of taking, or before, as can be reasonably done; provided, however, that
the rent specified in this Lease shall not be abated or reduced, except as
provided in subparagraph (b) of this section, during such remodeling and
reconstruction.

 

Condemnation Award

 

Section 7.09.         Should, during the term of this Lease
or any renewal or extension thereof, title and possession of all or any portion
of the Premises be taken under the power of eminent domain by any public or
quasi-public agency or entity, the portion of the compensation or damages for
the taking awarded to each of the parties to this Lease, Lessor and Lessee,
shall belong to and be the sole property of the party Lessor or Lessee, to whom
it is awarded. Lessee shall be entitled to that portion of the compensation or
damages awarded for the eminent domain taking that represents (i) reasonable
value of Lessee’s rights under this Lease for the unexpired term of this Lease
and (ii) the cost or loss sustained by Lessee because of the removal of Lessee’s
trade fixtures, equipment and furnishings from the portion of the Premises
taken by eminent domain.

 

18

 

 

Arbitration of Condemnation Award

 

Section 7.10.         Should separate awards not be made to
Lessor and Lessee for the taking by eminent domain of all or any portion of the
Premises, and should Lessor and Lessee be unable to agree on the manner the
total award is to be divided between them pursuant to Section 7.09 of this
Lease, the proper division of the award between Lessor and Lessee shall be
settled by arbitration as provided in Section 9.03.

 

Lessee’s Waiver

 

Section 7.11.         Lessee agrees that its rights to terminate
this Lease due to partial condemnation are governed by this Section. Lessee
waives all rights it may have under California Code of Civil Procedure section
1265.13, or otherwise, to terminate this Lease based on a partial condemnation.

 

ARTICLE 8.  DEFAULT, ASSIGNMENT, AND TERMINATION

 

Subleasing or Assigning as Breach

 

Section 8.01.         Lessee shall not encumber, assign, or
otherwise transfer this Lease, any right or interest in this Lease, or any
right or interest in the Premises or any of the improvements that may now or
hereafter be constructed or installed on the Premises without the express
written consent of Lessor first had and obtained. Neither shall Lessee sublet
the Premises or any part thereof or allow any other person, other than Lessee’s
patrons, agents, servants, and employees, to occupy the Premises or any part
thereof without the prior written consent of Lessor. The consent of Lessor to
any assignment of Lessee’s interest in this Lease or the subletting by Lessee
of the Premises or parts of the Premises shall not be unreasonably withheld. A
consent by Lessor to one assignment, one subletting, or one occupation of the
Premises by another person shall not be deemed to be a consent to any
subsequent assignment, subletting, or occupation of the Premises by another
person. Any encumbrance, assignment, transfer, or subletting without the prior
written consent of Lessor, whether it be voluntary or involuntary, by operation
of law or otherwise, is void and shall, at the option of Lessor, terminate this
Lease. Notwithstanding the above, Lessee may assign or sublease the Premises,
or portions thereof, to a subsidiary, affiliate or parent of Lessee. Such
permitted assignment shall not relieve Lessee or any person who has personally
guaranteed Lessee’s performance of this Lease from any liability under this
Lease or any such guarantee.

 

Lessee’s Default

 

Section 8.02.         The occurrence of any one or more of
the following events shall constitute a default under this Lease by Lessee:

 

(a)                                 Non-curable Defaults: (i)  The vacation or abandonment of any
substantial portion of the Premises by Lessee for a period of five (5) business
days or longer;

 

19

 

(ii)     Any involuntary transfer of Lessee’s interest in this Lease or
any voluntary transfer, attempted or actual, of Lessee’s interest in this
Lease, without Lessor’s prior written consent, in violation of Section 8.01;

 

(iii)    If the leasehold interest of Lessee is levied upon under
execution or is attached by process of law and said levy or attachment is not
promptly released;

 

(iv)    If: (1) all or substantially all of the Lessee’s assets are
placed in the hands of a receiver or trustee, and such receivership or
trusteeship continues for a period of sixty (60) days, or

 

(2)   if
Lessee makes an assignment for the benefit of creditors or is adjudicated a
bankrupt, or

 

(3)   if
Lessee institutes any proceedings under any provision of the Bankruptcy Code or
under any other act relating to the subject of bankruptcy wherein Lessee seeks
to be adjudicated a bankrupt, be discharged of its debts, or effect a plan of
liquidation, composition, arrangement or reorganization, or

 

(4)   if
any involuntary proceeding is filed against Lessee under any such bankruptcy
laws and Lessee consents thereto or acquiesces therein by pleading or default,

 

then
any such act shall be deemed a breach of this Lease, and neither this Lease nor
any interest in and to the Premises shall become an asset in any of such
proceedings and, in any such event, and in addition to any and all rights or
remedies of Lessor hereunder or provided by law, this Lease shall terminate
automatically as of the date on which any one or more of the above-described
occurrences takes place. In such event, it shall be lawful for Lessor to
re-enter the Premises and take possession thereof and remove all persons and
all of Lessee’s personal property, fixtures, equipment, alterations,
improvements and utility installations therefrom, and Lessee shall have no
further claim to the Premises or under this Lease. Nothing contained herein
shall limit or prejudice the right of Lessor to recover damages by reason of
any such termination equal to the maximum allowed by any statute or rule of law
in effect at the time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount is greater, equal to, or
less than the amount of damages recoverable under the provisions of this
Article. However, the foregoing provisions in this Article shall be subject to
the Bankruptcy Code, as heretofore and hereafter amended.

 

(b)           Curable Defaults: (i) 
The failure by Lessee to make any payment of Basic Rent, Additional Rent
or any other payment required to be made by Lessee hereunder as and when due
and which shall continue for a period of ten (10) business days after written
notice thereof from Lessor to Lessee; provided however, any such notice shall
be in lieu of, and not in addition to, any notice required under the California
Code of Civil Procedure or any other law, regulation or ordinance; or

 

(ii)     The failure by Lessee to observe or perform any non-monetary
covenants, conditions or provisions of this lease to be observed or performed
by Lessee, other than 

 

20

 

the aforementioned non-curable defaults, within
thirty (30) days after Lessee has been given written notice of such failure.
Notwithstanding the foregoing, if Lessee cannot reasonably cure such default
within thirty (30) days, Lessee shall not be in default hereunder so long as
Lessee commences to cure the default within such thirty (30) day period and
thereafter diligently and in good faith pursues such cure to completion.

 

Lessors Default

 

Section 8.03.         (a) 
Lessor shall be in default if it fails or refuses to perform any
provision of this Lease that it is obligated to perform and such failure
continues for thirty (30) days after written notice thereof from Lessee
detailing such failure. Notwithstanding the foregoing, if Lessor cannot
reasonably cure such default within thirty (30) days, Lessor shall not be in
default hereunder so long as Lessor commences to cure the default within such
thirty (30) day period and thereafter diligently and in good faith pursues such
cure to completion.

 

(b)           If Lessor is in default hereunder, and as a consequence
Lessee recovers a money judgment against Lessor, such judgment shall be
satisfied only out of the proceeds of sale received on execution of the
judgment and levy against the right, title, and interest of Lessor in the
Premises, and out of rent or other income from such real property receivable by
Lessor or out of the consideration received by Lessor from the sale or other
disposition of all or any part of Lessor’s right, title, and interest in the
Premises. Neither Lessor, nor any partner, agent, officer, director or employee
of Lessor shall be personally liable for any portion of such a judgment.

 

Abandonment

 

Section 8.04.         If Lessee vacates or abandons the
Premises, this Lease shall continue in effect unless and until expressly
terminated by Lessor, and Lessor shall have all of the remedies provided by
this Lease or by law, including without limitation, the right to maintain
Lessee’s right to possession and to recover Rent as it becomes due hereunder.
Lessor shall not be deemed to have terminated this Lease other than by written
notice of termination from Lessor. At any time subsequent to vacation or
abandonment of the Premises by Lessee, Lessor may give notice of termination
and shall thereafter have all of the rights hereinafter set forth.

 

Termination

 

Section 8.05.         Following the occurrence of any
default, Lessor shall have the right, so long as the default continues, to
terminate this Lease by written notice to Lessee setting forth: (a) the
default; (b) the requirements to cure it; and (c) a demand for possession,
which shall be effective in accordance with the notice provisions specified in Section
9.04.

 

Possession

 

Section 8.06.         Following termination under Section 8.05,
without prejudice to any other remedies Lessor may have by reason of Lessee’s
default or of such termination, 

 

21

 

Lessor may then or at any time thereafter, (a) peaceably
re-enter the Premises, or any part thereof, upon voluntary surrender by Lessee,
or expel or remove Lessee therefrom and any other persons occupying them, using
such legal proceedings as are then available; (b) 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 Lessor in its sole discretion shall
determine, with the right to make reasonable alterations and repairs to the
Premises; and (c) remove all personal property therefrom. Lessee hereby
expressly waives any and all rights of redemption granted by or under any
present or future law in the event of Lessee’s being evicted or dispossessed
for any cause, or in the event of Lessor’s obtaining possession of the
Premises, or by reason of the violation by Lessee of any of the items,
covenants or conditions, of this Lease, or otherwise.

 

Recovery

 

Section 8.07.         Following termination under Section 8.05,
Lessor shall have all the rights and remedies of a Lessor provided by Section 1951.2
of the California Civil Code. The amount of damages which Lessor may recover
following termination shall include: (a) the worth at the time of the award of
the unpaid Rent which had been earned at the time of termination; (b) 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 the Lessee proves could have been reasonably
avoided; (c) 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 Lessee proves could be reasonably avoided; and (d) any
other amount necessary to compensate Lessor for all detriment proximately caused
by Lessee’s failure to perform its obligations under this Lease. The “worth at
the time of the award” of the amounts referred to in (a) and (b) above shall be
computed by allowing interest at the maximum rate permitted by law. The “worth
at the time of the award” of the amount referred to in (c) above shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one (1 %) percent.

 

Additional Remedies

 

Section 8.08.         In addition to the foregoing remedies,
Lessor shall, so long as this Lease is not terminated, have the right to remedy
any default of Lessee, to maintain or improve the Premises without terminating
this Lease, to incur expenses on behalf of Lessee in seeking a new sublessee,
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 Lessor’s
reasonable costs in so doing, with interest at the maximum rate permitted by
law.

 

Other

 

Section 8.09.         If Lessee causes or threatens to cause
a breach of any of the covenants, agreements, terms or conditions contained in
this Lease, Lessor shall be entitled to retain all sums held by Lessor, by any
trustee or in any account provided for 

 

22

 

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.

 

Cumulative

 

Section 8.10.         Each right and remedy of Lessor
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, and shall not preclude
the simultaneous or later exercise by Lessor of any or all other rights or
remedies provided for in this Lease or now or hereafter existing in law or in
equity or by statute or otherwise.

 

No Waiver

 

Section 8.11.         No failure by Lessor or Lessee 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 Lessor
to mitigate the damages caused by Lessee’s breach of this Lease shall not be
construed to be a waiver of Lessor’s right to recover damages under this
Article. Nothing in this Article affects the right of Lessor to indemnification
by Lessee for liability arising prior to the termination of this Lease for
personal injuries or property damage.

 

Written Action

 

Section 8.12.         No act or thing done by Lessor or its agents
during the Term hereof shall be deemed an acceptance of a surrender of the
Premises, and no agreement to accept a surrender of the premises shall be valid
unless made in writing and signed by Lessor. Neither the reference in this
Lease to any particular remedy nor the pursuit of any particular remedy shall
preclude Lessor from any other remedy Lessor might have, either at law or in
equity.

 

Replacement of Statutory Notice Requirements

 

Section 8.13.         When this Lease requires service of a
notice, that notice shall replace rather than supplement any equivalent or
similar statutory notice, including any notices required by Code of Civil
Procedure section 1161 or any similar or successor statute. When a statute
requires service of a notice in a particular manner, service of that notice (or
a similar notice required by this Lease) in the manner required by Section 9.04
shall replace and satisfy the statutory service-of-notice procedures, including
those required by Code of Civil Procedure section 1162 or any similar or
successor statute.

