Document:

Exhibit 10.3

 

CATALINA
LANDING

AMENDED AND RESTATED OFFICE LEASE

 

Dated: May 9, 2003

 

This Amended and Restated Lease (“Lease”), is by and between AC-CATALINA LANDING LLC,  a Delaware limited liability company (“Landlord”), and OBAGI MEDICAL PRODUCTS, INC.,  a California corporation (“Tenant”). John Hancock Mutual
Life Insurance Company, a Massachusetts corporation, Landlord’s predecessor in
interest, and Tenant, are parties to that certain lease, dated February 27,
1998, and that certain First Amendment to Standard Office Lease, dated October
30, 1998 (collectively, the “Lease”), for the premises described below. Now,
therefore, Landlord and Tenant hereby express their mutual desire and intent to
amend and restate the Original Lease and First Amendment as follows:

 

1.        Basic Lease Provisions (“Basic Lease Provisions”)

 

1.1      Parties: This Lease, dated, for reference purposes
only, the ninth day of May, 2003, is made by and between AC-Catalina LLC, a Delaware limited liability company
(“Landlord”), and Obagi Medical Products,
Inc.,  a California corporation.

 

1.2      Premises: The premises are located at 310 Golden Shore,
Suite 120, Long Beach, Los Angeles County, CA, as shown on Exhibit “A-11”
hereto (the “Premises”). The Premises collectively contain approximately 12,023
Rentable Square Feet (subject to adjustment as provided in this Lease).
Notwithstanding anything contained in this Lease to the contrary, the parties
hereto agree and acknowledge that any statement of size, square footage, or
dimension set forth in this Lease or lease proposals that may have been used in
calculating rents or expense recoveries is a reasonable approximation. All
rents and/or expense recoveries based thereon is not subject to revision or
modification whether or not the actual size is greater or less than stated
herein.

 

1.3      Building and Project: Commonly described as being located at 310
Golden Shore, Long Beach, Los Angeles County, CA 90802 (the Building”), as
more particularly described in Exhibit “A” hereto. The Catalina Landing Office Project
(“The Office Building Project”) consists of four office buildings (310, 320,
330 and 340 Golden Shore) containing approximately 276,160 rentable square
feet.

 

1.4      Use: General Office, subject to paragraph 6.

 

1.5                   Term:                                Sixty (60) Lease Months

Commencement Date:     August 1, 2003 (“Commencement Date”)

Expiration Date:              July 31, 2008 (“Expiration Date”), as defined
in paragraph 3.

 

1.6      Base Rent Schedule: Monthly Base Rent is payable in advance on
the first day of each month, per paragraph 4.1.

 

	
  EFFECTIVE DATES OF INCREASE

  	
   

  	
  MONTHLY BASE RENT

  	
   

  
	
  August 1, 2003 – July 31,
  2004

  	
   

  	
  21,040

  	
   

  
	
  August 1, 2004 – July 31,
  2005

  	
   

  	
  21,671

  	
   

  
	
  August 1, 2005 – July 31,
  2006

  	
   

  	
  22,322

  	
   

  
	
  August 1, 2006 – July 31,
  2007

  	
   

  	
  22,991

  	
   

  
	
  August 1, 2007 – July 31,
  2008

  	
   

  	
  23,681

  	
   

  

 

1.7      Base Year:                                      1998

 

1.8      Rent paid upon execution:            $21,040 - To Be Billed

 

1.9      Security Deposit:                            $17,433.35 -
Previously Remitted

 

1.10    Tenant’s Share of Operating Expense
Increase:              4.35% [as defined in Paragraph 4.2]

 

2.        Premises,
Parking and Common Areas.

 

2.1      Premises: The Premises are a portion of a building,
herein sometimes referred to as the “Building” identified in paragraph 1.3 of
the Basic Lease Provisions. The Premises, the Building, the Common Areas, the
land upon which the same are located, along with all other buildings and
improvements thereon or thereunder, are herein collectively referred to as the “Office
Building Project.” Landlord hereby leases to Tenant and Tenant leases from
Landlord for the term, at the rental, and upon all of the conditions set forth
herein, the real property referred to in the Basic Lease Provisions, paragraph
1.2, as the “Premises,” including rights to the Common Areas as hereinafter
specified.

 

2.2      Vehicle Parking:   So
long as Tenant is not in default, and subject to the rules and regulations
attached hereto, and as established by Landlord from time to time and in
accordance with the prevailing parking rates charged by Landlord, Tenant shall
be entitled to use up to forty-two (42) parking spaces in the Office Building
Project including up to twelve (12) reserved spaces, three of which will be
billed at the non-reserved rate.

 

Initial            

Initial            

 

1

 

2.2.1   If
Tenant commits, permits or allows any of the prohibited activities described in
the Lease or the rules then in effect, then Landlord shall have the right,
without notice, in addition to such other rights and remedies that it may have,
to remove or tow away the vehicle involved and charge the cost to Tenant, which
cost shall be immediately payable upon demand by Landlord.

 

2.2.2   Intentionally Omitted

 

2.3      Common Areas-Definition. The term “Common Areas” is defined as all
areas and facilities outside the Premises and with the exterior boundary line
of the Office Building Project that are provided and designated by the Landlord
from time to time for the general non-exclusive use of Landlord, Tenant and of
other Tenants of the Office Building Project and their respective employees,
suppliers, shippers, customers and invitees, including but not limited to
common entrances, lobbies, corridors, stairways and stairwells, public restrooms,
elevators, escalators, parking areas to the extent not otherwise prohibited by
this Lease, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, ramps, driveways, landscaped areas and decorative walls.

 

2.4      Common Areas-Rules and Regulations. Tenant agrees to abide by and conform to the
rules and regulations attached hereto as Exhibit D with respect to the Office Building Project and Common Areas, and to
cause its employees, suppliers, shippers, customers, and invitees to so abide
and conform. Landlord or such other person(s) as Landlord may appoint shall
have the exclusive control and management of the Common Areas and shall have
the right, from time to time, to modify, amend and enforce said rules and
regulations. Landlord shall not be responsible to Tenant for the non-compliance
with said rules and regulations by other Tenants, their agents, employees and
invitees of the Office Building Project.

 

2.5      Common Areas- Changes. Landlord shall have the right, in Landlord’s
sole discretion, from time to time:

 

(a) To make changes to the Building
interior and exterior and Common Areas, including, without limitation, changes
in the location, size, shape, number, and appearance thereof, including but not
limited to the lobbies, windows, stairways, air shafts, elevators, escalators,
restrooms, driveways, entrances, parking spaces, parking areas, loading and
unloading areas, ingress, egress, direction of traffic, decorative walls,
landscaped areas and walkways; provided, however, Landlord shall at all times
provide the parking facilities required by applicable law;

 

(b) To close temporarily any of the
Common Areas for maintenance purposes so long as reasonable access to the
Premises remains available;

 

(c) To designate other land and improvements
outside the boundaries of the Office Building Project to be a part of the
Common Areas, provided that such other land and improvements have a reasonable
and functional relationship to the Office Building Project;

 

(d) To add additional buildings and
improvements to the Common Areas;

 

(e) To use the Common Areas while engaged
in making additional improvements, repairs or alterations to the Office
Building Project, or any portion thereof;

 

(f) To do and perform such other acts and
make such other changes in, to or with respect to the Common Areas and Office
Building Project as Landlord may, in the exercise of sound business judgment
deem to be appropriate.

 

3.        Term

 

3.1      Term. The term and Commencement Date of this Lease
shall be as specified in paragraph 1.5 of the Basic Lease Provisions.

 

3.2      Delivery of Possession. Landlord will deliver possession of the
Premises to Tenant in its current “as-is” condition. If, for any reason not
caused by Tenant, Landlord cannot deliver possession of the Premises to Tenant
on the Commencement Date, this Lease will not be void or voidable, nor will
Landlord be liable to Tenant for any loss or damage resulting from such delay,
but in such event, the Commencement Date and Tenant’s obligation to pay rent
will not commence until Landlord delivers possession to Tenant. If the delay in
possession is caused by Tenant, then the Term and Tenant’s obligation to pay
rent will commence as of the Commencement Date even though Tenant does not yet
have possession. Notwithstanding the foregoing, Landlord will not be obligated
to deliver possession of the Premises to Tenant (but Tenant will be liable for
rent if Landlord can otherwise deliver the Premises to Tenant) until Landlord
has received from Tenant all of the following: (i) a copy of this Lease fully
executed by Tenant and the guaranty of Tenant’s obligations under this Lease,
if any, executed by the Guarantor(s); (ii) the Security Deposit and the first
installment of Monthly Base Rent; and (iii) copies of policies of insurance or
certificates thereof as required in this Lease.

 

3.3      Early Possession. If Tenant occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Tenant shall
pay rent for such occupancy.

 

3.4      Uncertain Commencement. In the event commencement of the Lease term
is defined as the completion of the improvements, Tenant and Landlord shall
execute an amendment to this Lease establishing the date of Tender of
Possession (as defined in paragraph 3.2.1) or the actual taking of possession
by Tenant, whichever first occurs, as the Commencement Date.

 

4.        Rent

 

4.1      Base
Rent. Subject to adjustment as hereinafter provided in
paragraph 1.6, and except as may be otherwise expressly provided this Lease,
Tenant shall pay to Landlord the Base Rent for the Premises set forth in
paragraph 1.6 of the Basic Lease Provisions, without offset or deduction.
Tenant shall pay Landlord upon execution hereof the advance Base Rent described
in paragraph 1.8 of the

 

2

 

Basic Lease
Provisions. Rent for any period during the term hereof which is for less than
one month shall be prorated based upon the actual number of days of the calendar
month involved. Rent shall be payable in lawful money of the United States to
Landlord at the address stated herein or to such other persons or at such other
places as Landlord may designate in writing.

 

4.2      Operating
Expense Increase. Tenant shall
pay to Landlord during the term hereof, in addition to the Base Rent, Tenant’s
Share as hereinafter defined, of the amount by which all Operating Expenses, as
hereinafter defined, for each Comparison year exceeds the amount of all
Operating Expenses for the Base Year, such excess being hereinafter referred to
as the “Operating Expense Increase,” in accordance with the following
provisions:

 

(a) “Tenant’s Share” is defined, for purposes of this Lease, as
the percentage set forth in paragraph 1.10 of the Basic Lease Provisions, which
percentage has been determined by dividing the approximate square footage of
the Premises by the total approximate square footage of the rentable space
contained in the Office Building Project. It is understood and agreed that the
square footage figures set forth in Basic Lease Provisions are approximations
which Landlord and Tenant agree are reasonable and shall not be subject to
revision except in connection with an actual change in the size of the Premises
or a change in the space available for lease in the Office Building Project.

 

(b) “Base Year” is defined as the calendar year in which the Lease
term commences.

 

(c) “Comparison Year” is defined as each calendar year during the
term of this Lease subsequent to the Base Year; provided, however, Tenant shall
have no obligation to pay share of the Operating Expenses Increase applicable
to the first twelve (12) months of the Lease Term (other than such as are
mandated by a governmental authority as to which government mandated expenses Tenant
shall pay Tenant’s Share, notwithstanding they occur during the first twelve
(12) months). Tenant’s Share of the Operating Expense Increase for the first
and last Comparison Years of the Lease Term shall be prorated according to that
portion of such Comparison Year as to which Tenant is responsible for a share
of such increase.

 

(d) “Operating Expenses” is defined, for purposes of this Lease,
to include all costs, if any, incurred by Landlord in the exercise of its
reasonable discretion, for:

 

(i)        The operation, repair,
maintenance, and replacement, in neat, clean, safe, good order and condition,
of the Office Building Project, including but not limited to, the following:

 

(aa) The Common Areas, including their surfaces, coverings, decorative
items, carpets, drapes and window coverings, and including parking areas,
loading and unloading areas, trash areas, roadways, sidewalks, walkways,
stairways, parkways, driveways, landscaped area, striping, bumpers, irrigation systems, Common Area lighting
facilities, building exteriors and roofs, fences and gates;

 

(bb) All heating, air conditioning, plumbing, electrical systems, life
safety equipment, telecommunication and other equipment used in common by, or
for the benefit of, Tenants or occupants of the Office Building Project,
including elevators and escalators, tenant directories, fire detection systems
including sprinkler systems maintenance and repair.

 

(ii)                    Trash
disposal, janitorial and security services;

(iii)                 Any other service
to be provided by Landlord that is elsewhere in this Lease stated to be an “Operating
Expense”;

(iv)                The cost of the
premiums for the liability and property insurance policies to be maintained by
Landlord under paragraph 8 hereof;

(v)                   The amount of
the real property taxes to be paid by Landlord under paragraph 10.1 hereof;

(vi)                The cost of water,
sewer, gas, electricity, and other publicly mandated services to the Office
Building Project;

(vii)             Labor, salaries and
applicable fringe benefits and costs, materials, supplies and tools, used in
maintaining and/or cleaning the Office Building Project and accounting and a
management fee attributable to the operation of the Office Building Project;

(viii)          Replacing and /or adding
improvements mandated by any governmental agency and any repairs or removals
necessitated thereby amortized over its useful life according to Federal income
tax regulations or guidelines for depreciation thereof (including interest on
the unamortized balance as is then reasonable in the judgment of Landlord’s
accountants);

(ix)                  Replacements of
equipment or improvements that have a useful life for depreciation purposes
according to Federal income tax guidelines of five (5) years or less, as
amortized over such life.

 

(e) Operating Expenses shall not include the costs of replacements
of equipment or improvements that have a useful life for Federal income tax
purposes in excess of five (5) years unless it is of the type described in
paragraph 4.2(d)(viii), in which case their cost shall be included as above
provided.

 

(f) Operating Expenses shall not include any expenses paid by any
Tenant directly to third parties, or as to which Landlord is otherwise
reimbursed by any third party, other tenant, or by insurance proceeds.

 

(g) Tenant’s Share of Operating Expenses Increase shall be payable
by Tenant within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Tenant by Landlord. At Landlord’s option, however, an
amount may be estimated

 

3

 

by Landlord from
time to time in advance of Tenant’s Share of the Operating Expense Increase for
any Comparison Year, and the same shall be payable monthly or quarterly, as
Landlord shall designate, during each Comparison Year of the Lease term, on the
same day as the Base Rent is due hereunder. In the event that Tenant pays
Landlord’s estimate of Tenant’s Share of Operating Expense Increase as
aforesaid, Landlord shall deliver to Tenant within sixty (60) days after the
expiration of each Comparison Year a reasonably detailed statement showing
Tenant’s Share of the actual Operating Expense Increase incurred during such
year. If Tenant’s payments under this paragraph 4.2(g) during said Comparison
Year exceed Tenant’s Share as indicated on said statement, Tenant shall be
entitled to credit the amount of such overpayment against Tenant’s Share of
Operating Expense Increase next falling due. If Tenant’s payments under this
paragraph during said Comparison Year were less than Tenant’s Share as
indicated on said statement, Tenant shall pay to Landlord the amount of the
deficiency within ten (10) days after delivery by Landlord to Tenant of said
statement. Landlord and Tenant shall forthwith adjust between them by cash
payment any balance determined to exist with respect to that portion of the
last Comparison Year for which Tenant is responsible as to Operating Expense
Increases, notwithstanding that the Lease term may have terminated before the
end of such Comparison Year.

 

5.        Security Deposit.
Tenant shall deposit with Landlord upon execution hereof the security deposit
set forth in paragraph 1.9 of the Basic Lease Provisions as security for Tenant’s
faithful performance of Tenant’s obligations hereunder. If Tenant fails to pay
rent or other charges due hereunder, or otherwise defaults with respect to any
provision of this Lease, Landlord may use, apply or retain all or any portion
of said deposit for the payment of any rent or other charge in default for the
payment of any other sum to which Landlord may become obligated by reason of
Tenant’s default, or to compensate Landlord for any loss or damage which
Landlord may suffer thereby. If Landlord so uses or applies all or any portion
of said deposit, Tenant shall within ten (10) days after written demand
therefor deposit cash with Landlord in an amount sufficient to restore said
deposit to the full amount then required of Tenant. If the monthly Base Rent
shall, from time to time, increase during the term of this Lease, Tenant shall,
at the time of such increase, deposit with Landlord additional money as a
security deposit so that the total amount of the security deposit held by
Landlord shall at all times bear the same proportion to the then current Base
Rent as the initial security deposit bears to the initial Base Rent set forth
in paragraph 1.6 of the Basic Lease Provisions. Landlord shall not be required
to keep said security deposit separate from its general accounts. If Tenant
performs all of Tenant’s obligations hereunder, said deposit, or so much
thereof as has not heretofore been applied by Landlord, shall be returned,
without payment of interest or other increment for its use, to Tenant (or, at
Landlord’s option, to the last assignee, if any, of Tenant’s interest
hereunder) at the expiration of the term hereof and after Tenant has vacated
the Premises. No trust relationship is created herein between Landlord and
Tenant with respect to said Security Deposit.

 

6.        Use.

 

6.1      Use.
The Premises shall be used and occupied only for the purpose set forth in
paragraph 1.4 of the Basic Lease
Provisions or any other use which is reasonably comparable to that use and for
no other purpose.

 

6.2      Compliance
with Law.

 

(a) Landlord warrants to Tenant that the Premises, in the state
existing on the date that the Lease term commences, but without regard to
alterations or improvements made by Tenant or the use for which Tenant will
occupy the Premises, does not violate any covenants or restrictions of record,
or any applicable building code, regulation or ordinance in effect on such
Lease term Commencement Date. In the event it is determined that this warranty
has been violated, than it shall be the obligation of the Landlord, after
written notice from Tenant, to promptly, at Landlord’s sole cost and expense,
rectify any such violation.

 

(b) Except as provided in paragraph 6.2(a) Tenant shall, at Tenant’s
expense, promptly comply with all applicable statutes, ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements of
any fire insurance underwriters or rating bureaus, now in effect or which may
hereafter come into effect, whether or not they reflect a change in policy from
that now existing, during the term or any part of the term hereof, relating in
any manner to the Premises and the occupation and use by Tenant of the
Premises. Tenant shall conduct its business in a lawful manner and shall not
use or permit the use of the Premises or the Common Areas in any manner that
will tend to create waste or nuisance or shall tend to disturb other occupants
of the Office Building Project.

 

6.3      Condition
of Premises.

 

(a) Landlord will deliver possession of the Premises to Tenant in
its current “as-is” condition. If, for any reason not caused by Tenant,
Landlord cannot deliver possession of the Premises to Tenant on the
Commencement Date, this Lease will not be void or voidable, nor will Landlord
be liable to Tenant for any loss or damage resulting from such delay, but in
such event, the Commencement Date and Tenant’s obligation to pay rent will not
commence until Landlord delivers possession to Tenant. If the delay in
possession is caused by Tenant, then the Term and Tenant’s obligation to pay
rent will commence as of the Commencement Date even though Tenant does not yet
have possession. Notwithstanding the foregoing, Landlord will not be obligated
to deliver possession of the Premises to Tenant (but Tenant will be liable for
rent if Landlord can otherwise deliver the Premises to Tenant) until Landlord
has received from Tenant all of the following: (i) a copy of this Lease fully
executed by Tenant and the guaranty of Tenant’s obligations under this Lease,
if any, executed by the Guarantor(s); (ii) the Security Deposit and the first
installment of Monthly Base Rent; and (iii) copies of policies of insurance or
certificates thereof as required in this Lease.

 

(b) Except as otherwise provided in this Lease, Tenant hereby
accepts the Premises and the Office Building Project in their condition
existing as of the Lease Commencement Date or the date that Tenant takes
possession of the Premises, whichever is earlier, subject to all applicable
zoning, municipal, county and state laws, ordinances and regulations governing
and regulating the use of the

 

4

 

Premises, and any
easements, covenants or restrictions of record, and accepts this Lease subject
thereto and to all matters disclosed thereby and by any exhibits attached
hereto. Tenant acknowledges that it has satisfied itself by its own independent
investigation that the Premises are suitable for its intended use, possession
and to have acknowledged that all work to be completed by Landlord has been
completed and there are no additional items needing work or repair by Landlord.
Tenant further acknowledges that neither Landlord nor Landlord’s agent or
agents has made any representation or warranty as to present or future
suitability of the Premises, Common Areas, or Office Building Project for the
conduct of Tenant’s business.

 

7.        Maintenance,
Repairs, Alterations and Common Area Services.

 

7.1      Landlords Obligations. Landlord shall keep the Office Building
Project, including the Premises, interior and exterior walls, roof, and common
areas, and the equipment whether used exclusively for the Premises or in common
with other premises, in good condition and repair: provided, however, Landlord
shall not be obligated to pain, repair or replace wall coverings, or to repair
or replace any improvements that are not ordinarily a part of the Building or
are above then Building standards. Except as provided in paragraph 9.5, there
shall be no abatement of rent or liability of Tenant on account of any injury
or interference with Tenant’s business with respect to any improvements,
alterations or repairs made by Landlord to the Office Building Project or any
part thereof. Tenant expressly waives the benefits of any stature now or
hereafter in effect which would otherwise afford Tenant the right to make
repairs at Landlord’s expense or to terminate this Lease because of Landlord’s
failure to keep the premises in good order, condition and repair.

 

7.2      Tenant’s Obligations.

 

(a) Not withstanding Landlord’s
obligation to keep the Premises in good condition and repair, Tenant shall be
responsible for payment of the cost thereof to Landlord as additional rent for
the portion of the cost of any maintenance and repair of the Premises, or any
equipment (wherever located) that serves only Tenant or the Premises, to the
extent such cost is attributable to causes beyond normal wear and tear. Tenant
shall be responsible for the cost of painting, repairing or replacing wall
coverings, and to repair or replace any Premises improvements that are not
ordinarily a part of the Building or that are above then Building standards.
Landlord may, at its option, upon reasonable notice, elect to have Tenant
perform any particular such maintenance or repairs the cost of which is
otherwise Tenant’s responsibility hereunder.

 

(b) On the last day of the term hereof,
or on any sooner termination, Tenant shall surrender the Premises to Landlord
in the same condition as received, ordinary wear and tear excepted, clean and
free of debris. Any damage or deterioration of the Premises shall not be deemed
ordinary wear and tear it the same could have been prevented by good
maintenance practices by Tenant. Tenant shall repair any damage to the Premises
occasioned by the installation or removal of Tenant’s trade fixtures,
alterations, furnishings and equipment. Except as otherwise stated in this
Lease, Tenant shall leave the air lines, power panels, electrical distribution
systems, lighting fixtures, air conditioning, window coverings, wall coverings,
carpets, wall paneling, ceilings and plumbing on the Premises and in good operation condition.

 

7.3      Alterations
and Additions.

 

(a) Tenant shall not without Landlord’s
prior written consent make any alterations, improvements, additions, Utility
Installations or repairs in, on or about the Premises, or the Office Building
Project. As used in this paragraph 7.3 the term “Utility Installation” shall
mean carpeting, window and wall coverings, power panels, electrical
distribution systems, lighting fixtures, air conditioning, plumbing, and
telephone and telecommunication wiring and equipment. At the expiration of the
term, Landlord may require the removal of any or all of said alterations,
improvements, additions or Utility Installations, and the restoration of the
Premises and the Office Building Project to their prior condition, at Tenant’s
expense. Should Landlord permit Tenant to make its own alterations, improvements,
additions or Utility Installations, Tenant shall use only such contractor as
has been expressly approved by Landlord, and Landlord may require Tenant to
provide Landlord, at Tenant’s sole cost and expense, a lien and completion bond
in an amount equal to one-half times the estimated cost of such improvements,
to insure Landlord against any liability for mechanic’s and materialmen’s liens
and to insure completion of the work. Should Tenant make any alterations,
improvements, additions or Utility Installations without the prior approval of
Landlord, or use a contractor not expressly approved by Landlord, Landlord may,
at any time during the term of this Lease, require that Tenant remove any part
or all of the same.

 

(b) Any alterations, improvements,
additions or Utility Installations in or about the Premises or the Office
Building Project that Tenant shall desire to make shall be presented to
Landlord in written form, with proposed detailed plans. If Landlord shall give
its consent to Tenant’s making such alteration, improvement, addition or
Utility Installation, the consent shall be deemed conditioned upon Tenant
acquiring a permit to do so from the applicable governmental agencies,
furnishing a copy thereof to Landlord prior to the commencement of the work,
and compliance by Tenant with all conditions of said permit in a prompt and
expeditious manner.

 

(c) Tenant shall pay, when due, all
claims for labor or materials furnished or alleged to been furnished to or for
Tenant at or for use in the Premises, which claims are or may be secured by any
mechanic’s or materialmen’s lien against the Premises, the Building or the
Office Building Project, or any interest therein.

 

(d) Tenant shall give Landlord not less than ten (10) days notice
prior to the commencement of any work in the Premises by Tenant, and Landlord
shall have the right to post notices of non-responsibility in or on the
Premises or the Building as provided by law. If Tenant shall, in good faith, contest the validity of any such lien,
claim or demand, then Tenant shall, at its sole expense defend itself and
Landlord against the same and shall pay and satisfy any such adverse judgment
that may be rendered thereon before the

 

5

 

enforcement thereof against the Landlord or the Premises, the Building
or the Office Building Project, upon the condition that if Landlord shall
require, Tenant shall furnish to Landlord a surety bond satisfactory to
Landlord in an amount equal to such contested lien claim or demand indemnifying
Landlord against liability for the same and holding the Premises, the Building
and the Office Building Project free from the
effect of such lien or claim. In addition, Landlord may require Tenant to pay
Landlord’s reasonable attorney’s fees and cost in participating in such action
if Landlord shall decide it is to Landlord’s best interest so to do.

 

(e) All alterations, improvements,
additions and Utility Installations (whether or not such Utility Installations
constitute trade fixtures of Tenant), which may be made to the Premises by
Tenant, including but not limited to, floor coverings, paneling, doors, drapes,
built-ins, moldings, sound attenuation, and lighting and telephone or
communication systems, conduit, wiring and outlets, shall be made and done in a
good and workmanlike manner and of good and sufficient quality and materials
and shall be the property of Landlord and remain upon and be surrendered with
the Premises at the expiration of the Lease term, unless Landlord requires their
removal pursuant to paragraph 7.3 (a). Provided Tenant is not in default,
notwithstanding the provisions of this paragraph 7.3(e), Tenants personal
property and equipment, other than that which is affixed to the Premises so
that it cannot be removed without material damage to the premises or the
building, and other than Utility Installations, shall remain the property of
Tenant and may be removed by Tenant subject to the provisions of paragraph 7.2.

 

(f) Tenant shall provide Landlord with
as-built plans and specifications for any alterations, improvements, additions,
or Utility Installations.

 

7.4      Utility Additions. Landlord reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Landlord or Tenant, or any other Tenant of the Office Building
Project, including, but not by way of limitation, such utilities as plumbing,
electrical systems, communication systems, and fire protection and detection
systems, so long as such installations do not unreasonably interfere with
Tenant’s use of the Premises.

 

8.        Insurance:
Indemnity.

 

8.1      Liability Insurance-Tenant. Tenant shall, at all Tenant’s expense, obtain
and keep in force during the term of this Lease a policy of Comprehensive
General Liability insurance utilizing and Insurance Services Office Standard
form with Broad Form General Liability Endorsement (GLO404), or equivalent, in
an amount of not less than $1,000,000 per occurrence of bodily injury and
property damage combined or in a greater amount as reasonably determined by
Landlord and shall insure Tenant with Landlord as an additional insured against
liability arising our of the use, occupancy or maintenance of the Premises
Compliance with the above requirement shall not however limit the liability of
Tenant hereunder.

 

8.2      Liability Insurance-Landlord. Landlord shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily Injury
and Broad Form Property Damage Insurance, plus coverage against such other
risks Landlord deems advisable from time to time, insuring Landlord, but not
Tenant, against liability arising out of the ownership, use, occupancy or
maintenance of the Office Building Project in an amount not less than
$5,000,000.00 per occurrence.

 

8.3      Property Insurance-Tenant. Tenant shall, at Tenant’s expense, obtain and
keep in force during the term of this Lease for the benefit of Tenant,
replacement cost fire and extended coverage insurance, with vandalism and
malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the full
replacement cost, as the same may exist from time to time, of all of Tenant’s
personal property, fixtures, equipment and tenant improvements.

 

8.4      Property Insurance-Landlord. Landlord shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss
or damage to the Office Building Project improvements, but not Tenant’s
personal property, fixtures, equipment or tenant improvements, in the amount of
the full replacement cost thereof, as the same may exist from time to time,
utilizing Insurance Services Office standard form, or equivalent, providing
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, plate glass, and such other
perils as Landlord deems advisable or may be required by a lender having a lien
on the Office Building Project. In addition, Landlord shall obtain and keep in
force during the term of this Lease, a policy of rental value insurance
covering a period of one year, with loss payable to Landlord which insurance
shall also cover all Operating Expenses for said period. Tenant will not be
named in any such policies carried by Landlord and shall have no right to any
proceeds therefrom. The policies required by these paragraphs 8.2 and 8.4 shall
contain such deductibles as Landlord or the aforesaid lender may determine. In
the event that the Premises shall suffer an insured loss as defined in
paragraph 9.1(f) hereof, the deductible amounts under the applicable insurance
policies shall be deemed an Operating Expense. Tenant shall not do or permit to
be done anything which shall invalidate the insurance policies carried by Landlord.
Tenant shall pay the entirety of any increase in the property insurance premium
of the Office Building Project over what it was immediately prior to the
commencement of the term of this Lease if the increase is specified by Landlord’s
insurance carrier as being caused by the nature of Tenant’s occupancy or any
act or omission of Tenant.

 

8.5      Insurance
Policies. Tenant shall deliver to Landlord copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance PRIOR TO TENANTS
POSSESSION OF SAID PREMISES. No such policy shall be cancelable or subject to
reduction of coverage or other modification except after thirty (30) days prior
written notice by Landlord. Tenant
shall, at least thirty(30) days prior to the expiration of such policies,
furnish Landlord with renewals thereof.

 

6

 

8.6      Waiver
of Subrogation. Tenant and Landlord each hereby release and
relieve the other, and waive their entire right of recovery against the other,
for direct or consequential loss or damage arising out of or incident to the
perils covered by property insurance carried by such party, whether due to the
negligence of Landlord or Tenant or their agents, employees, contractors and/or
invitees. If necessary all property insurance policies required under this
Lease shall be endorsed to so provide.

 

8.7      Indemnity.
Tenant shall indemnify and hold harmless Landlord and its agents, Landlord’s
master or ground Landlord, partners, members and lenders, from and against any
and all claims for damage to the person or property of anyone or any entity
arising from Tenant’s use of the Office Building Project, or from the conduct
of Tenant’s business or from any activity, work or things done, permitted or
suffered by Tenant in or about the Premises or elsewhere and shall further
indemnify and hold harmless Landlord from and against any and all claims, cost
and expenses arising from any breach or default in the performance of any
obligation on Tenant’s part to be performed under the terms of this Lease, or
arising from any act or omission of Tenant, or any of Tenant’s agents,
contractors, employees, or invitees, and from and against all costs, attorney’s
fees, expenses and liabilities incurred by Landlord as the result of any such
use, conduct , activity, work, things done, permitted or suffered, breach,
default or negligence, and in dealing reasonably therewith, including but not
limited to the defense or pursuit of any claim or any action or proceeding
involved therein; and in case any action or proceeding be brought against
Landlord by reason of any such matter, Tenant upon notice from Landlord shall
defend the same at Tenant’s expense by counsel reasonably satisfactory to Landlord
and Landlord shall cooperate with Tenant in such defense. Landlord need not
have first paid any such claim in order to be so indemnified. Tenant, as a
material part of the consideration to Landlord, hereby assumes all risk of
damage to property of Tenant or injury to persons. In, upon or about the Office
Building Project arising from any cause and Tenant hereby waives all claims in
respect thereof against Landlord.

 

8.8      Exemption
of Landlord from Liability. Tenant hereby agrees that
Landlord shall not be liable for injury to Tenant’s business or any loss of
income therefrom or for loss of or damage to the goods, wares, merchandise or
other property of Tenant, Tenant’s employees, invitees, customers, or any other
persons in or about the Premises or the Office Building Project, nor shall
Landlord be liable for injury to the person of Tenant, Tenant’s employees,
agents or contractors, whether such damage or injury is caused by or results
from theft, fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether said damage or injury results from conditions arising upon the Premises
or upon other portions of the Office Building Project, or form other sources or
places, or from new construction or the repair, alteration or improvement of
any part of the Office Building Project, or of the equipment, fixtures or
appurtenances applicable thereto, and regardless of whether the cause of such
damage or injury or the means of repairing the same is inaccessible, Landlord
shall not be liable for any damages arising from any act or neglect of any
other Tenant, occupant or user of the Office Building Project, nor from the
failure of Landlord to enforce the provisions of any other lease of any other
Tenant of the Office Building Project.

 

8.9      No
Representation of Adequate Coverage. Landlord makes no
representation that the limits or forms of coverage of insurance specified in
this paragraph 8 are adequate to cover Tenant’s property or obligations under
this Lease.

 

8.10    Failure
to Maintain Insurance. For any period or periods in which
Tenant fails to maintain any insurance required by this Lease, or, if after ten
(10) days following the Commencement Date, Tenant has not provided Landlord
with the additional Insured-Manager’s or Landlord’s endorsement required to be
submitted pursuant to this Lease, without further notice, Base Rent shall be
automatically increased by One Hundred and Fifty Dollars ($150.00) per month,
until such time as Tenant complies with the insurance provisions of this Lease.
Notwithstanding anything contained herein to the contrary, the foregoing shall
not be construed, interpreted, or deemed (i) a waiver of any default created by
reason of Tenant’s failure to provide the insurance called for in this Lease;
(ii) limit any other right or remedy of Landlord; (iii) relieve Tenant of its
obligations regarding maintenance of insurance as provided by the lease; or
(iv) be considered a policy of insurance in favor of Tenant. Landlord and
Tenant agree the additional monthly charge described herein represents a fair
and reasonable estimate of the additional administrative costs Landlord will
incur by reason of any failure by Tenant to provide the required insurance
documentation to Landlord.

 

9.                         Damage or
Destruction.

 

9.1                 Definitions.

 

(a)                     “Premises
Damage” shall mean if the Premises are damaged or destroyed to any extent.

(b)                    “Premises
Building Partial Damage” shall mean if the Building of which the Premises are a
part is damaged or destroyed to the extent that the cost to repair is less than
fifty percent (50%) of the then Replacement Cost of the building.

(c)                     “Premises
Building Total Destruction” shall mean if the Building which the Premises are a
part is damaged or destroyed to the extent that the cost to repair is fifty
percent (50%) or more of the then Replacement Cost of the Building

(d)                    “Office
Building Project Buildings” shall mean all of the buildings on the Office
Building Project site.