 

Continuation of Lease in Effect

 

Section 8.14.         Lessor shall have the remedy described
in Civil Code section 1951.4, which provides that, when a Lessee has the right
to sublet or assign (subject 

 

23

 

only to reasonable limitations), the Lessor may
continue the lease in effect after the Lessee’s breach and abandonment and
recover Rent as it becomes due. Accordingly, if Lessor does not elect to
terminate this Lease on account of any default by Lessee, Lessor may enforce
all of Lessor’s rights and remedies under this Lease, including the night to
recover all Rent as it becomes due.

 

Efforts To Relet

 

Section 8.15.         For purposes of this Article 8, Lessee’s
right to possession shall not be considered to have been terminated by Lessor’s
efforts to relet the. Premises, by Lessor’s acts of maintenance or preservation
with respect to the Premises, or by appointment of a receiver to protect Lessor’s
interests under this Lease. This list is merely illustrative of acts that may
be performed by Lessor without terminating Lessee’s right to possession.

 

ARTICLE
9.  MISCELLANEOUS

 

Force Majeure - Unavoidable Delays

 

Section 9.01.         Should the performance of any act
required by this Lease to be performed by either Lessor or Lessee be prevented
or delayed by reason of an act of God, strike, lockout, labor troubles,
inability to secure materials, restrictive governmental laws or regulations, or
any other cause except financial inability, not the fault of the party required
to perform the act, the time for performance of the act will be extended for a
period equivalent to the period of delay and performance of the act during the
period of delay will be excused; provided, however, that nothing contained in this
section shall excuse the prompt payment of rent or other sums by Lessee as
required by this Lease or the performance of any act rendered difficult solely
because of the financial condition of the party, Lessor or Lessee, required to
perform the act.

 

Attorney’s Fees

 

Section 9.02.         (a) 
Should any litigation be commenced between the parties to this Lease
concerning the Premises, this Lease, or the rights and duties of either in
relation thereto, the party, Lessor or Lessee, prevailing in such litigation shall
be entitled, in addition to such other relief as may be granted in the
litigation, to a reasonable sum as and for his attorney’s fees in such
litigation which shall be determined by the court in such litigation or in a
separate action brought for that purpose.

 

(b)           If Lessor is made a party defendant to any litigation
concerning this Lease or the leased Premises or the occupancy thereof by
Lessee, then Lessee shall hold Lessor harmless from all liability by reason of
said litigation, including reasonable attorney’s fees and expenses incurred by
Lessor in any such litigation, whether or not any such litigation is prosecuted
to judgment, provided however, it is agreed between Lessor and Lessee that if
the litigation referred to in this Section arises out of no act, fault, or
negligence of the Lessee, there shall be no obligation on the part of Lessee to
hold harmless the Lessor from said litigation.

 

24

 

(c)           If Lessee breaches any term of this Lease, Lessor may
employ an attorney or attorneys to protect Lessor’s rights hereunder, and in
the event of such employment following any breach by Lessee, Lessee shall pay
Lessor reasonable attorney’s fees and expenses incurred by Lessor, whether or
not an action is actually commenced against Lessee by reason of said breach.

 

Arbitration of Disputes

 

Section 9.03.        IF
ANY DISPUTE ARISES BETWEEN LESSOR AND LESSEE CONCERNING THE PREMISES, ANY
PROVISION OF THIS LEASE OR THE RIGHTS AND DUTIES OF EITHER IN REGARD THERETO,
THE DISPUTE SHALL BE SETTLED BY ARBITRATION AS PROVIDED IN THIS SECTION. EACH
PARTY SHALL APPOINT AN ARBITRATOR AND GIVE THE OTHER PARTY WRITTEN NOTICE OF
THE NAME AND ADDRESS OF ARBITRATOR WITHIN FIVE (5) DAYS AFTER WRITTEN DEMAND TO
DO SO HAS BEEN SERVED ON THE PARTY MAKING THE APPOINTMENT BY THE OTHER PARTY TO
THIS LEASE. THE TWO APPOINTED ARBITRATORS SHALL WITHIN TEN (10) DAYS AFTER
THEIR APPOINTMENT, APPOINT A THIRD ARBITRATOR. THE WRITTEN DECISION OF ANY TWO
OF THE THREE ARBITRATORS SHALL BE BINDING AND CONCLUSIVE ON BOTH PARTIES TO
THIS LEASE. THE ARBITRATORS MAY APPORTION THE COSTS AND EXPENSES OF THE
ARBITRATION PROCEEDING, INCLUDING ATTORNEY’S FEES AND ARBITRATION FEES, BETWEEN
THE PARTIES TO THIS AGREEMENT IN ANY MANNER DEEMED REASONABLE BY TWO OF THE
THREE ARBITRATORS. THE ARBITRATION SHALL BE CONDUCTED IN ACCORDANCE WITH THE
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION.

 

NOTICE: BY
INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT
OF THE MATTERS INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION ABOVE
DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING
UP ANY RIGHTS YOU MAY HAVE TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY
TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS
TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE “ARBITRATION
OF DISPUTES” PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING
TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY.

 

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT
DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE “ARBITRATION OF DISP TES”
PROVISION TO NEUTRAL ARBITRATION.

 

	
  LESSOR’S INITIALS:

  	
   

  	
   

  	
  LESSEE’S INITIALS:

  	
   

  

 

25

 

Notices

 

Section 9.04.         All notices to be given to Lessee shall
be given in writing personally or by depositing the same in the United States
mail, postage prepaid, and addressed to Lessee at the Premises, whether or not
Lessee has departed from, abandoned or vacated the Premises. All notices to be
given to Lessor shall be given in writing personally or by depositing the same
in the United States mail, postage prepaid, and addressed to the Lessor at 316
South Strafford Avenue, Santa Maria, CA, 93454, or such other place or places
as may be designated from time to time by Lessor.

 

No Merger

 

Section 9.05.         The voluntary or other surrender of
this Lease by Lessee, or a mutual cancellation thereof, shall not work a
merger, and shall, at the option of Lessor, terminate any existing subleases or
subtenancies or may, at the option of Lessor, operate as an assignment to it of
any of such subleases or subtenancies.

 

Binding on Heirs and Successors

 

Section 9.06.         This Lease shall be binding on and
shall inure to the benefit of the heirs, executors, administrators, successors,
and assigns of the parties hereto, Lessor and Lessee, but nothing in this
section contained shall be construed as a consent by Lessor to any assignment
of this Lease or any interest therein by Lessee except as provided in Article 8
of this Lease.

 

Partial Invalidity

 

Section 9.07.         Should any provision of this Lease be
held by a court of competent jurisdiction to be either invalid, void, or
unenforceable, the remaining provisions of this Lease shall remain in full
force and effect unimpaired by the holding.

 

Sole and Only Agreement

 

Section 9.08.         This instrument constitutes the sole
and only agreement between Lessor and Lessee respecting the Premises, the
leasing of the Premises to Lessee, or the lease term herein specified, and
correctly sets for the obligations of Lessor and Lessee to each other as of its
date. Any agreements or representations respecting the Premises or their
leasing by Lessor to Lessee not expressly set forth in this instrument are null
and void.

 

Waiver

 

Section 9.09.         The waiver by Lessor of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition on any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance
of rent hereunder by Lessor shall not be deemed to be a waiver of any preceding
breach by Lessee of any term, covenant or condition of this Lease other than
the failure of the Lessee to pay the particular rental so 

 

26

 

accepted, regardless of Lessor’s knowledge of such
preceding breach at the time of the acceptance of such rent.

 

Subordination and Non-Disturbance

 

Section 9.10.         (a) 
This Lease is subject and subordinate to all mortgages and deeds of
trust which may hereafter be placed and recorded on the property of which the
Premises are a part and to all renewals, modifications, replacements, and
extensions thereof.

 

(b)           The subordination provided for above is conditioned on and
subject to the following:

 

(i)      For each mortgage or deed of trust, Lessor shall obtain from
the mortgagee or beneficiary a non-disturbance agreement in writing that, in
the event of foreclosure, or any sale thereunder, this Lease shall not be
terminated and Lessee’s right to possession under this Lease shall not be
disturbed, provided Lessee is not then in default under this Lease;

 

(ii)     In consideration of the mortgagee’s or beneficiary’s agreement
not to disturb Lessee’s possession as above provided, Lessee hereby agrees to
attorn to the purchaser at any foreclosure, sale or other action or proceeding.

 

(iii)    The subordination described in this section shall be effective
without the necessity of having any further instruments executed by Lessee, but
Lessee agrees to execute on demand any such further instruments evidencing
subordination that Lessor or any mortgagee or beneficiary may reasonably
request.

 

Time of Essence

 

Section 9.11.         Time is expressly declared to be the
essence of this Lease.

 

Accord and Satisfaction

 

Section 9.12.         No payment by Lessee or receipt by
Lessor of a lesser amount than the monthly rent stipulated herein or any other
sum due hereunder from Lessee to Lessor shall be deemed to be anything other
than a payment on account of the-earliest sum then due and owing to Lessor. No
endorsement or statement on any check of any letter accompanying any check or
payment or payment of any sum(s) due from Lessee to Lessor hereunder shall be
deemed to be an accord and satisfaction, and Lessor may accept and negotiate
any such payment without prejudice to Lessor’s right to recover the balance of such
rent or other sum or to pursue any other remedy provided for in this Lease or
by law.

 

Right of First Refusal to Purchase Leased Premises

 

Section 9.13.         (a) 
If at any time during the term of this Lease Lessor receives from any
third party a bona fide offer to purchase the Premises at a price and on terms
acceptable to Lessor, Lessor shall give written notice of the offer to Lessee.
Within thirty 

 

27

 

(30) days after Lessor gives Lessee written notice
of the third-party offer, Lessee shall have the right to purchase the Premises
at the same price and on the same terms and conditions set forth in the
third-party offer. To exercise its right, Lessee must, within the same thirty
(30) day period, deposit in escrow with any title company in Santa .Barbara
County, California, all moneys and instruments required by the terms of the
offer to be paid or delivered to Lessor on close of escrow and shall also give
Lessor written notice of the deposit. In the event Lessee fails to exercise the
option to purchase in accordance with the provisions of this Section, Lessor
may sell the Premises to the third party making the offer on the same terms and
conditions set forth in that offer. If for any reason the Premises are not sold
to the party making the offer, Lessor shall give Lessee the same right to
purchase the Premises on receiving any subsequent offer from any third party
that is acceptable to Lessor.

 

(b)           Lessee may not assign the rights granted under this
section either separately or together with a transfer of Lessee’s leasehold
interest, and any purported assignment shall be null and void.

 

(c)           If this property is sold to any third party during the
term of this Lease, then the provisions of this section shall thereafter be of
no further force or effect.

 

Bankruptcy

 

Section 9.14.         Should a petition in’bankruptcy be
filed by the Lessee, or should Lessee, during the term hereof, become insolvent
or make any assignment for the benefit of creditors, or be adjudicated bankrupt
or insolvent by any Court, or should a receiver or trustee in bankruptcy be
appointed over the business, property and assets of the Lessee, and the
Premises herein lease, or take charge of the Premises herein demised, or should
this lease, by operation of law, devolve upon or pass to any person or persons
other than the Lessee, then upon any of such events, the Lessor may, at its
option, re-enter and take possession of these Premises herein leased and remove
all persons therefrom and terminate the Lease.

 

Estoppel Certificate

 

Section 9.15.         Within ten (10) days following any
written request which Lessor may make from time to time, Lessee shall execute,
acknowledge and deliver to Lessor a statement certifying: (a) the date of
commencement of this Lease; (b) the fact that this Lease is unmodified and in
full force and effect, or, if there have been modifications hereto, that this
Lease is in full force and effect, and stating the date and nature of such
modifications; (c) the date to which the Rent and other sums payable under this
Lease have been paid; (d) that there are no current defaults under this Lease
by either Lessor or Lessee except as specified in Lessee’s statement; and (e) any
other information Lessor may reasonably require. Lessor and Lessee intend that
any statement delivered pursuant to this Section may be relied upon by any
encumbrancer, ground Lessee, beneficiary, purchaser or prospective purchaser of
the Property or any interest therein, as well as any of their assigns.