(e)                     “Office
Building Project Buildings Total Destruction” shall mean if the Office Building
Project Buildings are damaged or destroyed to the extent that the cost of
repair is fifty percent (50%) or more of the then Replacement Cost of the
Office Building Project Buildings.

(f)                       “Insured
Loss” shall mean damage or destruction which was caused by an event required to
be covered by the Insurance described in paragraph 8. The fact that an insured
Loss has a deductible amount shall not make the loss an uninsured loss.

 

7

 

(g)                    “Replacement
Cost” shall mean the amount of money necessary to be spent in order to repair
or rebuild the damaged area to the condition that existed immediately prior to
the damage occurring, excluding all improvements made by Tenants, other than
those installed by Landlord at Tenant’s expense.

 

9.2      Premises Damage: Premises Building Partial
Damage.

 

(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of either Premises Damage
or Premises Building Partial Damage, then Landlord shall, as soon as reasonably
possible and to the extent the required materials and labor are readily
available through usual commercial channels, at Landlord’s expense, repair such
damage (but not Tenant’s fixtures, equipment or tenant improvements originally
paid for by Tenant) to its condition existing at the time of the damage, and
this Lease shall continue in full force and effect.

 

(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4
and 9.5, if at any time during the term of this Lease there is damage which is
not an Insured Loss and which falls within the classification of Premises
Damage or Premises Building Partial Damage, unless caused by a negligent or
willful act of Tenant (in which event Tenant shall make the repairs at Tenant’s
expanse), which damage prevents Tenant from making any substantial use of the
Premises. Landlord may at Landlord’s option either (i) repair such damage as
soon as reasonably possible at Landlord’s expense, in which event this Lease
shall continue in full force and effect, or (ii) give written notice to Tenant
within thirty (30) days after the date of the occurrence of such damage of
Landlord’s intention to cancel and terminate this Lease as of the date of the
occurrence of such damage, in which event this Lease shall terminate as of the
date of the occurrence of such damage.

 

9.3      Premises
Building Total Destruction; Office Building Project Total Destruction.
Subject to the provisions of paragraphs 9.4 and 9.5, if at any time during the
term of this Lease there is damage, whether or not it is an Insured Loss, which
falls into the classifications of either (i) Premises Building Total
Destruction, or (ii) Office Building Total Destruction, then Landlord may at
Landlord’s option either (i) repair such damage or destruction as soon as
reasonably possible at Landlord’s expense (to the extent required materials are
readily available through usual commercial channels) to its condition existing
at the time of the damage, but not Tenant’s fixtures, equipment or tenant
improvements, and this Lease shall continue in full force and effect, or (ii)
give written notice to Tenant within thirty (30) days after the date of
occurrence of such damage of Landlord’s intention to cancel and terminate this
Lease, in which case this Lease shall terminate as of the date of the occurrence
of such damage.

 

9.4      Damage
Near End of Term.

 

(a) Subject to paragraph 9.4(b), if at any time during the last
twelve (12) months of the term of this Lease there is substantial damage to the
Premises. Landlord may at Landlord’s option cancel and terminate this Lease as
of the date of occurrence of such damage by giving written notice to Tenant of
Landlord’s election to do so within 30 days after the date of occurrence of
such damage.

 

(b) Notwithstanding paragraph 9.4(a), in the event that Tenant has
an option to extend or renew this Lease, and the time within which said option
may be exercised has not yet expired, Tenant shall exercise such option, if it
is to be exercised at all, no later than twenty (20) days after the occurrence
of an Insured Loss falling within the classification of Premises Damage during
the last twelve (12) months of the term of this Lease. If Tenant duly exercises
such option during said twenty (20) day period, Landlord shall, at Landlord’s
expense, repair such damage, but not Tenant’s fixtures, equipment or tenant
improvements, as soon as reasonably possible and this Lease shall continue in
full force and effect. If Tenant fails to exercise such option during said
twenty (20) day period, then Landlord may at Landlord’s option terminate and
cancel this Lease as of the expiration of said twenty (20) day period, at
Landlord’s expense, repair such damage, but not Tenant’s fixtures, equipment or
tenant improvements, as soon as reasonably possible and this Lease shall
continue in full force and effect. If Tenant fails to exercise such option
during said twenty (20) day period, then Landlord may at Landlord’s option
terminate and cancel this Lease as of the expiration of said twenty (20) day
period by giving written notice to Tenant of Landlord’s election to do so
within ten (10) days after the expiration of said twenty (20) day period,
notwithstanding any term or provision in the grant of option to the contrary.

 

9.5      Abatement of Rent: Tenant’s Remedies.

 

(a) In the event Landlord repairs or restores the Building or
Premises pursuant to the provisions of this paragraph 9, and any part of the
Premises are not usable (including loss of use due to loss of access or
essential services), the rent payable hereunder (including Tenant’s Share of Operating
Expense Increase) for the period during which such damage, repair or
restoration continues shall be abated, provided (1) the damage was not the
result of the negligence of Tenant, and (2) such abatement shall only be to the
extent the operation and profitability of Tenant’s business as operated from
the Premises is adversely affected. Except for said abatement of rent, if any
Tenant shall have no claim against Landlord for any damage suffered by reason
of any such damage, destruction, repair or restoration.

 

(b) If Landlord shall be obligated to repair or restore the
Premises or the Building under the provisions of this Paragraph 9 and shall not
commence such repair or restoration within ninety (90) days after such
occurrence, or if Landlord shall not complete the restoration and repair within
six (6) months after such occurrence, Tenant may at Tenant’s option cancel and
terminate this Lease by giving Landlord written notice of Tenant’s election to
do so at any time prior to the commencement or completion, respectively, of
such repair or restoration. In such event this Lease shall terminate as of the
date of such notice.

 

8

 

(c) Tenant agrees to cooperate with Landlord in connection with
any such restoration and repair, including but not limited to the approval
and/or execution of plans and specifications required.

 

9.6      Termination-
Advance Payments. Upon termination of this Lease pursuant to
this paragraph 9, an equitable adjustment shall be made concerning advance rent
and any advance payments made by Tenant to Landlord. Landlord shall, in
addition, return to Tenant so much of Tenant’s security deposit as has
therefore been applied by Landlord.

 

9.7      Waiver.
Landlord and Tenant waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree
that such event shall be governed by the terms of this Lease.

 

10.      Real Property Taxes.

 

10.1    Payment
of Taxes. Landlord shall pay the real property tax, as defined
in paragraph 10.3, applicable to the Office Building Project subject to
reimbursement by Tenant of Tenant’s Share of such taxes in accordance with the
provisions of paragraph 4.2. except as otherwise provided in paragraph 10.2.

 

10.2    Additional
Improvements. Tenant shall not be responsible for paying any
increase in real property tax specified in the tax assessor’s records and work
sheets as being caused by additional improvements placed upon the Office
Building Project by other Tenants or by Landlord for the exclusive enjoyment of
any other Tenant. Tenant shall, however pay to Landlord at the time that
Operating Expenses are payable under paragraph 4.2(c) the entirety of any
increase in real property tax if assessed solely by reason of additional improvements
placed upon the Premises by Tenant or at Tenant’s request.

 

10.3    Definition
of “Real Property Tax.” As used herein, the term “real
property tax” shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Office Building Project or any portion thereof
by any authority having the direct or indirect power to tax, including any
city, county, state or federal government, or any school, agricultural,
sanitary, fire, street, drainage or other improvement district thereof, as
against any legal or equitable interest of Landlord in the Office Building
Project or in any portion thereof, as against Landlord’s right to rent or other
income therefrom, and as against Landlord’s business of leasing the Office
Building Project. The term “real property tax” shall also include any tax, fee,
levy, assessment, or charge (i) in substitution of partially or totally, any
tax, fee, levy, assessment or charge hereinabove included within the definition
of “real property tax,” or (ii) the nature of which was hereinbefore included
within the definition of “real property tax,” or (iii) which is imposed for a service
or right not charged prior to June 1, 1978, or, if previously charged, has been
increased since June 1, 1978, or (iv) which is imposed as a result of a change
in ownership, as defined by applicable local statutes for property tax
purposes, of the Office Building Project or which is added to a tax or charge
hereinbefore included within the definition of real property tax by reason of
such change of ownership, or (v) which is imposed by reason of this
transaction, any modifications or changes hereto, or any transfers hereof.

 

10.4    Joint
Assessment. If the improvements or property, the taxes for
which are to be paid separately by Tenant under paragraph 10.2 or 10.5 are not
separately assessed, Tenant’s portion of that tax shall be equitably determined
by Landlord form the respective valuations assigned in the assessor’s work
sheets or such other information (which may include the cost of construction)
as many be reasonably available. Landlord’s reasonable determination thereof,
in good faith, shall be conclusive.

 

10.5    Personal
Property Taxes.

 

(a) Tenant shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Tenant contained in the Premises or elsewhere.

 

(b) If any of Tenant’s said personal property shall be assessed
with Landlord’s real property, Tenant shall pay to Landlord the taxes
attributable to Tenant within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Tenant’s property.

 

11.      Utilities.

 

11.1    Services
Provided by Landlord. Landlord shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amounts if electricity for normal lighting and office machines,
water for reasonable and normal drinking and lavatory use, and replacement
light bulbs and/or fluorescent tubes and ballast for standard overhead
fixtures.

 

11.2    Services
Exclusive to Tenant. Tenant shall pay for all water, gas,
heat, light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Tenant,
together with any taxes thereon. If any such services are not separately
metered to the Premises Tenant shall pay at Landlord’s option, either Tenant’s
Share or a reasonable proportion to be determined by Landlord of all charges
jointly metered with other premises in the Building.

 

11.3    Hours
of Service. Said services and utilities shall be provided
during generally accepted business days and hours or such other days or hours
as may hereafter be set forth. Utilities and services required at other times
shall be subject to advance request and reimbursement by Tenant to Landlord of
the cost thereof.

 

9

 

11.4    Excess
Usage by Tenant. Tenant shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power, or suffer or permit any act that causes extra burden upon the
utilities or services, including but not limited to security services, over
standard office usage for the Office Building Project. Landlord shall require
Tenant to reimburse Landlord for any excess expenses or costs that may arise
out of a breach of this subparagraph by Tenant. Landlord may, in its sole
discretion, install at Tenant’s expense supplemental equipment and/or separate
metering applicable to Tenant’s excess usage or loading.

 

11.5    Interruptions.
There shall be no abatement of rent and Landlord shall not be liable in any
respect whatsoever for the inadequacy, stoppage, interruption or discontinuance
of any utility or service due to riot, strike, labor dispute, breakdown, accident,
repair or other cause beyond Landlord’s reasonable control or in cooperation
with governmental request or directions.

 

12.      Assignment and Subletting.

 

12.1    Landlord’s
Consent Required. Tenant shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Tenant’s interest in the Lease or in the Premises,
without Landlord’s prior written consent, which Landlord shall not unreasonably
withhold. Landlord shall respond to Tenant’s request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a material
default and breach of this Lease without the need for notice to Tenant under
paragraph 13.1 “Transfer” within the meaning of this paragraph 12 shall include
the transfer or transfers aggregating; (a) if Tenant is a corporation, more
than twenty-five percent (25%) of the voting stock of such corporation, or (b)
if Tenant is a partnership, more than twenty-five percent (25%) of the profit
and loss participation in such partnership.

 

12.2    Tenant
Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, Tenant may assign or sublet the Premises, or any portion thereof,
without Landlord’s consent, to any corporation which controls, is controlled by
or is under common control with Tenant, or to any corporation resulting from
the merger or consolidation with Tenant, or to any person or entity which
acquires all the assets of Tenant as going concern of the business that is
being conducted on the Premises, all of which are referred to as “Tenant
Affiliate”; provided that before such assignment shall be effective, (a) said
assignee shall assume, in full, the obligations of Tenant under this Lease and
(b) Landlord shall be given written notice of such assignment and assumption.
Any such assignment shall not, in any way, affect or limit the liability of
Tenant under the terms of this Lease even if after such assignment or subletting
the terms of this Lease are materially changed or altered without the consent
of Tenant, the consent of whom shall not be necessary.

 

12.3    Terms
and Conditions Applicable to Assignment and Subletting.

 

(a) Regardless of Landlord’s consent, no assignment or subletting
shall release Tenant of Tenant’s obligations hereunder or after the primary
liability of Tenant to pay the rent and other sums due Landlord hereunder
included Tenant’s Share of Operating Expenses Increase, and to perform all
obligations to be performed by Tenant hereunder.

 

(b) Landlord may accept rent from anyone other than Tenant pending
approval or disapproval or disapproval of such assignment.

 

(c) Neither a delay in the approval or disapproval of such
assignment or subletting, nor the acceptance of rent, shall constitute a waiver
or estoppel of Landlord’s right to exercise its remedies for the breach of any
of the terms or conditions of this paragraph 12 or this Lease.

 

(d) If Tenant’s obligations under this Lease have been guaranteed by
third parties, then an assignment
or sublease, and Landlord’s consent thereto, shall not be effective unless said
guarantors give their written consent to such sublease and the terms thereof.

 

(e) The consent by Landlord to any assignment or subletting shall
not constitute a consent to any subsequent assignment or subletting by Tenant
or to any subsequent or successive assignment or subletting by the subtenant.
However, Landlord may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Tenant or
anyone else liable on the Lease or sublease and without obtaining their consent
and such action shall not relieve such persons from liability under this Lease
or said sublease; however, such persons shall not be responsible to the extent
any such amendment or modification enlarges or increases the obligations of the
Tenant or subtenant under this Lease or such sublease.

 

(f) In the event of any default under this Lease, Landlord may
proceed directly against Tenant, any guarantors or any one else responsible for
the performance of this Lease, including the subtenant, without first
exhausting Landlord’s remedies against any other person or entity responsible
therefor to Landlord, or any security held by Landlord or Tenant.

 

(g) Landlord’s written consent to any assignment or subletting of
the Premises by Tenant shall not constitute an acknowledgment that no default
then exists under this Lease of the obligations to be performed by Tenant nor
shall such consent be deemed a waiver of any then existing default, except as
may be otherwise stated by Landlord at the time.

 

10

 

(h) The discovery of the fact that any financial statement relied
upon by Landlord in giving its consent to an assignment or subletting was
materially false shall, at Landlord’s election, render Landlord’s said consent
null and void.

 

12.4    Additional
Terms and Conditions Applicable to Subletting. Regardless of
Landlord’s consent, the following terms and conditions shall apply to any
subletting by Tenant of all or any part of the Premises and shall be deemed
included in all subleases under this Lease whether or not expressly
incorporated therein:

 

(a) Tenant hereby assigns and transfers to Landlord all of Tenant’s
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Tenant, and Landlord may collect such rent and income and
apply same toward Tenant’s obligations under this Lease; provided, however, that
until a default shall occur in the performance of Tenant’s obligations under
this Lease, Tenant may receive, collect and enjoy the rents accruing under such
sublease. Landlord shall not, by reason of this or any other assignment of such
sublease to Landlord nor by reason of the collection of the rents from a
subtenant, be deemed liable to the subtenant for any failure of Tenant to
perform and comply with any of Tenant’s obligations to such subtenant under
such sublease. Tenant hereby irrevocably authorizes and directs any such
subtenant, upon receipt of a written notice from Landlord stating that a
default exists in the performance of Tenant’s obligations under this Lease, to
pay to Landlord the rents due and to become due under the sublease. Tenant agrees
that such subtenant shall have the right to rely upon any such statement and
request from Landlord, and that such subtenant shall pay such rents to Landlord
without any obligation or right to inquire as to whether such default exists
and notwithstanding any notice from or claim from Tenant to the contrary.
Tenant shall have no right or claim against said subtenant or Landlord for any
such rents so paid by said subtenant to Landlord.

 

(b) No sublease entered into by Tenant shall be effective unless
and until it has been approved in writing by Landlord. In entering into any
sublease, Tenant shall use only such form of subtenant as is satisfactory to
Landlord, and once approved by Landlord, such sublease shall not be changed or
modified without Landlord’s prior written consent. Any sublease shall, by
reason of entering into a sublease under this Lease, be deemed, for the benefit
of Landlord, to have assumed and agreed to conform and comply with each and
every obligation herein to be performed by Tenant other than such obligations
as are contrary to or inconsistent with provisions contained in a sublease to
which Landlord has expressly consented in writing.

 

(c) In the event Tenant shall default in the performance of its
obligations under this Lease, Landlord at its option and without any obligation
to do so, may require any subtenant to attorn to Landlord, in which event
Landlord shall undertake the obligations of Tenant under such sublease from the
time to the exercise of said option to the termination of such sublease;
provided, however, Landlord shall not be liable for any prepaid rents or
security deposit paid by such subtenant to Tenant or for any other prior
defaults of Tenant under such sublease.

 

(d) No subtenant shall further assign or sublet all or any part of
the Premises without Landlord’s prior written consent.

 

(e) With respect to any subletting to which Landlord has
consented, Landlord agrees to deliver a copy of any notice of default by Tenant
to the subtenant. Such subtenant shall have the right to cure a default of
Tenant within three (3) days after service of said notice of default upon such
subtenant, and the subtenant shall have a right of reimbursement and offset
from and against Tenant for any such defaults cured by the subtenant.

 

12.5    Landlord’s
Expenses. In the event Tenant shall assign or sublet the
Premises or request the consent of Landlord to any assignment or subletting or
if Tenant shall request the consent of Landlord for any act Tenant proposes to
do then Tenant shall pay a minimum $250.00 consent fee in addition to Landlord’s
reasonable costs and expenses incurred in connection therewith, including
attorneys; architects; engineers’ or other consultants’ fees.