 

28

 

Transfer Of Lessor’s Interest

 

Section 9.16.         Lessor has the right to transfer all or
part of its interest in the Building and Real Property and in this Lease. On
such a transfer, Lessor shall automatically be released from all liability
accruing under this Lease, and Lessee shall look solely to that transferee for
the performance of Lessor’s obligations under this Lease after the date of
transfer. Lessor may assign its interest in this Lease to a mortgage lender as
additional security. This assignment shall not release Lessor from its
obligations under this Lease, and Lessee shall continue to look to Lessor for
the performance of its obligations under this Lease.

 

Liability Of The Lessor

 

Section 9.17.         Except as otherwise provided in this
Lease or applicable law, for any breach of this Lease the liability of Lessor
(including all persons and entities that comprise Lessor, and any successor
Lessor) and any recourse by Lessee against Lessor shall be limited to the
interest of Lessor and Lessor’s successors in interest in and to the Building
and Real Property. On behalf of itself and all persons claiming by, through, or
under Lessee, Lessee expressly waives and releases Lessor from any personal
liability for breach of this Lease.

 

Executed
on the day and date first above written at Santa Maria, California.

 

	
  LESSEE:

  
	
   

  
	
  COASTAL RADIATION ONCOLOGY MEDICAL GROUP, INC.

  
	
  a California corporation

  
	
   

  	
   

  
	
  by:

  	
  /s/  Thomas
  D. Fogel

  	
   

  
	
   

  	
  THOMAS
  D. FOGEL, M.D., President

  	
   

  
	
   

  	
   

  
	
  by:

  	
  /s/  Jonathan
  R. Stella

  	
   

  
	
   

  	
  JONATHAN
  R. STELLA, M.D., Secretary

  	
   

  
	
   

  	
   

  
	
  LESSOR:

  
	
   

  
	
  SANTA MARIA BUILDING PARTNERSHIP

  
	
  a California general partnership

  
	
   

  	
   

  
	
  by:

  	
  /s/  Peter
  K. Sien

  	
   

  
	
   

  	
  PETER
  K. SIEN, M.D., Managing Partner

  	
   

  

 

29

 

EXHIBIT A

 

PARCEL 1:

 

AN
UNDIVIDED INTEREST IN LOT 4 OF STRATFORD COURT NO. 2 TRACT 5164 IN THE CITY OF
SANTA MARIA, IN THE COUNTY OF SANTA BARBARA, STATE OF CALIFORNIA, AS SHOWN ON
MAP FILED IN BOOK 92, PAGES 10 AND 11 OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

 

30Exhibit 10.42

 

LEASE AGREEMENT

 

BY
THIS LEASE dated February 1, 2001, SANTA MARIA BUILDING PARTNERSHIP, a
California general partnership, herein called “Lessor,” leases to COASTAL
RADIATION ONCOLOGY MEDICAL GROUP, INC., a California corporation, herein called
“Lessee,” that certain real property, herein called “the Premises,” in the City
of Santa Maria, County of Santa Barbara, State of California, commonly known as
314 South Stratford Avenue, Santa Maria, California, and more particularly
described in Exhibit A, attached hereto.

 

ARTICLE 1.  TERM OF LEASE

 

Original Term

 

Section 1.01. 
This Lease shall be for a term of fifteen (15) years, commencing on
February 1, 2001, and ending on January 31, 2016.

 

Extended Term

 

Section 1.02. 
Should Lessee perform all the terms and conditions of this Lease and
provided Lessee is not then in default under the terms of this Lease, Lessee
may extend this Lease for two (2) additional, separate terms of ten (10) years
each, commencing on expiration of the preceding term, by giving Lessor written
notice of Lessee’s desire to extend the term hereof not less than one hundred
eighty (180) days prior to expiration of the preceding term.  This option to extend the term of this Lease
is personal to Lessee and may not be transferred by Lessee without Lessor’s
prior written consent.

 

Hold Over

 

Section 1.03. 
Should Lessee hold over and continue in possession of the Premises after
expiration of the term of this Lease or any extension thereof, Lessee’s
continued occupancy of the Premises shall be considered a month-to-month
tenancy subject to all the terms and conditions of this Lease, except that the
base rent shall be in an amount equal to 100% of the last monthly rent.  If Lessee fails to surrender the Premises
upon the expiration of this Lease, Lessee shall indemnify and hold Lessor
harmless from all loss or liability, including without limitation, any claims
made by any succeeding tenant founded on or resulting from such failure to
surrender.

 

ARTICLE
2.  RENT

 

Base Rent

 

Section 2.01.  For the first year of the
term hereof, Lessee agrees to pay to Lessor a fixed rental for the use and
occupancy of the Premises of Twelve Thousand Six Hundred Sixty Nine Dollars
($12,669.00) per month, payable on the first (1st) day of each and every calendar
month commencing on February 1, 2001, at 316 S. Stratford Avenue, Santa Maria,
CA 93454, or at such other place or places as Lessor may from time to time
designate by written notice delivered to Lessee.

 

 

Rent Adjustment

 

Section 2.02. 
The Base Rent provided for in Section 2.01 above shall be increased by
three percent (3%) one year after the commencement of the term hereof and
annually thereafter on the same date each calendar year.

 

Base Rent for Extension Terms

 

(a)           In the event Lessee timely exercises its option to extend
the lease term under Section 1.02 above, then within fifteen (15) days of
Lessee’s written notice to Lessor of Lessee’s exercise of such option, Lessor
and Lessee shall meet to establish the Base Rent for the first year of the
Extension Term (“Rent Meeting”).  The
Base Rent per square foot of leaseable area in the Premises for the first year
of each extension term shall be the fair market rental value of the Premises,
determined in accordance with the following formula:

 

Vault Sq.  Ft.  X (Market Rent x 2.67)  + 
Medical Sq.  Ft. X (Market Rent)

(divided by) total leaseable square footage

 

= Base Rent per square foot

 

As
used in the above formula, “Vault Sq. Ft.” means the total square footage of
the treatment vaults, other than any treatment vaults added at the Lessee’s
cost and expense.  “Market Rent” is the
current fair market rent per square foot for medical office space in the City
of Santa Maria, California on a triple net basis.  This space will be leased (not subleased) and
will be comparable in size, location and quality to the Premises.  “Medical Sq. 
Ft” refers to all leaseable space in the Premises other than Vault Sq.
Ft.  “Total leaseable square footage”
shall be the total leaseable square footage in the Premises determined by
survey.

 

In
the event that the parties cannot agree on the Market Rent for the first year
of an extension term, then within ten (10) days after the Rent Meeting, Lessor
and Lessee shall each specify in writing to the other party its determination
of such Market Rent Rate.  If either
party fails to submit its written determination in accordance with this
Section, the Base Rent for the extension term shall be the determination
submitted by the other party.

 

(b)           Within ten (10) days after the parties have exchanged
written determinations, Lessor and Lessee shall mutually select three
commercial realtors within the City of Santa Maria to determine the Market
Rent.  Each such realtor shall (i) be
disinterested; (ii) be qualified to determine the fair market rental rates for
real estate similar to the Premises; and (iii) have been actively engaged in
the leasing of comparable medical space in the City of Santa Maria for a period
of not less than five (5) continuous years immediately preceding his or her
appointment.  If Lessor and Lessee are
unable to mutually select three such commercial realtors, then either party, on
behalf of both, may request such appointment by the President of the local
chapter of the California Realtors Association. 
If such Association is not then in existence, either party, on behalf of
both, may request such appointment by the presiding judge of the Superior Court
of the Judicial District in which the property is located.  Each such realtor shall submit their
respective determinations of Market Rent for the area in writing to both
parties and shall provide the basis for such determination.

 

2

 

(c)           The average of the three written determinations of Market
Rent prepared by the realtors so selected shall be utilized to determine the
Base Rent of the Premises for the initial year of the extension term.  The costs of the three realtors’ services
shall be shared equally by the parties. 
The decision of the realtors shall be binding upon the Lessor and
Lessee.

 

(d)           In the event that the parties have not agreed on the
Market Rent or the realtors have not been selected and the Market Rent
determined before the commencement of the extension term, Lessee shall continue
to pay the same lease rate in effect at the end of the lease year immediately
preceding the commencement of the extension term.  Lessee shall pay such sum as Base Rent until
the initial Base Rent for the extension term is determined, at which time
Lessee shall promptly pay Lessor any additional rent due by reason of any
increase in the Base Rent during the extension term over the Base Rent
previously paid by Lessee.  If the Base
Rent actually paid by Lessee during this period is ultimately determined to be
more than the revised Base Rent as finally determined as above provided, any
such over payment shall constitute a credit against the revised Base Rent, and
that credit shall be applied to the following month or months until such credit
is exhausted.

 

(e)           The Base Rent as above determined shall be subject to
increase at the end of the first lease year of the extension term in the same
manner as provided in Section 2.02 above.

 

Taxes, Utilities and Operating Expenses as Additional Rent

 

Section 2.03. 
In addition to the rent specified in Sections 2.01 and 2.02 above,
Lessee shall pay, as additional rent, all Utilities, Insurance, Personal and
Real Property Taxes and Operating Expenses directly to the vendor or creditor
for such items, or otherwise as set forth in this Section 2.03.  If Lessee fails to pay any such amount,
Lessor may in its sole discretion, advance monies to pay such items, and demand
reimbursement in full from Lessee (referred to as “additional rent” herein),
including without limitation any cost, expense, assessment or charge, as well
as interest as provided in this Lease.

 

Utilities

 

(a)           Lessee shall pay, and hold Lessor and the property of
Lessor including the Premises, free and harmless from, all charges for the
furnishing of gas, water, sewer, electricity, telephone service, garbage and
trash removal and other public utilities during the entire term of this Lease
or any extension thereof.  All such
charges shall be paid by Lessee directly to the provider of the service and shall
be paid as they become due and payable but in any event before delinquency.

 

Lessee
agrees that Lessor shall not be liable for damages, by abatement of Rent or
otherwise, for failure to furnish or delay in furnishing any service (including
telephone and telecommunication services) or for diminution in the quality or
quantity of any service when the failure, delay, or diminution is entirely or
partially caused by:

 

(i)      Breakage repairs,
replacements, or improvements;

 

(ii)     Strike, lockout, or other
labor trouble;

 

3

 

(iii)    Inability to secure
electricity, gas, water, or other fuel at the Building after reasonable effort
to do so;

 

(iv)    Accident or casualty;

 

(v)     Act or default of Lessee or
other parties; or

 

(vi)    Any other cause beyond
Lessor’s reasonable control.

 

Such
failure, delay, or diminution shall not be considered to constitute an eviction
or a disturbance of Lessee’s use and possession of the Premises or relieve
Lessee from paying rent or performing any of its obligations under this Lease.  Lessor shall not be liable under any
circumstances for a loss of or injury to property or for injury to or
interference with Lessee’s business, including loss of profits through, in
connection with, or incidental to a failure to furnish any of the utilities or
services under this Section 2.03.  Lessor
may comply with mandatory or voluntary controls or guidelines promulgated by
any government entity relating to the use or conservation of energy, water,
gas, light, or electricity or the reduction of automobile or other emissions
without creating any liability of Lessor to Lessee under this Lease as long as
compliance with voluntary controls or guidelines does not materially and
unreasonably interfere with Lessee’s use of the Premises.

 

Personal Property Taxes

 

(b)           Lessee shall pay before they become delinquent all taxes,
assessments and other charges levied or imposed by any governmental entity on
the furniture, trade fixtures, equipment and other personal property placed by
Lessee in, on or about the Premises.