 

12.6    Conditions
to Consent. Landlord reserves the right to condition any
approval to assignee sublet upon Landlord’s determination that (a) the proposed
assignee or subtenant shall conduct a business on the Premises of a quality
substantially equal to that of Tenant and consistent with the general character
of the other occupants of the Office Building Project and not in violation of
any exclusives or rights then held by other tenants, and (b) the proposed
assignee or subtenant be at least as financially responsible as Tenant was
expected to be at the time of the execution of this Lease or of such assignment
or subletting, whichever is greater.

 

13.      Default; Remedies.

 

13.1    Default.
The occurrence of anyone or more of the following events shall constitute a
material default of this Lease by Tenant:

 

(a) The vacation or abandonment of the Premises by Tenant.
Vacation of the Premises shall include the failure to occupy the Premises for a
continuous period of fourteen (14) days or more, whether or not the rent is
paid.

 

(b) The breach by Tenant of any of the covenants, conditions or
provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1 (assignment or
subletting), 13.1 (a) (vacation or abandonment), 13. 1 (e) (insolvency), 13.1
(f) (false statement), 16 (a) (estoppel certificate), 30 (b) (subordination),
33 (auctions), or 41.1 (easements), all of which are hereby deemed to be
material, non-curable defaults without the necessity of any notice by Landlord
to Tenant thereof.

 

(c) The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof from Landlord to Tenant. In the

 

11

 

event Landlord
serves Tenant with a Notice to Pay Rent or Quit pursuant to applicable Unlawful
Detainer statutes, such Notice to Pay Rent or Quit shall also constitute the notice required by this subparagraph.
Additionally, Tenant shall pay Landlord a $175.00 demand preparation fee each
occurrence Landlord serves Tenant with a Notice to Pay Rent or Quit.

 

(d) The failure by Tenant to observe or perform any of the
covenants, conditions, or provisions of this Lease to be observed or performed
by Tenant other than those referenced in subparagraphs (b) and (c), above,
where such failure shall continue for a period of thirty (30) days after
written notice there from Landlord to Tenant; provided, however, that if the
nature of Tenant’s noncompliance is such that more than thirty (30) days are
reasonably required for its cure, then Tenant shall not be deemed to be in
default provided Tenant commenced such cure within said thirty (30) day period
and thereafter diligently pursues such cure to completion. To the extent
permitted by law such thirty (30) day notice shall constitute the sole and
exclusive notice required to be given to Tenant under applicable Unlawful
Detainer statutes.

 

(e) (i) The making by Tenant of any general arrangement or general
assignment for the benefit of creditors: (ii) Tenant becoming a “debtor” as
defined in 11U.S.C. 101 or any successor stature thereto (unless, in the case
of a petition filed against Tenant, the same is dismissed within sixty (60)days
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Tenant’s assets located at the Premises or of Tenant’s interest
in this Lease, where possession is not restored to Tenant within thirty (30)
days: or (iv) the attachment, execution or other judicial seizure of
substantially all of Tenant’s assets located at the Premises or of Tenant’s
interest in this Lease, where such seizure is not discharged within thirty (30)
days. In the event that any provision of this paragraph 13.1 (e) is contrary to
any applicable law, such provision shall be of no force or effect.

 

(f) The discovery by Landlord that any financial statement given
to Landlord by Tenant, or its successor in interest or by any guarantor of
Tenant’s obligation hereunder, was materially false.

 

13.2    Remedies.
In the event of any material default or breach of this Lease by Tenant,
Landlord may at any time thereafter, with or without notice or demand and
without limiting Landlord in the exercise of any right or remedy which Landlord
may have by reason of such default:

 

(a) Terminate Tenant’s right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Tenant shall immediately surrender possession of the Premises to Landlord. In
such event Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant’s default including, but not limited
to, the cost of recovering possession of the Premises; expenses of reletting,
including necessary renovation and alteration of the Premises, reasonable
attorney’s fees and any real estate commission actually paid; the worth at the
time of award by the court having jurisdiction thereof of the amount by which
the unpaid rent for the balance of the term after the time of such award
exceeds the amount of such rental loss from the same period that Tenant proves
could be reasonably avoided; that portion of the leasing commission paid by
Landlord pursuant to paragraph 15 applicable to the unexpired term of this
Lease.

 

(b) Maintain Tenant’s right to possession in which case this Lease
shall continue in effect whether or not Tenant shall have vacated or abandoned
the Premises. In such event Landlord shall be entitled to enforce all of
Landlord’s rights and remedies under this Lease, including the right to recover
the rent as it becomes due hereunder.

 

(c) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
Tenant under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.

 

13.3    Default
by Landlord. Landlord shall not be in default unless Landlord
fails to perform obligations required by Landlord within a reasonable time, but
in no event later than thirty (30) days after written notice by Tenant to
Landlord and to the holder of any first mortgage or deed or trust covering the
Premises whose name and address shall have theretofore been furnished to Tenant
in writing, specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord’s obligation is such that
more than thirty (30) days are required for performance then Landlord shall not
be in default if Landlord commences performance within such 30-day period and
thereafter diligently pursues the same to completion.

 

13.4    Late
Charges. Tenant hereby acknowledges that late payments by
Tenant to Landlord of Base Rent, Tenant’s Share of Operating Expense Increase
or other sums due hereunder will cause Landlord to incur costs not contemplated
by this Lease, the exact amount of which will be extremely difficult to
ascertain. Such costs include, but not limited to, processing and accounting
charges, and late charges which may be imposed on Landlord by the terms of any
mortgage or trust deed covering the Office Building Project. Accordingly, if
any installment of Base Rent, Operating Expense Increase, or any other sum due
from Tenant shall not be received by Landlord or Landlord’s designee within
five (5) days after such amount shall be due, then, without any requirement for
notice to Tenant, Tenant shall pay to Landlord a late charge equal to 10% of
such overdue amount. The parties hereby agree that such late charge represents
a fair and reasonable estimate of the costs Landlord will incur by reason of
late payment by Tenant. Acceptance of such late charge by Landlord shall in no
event constitute a waiver of Tenant’s default with respect to such overdue
amount, nor prevent Landlord from exercising any of the other rights and
remedies granted hereunder.

 

14.      Condemnation. If the
Premises or any portion thereof or the Office Building Project are taken under
the power of eminent domain, or sold under the threat of the exercise of said
power (all of which are herein called “condemnation”), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs; provided that if so much of

 

12

 

the Premises or
the Office Building Project are taken by such condemnation as would
substantially and adversely affect the operation and profitability of Tenant’s
business conducted from the Premises, Tenant shall have the option, to be
exercised only in writing within thirty (30) days after Landlord shall have
given Tenant written notice of such taking (or in the absence of such notice ,
within thirty (30) days after the condemning authority shall have taken
possession), to terminate this Lease as of the date the condemning authority
takes such possession. If Tenant does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the rent and Tenant’s Share of
Operating Expense Increase shall be reduced in the proportion that the floor
area of the Premises taken bears to the total floor area of the Premises.
Common Areas taken shall be excluded from the Common Areas usable by Tenant and
no reduction of rent shall occur with respect thereto or by reason thereof
Landlord shall have the option in its sole discretion to terminate this Lease
as of the taking of possession by the condemning authority, by giving written
notice to Tenant of such election within thirty (30) days after receipt of
notice of a taking by condemnation of any part of the Premises or the Office
Building Project. Any award for the taking of all or any part of the Premises
or the Office Building Project under the power of eminent domain or any payment
made under threat of the exercise of such power shall be the property of
Landlord, whether such award shall be made as compensation for diminution in
value of the leasehold or for the taking of the fee, or as severance damages;
provided however, that Tenant shall be entitled to any separate award for loss
of or damage to Tenant’s trade fixtures, removable personal property and
unamortized tenant improvements that have been paid for by Tenant. For that
purpose the cost of such improvements shall be amortized over the original term
of this Lease excluding any options. In the event that this Lease is not
terminated by reason of such condemnation, Landlord shall to the extent of
severance damages received by Landlord in connection with such condemnation,
repair any damage to the Premises caused by such condemnation except to the
extent that Tenant has been reimbursed therefor by the condemning authority.
Tenant shall pay any amount in excess of such severance damages required to
complete such repair.

 

15.      Broker’s Fee.

 

(a) The brokers involved in this transaction are _______ as “Listing
Broker,” and _______ as “Cooperating Broker,” licensed real estate broker(s). A
“Cooperating Broker” is defined as any broker other than the Listing Broker entitled
to a share of any commission arising under this Lease. Upon execution of this
Lease by both parties, Landlord shall pay to said brokers jointly, or in such
separate shares as they may mutually designate in writing, a fee as set forth
in a separate agreement between Landlord and said broker(s), or in the event
there is no separate agreement between Landlord and said broker(s), the sum of
$ _______ for brokerage services rendered by said broker(s) to Landlord in this
transaction.

 

(b) Landlord, Tenant, and Cooperating Broker further agree that no
commission or fee shall be paid to the Cooperating Broker if: (i) Tenant
exercises any Option, as defined in paragraph 39.1 of this Lease, which is
granted to Tenant under this Lease, or any subsequently granted option which is
substantially similar to an Option granted to Tenant under this Lease, or (ii)
Tenant acquires any rights to the Premises or other premises described in this
Lease which are substantially similar to what Tenant would have acquired had an
Option herein granted to Tenant been exercised, or (iii) Tenant remains in
possession of the Premises after the expiration of the term of this Lease after
having failed to exercise an Option, or (iv) said broker(s) are the procuring
cause of any other lease or sale entered into between the parties pertaining to
the Premises and /or any adjacent property in which Landlord has an interest,
or (v) except as provided in this Lease, the Base Rent is increased.

 

(c) Landlord agrees to pay said fee not only on behalf of Landlord but
also on behalf on any person, corporation, association, or other entity having
an ownership interest in said real property or any part thereof, when such fee
is due hereunder. Any transferee of Landlord’s interest in this Lease, whether such
transfer is by agreement or by operation of law, shall be deemed to have
assumed Landlord’s obligation under this paragraph 15. Each listing and
cooperating broker shall be a third party beneficiary of the provisions of this
paragraph 15 to the extent of their interest in any commission arising under
this Lease and may enforce that right directly against Landlord; provided,
however, that all brokers having a right to any part of such total commission
shall be a necessary party to any suit with respect thereto.

 

(d) Tenant and Landlord each represent and warrant to the other that
neither has had any dealings with any person, firm, broker or finder (other
than the person(s), if any, whose names are set forth in paragraph 15(a),
above) in connection with the negotiation of this Lease and/or the consummation
of the transaction contemplated hereby, and no other broker or other person,
firm or entity is entitled to any commission or finder’s fee in connection with
said transaction and Tenant and Landlord do each hereby indemnify and hold the
other harmless from and against any costs, expenses, attorneys’ fees or
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying party.

 

16.      Estoppel Certificate.

 

(a) Each party (as “responding party”) shall at any time upon not less
than ten (10) day’s prior written notice from the other party (“requesting
party”) execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party’s knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Office Building Project or
of the business of Tenant.

 

13

 

(b) At the requesting party’s option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it shall
be conclusive upon such party that (i) this Lease is in full force and effect,
without modification except as may be represented by the requesting party, (ii)
there are no uncured defaults in the requesting party’s performance, and (iii)
if Landlord is the requesting party, not more than one month’s rent has been
paid in advance.

 

(c) If Landlord desires to finance, refinance, or sell the Office
Building Project, or any part thereof, Tenant hereby agrees to deliver to any
lender or purchaser designated by Landlord such financial statements of Tenant
as may be reasonably required by such lender or purchaser. Such statements
shall include the past three (3) years’ financial statement of Tenant. All such
financial statements shall be received by Landlord and such lender or purchaser
in confidence and shall be used only for the purposes herein set forth.

 

17.      Landlord’s Liability.
The term “Landlord” as used herein shall mean only the owner or owners, at the
time in question, of the fee title or a Tenant’s interest in a ground lease of
the Office Building Project, and except as expressly provided in paragraph 15,
in the event of any transfer of such title or interest, Landlord herein named
(and in case of any subsequent transfers then the grantor) shall be relieved
from and after the date of such transfer of all liability as respects Landlord’s
obligations thereafter to be performed, provided that any funds in the hands of
Landlord or the then grantor at the time of such transfer, in which Tenant has
an interest, shall be delivered to the grantee. The obligations contained in
this Lease to be performed by Landlord shall, subject as aforesaid, be binding
on Landlord’s successors and assigns, only during their respective periods of
ownership.

 

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

 

19.      Interest on Past-due Obligations.
Except as expressly herein provided, any amount due to Landlord not paid when
due shall bear interest at the maximum rate then allowable by law or judgments
from the date due. Payment of such interest shall not excuse or cure any
default by Tenant under this Lease; provided, however, that interest shall not
be payable on late charges incurred by Tenant nor on any amounts upon which
late charges are paid by Tenant.

 

20.      Time of Essence. Time is
of the essence with respect to the obligations to be performed under this
Lease.

 

21.      Additional Rent. All
monetary obligations of Tenant to Landlord under the terms of this Lease,
including but not limited to Tenant’s Share of Operating Expense Increase and
any other expenses payable by Tenant hereunder shall be deemed to be rent.

 

22.      Incorporation of Agreement; Amendments.
This Lease contains all agreements of the parties with respect to any matter
mentioned herein. No prior or contemporaneous agreement or understanding
pertaining to any such matter shall be effective. This lease may be modified in
writing only signed by the parties in interest at the time of the modification.
Except as otherwise stated in this Lease, Tenant hereby acknowledges that
neither the real estate broker listed in paragraph 15 hereof nor any
cooperating broker on this transaction nor the Landlord or any employee or
agents of any of said person has made any oral or written warranties or
representations to Tenant relative to the condition or use by Tenant of the
Premises or the Office Building Project and Tenant acknowledges that Tenant
assumes all responsibility regarding the Occupational Safety Health Act, the
legal use and adaptability of the Premises and the compliance thereof with all
applicable laws and regulations in effect during the term of this Lease.

 

23.      Notices. Any notice
required or permitted to be given hereunder shall be in writing and may be
given by personal delivery or by certified or registered mail, and shall be
deemed sufficiently given if delivered or addressed to Tenant or to Landlord at
the address noted below or adjacent to the signature of the respective parties,
as the case may be. Mailed notices shall be deemed given upon actual receipt at
the address required, or forty-eight hours following deposit in the mail,
postage prepaid, whichever first occurs. Either party may by notice to the
other specify a different address for notice purposes except that upon Tenant’s
taking possession of the Premises, the Premises shall constitute Tenant’s
address for notice purposes. A copy of all notices required or permitted to be
given to Landlord hereunder shall be concurrently transmitted to such party or
parties at such addresses as Landlord may from time to time hereafter designate
by notice to Tenant.

 

24.      Waivers. No waiver by
Landlord of any provisions hereof shall be deemed a waiver of any other
provision hereof or of any subsequent breach by Tenant of the same or any other
provision, Landlord’s consent to, or approval of any act shall not be deemed to
render unnecessary the obtaining of Landlord’s consent to or approval of any
subsequent act by Tenant. The acceptance of rent hereunder by Landlord shall
not be a waiver of any preceding breach by Tenant of any provision hereof,
other than the failure of Tenant to pay the particular rent so accepted,
regardless of Landlord’s knowledge of such preceding breach at the time of
acceptance of such rent.

 

25.      Recording. Either Landlord
or Tenant shall, upon request of the other, execute, acknowledge and deliver to
the other a “short form” memorandum of this Lease for recording purposes.

 

26.      Holding Over. If Tenant,
with Landlord’s consent, remains in possession of the Premises or any part
thereof after the expiration of the term hereof, such occupancy shall be a
tenancy from month to month upon all the provisions of this Lease pertaining to
the obligations of Tenant, except that the rent payable shall be two hundred
percent (200%) of the rent payable immediately preceding the termination date
of this Lease, and all Options, if any, granted under the terms of this Lease
shall be deemed terminated and be of no further effect during said month to
month tenancy.

 

14

 

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

 

28.      Covenant
and Conditions. Each
provision of this Lease performable by Tenant shall be deemed both a covenant
and a condition.

 

29.      Binding
Effect; Choice of Law.
Subject to any provisions hereof restricting assignment or subletting by Tenant
and subject to the provisions of paragraph 17, this Lease shall bind the
parties, their personal representatives, successors and assigns. This Lease
shall be governed by the laws of the State where the Office Building Project is
located and any litigation concerning this Lease between the parties hereto
shall be initiated in the county in which the Office Building Project is
located.

 

30.      Subordination.

 

(a) This Lease, and any Option or right
of first refusal granted hereby, at Landlord’s option, shall be subordinate to
any ground lease, mortgage, deed of trust, or any other hypothecation or
security now hereafter placed upon the Office Building Project and to any and
all advances made on the security thereof and to all renewals, modifications,
consolidations, replacements and extensions thereof. Notwithstanding such subordination,
Tenant’s right to quiet possession of the Premises shall not be disturbed if
Tenant is not in default and so long as Tenant shall pay the rent and observe
and perform all of the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgagee, trustee or ground Landlord
shall elect to have this Lease and any Options granted hereby prior to the lien
of its mortgage, deed of trust or ground lease, and shall give written notice
thereof to Tenant, this Lease and such Options shall be deemed prior to such
mortgage, deed of trust or ground lease, whether this Lease or such Options are
dated prior or subsequent to the date of said mortgage, deed of trust or ground
lease or the date of recording thereof.