 

Real Property Taxes

 

(c)           Lessee shall pay all real property taxes and general and
special assessments on the Premises, including any increases in such taxes and
assessments, before they become delinquent.

 

The
real property taxes and assessments levied against the Premises for the first
and last years of the term hereof shall be prorated between Lessor and Lessee
for purposes of this section as of 12:01 A.M. on the date of commencement and
termination respectively of this Lease.

 

Lessee
shall have the right, at Lessee’s sole cost and expense, to protest or contest
in good faith the amount of any tax or assessment.  As a condition precedent to Lessee’s right to
protest such taxes or assessments, Lessee shall either pay the disputed amount
and file for refund or deposit with Lessor the disputed amount plus one (1) years
interest at the rate then charged by said county plus any estimated penalty
which Lessor may incur by non-payment. 
Upon such payment or deposit, Lessor shall cooperate with Lessee in prosecuting
such dispute.

 

Operating Expenses

 

(d)           Lessee shall pay all Operating Expenses attributable to
the occupation and use of the Premises.

 

4

 

The
term “Operating Expenses” as used in this Lease shall Mean all expenses, costs
and fees attributable to Lessee’s use and occupancy of the Premises under this
Lease, including but not limited to:

 

(i)      Miscellaneous operating costs, maintenance, security services,
replacement for normal wear and tear, repair, re-striping and resurfacing of
paving, insurance (including public liability and property damage, rent
continuation, boiler and machinery and extended coverage insurance), and
cleaning of the Premises and all parts thereof and all furnishings, fixtures
and equipment therein.  The term “Operating
Expenses” shall include the annual amortization of costs (including financing
at the then prevailing rate, if any) of any improvements, equipment, or devices
required by any governmental authority or incurred as a labor saving measure or
to reduce operation or maintenance expenses with respect to the Premises where
such costs are amortized over the useful life thereof.

 

(ii)     Operating Expenses shall also include licenses, permits, charges
and assessments which are levied, assessed, imposed or collected by any
governmental authority or improvement or assessment district during any
calendar year with respect to the Premises and Lessee’s use and occupancy of
the Premises and the land on which the premises are located, and any
improvements, fixtures, equipment and other property of Lessor, real or
personal, used in connection with the operation or maintenance of the Premises
(computed on a cash basis or as if paid in permitted installments regardless of
whether actually so paid), as well as any tax which shall be levied or assessed
in addition to or in lieu of any tax described in Sections 2.03 (b) or (c) above
(it being acknowledged that because of the passage of laws which limit
increases in property taxes, government agencies may impose fees, charges,
assessments or other levies in connection with services previously furnished
without charge or at a lesser charge and which were previously paid for in
whole or in part, directly or indirectly by real property taxes), any gross
excise tax or other similar tax, and any costs or expenses of contesting any
such taxes, licenses, charges or assessments, but excluding any federal or
state income or gift tax or any franchise, capital stock, estate or Inheritance
taxes.

 

Late Charges

 

Section 2.04. 
If any installment of rent or other payment required to be paid by
Lessee to Lessor is not paid within ten (10) days of the date on which it is
due, a late charge equal to five percent (5%) of the late payment shall be due
from Lessee to Lessor to compensate Lessor for the additional administrative
work caused by such default and to compensate Lessor for the loss of use of
such defaulted payment.  The late charge
herein shall be in addition to any other remedy which Lessor may have hereunder
for such default.

 

Interest on Late Payments

 

Section 2.05. 
If any payment required to be paid by Lessee to Lessor is not paid
within ten (10) days of the date on which it is due, such payment shall bear
interest at the maximum rate permitted by law from the date it became due until
it is paid by Lessee to Lessor.

 

5

 

ARTICLE 3.  USE OF PREMISES

 

Permitted Use

 

Section 3.01. 
The Premises shall, during the term of this Lease and any extensions
thereof, be used for conducting a medical and radiation oncology business, for
related activities and for no other purpose without the prior written consent
of Lessor.

 

Insurance Hazards

 

Section 3.02. 
Lessee shall not commit or permit the commission of any acts on the Premises
nor use or permit the use of the Premises in any manner that will increase the
existing rates for or cause the cancellation of any fire, liability, or other
insurance policy insuring the Premises or the improvements on the Premises.

 

Waste or Nuisance

 

Section 3.03. 
Lessee shall not commit or permit the commission by others of any waste
on the Premises; Lessee shall not maintain, commit, or permit the maintenance
or commission of any nuisance as defined in Section 3479 of the California
Civil Code on the Premises; and Lessee shall not use or permit the use of the
Premises for any unlawful purpose.

 

Hazardous Materials

 

Section 3.04. 
Lessee warrants and represents that during the term hereof, and any
extensions thereof, Lessee shall not use the Premises in any manner that would
be in violation of any federal, state or local law, ordinance or regulation
relating to environmental conditions on, under or about the Premises, including
but not limited to soil and groundwater conditions.  Lessee shall not use, generate, manufacture,
produce, store or dispose of on, under or about the Premises any hazardous
materials, including without limitation, flammable materials, explosives,
asbestos, radioactive materials, hazardous wastes, toxic substances or related injurious
materials, whether injurious by themselves or in combination with other
materials, other than such materials as may be necessary for Lessee’s normal
operations on the Premises.  Lessee shall
not dispose of or permit the disposal of any hazardous materials into the sewer
system serving the Premises.

 

As
used in this Section 3.04, the term “Hazardous Material” shall mean any
hazardous or toxic substance, material, or waste at any concentration that is
or becomes regulated by the United States, the State of California, or any
local government authority having jurisdiction over the Building.  Hazardous Material includes:

 

(a)           Any “hazardous substance,” as that term is defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(CERCLA) (42 United States Code sections 9601-9675);

 

(b)           “Hazardous waste,” as that term is defined in the Resource
Conservation and Recovery Act of 1976 (RCRA) (42 United States Code sections
6901-6992k);

 

6

 

(c)           Any pollutant, contaminant, or hazardous, dangerous, or
toxic chemical, material, or substance, within the meaning of any other
applicable federal, state or local law, regulation, ordinance, or requirement
(including consent decrees and administrative orders imposing liability or
standards of conduct concerning any hazardous, dangerous, or toxic waste,
substance, or material, now or hereafter in effect);

 

(d)           Petroleum products;

 

(e)           Radioactive material, including any source, special
nuclear, or byproduct material as defined in 42 United States Code sections
2011-2297g-4;

 

(f)            Asbestos in any form or condition; and

 

(g)           Polychlorinated biphenyls (PCBs) and substances or
compounds containing PCBs.

 

If,
during the Lease Term (including any extensions), Lessee becomes aware of (i) any
actual or threatened release of any Hazardous Material on, under, or about the
Premises or the Building or (ii) any inquiry, investigation, proceeding, or
claim by any government agency or other person regarding the presence of
Hazardous Material on, under, or about the Premises or the Building, Lessee
shall give Lessor written notice of the release or investigation within five (5)
days after learning of it and shall simultaneously furnish to Lessor copies of
any claims, notices of violation, reports, or other writings received by Lessee
that concern the release or investigation.

 

Lessee
shall, at Lessee’s sole expense and with counsel reasonably acceptable to
Lessor, indemnify, defend, and hold harmless Lessor and Lessor’s shareholders,
directors, officers, employees, partners, affiliates, agents, successors, and
assigns with respect to all losses arising out of or resulting from the release
of any Hazardous Material in or about the Premises or the Building, or the violation
of any Environmental Law, by Lessee or Lessee’s agents, assignees, sublessees,
contractors, or invitees.  This
indemnification applies whether or not the concentrations of any such Hazardous
Material is material, the concentrations exceed state or federal maximum
contaminant or action levels, or any governmental agency has issued a cleanup
order.  This indemnification includes:

 

(1)           Losses attributable to diminution in the value of the
Premises or the Building;

 

(2)           Loss or restriction of use of rentable space in the
Building;

 

(3)           Adverse effect on the marketing of any space in the
Building; and

 

(4)           All other liabilities, obligations, penalties, fines,
claims, actions (including remedial or enforcement actions of any kind and
administrative or judicial proceedings, orders, or judgements), damages
(including consequential and punitive damages), and costs (including attorney,
consultant, and expert fees and expenses) resulting from the release or
violation.

 

7

 

This indemnification shall survive the expiration or termination of
this Lease.

 

If
the presence of any Hazardous Material brought onto the Premises or the
Building by Lessee or Lessee’s employees, agents, contractors, or invitees
results in contamination of the Building, Lessee shall promptly take all
necessary actions to remove or remediate such Hazardous Materials, whether or
not they are present at concentrations exceeding state or federal maximum
concentration or action levels, or any governmental agency has issued a cleanup
order, at Lessee’s sole expense, to return the Premises or the Building to the
condition that existed before the introduction of such Hazardous Material.  Lessee shall first obtain Lessor’s approval
of the proposed removal or remedial action. 
This provision does not limit the indemnification obligation set forth
in Section 3.04.

 

Compliance With Law

 

Section 3.05. 
Lessee shall at Lessee’s own cost and expense comply with all statues,
ordinances, regulations, existing use permits and requirements of all
governmental entities, both federal and state and county or municipal, relating
to Lessee’s use and occupancy of the Premises whether such statutes,
ordinances, regulations, and requirements be now in force or hereinafter enacted.  The judgment of any court of competent
jurisdiction, or the admission by Lessee in a proceeding brought against Lessee
by any government entity, that Lessee has violated any such statute, ordinance,
regulation, or requirement shall be conclusive as between Lessor and Lessee and
shall be grounds for termination of this Lease by Lessor.  Lessor agrees that any requirements of the
Municipal, State, or Federal authorities which require alteration of Lessor’s
building shall not be the responsibility of Lessee, unless required because of
an act of Lessee or a use of the Premises by Lessee.

 

ARTICLE 4.  ALTERATIONS AND REPAIRS

 

Maintenance

 

Section 4.01. 
Lessee shall at his own cost and expense keep and maintain all portions
of the Premises as well as all improvements on the Premises and all facilities
appurtenant to the Premises, including but not limited to electrical, plumbing,
heating and air conditioning, sewage systems, roof and outer walls in good
order and repair and in as safe and clean a condition as they were when
received by Lessee from Lessor, reasonable wear and tear excepted.

 

Should
Lessee fail to maintain the Premises as set forth above, Lessor may, at Lessor’s
option, perform or contract for the performance of such maintenance for and on
behalf of Lessee.  In such event, Lessee
shall promptly on written demand of Lessor reimburse Lessor for all cost and
expense incurred by Lessor in performing Lessee’s obligations hereunder plus
interest at the maximum rate permitted by law from the date expended by Lessor
to the date of repayment by Lessee.

 

Alterations and Liens

 

Section 4.02. 
Lessor and Lessee agree that from time to time during the term of this
Lease, Lessee may desire alterations, changes and additions in and to the
interior of the Premises

 

8

 

and
to the Building that are necessary or convenient to the operation of its
business at the Premises.

 

Non-structural Changes

 

(a)           Lessee may, at its own expense, make nonstructural changes
to the interior of the Premises (eg. revisions to interior decor, carpeting,
painting, wall covering, etc.) provided that the value of the Premises shall
not be diminished thereby.  Further
provided, that any non-structural changes exceeding $5,000 in total cost must
first be approved by the Lessor prior to commencement of such changes.

 

Structural Changes

 

(b)           If Lessee desires either (i) interior changes to the
Premises of a structural nature (e.g. relocating interior walls); or (ii) changes
to the facade or exterior walls or roof, or (iii) desires the addition of
square footage to the Premises (i.e. addition of Medical square footage or
Vault square footage) then Lessee shall submit detailed plans and
specifications for any proposed alteration or improvement to the Premises for
Lessor’s review and approval.  The Lessor
shall have the option to approve or deny the request for structural changes in
writing within 30 (thirty) days of receipt of such request, in the reasonable
discretion of the Lessor.  The failure of
the Lessor to disapprove or object to such plans and specifications or any
substantial changes therein within said thirty (30) days, shall constitute
Lessor’s disapproval of the same. 
Subsequent to such approval, minor changes in work or materials not affecting
the general character of the improvements need not be approved by Lessor but a
copy of the altered plans and specifications reflecting such changes must be
promptly given to Lessor.  If approved,
the Lessor shall have the option to pay for the changes, or not, in its sole
discretion.  If the Lessor chooses to pay
for the changes, then the parties shall meet immediately to negotiate an
adjustment to the Base Rent to go into effect at the completion of the alterations.  If the Lessor chooses not to pay for the
alterations, the Lessee has the option to proceed with the alterations, in its
sole discretion and at its expense, without paying any amount of rent for the
added square footage for the remaining Original Term, only the expenses
attributable to the additional space.