 

(b) Tenant agrees to execute any document
required to effectuate an attornment, a subordination, or to make this Lease or
any Option granted herein prior to the lien of any mortgage, deed of trust or
ground lease, as the case may be. Tenant’s failure to execute such documents
within ten (10) days after written demand shall constitute a material default
by Tenant hereunder without further notice to Tenant or, at Landlord’s option,
Landlord shall execute such documents on behalf of Tenant as Tenant’s
attorney-in-fact. Tenant does hereby make, constitute and irrevocably appoint
Landlord as Tenant’s attorney-in-fact and in Tenant’s name, place and stead, to
execute such documents in accordance with this paragraph 30(b).

 

31.      Professional
Fees and Costs. Any
expenses of any nature incurred by Landlord in connection with any performance
by it for the account of Tenant, and all costs and expenses, including
reasonable attorneys’ fees (whether or not legal proceedings are instituted)
involved in collecting monies due under this Lease and enforcing or
interpreting the obligations of Tenant under this Lease, including but not
limited to the cost and expense of instituting and prosecuting legal
proceedings or recovering possession of the Premises after default by Tenant or
upon expiration or sooner termination of this Lease (whether in the State
Courts or in the United States Bankruptcy Court), shall be due and payable by
Tenant, on demand, as Additional Rent. Additionally, and without any limitation
by any of the foregoing, in the event that either Landlord or Tenant shall
institute any action or proceeding (whether in the State Courts or in the
United States Bankruptcy Court) against the other relating to the provisions of
this Lease, or any default hereunder, the unsuccessful party in such action or
proceeding agrees to pay to the successful party the reasonable attorneys’ fees
and costs incurred therein by the successful party. Tenant agrees to pay a
minimum fee of $75.00 for the preparation of any demand for delinquent rent or
other amounts due under this Lease, or any notice to pay rent or quit.

 

32.      Landlord’s
Access.

 

32.1 Landlord and Landlord’s agents shall
have the right to enter the Premises at reasonable times for the purpose of
inspecting the same, performing any services required of Landlord, showing the
same to prospective purchasers, lenders or Tenants, taking such safety
measures, erecting such scaffolding or other necessary structures, making such
alterations, repairs, improvements or additions to the Premises or to the
Office Building Project as Landlord may reasonably deemed necessary or
desirable and the erecting, using and maintaining of utilities, services, pipes
and conduits through the Premises and/or other premises as long as there is no
material adverse effect to Tenant’s use of the Premises. Landlord may at any
time place on or about the Premises or the Building any ordinary “For Sale”
signs and Landlord may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary “For Lease” signs.

 

32.2 All activities of Landlord pursuant to
this paragraph shall be without abatement of rent, nor shall Landlord have any
liability to Tenant for the same.

 

32.3 Landlord shall have the right to retain
keys to the Premises and to unlock all doors in or upon the Premises other than
to files, vaults and safes, and in case of emergency to enter the Premises by
any reasonably appropriate means, and any such entry shall not be deemed a
forceable or unlawful entry or detainer to the Premises or an eviction. Tenant
waives any charges for damages or injuries or interference with Tenant’s
property or business in connection therewith.

 

33.      Auctions. Tenant shall not conduct, nor permit to be
conducted, either voluntarily or involuntarily, any auction upon the Premises
or the Common Areas without first having obtained Landlord’s prior written
consent. Not withstanding anything to the contrary in this lease, Landlord
shall not be obligated to exercise any standard of reasonableness in
determining whether to grant such consent. The holding of any auction on the
Premises or Common Areas in violation of this paragraph shall constitute a
material default of this Lease.

 

15

 

34.      Signs. Tenant shall not place any sign upon the
Premises or the Office Building Project without Landlord’s prior written
consent. Under no circumstances shall Tenant place a sign on any roof of the
Office Building Project.

 

35.      Merger. The voluntary or other surrender of this Lease
by Tenant, or a mutual cancellation thereof or, a termination by Landlord,
shall not work a merger, and shall, at the option of Landlord, terminate all or
any existing subtenancies or may, at the option of Landlord, operate as an
assignment to Landlord of any or all of such subtenancies.

 

36.      Consents. Except for paragraphs 33 (auctions and 34
(signs hereof, wherever in this Lease the consent of one party is required to
an act of the other party such consent shall not be unreasonably withheld or
delayed.)

 

37.      Guarantor. In the event that there is a guarantor of
this Lease, said guarantor shall have the same obligations as Tenant under this
Lease.

 

38.      Quiet
Possession. Upon
Tenant paying the rent for the Premises and observing and performing all of the
covenants, conditions and provisions on Tenant’s part to be observed and
performed hereunder, Tenant shall have quiet possession of the Premises for the
entire term hereof subject to all of the provisions of this Lease. The
individuals executing this Lease on behalf of Landlord represent and warrant to
Tenant that they are fully authorized and legally capable of executing this
Lease on behalf of Landlord and that such execution is binding upon all parties
holding an ownership interest in the Office Building Project.

 

39.      Options.

 

39.1 Definition. As used in this paragraph the word “Option”
has the following meaning: (1) the right or option to extend the term of this
Lease or to renew this Lease or to extend or renew any lease that Tenant has on
other property of Landlord; (2) the option of right of first refusal to lease
the Premises or the right of first offer to lease the Premises or the right of
first refusal to lease other space within the Office Building Project or other
property of Landlord or the right of first offer to lease other space within
the Office Building Project or other property of Landlord; (3) the right or
option to purchase the Premises or the Office Building Project, or the right of
first refusal to purchase the Premises or the Office Building Project or the
right of first offer to purchase the Premises or the Office Building Project,
or the right or option to purchase other property of Landlord, or the right of
first refusal to purchase other property of Landlord or the right of first offer
to purchase other property of Landlord.

 

39.2 Options
Personal. Each Option
granted to Tenant in this Lease is personal to the original Tenant and may be
exercised only by the original Tenant while occupying the Premises who does so
without the intent of thereafter assigning this Lease or subletting the
premises or any portion thereof, and may not be exercised by or assigned,
voluntarily or involuntarily, by or to any person or entity other than Tenant;
provided, however, that an Option may be exercised by or assigned to any Tenant
Affiliate as defined in paragraph 12.2 of this Lease. The options, if any,
herein granted to Tenant are not assignable separate and apart from this Lease,
nor may any Option be separated from this Lease in any manner, either by reservation
or otherwise.

 

39.3 Multiple
Options. In the event
that Tenant has any multiple options to extend or renew this Lease a later
option cannot be exercised unless the prior option to extend or renew this
Lease has been so exercised.

 

39.4 Effect
of Default on Options.

 

(a) Tenant shall have no right to
exercise an Option, notwithstanding any provision in the grant of Option to the
contrary, (i) during the time commencing from the date Landlord gives to Tenant
a notice of default pursuant to paragraph 13.1 (c) or 13.1 (d) and continuing
until the noncompliance alleged in said notice of default is cured, or (ii)
during the period of time commencing on the day after a monetary obligation to
Landlord is due from Tenant and unpaid (without any necessity for notice
thereof to Tenant) and continuing until the obligation is paid, or (iii) in the
event Landlord has given to Tenant three or more notices of default under
paragraph 13.1 (c), or paragraph 13.1 (d), whether or not the defaults are
cured, during the 12 month period of time immediately prior to the time that
Tenant attempts to exercise the subject Option, (iv) if Tenant has committed
any non-curable breach, including without limitation those described in
paragraph 13.1 (b), or is otherwise in default of any of the terms, covenants
or conditions of this Lease.

 

(b) The period of time within which an
Option may be exercised shall not be extended or enlarged by reason of Tenant’s
inability to exercise an Option because of the provisions of paragraph 39.4(a).

 

(c) All rights of Tenant under the
provisions of an Option shall terminate and be of no further force or effect,
notwithstanding Tenant’s due and timely exercise of the Option, if, after such
exercise and during the term of this Lease, (i) Tenant fails to pay to Landlord
a monetary obligation of Tenant for a period of thirty (30) days after such
obligation becomes due (without any necessity of Landlord to give notice
thereof to Tenant), or (ii) Tenant fails to commence to cure a default
specified in paragraph 13.1 (d) within thirty (30) days after the date that
Landlord gives notice to Tenant of such default and/or Tenant fails thereafter
to diligently prosecute said cure to completion, or (iii) Landlord gives to
Tenant three or more notices of default under paragraph 13.1 (c), or paragraph
13.1 (d), whether or not the defaults are cured, or (iv) if Tenant has
committed any non-curable breach, including without limitation those described
in paragraph 13.1 (b), or is otherwise in default of any of the terms,
covenants and conditions of this Lease.

 

16

 

40.      Security
Measures-Landlord’s Reservations.

 

40.1 Tenant hereby acknowledges
that Landlord shall have no obligation whatsoever to provide guard service or other
security measures for the benefit of the Premises or the Office Building
Project. Tenant assumes all responsibility for the protection of Tenant, if agents
and invitees and the property of Tenant and of Tenant’s agents and invitees
from acts of third parties. Nothing herein contained shall prevent Landlord, at
Landlord’s sole option, from providing security protection for the Office
Building project or any part thereof, in which event the cost thereof shall be
included within the definition of Operating Expenses, as set forth in paragraph
4.2 (b).

 

40.2 Landlord shall have the
following rights:

 

(a) To change the name, address or title of the Office Building
Project or building in which the Premises are located upon not less than 90
days prior written notice;

 

(b) To, at Tenant’s expense, provide and install Building standard
graphics on the door of the Premises and such portions of the Common Areas as
Landlord shall reasonably deem appropriate;

 

(c) To permit any Tenant the exclusive right to conduct any
business as long as such exclusive does not conflict with any rights expressly
given herein;

 

(d) To place such signs, notices or displays as Landlord
reasonably deems necessary or advisable upon the roof, exterior of the
buildings or the Office Building Project or on pole signs in the Common Areas;

 

40.3 Tenant shall not:

 

(a) Use a representation (photographic or otherwise) of the
Building or the Office Building Project or their name(s) in connection with
Tenant’s business;

 

(b) Suffer or permit anyone, except in emergency to go upon the
roof of the Building.

 

41.      Easements.

 

41.1 Landlord reserves to itself
the right, from time to time, to grant such easements, rights and dedications
that Landlord deems necessary or desirable, and to cause the recordation of
Parcel Maps and restrictions, so long as such easements, rights, dedications,
Maps and restrictions do not unreasonably interfere with the use of the
Premises by Tenant. Tenant shall sign any of the documents upon request of
Landlord and failure to do so shall constitute a material default of this
Tenant without the need for further notice to Tenant.

 

41.2 The obstruction of Tenant’s
view, air, or light by any structure erected in the vicinity of the Building,
whether by Landlord or third parties, shall in no way affect this Lease or
impose any liability upon Landlord.

 

42.      Performance Under Protest.
If at any time a dispute shall arise as to any amount or sum of money to be
paid by one party to the other under the provisions hereof, the party against whom
the obligation to pay the money is asserted shall have the right to make
payment “under protest” and such payment shall not be regarded as a voluntary
payment, and there shall survive the right on the part of said party to institute
suit for recovery of such sum. If it shall be adjudged that there was no legal
obligation on the part of said party to pay such sum or any part thereof, said
party shall be entitled to recover such sum or so much thereof as it was not
legally required to pay under the provisions of this Lease.

 

43.      Authority. If Tenant is
a corporation, trust or general or limited partnership, Tenant, and each
individual executing this Lease on behalf of such entity represent and warrant
that such individual is duly authorized to execute and deliver this Lease on
behalf of said entity. If Tenant is a corporation, trust or partnership, Tenant
shall, within thirty (30) days after execution of this Lease, deliver to
Landlord evidence of such authority satisfactory to Landlord.

 

44.      Conflict. Any conflict
between the printed provisions, Exhibits or Addenda of this Lease and the
typewritten provisions, if any shall be controlled by the typewritten or
handwritten provisions.

 

45.      No Offer. Preparation of
this Lease by Landlord or Landlord’s agent and submission of same to Tenant
shall not be deemed an offer to Tenant to lease. This Lease shall become
binding upon Landlord and Tenant only when fully executed by both parties.

 

46.      Lender Modification.
Tenant agrees to make such reasonable modifications to this Lease may be
reasonably required by an institutional lender in connection with the obtaining
of normal financing or refinancing of the Office Building Project.

 

47.      Multiple Parties. If
more than one person or entity is named as either Landlord or Tenant herein,
except as otherwise expressly provided herein, the obligations of the Landlord
or Tenant herein shall be the joint and several responsibility of all persons
or entities named herein as such Landlord or Tenant, respectively.

 

48.      Work Letter. This Lease
is supplemented by that certain Work Letter of even date executed by Landlord
and Tenant, attached hereto and incorporated herein.

 

17

 

49.      Attachments. Attached
hereto are the following documents, which constitute a part of this Lease:

 

Exhibit A       The Premises, The
Building, and The Project

Exhibit B        Lease Application

Exhibit C        Signage Program

Exhibit D        Rules and
Regulations

Exhibit E        Insurance
Requirements

Exhibit F        Tenant
Environmental Questionnaire

Exhibit G        fill in name

 

50.      Alterations and Additions.
Notwithstanding anything to the contrary in Section 7.3 of the Lease, in the
event that Tenant desires to make any modification to the interior or exterior
of the Premises after the initial tenant improvements have been installed,
Tenant shall submit to Landlord prior to commencement of construction, for
review and approval by Landlord, plans for any such modifications, along with
an architectural review fee of Two Hundred Fifty Dollars ($250.00). Landlord
shall have no liability for the inaccuracy, inadequacy or lack of safety
features of such plans and shall have no duty to review such plans at all.

 

51.      Toxic or Hazardous Substances.
Tenant shall not use, store or permit toxic waste or other toxic or hazardous
substances or material on the Premises during the term of this Lease, without
the prior written consent of Landlord. In the event Tenant desires to use or
store toxic or hazardous substances on the Premises (including but not limited
to petroleum based fuels), Tenant shall request such use in an application to
Landlord which shall explain in detail the types of chemicals/substances which
Tenant desires to use, the proposed location and manner of storage of same and
the manner of disposition of such chemicals/substances or by-products or
remains thereof. Tenant shall deliver to Landlord copies of all studies,
reports and other information submitted by Tenant to any governmental entity or
agency regulating the use of such substances and materials, concurrently with
the delivery of same to such governmental agency or entity. In no event shall
Tenant store any chemicals/substances in underground tanks. The proposed use of
such chemicals/substances shall label as to the chemicals/substances located within
the Premises. In the event that any such wastes, substances or materials are
hereinafter found on, under or about the Premises except as expressly allowed
by Landlord, Tenant shall take all necessary and appropriate actions and shall
spend all necessary sums to cause the same to be cleaned up and immediately
removed from the Premises, and Landlord shall in no event be liable or
responsible for any costs or expenses incurred in so doing. Tenant shall at all
times observe and satisfy the requirements of, and maintain the Premises in
compliance with, all federal, state and local environmental protection,
occupational, health and safety and similar laws, ordinances, restrictions,
licenses and regulations, including but not limited to, the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.). Resource Conservation and Recovery
Act (42 U.S.C. Section 6901 et seq.), Safe Drinking Water Act (42 U.S.C.
Section 3000 (f) et seq.), Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.), Clean Air Act (42 U.S.C. Section 7401 et seq.), Comprehensive
Environmental Response of Compensation and Liability Act (42 U.S.C. Section
9601 et seq.), California Health and Safety Code (Section 25100 et seq.,
Section 39000 et seq.), California Water Code (Section 13000 et seq.). Should
Tenant at any time receive any notice of violation of any laws, including those
aforementioned, or be given a citation with respect thereto, Tenant shall (i)
immediately notify Landlord of such violation or citation, (ii) provide
Landlord with a copy of same, (iii) cure the deficiency set forth in the
violation or citation within fifteen (15) days after the date of receipt
thereof and (iv) immediately provide Landlord with proof of the curing of such
deficiency or complained of matter. Should Tenant at any time default in or fail
to perform or observe any of its obligations under this Addendum Paragraph 52,
Landlord shall have the right, but not the duty, without limitation upon any of
the Landlord’s rights pursuant hereto, to perform the same, and Tenant agrees
to pay to Landlord on demand, all costs and expenses incurred by Landlord in
connection therewith, including without limitation, attorneys’ fees, together
with interest from the date of expenditure at the highest rate allowed by law.
Tenant hereby indemnifies Landlord and agrees to defend with counsel selected
by Landlord and hold Landlord harmless for any loss incurred by or liability
imposed on Landlord by reason of Tenant’s failure to perform or observe any of
its obligations or agreements under this Addendum Paragraph 52, including but
not limited to any damage, liability, fine, penalty, punitive damage, cost or
expense (including sickness, disease or death), tangible or intangible property
damage, compensation for lost wages, business income, profits, or other
economic loss, damage to the natural resources or the environment, nuisance,
pollution, contamination, leak, spill, release or other adverse effect on the
environment. Landlord may enter the Premises at any time, without notice for
the purpose of ascertaining compliance by Tenant with the requirements of this
Addendum Paragraph 52. If Tenant is a corporation, or is a partnership whose
general partners are corporations, the undersigned unconditionally personally
guarantees the performance by Tenant of all duties of Tenant under this
Addendum Paragraph 52 and the payment of all sums required hereby.

 

52.      Cross Default. In the
event of a default by Tenant under any other Lease for space which is in the
Project or in another real property owned by Landlord or an affiliate of
Landlord, such default shall, at the election of Landlord, constitute a default
by Tenant under this Lease, and shall entitle Landlord to all remedies
available to Landlord under this Lease.

 

53.      Limit on Landlord’s Liability.
The liability of Landlord under this Lease shall be limited to Landlord’s
estate in the Premises. Tenant agrees to look solely to Landlord’s interest in
the Premises for the satisfaction of any liability, duty or obligation of Landlord
with respect to this Lease, or the relationship of Landlord and Tenant
thereunder, and no other assets of Landlord shall be subject to any liability
therefor. In no event shall Tenant seek, and Tenant does hereby waive, any
recourse against the shareholders and/or constituent partners of Landlord and
the partners, members, directors, officers or shareholders thereof, and any of
their respective personal assets for such satisfaction.

 

18

 

54.      Surrender of Lease. The
voluntary or other surrender of this Lease by Tenant, or a mutual cancellation
thereof, shall not work a merger, and shall, at the option of Landlord,
terminate all or any existing subleases or sub-tenancies, or may, at the option
of Landlord, operate as an assignment to him of any or all of such sublease or
sub-tenancies.

 

55.      Sale of Premises by Landlord.
In the event of any sale of the Premises by Landlord, Landlord shall be and is
hereby entirely freed and relieved of all liability under any and all of its
covenants and obligations contained in or derived from this Lease arising out
of any act, occurrence or omission occurring after the consummation of such
sale; and the purchaser, at such sale or any subsequent sale of the Premises,
shall be deemed, without any further agreement between the parties or their
successors in interest or between the parties and any such purchaser, to have
assumed and agreed to carry out any and all of the covenants and obligations of
Landlord under this Lease.

 

56.      Tenant’s Performance Before Commencement.
In the event that Tenant shall abandon the premises or fail to occupy the
Premises and pay rent by the commencement of the term of this Lease, it is
expressly agreed by and between Landlord and Tenant that the amount of damage
to Landlord as a result of that default and the termination of this Lease under
this provision is difficult to calculate, and that Landlord, in addition to its
other rights or remedies provided in Section 13 and not as liquidated damages or
by way of forfeiture, shall be entitled to retain, at Landlord’s option, such
improvements as Tenant may have annexed to the property that cannot be removed
without damage thereto.

 

57.      Marginal Captions. The
various headings and numbers herein and the grouping of the provisions of this
Lease into separate sections and paragraphs are for the purpose of convenience
only and shall not be considered a part hereof.

 

58.      Subordination, Attornment and Estoppel.
This Lease, at Landlord’s option, shall be subordinate to the lien of any first
deed of trust or first mortgage subsequently placed upon the real property of
which the Premises are a part, and to any and all advances made on the security
thereof, and to all renewals, modifications, consolidations, replacements and
extensions thereof, as well as any reciprocal easement agreement now or
hereafter recorded against the office building project and any amendments
thereto, and Tenant shall execute any documents required by Landlord or
Landlord’s mortgagee in this regard within ten (10) days of written request to
do so and Tenant’s failure or refusal to do so shall constitute a material
default by Tenant hereunder and Landlord may, without further notice to Tenant,
declare the term hereof ended, and Landlord may at its option execute any such
documents on behalf of Tenant as Tenant’s attorney-in-fact and in Tenant’s
name, place and stead, to execute such documents, such appointment to be
irrevocable and coupled with an interest; provided, however, that as to the
lien of any such deed of trust or mortgage, Tenant’s right to quiet possession
of the Premises shall not be disturbed if Tenant is not in default and so long
as Tenant shall pay the rent and observe and perform all of the provisions of
this Lease, unless this Lease is otherwise terminated pursuant to its terms. If
any mortgagee, trustee or ground Landlord shall elect to have this Lease prior
to the lien of its mortgage, deed of trust or ground lease, and shall give
written notice thereof to Tenant, this Lease shall be deemed prior to such
mortgage, deed of trust or ground lease, whether this Lease is dated prior or
subsequent to the date of said mortgage, deed of trust or ground lease or the
date of recording thereof.

 

In the event any
proceedings or brought for foreclosure, or in the event of the exercise of the
power of sale under any mortgage or deed of trust made by Landlord covering the
Premises, Tenant shall, at the new owner’s option, attorn to the purchaser upon
any such foreclosure or sale and recognize such purchaser as Landlord under
this Lease.

 

If upon any sale,
assignment or hypothecation of the Premises or the land thereunder by Landlord,
or at any other time, an estoppel certificate, and/or financial statement or
Tenant, Tenant agrees, within ten (10) days thereafter, to deliver such
financial statement, and to deliver such estoppel certificate (in the form of
that attached hereto or as may be required by Landlord’s mortgagee or purchaser
or to Landlord certifying the requested information, including among other
things, the dates of commencement and termination of this Lease, the amounts of
security deposits, that this Lease is in full force and effect, if such be the
case, and that there are no differences, offsets or defaults of Landlord, or
noting such differences, offsets or defaults as actually exist. Tenant shall be
liable for any loss or liability resulting from any incorrect information
certified, and such mortgagee and purchaser shall have the right to rely on
such estoppel certificate and financial statement. Tenant shall in the same
manner acknowledge and execute any assignment of rights to receive rents as
required by any mortgagee of Landlord. Should Tenant fail to provide such
estoppel certificate, financial statement or assignment of rights within ten
(10) days of the service on Tenant or a written request therefor, then it is
agreed between the parties hereto that Landlord may suffer substantial damage
as a result of Tenant’s failure and therefore Tenant shall pay to Landlord
daily Additional Rental, in addition to all other rental due under this Lease,
in an amount equal to one-thirtieth (1/30th) of the Base Rent (as set forth in
Section 4 hereof) for each day commencing on the eleventh (11th) day after
service of the request for such estoppel certificate, financial statement or
assignment of rights until the same is provided to Landlord, its mortgagee or
purchaser. Said daily Additional Rental shall be due and payable daily for each
day commencing on the eleventh (11th) day following the service of such
request, and in default three (3) days after each such daily due date. In
addition but without limitation of the foregoing, Landlord may at its option
execute any such documents on behalf of Tenant as Tenant’s attorney-in-fact,
and Tenant does hereby appoint Landlord as Tenant’s attorney-in-fact and in
Tenant’s name, place and stead, to execute such documents, such appointment to
be irrevocable and coupled with an interest.

 

59.      Building Planning. In
the event Landlord requires the Premises for use in conjunction with another
suite or for other reasons connected with the Building planning program, upon
notifying Tenant in writing, Landlord shall have the right to move Tenant to
other space in the Building of which the Premises forms a part, at Landlord’s
cost and expense, and the terms and conditions of the original lease shall
remain in full force and effect, save and excepting that a revised Exhibit “A”
shall become part of this Lease and shall reflect the location of the new
space.

 

19

 

(a)       Prior
to Completion. Landlord reserves and is hereby granted the
right, at any time prior to occupancy by Tenant of Tenant’s Premises, upon not
less than thirty (30) days’ written notice to Tenant, to relocate Tenant and to
substitute as the Premises thereunder other Premises within the office building
project for the Premises originally leased to Tenant at the time of the
execution hereof; provided, however, that the substituted Premises shall
contain an area not less or greater than one hundred twenty percent (120%)
times the square footage contained in the original Premises, with a pro-rata
adjustment to Base Rent as a result of the increase or decrease in the size of
the Substituted Premises.

 

(b)       Subsequent
to Completion. In addition, Landlord shall have the right, at
any time and from time to time upon sixty (60) days’ prior written notice to
Tenant, and within a reasonable period of time after said notice, to relocate
to other Premises (“New Premises”) within the office building project; subject,
however, to the following terms and conditions: (a) The New Premises shall have
approximately the same Floor Area as is contained in the Premises; (b) the New
Premises shall be leased to Tenant on the same terms and conditions as provided
in this Lease, except that if the Floor Area in the New Premises in more or
less than that contained in the Premises, there shall be proportionate
adjustment of Base Rent and Additional Rental based upon the Floor Area in the New
Premises; (c) Landlord shall pay to Tenant, within thirty (30) days following
the date Tenant initially opens for business in the New Premises, those
expenses both direct and incidental reasonably incurred by Tenant in connection
with the relocation of Tenant’s personal property, together with Tenant’s
unamortized book value of Tenant’s leasehold improvements, excluding movable
trade fixtures (to the extent that said leasehold improvements were paid for by
Tenant, as evidenced by invoices and proofs of payment of same), depreciated on
a straight-line basis over the Term, and Tenant shall provide Landlord with a
bill of sale for said leasehold improvements; provided, however, Tenant has
first provided Landlord with an itemized list of these expenses (accompanied
with copies of invoices and proofs of payment of same), and (d) Landlord and
Tenant, during said sixty (60) day period, mutually agree in writing upon (i)
the scope and cost of all leasehold improvements to be constructed at the New
Premises, (ii) the extent of Landlord’s contribution to this cost, and (iii) a
timetable for completion of the leasehold improvements. Landlord and Tenant
shall use best efforts and act in good faith to reach agreement on the terms
set forth in subparagraph (d) above. If the provisions of subparagraphs (a),
(b), (c) and (d) are not met by Landlord, Landlord agrees that Tenant shall not
be required to relocate until such conditions are met.

 

60.      NO ORAL AGREEMENT. THIS
LEASE COVERS IN FULL EACH AND EVERY AGREEMENT OF EVERY KIND OR NATURE
WHATSOEVER BETWEEN THE PARTIES AND THEIR RESPECTIVE AGENTS AND REPRESENTATIVES
HERETO CONCERNING THIS LEASE, AND ALL PRELIMINARY NEGOTIATIONS AND AGREEMENTS
OF WHATSOEVER KIND OR NATURE ARE MERGED HEREIN, AND THERE ARE NO ORAL
AGREEMENTS OR IMPLIED COVENANTS. LANDLORD SPECIFICALLY DOES NOT WARRANT THAT
ANY OTHER OCCUPANCY, PRESENT OR FUTURE, IN THE OFFICE BUILDING PROJECT OF WHICH
THE PREMISES ARE A PART, SHALL REMAIN AN OCCUPANT DURING THE TERM OF THIS
LEASE.

 

61.      Tenant Entity. If Tenant
is a corporation, each individual executing this Lease on behalf of Tenant
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of Tenant an shall deliver appropriate certification to that
effect, if requested. If Tenant is a partnership, joint venture, or other
unincorporated association, each individual executing this Lease on behalf of
Tenant represents that this Lease is binding on Tenant. Furthermore Tenant
agrees that the execution of any written consent hereunder, or of any written
modification or termination of this Lease, by any general partner of Tenant or
any other authorized agent of Tenant, shall be binding on Tenant.

 

62.      Americans with Disabilities Act.
Landlord agrees to be responsible for and shall pay all remedial costs
associated with, and shall use commercially reasonable diligence in complying
with, the Americans with Disabilities act (“ADA”), as it relates to the Common
Areas of the Building only, based solely on requirements existing or imposed on
Landlord as of the Commencement Date. Any changes, modifications,
rehabilitation or repair to the Common Area required by any amendment to ADA or
any regulations thereunder which are enacted or become effective after the
Commencement Date, shall be Landlord’s responsibility, but the cost thereof
shall be an Operating Expense for purposes of this Lease. Notwithstanding any
other provision of the Lease, Landlord shall have no duty, obligation or
responsibility, nor shall Landlord be obligated to expend any moneys over and
above the work specified in the Work Letter to make the Premises comply with
any requirements of ADA or any other similar laws, including life-fire safety
codes, physical handicap codes and/or earthquake safety codes.

 

LANDLORD AND
TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION
CONTAINED HEREIN AND, BY THE EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND
VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND TENANT WITH RESPECT TO THE
PREMISES.

 

20

 

IF THIS LEASE HAS
BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR HIS/HER
APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE REAL ESTATE BROKER
OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF HIS LEASE OR THE TRANSACTION RELATING THERETO; THE PARTIES SHALL
RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX
CONSEQUENSES OF THIS LEASE.

 

	
  Dated:

  	
   

  	
   

  	
  Dated:
  

  	
  6/16/03

  	
   

  
	
   

  	
   

  
	
  LANDLORD:

  	
  TENANT:

  
	
   

  	
   

  
	
  AC-CATALINA LANDING LLC, 

  	
  OBAGI MEDICAL PRODUCTS, INC., 

  
	
  a Delaware limited liability company

  	
  a California corporation

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
  /s/ Curtis Cluff

  	
   

  
	
   

  	
  Donald G. Abbey

  	
  Name:

  	
  Curtis Cluff

  	
   

  
	
  Its:

  	
  Managing Member

  	
  Its:

  	
  CFO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  or

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ David J. Gullen

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  David J. Gullen

  	
  Name:

  	
   

  	
   

  
	
  Its:

  	
  Vice President

  	
  Its:

  	
   

  	
   

  
										

 

21

 

ADDENDUM TO LEASE

 

This Addendum to
Lease (the “Addendum”) is entered into in connection with and as part of that
certain lease, dated May 9, 2003, by and between AC-CATALINA LANDING LLC,  a Delaware limited
liability company (“Landlord”), and OBAGI MEDICAL PRODUCTS, INC.,  a California
corporation (“Tenant”). Notwithstanding anything to the contrary
contained in the Lease, the parties further agree as follows:

 

63.       Provided Tenant is not then in default
under the Lease (in which event Tenant shall have no expansion rights under
this Addendum, provided that in the case of a non-monetary default Tenant shall
be deemed to be not in default for purposes of this Addendum if Tenant cures
the default within five (5) days after written notice of the existence of the
default), if Landlord decides that upon the expiration or other termination of
any lease between Landlord and a third party for space on the first (1st)
floor of the Building, Landlord will offer that space for lease to the general
public (“Expansion Space”), Landlord shall state the terms and conditions on
which Landlord is willing, in its sole discretion, to Lease the Expansion Space
to Tenant, provided that Landlord shall act in good faith to retain in Landlord’s
Notice as many of the non-economic provisions of this Lease as possible
consistent with the economic provisions (e.g., rent, base year, parking
concessions, moving allowances, and tenant improvement allowance) Landlord
desires to include in or exclude from Landlord’s Notice. Tenant shall have five
(5) business days after Landlord’s Notice is given within which to
unconditionally agree to lease all (and not less than all) of the Expansion
Space on all the terms contained in Landlord’s Notice. If Tenant duly exercises
its rights under this Rider, the Expansion Space shall become part of the
Premises as of the date on which Tenant shall first have the right to occupy
that Expansion Space (“Expansion Space Commencement Date”). This Right of First
Notice shall apply only during each six (6) month period after Tenant has given
Landlord written notice requesting that Landlord give Tenant Landlord’s Notice
in accordance with this Addendum.

 

If Tenant fails to duly exercise its rights under this Addendum within
the above five business-day period, then all rights of Tenant to lease the
Expansion Space identified in Landlord’s Notice under this Addendum shall
automatically terminate and Landlord shall thereafter have no further
obligation to notify Tenant of any proposal to lease the Expansion Space.
Landlord shall thereafter have the right to lease the Expansion Space to one or
more third parties on any terms and conditions Landlord negotiates in its sole
discretion, without further obligation to Tenant.

 

If Tenant duly exercises this Right of First Notice within the above
five business-day period, then Tenant shall enter into an amendment to the
Lease (i) incorporating the Expansion Space into the Lease on the terms and
conditions contained in Landlord’s Notice and (ii) adjusting Tenant’s share and
rent accordingly. All other terms and conditions of the Lease (except as
specified in the immediately preceding sentence, this Addendum, shall remain
the same and in full effect. If Tenant fails to duly execute and return the
lease amendment or any revised amendment, or submit reasonable written
objections to the contents of the Lease amendment to Landlord within ten (10)
days after it is delivered to Tenant for signature, this Right of First Notice
and Tenant’s acceptance of Landlord’s Notice shall automatically be void, any
right accrued under this Right of First Notice shall be of no effect, and
Landlord shall thereafter be free to unconditionally lease the Expansion Space
to one or more third parties as set forth above.

 

This Right of First Notice shall not apply to (a) offers from any third
parties to lease the Expansion Space, (b) leases or transfers among entities or
persons related to Landlord (including, but not limited to, partners if
Landlord is a partnership, and shareholders if Landlord is a corporation), 9(c)
any proposed sale or purchase of the Building, including, without limitation, a
proposed sale-and-leaseback of the Building, and (d) any space in the Building
which is vacant as of the date of the Lease. In addition, this Right of First
Notice is subject and subordinate to all now existing preferential rights to
the Expansion Space granted to other tenants of the Office Building Project

 

This Right of First Notice is personal to Tenant. If Tenant transfers
any of Tenant’s interest in the Lease before the permitted exercise of Tenant’s
rights under this Right of First Notice, those rights shall not be transferred
to any transferee but shall instead automatically lapse, and Landlord’s
obligations under this Right of First Notice shall automatically terminate.
This Right of First Notice shall automatically expire without notice on the
expiration of the original Term or sooner termination of the Lease for any
reason or upon any Transfer by Tenant of all or any part of Premises.

 

64.       Tenant has converted the area located
adjacent to the south end of the Building and shown on attached Exhibit “G” as
the area marked with diagonal lines (“South End Area”) into a reserved parking
area for Tenant’s and Landlord’s exclusive use during the Term (“South End
Parking”). Landlord and Tenant shall each be entitled to park one car in the
South End Parking. Tenant’s use of the South End Area will not be subject to
the monthly parking rate chargeable by Landlord. Tenant agrees that Tenant’s
use of the South End Area shall comply with all of Landlord’s parking rules and
regulations. All improvements constructed by Tenant in the South End Area or in
connection with the South End Parking shall at all times be and remain the
property of Landlord, provided that upon the expiration or earlier termination
of this Lease Landlord may require that Tenant immediately (a) restore the
South End Area to its condition existing on the date of this Lease and (b)
repair any damage caused to the Office Building Project or any other property
during such restoration. Any future improvements which Landlord desires to
complete to facilitate the joint parking arrangement between Landlord and
Tenant shall be paid for by Landlord.