 

Supervision of Alterations

 

(c)           All structural changes to the Premises involving load
bearing walls which require Lessor’s approval shall be made under the
supervision of a licensed architect or licensed structural engineer in
accordance with the detailed plans and specifications submitted to Lessor as
above provided.

 

Notices of Non-Responsibility

 

(d)           Lessee shall provide Lessor with at least twenty (20) days
written notice prior to commencing any alteration, addition or change to the Premises
requiring Lessor’s approval and Lessor shall have the right to enter the
Premises to post Notices of Non-Responsibility as provided by law.

 

9

 

Quality of Work; Ownership

 

(e)           All work with respect to any alteration, addition or
change must be performed in a good and workmanlike manner and diligently
prosecuted to completion to the end that the Premises shall at all times be a
complete unit, except during the period of work.  Furthermore, any and all alterations,
additions, improvements, and fixtures, except furniture and trade fixtures,
made or placed in or on the Premises by Lessee or any other person shall on
expiration or sooner termination of this Lease become the property of Lessor
and remain on the Premises; provided, however, that Lessor shall have the
option on expiration or sooner termination of this Lease of requiring Lessee,
at Lessee’s sole cost and expense, to remove any or all such alterations,
additions, improvements, or fixtures from the Premises (excluding vaults).  All such changes, alterations, and
improvements shall be performed and completed strictly in accordance with the
laws and ordinances relating thereto, and in such a manner as not to impede
access to the Premises.

 

Lessee
shall not be the cause or object of any liens or allow such liens to exist,
attach to, be placed on, or encumber Lessor’s or Lessee’s interest in the
Premises, Building, or Real Property by operation of law or otherwise.  Lessee shall not suffer or permit any lien of
mechanics, material suppliers, or others to be placed against the Premises,
with respect to work or services performed or claimed to have been furnished to
Lessee or the Premises.  If any such lien
attaches or Lessee receives notice of any such lien, Lessee shall cause the
lien to be immediately released and removed of record.  Despite any other provision of this Lease, if
the lien is not released and removed within 10 (ten) days after Lessor delivers
notice of the lien to Lessee, Lessor may immediately take all action necessary
to release and remove the lien, without any duty to investigate the validity of
it.  All expenses (including reasonable
attorney fees) incurred by Lessor in connection with the lien shall be
considered additional rent under this Lease and be immediately due and payable
by Lessee.

 

Additional Requirements

 

(f)            If Lessee pays for the changes, the following provisions
shall apply to such changes:

 

(i)      The exterior of the improvements shall be compatible with the
design and appearance of the Premises as it exists at the time of execution of
this Lease.

 

(ii)     All work required in the construction of the structural changes,
including any site preparation work, utility installations as well as actual
construction shall be performed only pursuant to a contract entered into by
Lessee with a competent general contractor and sub-contractors duly licensed as
such under the Laws of the State of California, with proof of adequate
liability and workers compensation insurance.

 

(iii)    The approval by Lessor of any plans and specifications under this
paragraph refers only to the conformity of such plans and specifications to the
general architectural plan for the Building. 
By approving such plans and specifications, Lessor assumes no liability
or responsibility therefor and for any defect in any structure constructed from
such plans or specifications.

 

10

 

Inspection by Lessor

 

Section 4.03. 
Lessee shall permit Lessor or his agents to enter into and upon the
Premises during business hours for the purpose of inspecting the same, or for
the purpose of posting notices of non-responsibility for alterations, additions
or repairs or for the purpose of placing upon the property in which the
Premises are located any usual or ordinary “for sale” signs, without any rebate
of rent and without any liability to Lessee for any loss of occupation or quiet
enjoyment of the Premises thereby occasioned. 
Lessee shall permit Lessor, at any time within one hundred eighty (180)
days prior to the expiration of this Lease, to place upon the Premises any
usual or ordinary “to let” or “to lease” signs, provided that such entries made
by Lessor hereunder shall not unreasonably interfere with the conduct of Lessee’s
business.

 

Surrender of Premises

 

Section 4.04. 
On expiration or sooner termination of this Lease, or any extensions or
renewals of this Lease, Lessee shall promptly surrender and deliver the
Premises to Lessor in as good condition as they are on at the date of possession,
reasonable wear and tear excepted.

 

ARTICLE 5.  INDEMNITY AND INSURANCE

 

Hold-Harmless Clause

 

Section 5.01. 
To the fullest extent permitted by law, Lessee, on its behalf and on
behalf of its successors and assignees, waives all claims (in law, equity, or
otherwise) against Lessor, its officers, directors, principals, agents,
successors, assignees and agent arising out of, knowingly and voluntarily
assumes the risk of, and agrees that Lessor shall not be liable to Lessee for
any of the following acts or failure to act set forth in paragraphs (a) to (c) below.  Lessor shall not be liable under this clause
regardless of whether the liability results from any active or passive act,
error, omission, or negligence of any of the Lessor; or is based on claims in
which liability without fault or strict liability is imposed or sought to be
imposed on any of the Lessor.  This
exculpation clause shall not apply to claims against Lessor to the extent that
a final judgment of a court of competent jurisdiction establishes that the
injury, loss, damage, or destruction was proximately caused by Lessor’s fraud,
willful injury to person or property, or violation of law.

 

(a)           The death or injury of any person or persons, including
Lessee or any person who is an employee or agent of Lessee, or by reason of the
damage to or destruction of any property, including property owned by Lessee or
any person who is an employee or agent of Lessee, and caused or allegedly
caused by either the condition of the Premises, or some act or omission of
Lessee or of some agent, contractor, employee, servant, sublessee, or
concessionaire of Lessee on the Premises;

 

(b)           Any work performed on the Premises or materials furnished
to the Premises at the instance or request of Lessee or any agent or employee
of Lessee;

 

(c)           Lessee’s failure to perform any provision of this Lease or
to comply with any requirement imposed on Lessee or the leased Premises by any
duly authorized governmental agency or political subdivision.

 

11

 

Liability Insurance

 

Section 5.02. 
Lessee shall, at its own cost and expense, obtain and maintain during
the entire term of this Lease and any renewals or extensions thereof, a broad
form comprehensive coverage policy of public liability insurance issued by an
insurance company or companies rated by Best as A+ or better and authorized to
conduct insurance business in the State of California and insuring Lessee and
Lessor against loss or liability caused by or connected with Lessee’s
occupation and use of the Premises under this Lease in amounts not less than:

 

(a)           $1,000,000.00 combined single limit for injury to or death
as a result of any accident or incident.

 

(b)           $2,000,000.00 for damage to or destruction of any property
of others.

 

Such
public liability insurance, and property damage insurance shall insure
performance by Lessee of the indemnity provisions of Section 5.01 above.  Both parties shall be named as co-insured,
and the policy shall contain cross liability endorsements, if available.  The policy shall be primary insurance for all
claims under it and provide that any insurance carried by Lessor is strictly
excess, secondary, and noncontributing with any insurance carried by Lessee.  Lessee may provide such insurance under a
single policy or under one or more separate policies.

 

Every
three (3) years, Lessor may increase the amount of public liability and
property damage insurance coverage required hereunder, if at that time the
existing coverage is not adequate in the opinion of Lessor’s insurance broker
or lender(s).

 

Fire and Casualty Insurance

 

Section 5.03. 
Lessee shall, at Lessee’s sole cost and expense, at all times during the
term hereof, and any extensions thereof, keep all buildings, improvements and
other structures on the Premises insured for their full replacement cost
against loss or destruction by fire and the perils, including vandalism and
malicious mischief, commonly covered under standard extended coverage
endorsements in Santa Barbara County, California.  Lessor shall be named as an additional
insured on all such policies and the policies shall contain a cross-liability
endorsement.

 

“Full
replacement cost” as used herein shall mean the actual cost of replacement for
the buildings and other improvements on the Premises, as determined from time
to time by Lessor.  Upon notification to
Lessee in writing of Lessor’s determination of full replacement cost, Lessee
shall, within thirty (30) days of such written notice, increase the amount of
the insurance carried to the amount stated in the notice.

 

Business Interruption Insurance

 

Section 5.04. 
Lessee shall, at all times during the term of this Lease and any
extensions thereof, maintain at Lessee’s sole cost and expense a policy of
business interruption insurance, ensuring the rent provided for in this Lease
will be paid to Lessor for a period not less than one (1) year in the event the
Premises are destroyed or damaged so as to render operation of

 

12

 

 

Lessee’s
business impossible or impractical by any casualty insured against by standard
fire and extended coverage insurance.

 

Lessee’s Personal Property

 

Section 5.05. 
Lessee shall, at all times during the term of this Lease and any
extensions thereof, maintain at Lessee’s sole cost and expense an insurance
policy issued by a company acceptable to Lessor insuring for their full
insurable value all furniture, fixtures, equipment and alterations or
improvements made to the Premises by Lessee against loss or destruction by fire
and the perils commonly covered under the standard extended coverage
endorsement to fire insurance policies in Santa Barbara County.  Any loss payable under such insurance shall
be payable to Lessee and shall be used to repair or replace such furniture,
fixtures, equipment and alterations and improvements.

 

Cancellation Clause

 

Section 5.06. 
Any policy of insurance required to be obtained and maintained by Lessee
under this Article shall be written by insurance companies authorized to
do business in the State of California. 
Each such policy of insurance shall expressly provide that it cannot be
cancelled for any reason or altered in any manner unless at least thirty (30)
days prior written notice has been given to Lessor by the insurance company.

 

Deposit of Insurance with Lessor

 

Section 5.07. 
Lessee shall, prior to taking possession of the Premises and promptly
thereafter when any such policy is replaced, rewritten, or renewed, deliver to
Lessor a true and correct copy of each insurance policy required by this Article of
this Lease or a certificate executed by the insurance company or companies or
their authorized agent evidencing such policy or policies.

 

Lessor’s Right to Procure Insurance

 

Section 5.08. 
If at any time Lessee fails to procure or maintain the insurance
required by this Article, Lessor may obtain that insurance and pay the premiums
on it for the benefit of Lessee.  Any
amounts paid by Lessor to procure or maintain insurance pursuant to this
section shall be immediately due and repayable to Lessor by Lessee with the
next then due installment of rent under this Lease.  Failure to repay at that time any amount
expended by Lessor shall be considered the same as a failure to pay rent and a
default by Lessee under this Lease.

 

Lessor’s Indemnity

 

Section 5.09. 
Lessor expressly agrees to indemnify, protect, defend and hold Lessee
harmless from all claims arising from any breath or default in the performance
of any obligation to be performed by Lessor under the terms of this Lease and
from and against all costs, loss, damage, legal expenses and liabilities
incurred in connection with such claim or any action or proceeding brought
thereon.  Notwithstanding anything to the
contrary herein, any claim for indemnity brought by the Lessee under this
provision shall be limited to Lessor’s interest in the 

 

13

 

Premises,
and Lessee shall not have recourse to any other assets of Lessor or to the
assets of any partner of Lessor for such claim.

 

ARTICLE 6.  SIGNS
AND TRADE FIXTURES

 

Installation and Removal of Trade Fixtures

 

Section 6.01. 
Lessee shall have the right at any time and from time to time during the
term of this Lease and any renewal or extension of such term, at Lessee’s sole
cost and expense, to install and affix in, to, or on the Premises such items,
herein called “trade fixtures”, for use in Lessee’s trade or business as Lessee
may, in its sole discretion, deem advisable. 
Any and all such trade fixtures that can be removed without structural
damage to the Premises or any building or improvement on the Premises shall
remain the property of the Lessee and may be removed by Lessee at any time or
times prior to the expiration or sooner termination of this Lease.

 

Unremoved Trade Fixtures

 

Section 6.02. 
Any trade fixtures described in this Article that are not removed
from the Premises by Lessee within ten (10) days after the expiration or
sooner termination, regardless of cause, of this Lease shall be deemed
abandoned by Lessee and shall automatically become the property of Lessor as
owner of the real property to which they are affixed, unless Lessor notifies
Lessee, in writing, of Lessor’s election to have Lessee remove such trade
fixtures and to repair any damage caused thereby.  Upon such election by Lessor to require
Lessee to remove such trade fixtures, Lessee shall have fifteen (15) days from
the date of such notice in which to remove such trade fixtures and repair any
damage caused by such removal.  If Lessee
fails to remove such trade fixtures and repair any such damage, Lessor may do
so at Lessee’s sole cost and expense, including any costs of storing such
property.  Such costs and expenses, if
incurred by Lessor for Lessee’s benefit, shall be promptly, upon written demand
therefor, reimbursed to Lessor by Lessee, together with interest at the maximum
rate permitted by law from the date expended by Lessor to the date of
reimbursement by Lessee.

 

Signs

 

Section 6.03. 
Lessee may place and maintain, or permit any other person to place and
maintain any sign on the Premises providing such sign is in compliance with
then existing governmental regulations. 
Lessee may not place any decoration, lettering, or advertising matter on
the glass of any exterior show window of the Premises.  Lessee shall maintain such sign at all times
during this Lease in good appearance and repair.  On expiration or sooner termination of this
Lease, all such signs not removed from the Premises by Lessee on such
expiration or termination of this Lease may, without liability, be destroyed by
Lessor.

 

14

 

ARTICLE 7.  DAMAGE,
DESTRUCTION OR CONDEMNATION

 

Duty to Repair or Restore

 

Section 7.01. 
If any improvements, including the buildings and other structures,
located on the Premises are damaged or destroyed during the term of this Lease
or any extension thereof, the damage shall be repaired as follows:

 

(a)           If the damage or destruction is caused by a peril against
which fire and extended coverage insurance is required to be carried under this
Lease, Lessee shall repair that damage as soon as reasonably possible and
restore the Premises and improvements to substantially the same condition as
existed before the damage or destruction, regardless of whether the insurance
proceeds are sufficient to cover the actual cost of repair or restoration.  If insurance required to be carried by Lessee
under this Lease has lapsed or not been carried, Lessee shall be solely
responsible for the full cost and expense of necessary repairs and restoration.

 

(b)           If the damage or destruction is caused by a peril against
which insurance is not required to be carried by this Lease, Lessor, subject to
Lessor’s right to terminate this Lease described in Section 7.02, shall
repair that damage as soon as reasonably possible and restore the Premises to
substantially the same condition as existed before the damage or destruction.

 

(c)           Whether the damage of destruction is caused either by a
peril against which fire and extended coverage insurance is required by this
Lease to be carried or by a peril against which insurance is not required to be
carried by this Lease, Lessee expressly waives any right under Civil Code
Sections 1931-1933 to terminate this Lease for damage or destruction to the Premises.

 

Termination of Lease for Certain Losses

 

Section 7.02. 
(a) Notwithstanding any other provision of this Lease, if any
improvements located on the Premises are damaged or destroyed to such extent it
will cost more than $100,000.00 to repair or replace them, and the damage or
destruction is caused by a peril against which insurance is not required to be
carried by this Lease, Lessor may terminate this Lease by giving Lessee written
notice of the termination.  The notice
must be given within sixty (60) days after the occurrence of the damage or
destruction.

 

(b)           Lessee or Lessor shall have the right to terminate this
Lease under either of the following circumstances:

 

(i)      If the Premises are damaged or destroyed from any cause
whatsoever, insured or uninsured, and the laws then in effect do not permit the
repair or restoration of the Premises provided for in this Article; or

 

(ii)     If the Premises are damaged or destroyed from any cause
whatsoever, insured or uninsured, during the last year of the term of this
Lease or any extension thereof (provided Lessee has not elected before the date
of damage or destruction to extend the term of this Lease in accordance with Section 1.02).

 

15

 

(c)           Either party may terminate this Lease by giving written
notice of termination to the other party not later than fourteen (14) days
after the right to terminate accrues, and such termination shall be effective
as of the date of the notice of termination. 
In the event of a termination under subsection (b), Lessee shall not be
entitled to collect any insurance proceeds attributable to insurance policies
covering the Premises or improvements except those proceeds attributable to
Lessee’s personal property and trade fixtures.

 

(d)           If this Lease is terminated pursuant to either subsection (a) or
(b) above, the rent and other sums payable by Lessee to Lessor under this
Lease shall be prorated as of the termination date.  If any such sums have been paid in advance by
Lessee, Lessor shall refund them to Lessee for the unexpired period for which
the payment has been made.

 

Time for Construction of Repairs

 

Section 7.03. 
Any and all repairs and restorations of improvements required by this Article shall
be commenced by Lessor or Lessee, as the case may be, within a reasonable time
after the occurrence of the damage or destruction requiring the repairs or
restoration; shall be diligently pursued after being commenced; and shall be
completed within a reasonable time after the loss.  If Lessor is required under this Lease to
perform the repairs and restoration, Lessor shall cause the repairs and
restoration to be completed within 180 days after the occurrence of the event
causing destruction or Lessee shall have the right to terminate this Lease,
unless the delays are caused by events outside the control of Lessor.

 

Insurance Proceeds

 

Section 7.04. 
If the damage or destruction is caused by a peril against which fire and
extended coverage insurance is required to be carried and maintained under this
Lease by Lessee, the proceeds of insurance shall be paid directly to the
parties for the purpose of making the necessary repairs to the Premises as
required under this Lease.

 

Abatement of Rent

 

Section 7.05. 
In the event of repair, replacement or restoration as herein provided,
the Base Rent payable under this Lease shall be abated proportionately with the
degree to which Lessee’s use of the Premises is impaired, from the date of the
damage until completion of repairs plus one (1) calendar month.  Lessee shall not be entitled to any
compensation of damages for loss in the use of all or part of the Premises
and/or for any inconvenience or annoyance occasioned by such damage, repair,
replacement or reconstruction.

 

Total Condemnation

 

Section 7.06. 
Should, during the term of this Lease or any renewal or extension
thereof, title and possession of all of the Premises be taken under the power
of eminent domain by any public or quasi-public agency or entity, this Lease
shall terminate as of 12:01 A.M. on the date actual physical possession of
the Premises is taken by the agency or entity exercising the power of eminent
domain and both Lessor and Lessee shall thereafter be released from all
obligations, except those specified in Section 7.10 of this Lease, under
this Lease.

 

16

 

Termination Option for Partial Condemnation

 

Section 7.07. 
Should, during the term of this Lease or any extension thereof, title
and possession of only a portion of the Premises be taken under the power of
eminent domain by any public or quasi-public agency or entity, Lessee may, at
Lessee’s option, terminate this Lease if more than 35 percent of the floor
space or more than 55 percent in value of the Premises is taken under the power
of eminent domain.  Lessee shall exercise
its option by giving written notice to Lessor within 30 days after actual
physical possession of the portion subject to the eminent domain power is taken
by the agency or entity exercising that power. 
This Lease shall terminate as of 12:01 A.M. on the date the notice
is deemed given to Lessor but the rent specified in Article 2 of this
Lease shall be reduced in the manner specified in Section 7.08 below from
the date of taking to the date of termination of the lease.

 

Partial Condemnation Without Termination

 

Section 7.08. 
Should Lessee fail to exercise the option described in Section 7.06
of this Lease or should the portion of the Premises taken under the power of
eminent domain be insufficient to give rise to the option described in Section 7.07
of this Lease, then, in that event:

 

(a)           This Lease shall terminate as to the portion of the
Premises taken by eminent domain as of 12:01 A.M. on the day, herein
called the “date of taking,” actual physical possession of that portion of the
Premises is taken by the agency or entity exercising the power of eminent
domain;

 

(b)           The rent specified in Article 2 of this Lease shall,
after the date of taking, be reduced by an amount that bears the same ratio to
the rent specified in Article 2 of this Lease as the square footage floor
space of the portion of said premise taken under the power of eminent domain
bears to the total square footage floor space of the Premises as of the date of
this Lease; and

 

(c)           Lessor, at Lessor’s own cost and expense, will remodel and
reconstruct the building remaining on the portion of the Premises not taken by
eminent domain into a single efficient architectural unit as soon after the
date of taking, or before, as can be reasonably done; provided, however, that
the rent specified in this Lease shall not be abated or reduced, except as
provided in subparagraph (b) of this section, during such remodeling and
reconstruction.

 

Condemnation Award

 

Section 7.09. 
Should, during the term of this Lease or any renewal or extension
thereof, title and possession of all or any portion of the Premises be taken
under the power of eminent domain by any public or quasi-public agency or
entity, the portion of the compensation or damages for the taking awarded to
each of the parties to this Lease, Lessor and Lessee, shall belong to and be
the sole property of the party Lessor or Lessee, to whom it is awarded.  Lessee shall be entitled to that portion of
the compensation or damages awarded for the eminent domain taking that
represents (i) reasonable value of Lessee’s rights under this Lease for
the unexpired term of this Lease and (ii) the cost or loss sustained by
Lessee because of the removal of Lessee’s trade fixtures, equipment and
furnishings from the portion of the Premises taken by eminent domain.

 

17

 

Arbitration of Condemnation Award

 

Section 7.10. 
Should separate awards not be made to Lessor and Lessee for the taking
by eminent domain of all or any portion of the Premises, and should Lessor and
Lessee be unable to agree on the manner the total award is to be divided
between them pursuant to Section 7.09 of this Lease, the proper division
of the award between Lessor and Lessee shall be settled by arbitration as provided
in Section 9.03.

 

Lessee’s Waiver

 

Section 7.11. 
Lessee agrees that its rights to terminate this Lease due to partial
condemnation are governed by this Section. 
Lessee waives all rights it may have under California Code of Civil
Procedure section 1265.13, or otherwise, to terminate this Lease based on a
partial condemnation.

 

ARTICLE 8.  DEFAULT,
ASSIGNMENT, AND TERMINATION

 

Subleasing or Assigning as Breach

 

Section 8.01. 
Lessee shall not encumber, assign, or otherwise transfer this Lease, any
right or interest in this Lease, or any right or interest in the Premises or
any of the improvements that may now or hereafter be constructed or installed
on the Premises without the express written consent of Lessor first had and
obtained.  Neither shall Lessee sublet
the Premises or any part thereof or allow any other person, other than Lessee’s
patrons, agents, servants, and employees, to occupy the Premises or any part
thereof without the prior written consent of Lessor.  The consent of Lessor to any assignment of
Lessee’s interest in this Lease or the subletting by Lessee of the Premises or
parts of the Premises shall not be unreasonably withheld.  A consent by Lessor to one assignment, one
subletting, or one occupation of the Premises by another person shall not be
deemed to be a consent to any subsequent assignment, subletting, or occupation
of the Premises by another person.  Any
encumbrance, assignment, transfer, or subletting without the prior written
consent of Lessor, whether it be voluntary or involuntary, by operation of law
or otherwise, is void and shall, at the option of Lessor, terminate this
Lease.  Notwithstanding the above, Lessee
may assign or sublease the Premises, or portions thereof, to a subsidiary, affiliate
or parent of Lessee.  Such permitted
assignment shall not relieve Lessee or any person who has personally guaranteed
Lessee’s performance of this Lease from any liability under this Lease or any
such guarantee.