 

65.       Tenant shall receive a rent credit of Thirty-One
Thousand Five Hundred & Sixty Dollars ($31,560); Twenty-One Thousand &
Forty Dollars ($21,040) of which will be applied against Tenant’s August 2003
rental obligation with the remaining balance of Ten Thousand Five Hundred &
Twenty Dollars ($10,520) to be applied against Tenant’s September 2003 rental
obligation.

 

22

 

EXHIBIT A

THE OFFICE BUILDING PROJECT

 

 

23A

 

FLOOR PLAN OF THE PREMISES

 

EXHIBIT A-II

 

 

24B

 

EXHIBIT B 

LEASE APPLICATION

 

[ATTACHED]

 

24

 

EXHIBIT C

SIGNAGE PROGRAM

 

This criteria
establishes a uniform policy for all tenant sign identification at Catalina
Landing. It is designed to establish standards, which assure an attractive
business complex for the benefits of all tenants. Plans for proposed signs
shall be submitted for design review and approval of owner. Adherence to these
rules shall be the responsibility of each tenant. Conformance will be strictly
enforced; any non-conforming signage shall be brought in to conformance at the
expense of the tenant.

 

Tenant shall be
represented on the interior building directory of Building 310 and Tenant’s
suite. All signs will be in accordance with existing building standards and
will be fabricated and installed at Landlord’s expense.

 

25

 

EXHIBIT D 

RULES AND REGULATIONS

 

General Rules and Regulations.
The following rules and regulations govern the use of the Building and the
Common Areas. Tenant will be bound by such rules and regulations and agrees to
cause Tenant’s Authorized Users, its employees, subtenants, assignees,
contractors, suppliers, customers and invitees to observe the same.

 

1.                          Except
as specifically provided in the Lease to which these Rules and Regulations are
attached, no sign, placard, picture, stickers, banners, advertisement, name or
notice may be installed or displayed on any part of the outside or inside of
the Building without the prior written consent of Landlord. Landlord will have
the right to remove, at Tenant’s expense and without notice, any sign installed
or displayed in violation of this rule. All approved signs or lettering on
doors and walls are to be printed, painted, affixed or inscribed at the expense
of Tenant and under the direction of Landlord by a person or company designated
or approved by Landlord.

 

2.                          If
Landlord objects in writing to any curtains, blinds, shades, screens or hanging
plants or other similar objects attached to or used in connection with any
window or door of the Premises, or placed on any windowsill, which is visible
from the exterior of the Premises. Tenant will immediately discontinue such
use. Tenant agrees not to place anything against or near glass partitions or
doors or windows which may appear unsightly from outside the Premises, including,
without limitation, stickers, tinting materials, foil shades, blinds or
Screens.

 

3.                          Tenant
will not obstruct any sidewalks, passages, exits or entrances of the Project.
The sidewalks, passages, exits and entrances are not open to the general
public, but are open, subject to reasonable regulations, to Tenant’s business
invitees. Landlord will in all cases retain the right to control and prevent
access thereto of all persons whose presence in the reasonable judgment of
Landlord would be prejudicial to the safety, character, reputation and Interest
of the Project and its tenants, provided that nothing herein contained will be
construed to prevent such access to persons with whom any tenant normally deals
in the ordinary course of its business, unless such persons are engaged in
illegal or unlawful activities. No tenant and no employee or invitee of any
tenant will go upon the roof of the Building.

 

4.                          Landlord
expressly reserves the right to absolutely prohibit solicitation, canvassing,
distribution of handbills or any other written material or goods, peddling,
sales and displays of products, goods and wares in all portions of the Project
except for such activities as may be expressly permitted under the Lease.
Landlord reserves the right to restrict and regulate the use of the Common
Areas of the Project by Invitees of tenants providing services to tenants on a
periodic or daily basis including food and beverage vendors. Such restrictions
may include limitations on time, place, manner and duration of access to a
tenant’s premises for such purposes.

 

5.                          Landlord
reserves the right to prevent access to the Project in case of invasion, mob,
riot, public excitement or other commotion by closing the doors or by other
appropriate action.

 

6.                          Landlord
reserves the right to approve companies providing cleaning and janitorial
services for the Premises. Tenant will not cause any unnecessary labor by
carelessness or indifference to the good order and cleanliness of the Premises.

 

7.                          Landlord
will furnish Tenant, free of charge, with two keys to each exterior entry door
lock to the Premises. Landlord may make a reasonable charge for any additional
keys. Tenant shall not make or have made additional keys, and Tenant shall not
alter any lock or install any new additional lock or bolt on any door of the
Premises. Tenant, upon the termination of its tenancy, will deliver to Landlord
the keys to all doors which have been furnished to Tenant.

 

8.                          If
Tenant requires telegraphic, telephonic, burglar alarm, satellite dishes,
antennae or similar services, it will first obtain Landlord’s approval, and
comply with, Landlord’s reasonable rules and requirements applicable to such
services, which may include separate licensing by, and fees paid to, Landlord,
as well as all federal, state, and local regulations. Tenant will not transmit
or receive any electromagnetic, microwave or other radiation which may be
harmful or hazardous to any person or property in or about the Premises or
elsewhere within the Project.

 

9.                          No
deliveries will be made which impede or interfere with other tenants or the
operation of the Building.

 

10.                    Tenant
will not use or keep in the Premises any kerosene, gasoline or inflammable or
combustible fluid or material other than those limited quantities necessary for
the operation or maintenance of office equipment. Tenant will not sleep, cook
or wash clothes in the Premises or use or permit to be used in the Premises any
foul or noxious gas or substance, or permit or allow the Premises to be
occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors or vibrations, intense
glare, light or heat, nor will Tenant bring into or keep in or about the
Premises any birds or animals.

 

11.                    Landlord
reserves the right, exercisable without notice and without liability to Tenant,
to change the name and street address of the building. Without the written
consent of Landlord, Tenant will not use the name of the Building or the
Project in connection with or in promoting or advertising the business of
Tenant except as Tenant’s address.

 

26

 

12. The toilet
rooms, toilets, urinals, wash bowls and other apparatus will not be used for
any purpose other than that for which they were constructed and no foreign
substance of any kind whatsoever shall be thrown therein. The expense of any
breakage, stoppage or damage resulting from any violation of this rule will be
borne by the tenant who, or whose employees or invitees, break this rule.

 

13. Tenant will
not sell, or permit the sale at retail of newspapers, magazines, periodicals,
theater tickets or any other goods or merchandise to the general public in or
on the Premises. Tenant will not make any building-to-building solicitation of
business from other tenants in the Project. Tenant will not use the Premises
for any business or activity other than that specifically provided for in this
Lease. Tenant will not conduct, nor permit to be conducted, either voluntarily
or involuntarily, any auction upon the Premises without first having obtained
Landlord’s prior written consent, which consent Landlord may withhold in its
sole and absolute discretion.

 

14. Except for the
ordinary hanging of pictures and wall decorations, Tenant will not mark, drive
nails partitions, woodwork or plaster or in any way deface the Premises or any
part thereof, except inprovisions of the Lease pertaining to alterations.
Landlord reserves the right to direct electricians as to where and how
telephone and telegraph wires are to be introduced to the Premises. Tenant will
not cut or bore holes for wires. Tenant will not affix any floor covering to
the floor of the Premises in any manner except as approved by Landlord. Tenant
shall repair any damage resulting from noncompliance with this rule.

 

15. Landlord
reserves the right to exclude or expel from the Project any person who, in
Landlord’s judgment, is intoxicated or under the influence of liquor or drugs
or who is in violation of any of the Rules and Regulations of the Building.

 

16. Tenant will
store all its trash and garbage within its Premises or in other facilities
provided by Landlord. Tenant will not place in any trash box or receptacle any
material which cannot be disposed of in the ordinary and customary manner of
trash and garbage disposal. All garbage and refuse disposal is to be made in
accordance with directions issued from time to time by Landlord.

 

17. The Premises
will not be used for lodging nor shall the Premises be used for any improper,
immoral or objectional purpose.

 

18. Tenant agrees
to comply with all safety, fire protection and evacuation procedures and
regulations established by Landlord or any governmental agency.

 

19. Tenant assumes
any and all responsibility for protecting its Premises from theft, robbery and
pilferage, which includes keeping doors locked and other means of entry to the
Premises closed. Tenant will not leave or store any equipment materials or
items of any kind outside the walls of the Premises.

 

20. Tenant shall
use at Tenant’s cost such pest extermination and control contractor(s) as
Landlord may direct and at such intervals as Landlord may reasonably require.

 

21. To the extent
Landlord reasonably deems it necessary to exercise exclusive control over any
portions of the Common Areas for the mutual benefit of the tenants in the
Project, Landlord may do so subject to reasonable, non-discriminatory
additional rules and regulations.

 

22. Tenant’s
requirements will be attended to only upon appropriate application to Landlord’s
management office for the Project by an authorized individual of Tenant.
Employees of Landlord will not perform any work or do anything outside of their
regular duties unless under special instructions from Landlord, and no employee
of Landlord will admit any person (Tenant or otherwise) to any office without
specific instructions from Landlord.

 

23. These Rules
and Regulations are in addition to, and will not be construed to in any way
modify or amend, in whole or in part, the terms, covenants, agreements and conditions
of the Lease. Landlord may waive any one or more of these Rules and Regulations
for the benefit of Tenant or any other tenant, but no such waiver by Landlord
will be construed as a waiver of such Rules and Regulations in favor of Tenant
or any other tenant, nor prevent Landlord from thereafter enforcing any such
Rules and Regulations against any or all of the tenants of the Project.

 

24. Landlord
reserves the right to make such other and reasonable and non-discriminatory
Rules and Regulations as, in its judgment, may from time to time be needed for
safety and security, for care and cleanliness of the Project and for the
preservation of good order therein. Tenant agrees to abide by all such Rules
and Regulations herein above stated and any additional reasonable and
non-discriminatory rules and regulations which are adopted. Tenant is
responsible for the observance of all of the foregoing rules by Tenant’s
employees, agents, clients, customers, invitees and guests.

 

B. Parking Rules and Regulations. The
following rules and regulations govern the use of the parking facilities which
serve the Building. Tenant will be bound by such rules and regulations and
agrees to cause its employees, subtenants assignees, contractors, suppliers,
customers and invitees to observe the same:

 

1. Tenant Will not
permit or allow any vehicles that belong to or are controlled by Tenant or
Tenant’s employees, subtenants, customers or invitees to be loaded, unloaded or
parked in areas other than those designated by Landlord for such activities. No
vehicles are to be

 

27

 

left in the
parking areas overnight and no vehicles are to be parked in the parking areas
other than normally sized passenger automobiles, motorcycles and pick-up trucks.
No extended term storage of vehicles is permitted.

 

2. Vehicles must
be parked entirely within painted stall lines of a single parking stall.

 

3. All directional
signs and arrows must be observed.

 

4. The speed limit
within all parking areas shall be five (5) miles per hour.

 

5. Parking is
prohibited: (a) in areas not striped for parking; (b) in aisles or on ramps;
(c) where “no parking” signs are posted; (d) in cross-hatched areas; and (e) in
such other areas as may be designated from time to time by Landlord or Landlord’s
parking operator.

 

6. Landlord
reserves the right, without cost or liability to Landlord, to tow any vehicle
if such vehicle’s audio theft alarm system remains engaged for an unreasonable
period of time.

 

7. Washing,
waxing, cleaning or servicing of any vehicle in any area not specifically
reserved for such purpose is prohibited.

 

8. Landlord may
refuse to permit any person to park in the parking facilities who violates
these rules with unreasonable frequency, and any violation of these rules shall
subject the violator’s car to removal, at such car owner’s expense. Tenant
agrees to use its best efforts to acquaint its employees, subtenants,
assignees, contractors, suppliers, customers and invitees with these parking
provisions, rules and regulations.

 

9. Landlord
reserves the right, without cost or liability to Landlord, to tow any vehicles
which are used or parked in violation of these rules and regulations.

 

10. Landlord
reserves the right from time to time to modify and/or adopt such other
reasonable and non-discriminatory rules and regulations for the parking
facilities as it deems reasonably necessary for the operation of the parking
facilities.

 

RULES
AND REGULATIONS FOR ALTERATIONS

 

ALTERATIONS. After
installation of the initial Tenant Improvements for the Premises as described
on Exhibit “A” to the Lease. Tenant shall not make any alterations, additions,
improvements or decorations to the Premises (collectively, “Alterations”)
without Landlord’s prior written consent, which consent Landlord may withhold
in its reasonable but subjective discretion. All permitted Alterations shall be
subject to the following terms and conditions:

 

(a) Prohibited Alterations. Tenant may not make
any Alterations which: (i) affect any area outside the Premises; (ii) affect
the Building’s structure, equipment, services or systems, or the proper
functioning thereof, or Landlord’s access thereto; (iii) affect the
outside appearance, character or use of the Building or any Common Areas; (iv)
in the reasonable opinion of Landlord, lessen the value of the Building; or (v)
will violate or require a change in any occupancy certificate applicable to the
Premises.

 

(b) Landlord’s Approval. In requesting Landlord’s
approval of any Alterations, Tenant must deliver to Landlord written notice
requesting Landlord’s approval and a copy of any plans, specifications and
working drawings for any such Alterations at least ten (10) days prior to
commencement of the work thereof. Landlord’s approval of plans, specifications
and/or working drawings for Alterations will not create any responsibility or
liability on the part of Landlord for their completeness, design sufficiency,
or compliance with applicable permits, laws, rules and regulations of
governmental agencies or authorities, in approving any Alterations, Landlord
reserves the right to require Tenant to increase Its Security Deposit to
provide Landlord with additional reasonable security for the removal of such
Alterations by Tenant as may be required by the Lease.

 

(c) Contractors. Alterations may be made or
installed only by contractors and subcontractors which have been approved by
Landlord, which approval Landlord will not unreasonably withhold or delay;
provided, however. Landlord reserves the right to require that Landlord’s
contractor for the Building be given the first opportunity to bid for any
Alteration work. Before proceeding with any Alterations, Tenant agrees to
provide Landlord with ten (10) days prior written notice and Tenant’s
contractors must obtain and maintain, on behalf of Tenant and at Tenant’s sole
cost and expense: (i) all necessary governmental permits and approvals for the
commencement and completion of such Alterations; and (ii) if requested by
Landlord, a completion and lien indemnity bond, or other surety, reasonably
satisfactory to Landlord for such Alterations. Throughout the performance of
any Alterations, Tenant agrees to obtain, or cause its contractors to obtain,
workers compensation insurance and general liability insurance in compliance with
the provisions of Paragraph 19 of the Lease.

 

(d) Manner of Performance. All Alterations must
be performed: (i) in accordance with the approved plans, specifications and
working drawings; (ii) in a lien-free and first-class and workmanlike manner;
(iii) in compliance with all applicable permits, laws, statutes, ordinances,
rules, regulations, orders and rulings now or hereafter in effect and imposed
by any governmental agencies and authorities which assert jurisdiction; (iv) in
such a manner so as not to interfere with the occupancy of any other tenant in
the Building, nor impose

 

28

 

any additional
expense upon nor delay Landlord in the maintenance and operation of the
Building; and (v) at such times, in such manner, and subject to such rules and
regulations as Landlord may from time to time reasonably designate.

 

(e) Ownership. At
Landlord’s election, all Alterations will become the property of Landlord and
will remain upon and be surrendered with the Premises at the end of the Term of
the Lease, or, Landlord may, by written notice delivered to Tenant, identify
those Alterations which Landlord will require Tenant to remove at the end of
the Term of the Lease. Landlord may also require Tenant to remove Alterations
which Landlord did not have the opportunity to approve. If Landlord requires
Tenant to remove any Alterations, Tenant, at its sole cost and expense, agrees
to remove the identified Alterations on or before the expiration or earlier
termination of the Lease and repair any damage to the Premises caused by such
removal (or, at Landlord’s option, Tenant agrees to pay to Landlord all of
Landlord’s costs of such removal and repair).

 

(f) Personal
Property. All articles of personal property owned by Tenant or
installed by Tenant at its expense in the Premises (including Tenant’s business
and trade fixtures, furniture, movable partitions and equipment [such as
telephones, copy machines, computer terminals, refrigerators and facsimile
machines]) will be and remain the property of Tenant, and must be removed by
Tenant from the Premises, at Tenant’s sole cost and expense, on or before the
expiration or earlier termination of the Lease. Tenant agrees to repair any
damage caused by such removal at its cost on or before the expiration or
earlier termination of the Lease.

 

(g) Removal of Alterations. If
Tenant fails to remove by the expiration or earlier termination of the Lease
all of its personal property, or any Alterations identified by Landlord for
removal, Landlord may, at its option, treat such failure as a hold-over
pursuant to Subparagraph 11(b) of the Lease, and/or Landlord may (without
liability to Tenant for loss thereof) treat suchpersonal property and/or
Alterations as abandoned and, at Tenant’s sole cost and expense, and in
addition to Landlord’s other rights and remedies under the Lease, at law or in
equity: (a) remove and store such items; and/or (b) upon ten (10) days prior
notice to Tenant, sell, discard or otherwise dispose of all or any such items at
private or public sale for such price as Landlord may obtain or by other
commercially reasonable means. Tenant shall be liable for all costs of
disposition of Tenant’s abandoned property and Landlord shall have no liability
to Tenant with respect to any such abandoned property. Landlord agrees to apply
the proceeds of any sale of any such property to any amounts due to Landlord
under this Lease from Tenant (including Landlord’s attorneys’ fees and other
costs incurred in the removal, storage and/or sale of such items), with any
remainder to be paid to Tenant.