 

Lessee’s Default

 

Section 8.02. 
The occurrence of any one or more of the following events shall
constitute a default under this Lease by Lessee:

 

(a)                                 Non-curable
Defaults:  (i) The vacation or
abandonment of any substantial portion of the Premises by Lessee for a period
of five (5) business days or longer;

 

(ii)     Any involuntary transfer of Lessee’s interest in this Lease or
any voluntary transfer, attempted or actual, of Lessee’s interest in this
Lease, without Lessor’s prior written consent, in violation of Section 8.01;

 

18

 

(iii)    If the leasehold interest of Lessee is levied upon under
execution or is attached by process of law and said levy or attachment is not
promptly released;

 

(iv)    If:  (1) all or
substantially all of the Lessee’s assets are placed in the hands of a receiver
or trustee, and such receivership or trusteeship continues for a period of
sixty (60) days, or

 

(2)           if Lessee makes an assignment for the benefit of creditors
or is adjudicated a bankrupt, or

 

(3)           if Lessee institutes any proceedings under any provision of
the Bankruptcy Code or under any other act relating to the subject of
bankruptcy wherein Lessee seeks to be adjudicated a bankrupt, be discharged of
its debts, or effect a plan of liquidation, composition, arrangement or
reorganization, or

 

(4)           if any involuntary proceeding is filed against Lessee
under any such bankruptcy laws and Lessee consents thereto or acquiesces
therein by pleading or default,

 

then
any such act shall be deemed a breach of this Lease, and neither this Lease nor
any interest in and to the Premises shall become an asset in any of such
proceedings and, in any such event, and in addition to any and all rights or
remedies of Lessor hereunder or provided by law, this Lease shall terminate
automatically as of the date on which any one or more of the above-described
occurrences takes place.  In such event,
it shall be lawful for Lessor to re-enter the Premises and take possession
thereof and remove all persons and all of Lessee’s personal property, fixtures,
equipment, alterations, improvements and utility installations therefrom, and
Lessee shall have no further claim to the Premises or under this Lease.  Nothing contained herein shall limit or
prejudice the right of Lessor to recover damages by reason of any such
termination equal to the maximum allowed by any statute or rule of law in
effect at the time when, and governing the proceedings in which, such damages
are to be proved, whether or not such amount is greater, equal to, or less than
the amount of damages recoverable under the provisions of this Article.  However, the foregoing provisions in this Article shall
be subject to the Bankruptcy Code, as heretofore and hereafter amended.

 

(b)           Curable Defaults:  (i) The
failure by Lessee to make any payment of Basic Rent, Additional Rent or any
other payment required to be made by Lessee hereunder as and when due and which
shall continue for a period of ten (10) business days after written notice
thereof from Lessor to Lessee; provided however, any such notice shall be in
lieu of, and not in addition to, any notice required under the California Code
of Civil Procedure or any other law, regulation or ordinance; or

 

(ii)     The failure by Lessee to observe or perform any non-monetary
covenants, conditions or provisions of this lease to be observed or performed
by Lessee, other than the aforementioned non-curable defaults, within thirty
(30) days after Lessee has been given written notice of such failure.  Notwithstanding the foregoing, if Lessee
cannot reasonably cure such default within thirty (30) days, Lessee shall not
be in default hereunder so long as Lessee commences to cure the default within
such thirty (30) day period and thereafter diligently and in good faith pursues
such cure to completion.

 

19

 

Lessors Default

 

Section 8.03. 
(a) Lessor shall be in default if it fails or refuses to perform
any provision of this Lease that it is obligated to perform and such failure
continues for thirty (30) days after written notice thereof from Lessee detailing
such failure.  Notwithstanding the
foregoing, if Lessor cannot reasonably cure such default within thirty (30)
days, Lessor shall not be in default hereunder so long as Lessor commences to
cure the default within such thirty (30) day period and thereafter diligently
and in good faith pursues such cure to completion.

 

(b)           If Lessor is in default hereunder, and as a consequence
Lessee recovers a money judgment against Lessor, such judgment shall be
satisfied only out of the proceeds of sale received on execution of the
judgment and levy against the right, title, and interest of Lessor in the
Premises, and out of rent or other income from such real property receivable by
Lessor or out of the consideration received by Lessor from the sale or other
disposition of all or any part of Lessor’s right, title, and interest in the
Premises.  Neither Lessor, nor any
partner, agent, officer, director or employee of Lessor shall be personally
liable for any portion of such a judgment.

 

Abandonment

 

Section 8.04. 
If Lessee vacates or abandons the Premises, this Lease shall continue in
effect unless and until expressly terminated by Lessor, and Lessor shall have
all of the remedies provided by this Lease or by law, including without
limitation, the right to maintain Lessee’s right to possession and to recover
Rent as it becomes due hereunder.  Lessor
shall not be deemed to have terminated this Lease other than by written notice
of termination from Lessor.  At any time
subsequent to vacation or abandonment of the Premises by Lessee, Lessor may
give notice of termination and shall thereafter have all of the rights
hereinafter set forth.

 

Termination

 

Section 8.05. 
Following the occurrence of any default, Lessor shall have the right, so
long as the default continues, to terminate this Lease by written notice to
Lessee setting forth:  (a) the
default; (b) the requirements to cure it; and (c) a demand for
possession, which shall be effective in accordance with the notice provisions
specified in Section 9.04.

 

Possession

 

Section 8.06. 
Following termination under Section 8.05, without prejudice to any
other remedies Lessor may have by reason of Lessee’s default or of such
termination, Lessor may then or at any time thereafter, (a) peaceably
re-enter the Premises, or any part thereof, upon voluntary surrender by Lessee,
or expel or remove Lessee therefrom and any other persons occupying them, using
such legal proceedings as are then available; (b) 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 Lessor in its sole discretion shall
determine, with the right to make reasonable alterations and repairs to the
Premises; and (c) remove all personal property therefrom.  Lessee hereby expressly waives any and all
rights of redemption granted by or under any present or future law in the event
of 

 

20

 

Lessee’s
being evicted or dispossessed for any cause, or in the event of Lessor’s
obtaining possession of the Premises, or by reason of the violation by Lessee
of any of the items, covenants or conditions, of this Lease, or otherwise.

 

Recovery

 

Section 8.07. 
Following termination under Section 8.05, Lessor shall have all the
rights and remedies of a Lessor provided by Section 1951.2 of the
California Civil Code.  The amount of
damages which Lessor may recover following termination shall include:  (a) the worth at the time of the award
of the unpaid Rent which had been earned at the time of termination;
(b) 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 the Lessee proves could have been
reasonably avoided; (c) 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 Lessee proves could be reasonably avoided;
and (d) any other amount necessary to compensate Lessor for all detriment
proximately caused by Lessee’s failure to perform its obligations under this
Lease.  The “worth at the time of the
award” of the amounts referred to in (a) and (b) above shall be
computed by allowing interest at the maximum rate permitted by law.  The “worth at the time of the award” of the
amount referred to in (c) above shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one (1%) percent.

 

Additional Remedies

 

Section 8.08. 
In addition to the foregoing remedies, Lessor shall, so long as this
Lease is not terminated, have the right to remedy any default of Lessee, to
maintain or improve the Premises without terminating this Lease, to incur
expenses on behalf of Lessee in seeking a new sublessee, 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 Lessor’s reasonable costs in so
doing, with interest at the maximum rate permitted by law.

 

Other

 

Section 8.09. 
If Lessee causes or threatens to cause a breach of any of the covenants,
agreements, terms or conditions contained in this Lease, Lessor shall be
entitled to retain all sums held by Lessor, 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.

 

Cumulative

 

Section 8.10. 
Each right and remedy of Lessor 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, and shall not preclude the simultaneous or later exercise by
Lessor of any or all other rights or remedies provided for in this Lease or now
or hereafter existing in law or in equity or by statute or otherwise.

 

21

 

No Waiver

 

Section 8.11. 
No failure by Lessor or Lessee 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 Lessor to
mitigate the damages caused by Lessee’s breach of this Lease shall not be
construed to be a waiver of Lessor’s right to recover damages under this
Article.  Nothing in this Article affects
the right of Lessor to indemnification by Lessee for liability arising prior to
the termination of this Lease for personal injuries or property damage.

 

Written Action

 

Section 8.12. 
No act or thing done by Lessor or its agents during the Term hereof
shall be deemed an acceptance of a surrender of the Premises, and no agreement
to accept a surrender of the premises shall be valid unless made in writing and
signed by Lessor.  Neither the reference
in this Lease to any particular remedy nor the pursuit of any particular remedy
shall preclude Lessor from any other remedy Lessor might have, either at law or
in equity.

 

Replacement of Statutory Notice Requirements

 

Section 8.13. 
When this Lease requires service of a notice, that notice shall replace
rather than supplement any equivalent or similar statutory notice, including
any notices required by Code of Civil Procedure section 1161 or any similar or
successor statute.  When a statute
requires service of a notice in a particular manner, service of that notice (or
a similar notice required by this Lease) in the manner required by Section 9.04
shall replace and satisfy the statutory service-of-notice procedures, including
those required by Code of Civil Procedure section 1162 or any similar or
successor statute.

 

Continuation of Lease in Effect

 

Section 8.14. 
Lessor shall have the remedy described in Civil Code section 1951.4,
which provides that, when a Lessee has the right to sublet or assign (subject
only to reasonable limitations), the Lessor may continue the lease in effect
after the Lessee’s breach and abandonment and recover Rent as it becomes
due.  Accordingly, if Lessor does not
elect to terminate this Lease on account of any default by Lessee, Lessor may
enforce all of Lessor’s rights and remedies under this Lease, including the
night to recover all Rent as it becomes due.

 

Efforts To Relet

 

Section 8.15. 
For purposes of this Article 8, Lessee’s right to possession shall
not be considered to have been terminated by Lessor’s efforts to relet the
Premises, by Lessor’s acts of maintenance or preservation with respect to the
Premises, or by appointment of a receiver to protect Lessor’s interests under
this Lease.  This list is merely
illustrative of acts that may be performed by Lessor without terminating Lessee’s
right to possession.

 

22

 

ARTICLE 9.  MISCELLANEOUS

 

Force Majeure - Unavoidable Delays

 

Section 9.01. 
Should the performance of any act required by this Lease to be performed
by either Lessor or Lessee be prevented or delayed by reason of an act of God,
strike, lockout, labor troubles, inability to secure materials, restrictive
governmental laws or regulations, or any other cause except financial
inability, not the fault of the party required to perform the act, the time for
performance of the act will be extended for a period equivalent to the period
of delay and performance of the act during the period of delay will be excused;
provided, however, that nothing contained in this section shall excuse the
prompt payment of rent or other sums by Lessee as required by this Lease or the
performance of any act rendered difficult solely because of the financial
condition of the party, Lessor or Lessee, required to perform the act.

 

Attorney’s Fees

 

Section 9.02. 
(a) Should any litigation be commenced between the parties to this
Lease concerning the Premises, this Lease, or the rights and duties of either
in relation thereto, the party, Lessor or Lessee, prevailing in such litigation
shall be entitled, in addition to such other relief as may be granted in the
litigation, to a reasonable sum as and for his attorney’s fees in such
litigation which shall be determined by the court in such litigation or in a
separate action brought for that purpose.

 

(b)           If Lessor is made a party defendant to any litigation
concerning this Lease or the leased Premises or the occupancy thereof by
Lessee, then Lessee shall hold Lessor harmless from all liability by reason of
said litigation, including reasonable attorney’s fees and expenses incurred by
Lessor in any such litigation, whether or not any such litigation is prosecuted
to judgment, provided however, it is agreed between Lessor and Lessee that if
the litigation referred to in this Section arises out of no act, fault, or
negligence of the Lessee, there shall be no obligation on the part of Lessee to
hold harmless the Lessor from said litigation.

 

(c)           If Lessee breaches any term of this Lease, Lessor may
employ an attorney or attorneys to protect Lessor’s rights hereunder, and in
the event of such employment following any breach by Lessee, Lessee shall pay Lessor
reasonable attorney’s fees and expenses incurred by Lessor, whether or not an
action is actually commenced against Lessee by reason of said breach.

 

Arbitration of Disputes

 

Section 9.03.  IF ANY
DISPUTE ARISES BETWEEN LESSOR AND LESSEE CONCERNING THE PREMISES, ANY PROVISION
OF THIS LEASE OR THE RIGHTS AND DUTIES OF EITHER IN REGARD THERETO, THE DISPUTE
SHALL BE SETTLED BY ARBITRATION AS PROVIDED IN THIS SECTION.  EACH PARTY SHALL APPOINT AN ARBITRATOR AND
GIVE THE OTHER PARTY WRITTEN NOTICE OF THE NAME AND ADDRESS OF ARBITRATOR
WITHIN FIVE (5) DAYS AFTER WRITTEN DEMAND TO DO SO HAS BEEN SERVED ON THE
PARTY MAKING THE APPOINTMENT BY THE OTHER PARTY TO THIS LEASE.  THE TWO APPOINTED ARBITRATORS SHALL WITHIN
TEN (10) DAYS AFTER THEIR 

 

23

 

APPOINTMENT,
APPOINT A THIRD ARBITRATOR.  THE WRITTEN
DECISION OF ANY TWO OF THE THREE ARBITRATORS SHALL BE BINDING AND CONCLUSIVE ON
BOTH PARTIES TO THIS LEASE.  THE
ARBITRATORS MAY APPORTION THE COSTS AND EXPENSES OF THE ARBITRATION
PROCEEDING, INCLUDING ATTORNEY’S FEES AND ARBITRATION FEES, BETWEEN THE
PARTIES TO THIS AGREEMENT IN ANY MANNER DEEMED REASONABLE BY TWO OF THE THREE
ARBITRATORS.  THE ARBITRATION SHALL BE
CONDUCTED IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION.

 

NOTICE:  BY INITIALING IN THE SPACE BELOW YOU ARE
AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE “ARBITRATION
OF DISPUTES” PROVISION ABOVE DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MAY HAVE TO HAVE THE
DISPUTE LITIGATED IN A COURT OR JURY TRIAL. 
BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS
TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE “ARBITRATION
OF DISPUTES” PROVISION.  IF YOU REFUSE TO
SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE
COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE.  YOUR AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY.

 

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISION
TO NEUTRAL ARBITRATION.

 

	
  LESSOR’S
  INITIALS:

  	
  /s/

  	
   

  	
  LESSEE’S
  INITIALS:

  	
  /s/

  

 

Notices

 

Section 9.04. 
All notices to be given to Lessee shall be given in writing personally
or by depositing the same in the United States mail, postage prepaid, and
addressed to Lessee at the Premises, whether or not Lessee has departed from,
abandoned or vacated the Premises.  All
notices to be given to Lessor shall be given in writing personally or by
depositing the same in the United States mail, postage prepaid, and addressed
to the Lessor at 316 South Stratford Avenue, Santa Maria, CA, 93454, or such
other place or places as may be designated from time to time by Lessor.

 

No Merger

 

Section 9.05. 
The voluntary or other surrender of this Lease by Lessee, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Lessor, terminate any existing subleases or subtenancies or may, at the option
of Lessor, operate as an assignment to it of any of such subleases or
subtenancies.

 

24

 

Binding on Heirs and Successors

 

Section 9.06.  This Lease shall be binding on and shall inure
to the benefit of the heirs, executors, administrators, successors, and assigns
of the parties hereto, Lessor and Lessee, but nothing in this section contained
shall be construed as a consent by Lessor to any assignment of this Lease or
any interest therein by Lessee except as provided in Article 8 of this
Lease.

 

Partial Invalidity

 

Section 9.07. 
Should any provision of this Lease be held by a court of competent
jurisdiction to be either invalid, void, or unenforceable, the remaining
provisions of this Lease shall remain in full force and effect unimpaired by
the holding.

 

Sole and Only Agreement

 

Section 9.08. 
This instrument constitutes the sole and only agreement between Lessor
and Lessee respecting the Premises, the leasing of the Premises to Lessee, or
the lease term herein specified, and correctly sets for the obligations of
Lessor and Lessee to each other as of its date. 
Any agreements or representations respecting the Premises or their
leasing by Lessor to Lessee not expressly set forth in this instrument are null
and void.

 

Waiver

 

Section 9.09. 
The waiver by Lessor of any term, covenant or condition herein contained
shall not be deemed to be a waiver of such term, covenant or condition on any
subsequent breach of the same or any other term, covenant or condition herein
contained.  The subsequent acceptance of
rent hereunder by Lessor shall not be deemed to be a waiver of any preceding
breach by Lessee of any term, covenant or condition of this Lease other than
the failure of the Lessee to pay the particular rental so accepted, regardless
of Lessor’s knowledge of such preceding breach at the time of the acceptance of
such rent.

 

Subordination and Non-Disturbance

 

Section 9.10. 
(a) This Lease is subject and subordinate to all mortgages and
deeds of trust which may hereafter be placed and recorded on the property of
which the Premises are a part and to all renewals, modifications, replacements,
and extensions thereof.

 

(b)           The subordination provided for above is conditioned on and
subject to the following:

 

(i)      For each mortgage or deed of trust, Lessor shall obtain from
the mortgagee or beneficiary a non-disturbance agreement in writing that, in
the event of foreclosure, or any sale thereunder, this Lease shall not be
terminated and Lessee’s right to possession under this Lease shall not be
disturbed, provided Lessee is not then in default under this Lease;

 

(ii)     In consideration of the mortgagee’s or beneficiary’s agreement
not to disturb Lessee’s possession as above provided, Lessee hereby agrees to
attorn to the purchaser at any foreclosure, sale or other action or proceeding.

 

25

 

(iii)    The subordination described in this section shall be effective
without the necessity of having any further instruments executed by Lessee, but
Lessee agrees to execute on demand any such further instruments evidencing
subordination that Lessor or any mortgagee or beneficiary may reasonably
request.

 

Time of Essence

 

Section 9.11. 
Time is expressly declared to be the essence of this Lease.

 

Accord and Satisfaction

 

Section 9.12. 
No payment by Lessee or receipt by Lessor of a lesser amount than the
monthly rent stipulated herein or any other sum due hereunder from Lessee to
Lessor shall be deemed to be anything other than a payment on account of the
earliest sum then due and owing to Lessor. 
No endorsement or statement on any check of any letter accompanying any
check or payment or payment of any sum(s) due from Lessee to Lessor
hereunder shall be deemed to be an accord and satisfaction, and Lessor may
accept and negotiate any such payment without prejudice to Lessor’s right to
recover the balance of such rent or other sum or to pursue any other remedy
provided for in this Lease or by law.

 

Right of First Refusal to Purchase Leased Premises

 

Section 9.13. 
(a) If at any time during the term of this Lease Lessor receives
from any third party a bona fide offer to purchase the Premises at a price and
on terms acceptable to Lessor, Lessor shall give written notice of the offer to
Lessee.  Within thirty (30) days after
Lessor gives Lessee written notice of the third-party offer, Lessee shall have
the right to purchase the Premises at the same price and on the same terms and
conditions set forth in the third-party offer. 
To exercise its right, Lessee must, within the same thirty (30) day
period, deposit in escrow with any title company in Santa Barbara County,
California, all moneys and instruments required by the terms of the offer to be
paid or delivered to Lessor on close of escrow and shall also give Lessor
written notice of the deposit.  In the
event Lessee fails to exercise the option to purchase in accordance with the
provisions of this Section, Lessor may sell the Premises to the third party
making the offer on the same terms and conditions set forth in that offer.  If for any reason the Premises are not sold
to the party making the offer, Lessor shall give Lessee the same right to purchase
the Premises on receiving any subsequent offer from any third party that is
acceptable to Lessor.

 

(b)           Lessee may not assign the rights granted under this
section either separately or together with a transfer of Lessee’s leasehold
interest, and any purported assignment shall be null and void.

 

(c)           If this property is sold to any third party during the
term of this Lease, then the provisions of this section shall thereafter be of
no further force or effect.

 

Bankruptcy

 

Section 9.14. 
Should a petition in bankruptcy be filed by the Lessee, or should
Lessee, during the term hereof, become insolvent or make any assignment for the
benefit of creditors, or 

 

26

 

be
adjudicated bankrupt or insolvent by any Court, or should a receiver or trustee
in bankruptcy be appointed over the business, property and assets of the
Lessee, and the Premises herein lease, or take charge of the Premises herein
demised, or should this lease, by operation of law, devolve upon or pass to any
person or persons other than the Lessee, then upon any of such events, the
Lessor may, at its option, re-enter and take possession of these Premises
herein leased and remove all persons therefrom and terminate the Lease.

 

Estoppel Certificate

 

Section 9.15. 
Within ten (10) days following any written request which Lessor may
make from time to time, Lessee shall execute, acknowledge and deliver to Lessor
a statement certifying:  (a) the
date of commencement of this Lease; (b) the fact that this Lease is
unmodified and in full force and effect, or, if there have been modifications
hereto, that this Lease is in full force and effect, and stating the date and
nature of such modifications; (c) the date to which the Rent and other
sums payable under this Lease have been paid; (d) that there are no
current defaults under this Lease by either Lessor or Lessee except as
specified in Lessee’s statement; and (e) any other information Lessor may
reasonably require.  Lessor and Lessee
intend that any statement delivered pursuant to this Section may be relied
upon by any encumbrancer, ground Lessee, beneficiary, purchaser or prospective
purchaser of the Property or any interest therein, as well as any of their
assigns.

 

Transfer Of Lessor’s Interest

 

Section 9.16. 
Lessor has the right to transfer all or part of its interest in the
Building and Real Property and in this Lease. 
On such a transfer, Lessor shall automatically be released from all
liability accruing under this Lease, and Lessee shall look solely to that transferee
for the performance of Lessor’s obligations under this Lease after the date of
transfer.  Lessor may assign its interest
in this Lease to a mortgage lender as additional security.  This assignment shall not release Lessor from
its obligations under this Lease, and Lessee shall continue to look to Lessor
for the performance of its obligations under this Lease.

 

Liability Of The Lessor

 

Section 9.17. 
Except as otherwise provided in this Lease or applicable law, for any
breach of this Lease the liability of Lessor (including all persons and
entities that comprise Lessor, and any successor Lessor) and any recourse by
Lessee against Lessor shall be limited to the interest of Lessor and Lessor’s
successors in interest in and to the Building and Real Property.  On behalf of itself and all persons claiming
by, through, or under Lessee, Lessee expressly waives and releases Lessor from
any personal liability for breach of this Lease.

 

27

 

Executed
on the day and date first above written at Santa Maria, California.

 

LESSEE:

 

COASTAL
RADIATION ONCOLOGY MEDICAL GROUP, INC.

a California corporation

 

	
  by:

  	
  /s/
  Thomas D. Fogel, M.D.

  	
   

  
	
   

  	
  THOMAS
  D. FOGEL, M.D., President

  	
   

  
	
   

  	
   

  	
   

  
	
  by:

  	
  /s/
  Jonathan R. Stella, M.D.

  	
   

  
	
   

  	
  JONATHAN
  R. STELLA, M.D., Secretary

  	
   

  

 

LESSOR:

 

	
  SANTA
  MARIA BUILDING PARTNERSHIP

  	
   

  
	
  a
  California general partnership

  	
   

  
	
   

  	
   

  
	
  by:

  	
  /s/ Peter K. Sien, M.D.

  	
   

  
	
   

  	
  PETER K. SIEN, M.D., Managing Partner

  	
   

  

 

28

 

EXHIBIT A

 

PARCEL
1:

 

AN
UNDIVIDED INTEREST IN LOT 3 OF STRATFORD COURT NO 2, TRACT 5164, IN THE
CITY OF SANTA MARIA, COUNTY OF SANTA BARBARA, STATE OF CALIFORNIA, AS SHOWN ON
MAP FILED IN BOOK 92, PAGES 10 AND 11 OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

 

29

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