 

29

 

EXHIBIT E

TENANT’S INSURANCE REQUIREMENTS

 

This outlines the insurance requirements of your Lease. To assure
compliance with these terms, we suggest you send a copy of this Exhibit to your
insurer or agent. Initial Certificates must be provided to Landlord prior to
occupancy of the Premises, renewals ten (10) days before expiration.

 

1.                          Comprehensive
or Commercial General Liability Insurance:

 

$2,000,000
Combined Single Limit, each occurrence

 

$2,000,000
Aggregate (minimum) this location

 

$2,000,000
Products/Completed Operations Aggregate

 

$100,000 Fire
Legal Liability Limit, per fire

 

Bodily injury,
Property Damage, Personal Injury and Advertising Injury; Blanket Contractual
Liability - Covering Indemnity Paragraph 18(b); Products and Completed
Operations Liability; Landlord as an Additional Insured; Severability of
Interest, permitting Cross liability among insureds; provision stating that
tenant’s insurance is primary and non-contributing with any insurance carried
by Landlord.

 

2.                         Tenant’s
Property Insurance;

 

All Risks coverage
of Property owned by Tenant or for which the Tenant is legally liable;
replacement cost basis, covering no less than 90% of all values.

 

3.                          Tenant’s
Business Interruption Insurance (if requested):

 

All Risks coverage of operations at leased premises; covering one-years
business interruption due to insured peril.

 

4.                          Tenant’s
Workers’ Compensation and Employer’s Liability Insurance (if requested):

 

Statutory Limits and terms required by state of leased premises,
$1,000,000 Employer’s Liability Limit.

 

5.                          Tenant’s
Automobile Insurance (if requested):

 

$1,000,000
Combined Limit per accident; covering all owned, non-owned, hired autos (Symbol
1 - any auto).

 

All insurance is
to be with licensed insurers having a Best’s rating of “A 10” or better, and
must include the following:

 

Waiver of
Subrogation in favor of Landlord

Thirty (30) day pre-notice of cancellationinon renewal to Landlord

 

SEND
CERTIFICATE TO:                                   

AP-Catalina Landing LLC

Attn.: Property Manager 

310 Golden Shore, Suite 300 

Long Beach, California 90802

 

PLEASE INCLUDE:
Landlord and The Abbey Management Company LLC as additional insureds, and
reference the property address.

 

30

 

EXHIBIT F 

TENANT ENVIRONMENTAL QUESTIONNAIRE

 

The purpose of this form is to obtain information regarding the use or
proposed use of hazardous materials at the premises. Prospective tenants should
answer the questions in light of their proposed operations at the premises.
Existing tenants should answer the questions as they relate to ongoing
operations at the premises and should update any information previously
submitted. If additional space is needed to answer the questions, you may
attach separate sheets of paper to this form.

 

Your cooperation in this matter is appreciated.

 

1.0                  GENERAL INFORMATION

 

	
  Name of
  Responding Company:

  	
  OMP, Inc

  	
   

  
	
  Check the
  Applicable Status:

  	
  Prospective
  Tenant o
  Existing Tenant ý

  
	
   

  
	
  Mailing Address:

  	
  310 Golden Shore
  # 120

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Long Beach, CA
  90802

  	
   

  
	
   

  
	
  Contact Person
  and Title:

  	
   

  	
  ,

  	
   

  	
   Telephone Number: 

  	
   

  	
  /

  	
   

  	
   

  
	
   

  
	
  Address of
  Leased Premises:

  	
   

  	
   

  
	
   

  
	
  Length of Lease
  Term:

  	
  60 

  	
  months

  
																	

 

Describe the proposed operations to take place on the premises,
including principal products manufactured or services to be conducted. Existing
tenants should describe any proposed changes to ongoing operations.

 

 

2.0                  STORAGE OF HAZARDOUS MATERIALS

 

2.1                    Will
any hazardous materials be used or stored on-site?

 

	
  Wastes

  	
   

  	
  Yes o

  	
   

  	
  No ý

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Chemical
  Products

  	
   

  	
  Yes o

  	
   

  	
  No ý

  

 

2.2                    Attach
a list of any hazardous materials to be used or stored, the quantities that
will be on-site at any given time, and the location and method of storage
(e.g., 55-gallon drums on concrete pad).

 

3.0                  STORAGE TANKS AND SUMPS

 

3.1                    Is
any above or below ground storage of gasoline, diesel or other hazardous
substances in tanks or sumps proposed or currently conducted at the premises?

 

Yes o                                   No ý

 

If yes, describe the materials to be stored, and the type, size and
construction of the sump or tank. Attach copies of any permits obtained for the
storage of such substances.

 

3.2                    Have
any of the tanks or sumps been inspected or tested for leakage?

 

Yes o                                   No ý

 

If yes, attach the results.

 

3.3                    Have
any spills or leaks occurred from such tanks or sumps?

 

Yes o                                   No ý

 

3.4                    Were
any regulatory agencies notified of the spill or leak?

 

Yes o                                   No ý

 

31

 

If yes, attach copies of any spill reports filed, any clearance letters
or other correspondence from regulatory agencies relating to the spill or leak.

 

3.5                    Have
any underground storage tanks or sumps been taken out of service or removed?

 

Yes o                                   No ý

 

If yes, attach copies of any closure permits and clearance obtained
from regulatory agencies relating to closure and removal of such tanks.

 

4.0                  SPILLS

 

4.1                    During
the past year, havs any spills occurred at the premises?

 

Yes o                                   No ý

 

If yes, please describe the location of the spill.

 

 

4.2                    Were
any agencies notified in connection with such spills?

 

Yes o                                   No ý

 

If yes, attach copies of any spill reports or other correspondence with
regulatory agencies.

 

4.3                    Were
any clean-up actions undertaken in connection with the spills?

 

Yes o                                   No ý

 

If yes, attach copies of any clearance letters obtained from any
regulatory agencies involved and the results of any final soil or groundwater
sampling done upon completion of the clean-up work.

 

5.0                  WASTE MANAGEMENT

 

5.1                    Has
your company been issued an EPA Hazardous Waste Generator I.D. Number?

 

Yes o                                   No ý

 

5.2                    Has
your company filed a biennial report as a hazardous waste generator?

 

Yes o                                   No ý

 

If yes, attach a copy of the most recent report filed.

 

5.3                    Attach
a list of the hazardous wastes, If any, generated or to be generated at the
premises, its hazard class and the quantity generated on a monthly basis.

 

5.4                    Describe
the method(s) of disposal for each waste. Indicate where and how often disposal
will take place.

 

	
  On-site treatment or recovery:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Discharged to sewer:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Transported & disposed of off-site:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Incinerator:

  	
   

  	
   

  

 

5.5                    Indicate
the name of the person(s) responsible for maintaining copies of hazardous waste
manifests completed for off-site shipments of hazardous waste.

 

 

32

 

5.6                    Is
any treatment of processing of hazardous wastes currently conducted or proposed
to be conducted at the premises:

 

Yes o                                   No ý

 

If yes, please describe any existing or proposed treatment methods.

 

 

5.7                    Attach
copies of any hazardous waste permits or licenses issued to your company with
respect to its operations at the premises.

 

6.0                  WASTEWATER TREATMENT/DISCHARGE

 

6.1                    Do
you discharge wastewater to:

 

	
  Storm drain:

  	
   

  	
  Yes o

  	
   

  	
  No ý

  	
   

  	
  Sewer:

  	
   

  	
  Yes o

  	
   

  	
  No ý

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Surface water:

  	
   

  	
  Yes o

  	
   

  	
  No ý

  	
   

  	
  Industrial
  disch.:

  	
   

  	
  Yes o

  	
   

  	
  No ý

  

 

Is your wastewater treated before discharge?

 

Yes o                                   No o

 

If yes, describe the type of treatment conducted.

 

 

6.3                    Attach
copies of any wastewater discharge permits issued to your company with respect
to its operations at the premises.

 

7.0                  AIR DISCHARGES

 

7.1                    Do
you have any filtration systems or stacks that discharge into the air?

 

Yes o                                   No ý

 

7.2                    Do
you operate any of the following types of equipment or any other equipment
requiring an air emissions permit?

 

	
  o
  Spray booth

  	
   

  	
  o
  Incinerator

  
	
  o
  Dip tank

  	
   

  	
  o
  Other (please describe) 

  
	
  o
  Drying oven

  	
   

  	
  o
  Other equipment requiring air permits

  

 

7.3                    Are
air emissions from your operations monitored?

 

Yes o                                   No o

 

If yes, indicate the frequency of monitoring and a description of the
monitoring results.

 

 

 

7.4                    Attach
copies of any air emissions permits pertaining to your operations at the
premises.

 

8.0                  HAZARDOUS MATERIALS DISCLOSURES

 

8.1                    Does
your company handle hazardous materials in a quantity equal to or exceeding an
aggregate of 500 pounds, 55 gallons, or 200 cubic feet per month?

 

Yes o                                   No ý

 

8.2                    Has
your company prepared a hazardous materials management plan pursuant to any
applicable requirements of a local fire department or governmental agency?

 

Yes o                                   No ý

 

If yes, attach a copy of the business plan.

 

33

 

8.3                    Has
your company adopted any voluntary environmental, health or safety program?

 

Yes o                                   No ý

 

If yes, attach a copy of the program.

 

9.0                  ENFORCEMENT ACTIONS, COMPLAINTS

 

9.1                    Has
your company ever been subject to any agency enforcement actions,
administrative orders, or consent decrees?

 

Yes o                                   No ý

 

If yes, describe the actions and any continuing compliance obligations
imposed as a result of these actions.

 

 

 

9.2                    Has
your company ever received requests for information, notice or demand letters,
or any other inquiries regarding its operations?

 

Yes o                                   No ý

 

9.3                    Have
there ever been, or are there now pending, any lawsuits against the company
regarding any environmental or health and safety concerns?

 

Yes o                                   No ý

 

9.4                    Has
an environmental audit ever been conducted at your company’s current facility?

 

Yes o                                   No ý

 

If yes, identify who conducted the audit and when it was conducted: 

 

 

 

34

 

EXHIBIT G

 

 

35

 

FIRST
AMENDMENT TO STANDARD OFFICE LEASE

 

THIS FIRST AMENDMENT TO STANDARD OFFICE LEASE (“Amendment”) is made as
of October 30, 1998 between JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a
Massachusetts corporation (“Landlord”), and OBAGI MEDICAL PRODUCTS, INC., a
California corporation (“Tenant”), with reference to the following facts:

 

A.                      Landlord and
Tenant entered into that certain Standard Office Lease, dated February 27, 1998
(“Lease”), for premises known as Suite 120 (“Premises”), 310 Golden Shore (the “Building”),
Long Beach, California. The Building is a portion of the Office Building
Project known as Catalina Landing.

 

B.                        Landlord
and Tenant desire to amend the Lease as set forth below. Unless otherwise
indicated in this Amendment, the defined terms used herein have the same
definitions as the defined terms used in the Lease.

 

THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.                          Rentable
Area. Tenant hereby agrees to lease an additional 1,694 Rentable Square
Feet of space commonly known as Suite 100, located on the first (1st) floor of
the Building, and depicted on Exhibit “A” attached hereto and incorporated
herein by reference (“Additional Premises”). Except as otherwise provided
herein, as used in the Lease, “Premises” shall mean and include the original
Premises and the Additional Premises and all terms and conditions of the Lease
applicable to the original Premises shall also apply to the Additional
Premises, except that the following provisions of the Lease shall not apply to
the Additional Premises:  the last
sentence of paragraph 2.2.3, paragraphs 52 and 53, and Lease Exhibit “C”.

 

2.                          Base
Rent. Monthly Base Rent for the Additional Premises shall initially be
$2,795.10 ($1.65 per rentable square foot). On December 10, 2000, Base Rent for
the Additional Premises shall increase to $2,964.50 per month ($1.75 per
Rentable Square Foot). Base Rent payable for the Additional Premises shall be
in addition to the Base Rent payable under the Lease for the Premises.

 

3.                          Term.
The term of the Lease with respect to the Additional Premises shall begin on
the Additional Premises Commencement Date as determined in accordance with
paragraph 8 of the Work Letter Agreement attached hereto as Exhibit “B”
(“Work Letter Agreement”) and shall thereafter be concurrent with the term set
forth in the Lease for the Premises.

 

1

 

4.                          Operating Expenses. For the purposes of calculating Tenant’s
share of any increases in Operating Expenses and/or Applicable Taxes for the
Additional Premises, “Base Year” and “Tax Base Year” shall be as set forth in
paragraphs 1.10 and 1.11 of the Lease, and “Tenant’s Share of Operating
Expenses” and “Tenant’s Tax Share” for the Additional Premises shall be 0.61%,
based on 275,962 total Rentable Square Feet of the Office Building Project.
Tenant’s Share of any increases in Operating Expenses and/or Applicable Taxes
for the original Premises shall continue to be determined in accordance with
the Lease without amendment or modification by this Amendment.

 

5.                          Tenant Improvements. Landlord shall perform certain work of remodeling or renovation in the Additional
Premises. Such work shall be performed and paid for in accordance with the
provisions of the Work Letter Agreement and shall constitute part of the “Tenant
Improvements” under the Lease. The Work Letter Agreement sets forth Landlord’s
sole obligation to make improvements to the Additional Premises.

 

6.                          Terms and Conditions for the Additional Premises. From and after the date of delivery of the
Additional Premises to Tenant, Tenant shall hold and occupy the Premises and
Additional Premises upon all of the terms and conditions of the Lease as
amended by this Amendment and, in the event of any inconsistency between the
Lease and this Amendment, the provisions of this Amendment shall control as to
the Additional Premises.

 

7.                          Real Estate Commission. Landlord and Tenant represent and warrant to
each other that they have had no dealings with any real estate broker or agent
in connection with the negotiation of this Lease except Matlow-Kennedy
Commercial Real Estate Services, Robert L. Alperin (“Matlow”), and CB
Commercial Properties, Timothy D. Vaughan (“CB”). Landlord shall pay CB a
commission pursuant to a separate written agreement. Landlord shall not,
however, have any obligation to pay any Compensation (defined below) to Matlow
in connection with this Lease. Landlord and Tenant each agree to indemnify and
defend the other from any cost, expense, claim, loss, or liability for any
compensation, fee, commission or charge (collectively, “Compensation”) claimed
by any party other than CB claiming by, through or on behalf of it with respect
to this Lease.

 

8.                          Parking. In addition to the parking spaces which Tenant has the right to use
under the Lease, and subject to the provisions of the Lease, Tenant shall be
entitled to use a total of six (6) parking spaces (of which one (1) may be
reserved) in the open parking lot appurtenant to the Office Building Project at
a monthly rate of $55.00 per space for unreserved parking or $80.00 per space
for reserved parking, subject to increase from time to time in Landlord’s sole
discretion upon five (5) day’s written notice to Tenant.

 

2

 

9.                          Security Deposit. Concurrently with execution and delivery of
this Amendment by Tenant, Tenant shall deposit with Landlord the sum of $2,964.50
as a Security Deposit pursuant to Paragraph 5 of the Lease and to secure Tenant’s
faithful performance of Tenant’s obligations under the Lease and this
Amendment. Such amount shall be in addition to the Security Deposit set forth
in Paragraph 1.8 of the Lease.

 

10.                    No Other Amendments. There are no other amendments,
modifications, or addenda to the Lease other than this Amendment. The Lease
remains in full force, except as amended by this Amendment, and is hereby
ratified and reaffirmed.

 

11.                    Conflicts. If any conflict between this Amendment and the Lease should arise, the
terms of this Amendment shall control.

 

12.                    Defined Terms. All terms used in this Amendment with
initial capital letters and not defined herein shall have the meanings given to
such terms in the Lease.

 

13.                    Counterparts. This Amendment may be executed in multiple counterparts, each of which
shall be deemed an original, but all of which shall together constitute a
single instrument.

 

The parties have executed this Amendment as of
the date first written above.

 

 

	
  Landlord:

  	
  Tenant:

  
	
   

  	
   

  
	
  JOHN
  HANCOCK MUTUAL LIFE 

  	
  OBAGI
  MEDICAL PRODUCTS, INC.

  
	
  INSURANCE
  COMPANY

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  John P. McDonough

  	
   

  	
  By:

  	
    /s/
  Ian Walker

  
	
   

  	
  John
  P. McDonough,

  	
  Name:

  	
  Ian Walker

  
	
   

  	
  Investment
  Officer

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Ian Walker

  
	
   

  	
  Name:

  	
  Ian Walker

  
	
   

  	
  Title:

  	
  Secretary

  
									

 

3

 

FLOOR PLAN OF THE ADDITIONAL PREMISES

 

 

 

WORK LETTER AGREEMENT

 

In connection with the First Amendment to Standard Office Lease to
which this Work Letter Agreement is attached (the “Amendment”), and in
consideration of the mutual covenants hereinafter contained, Landlord and
Tenant agree as follows:

 

1.                          COMPLETION
SCHEDULE. Within ten (10) days after its execution of the Amendment,
Landlord shall deliver to Tenant, for Tenant’s review and approval, a schedule
(the “Work Schedule”) setting forth a timetable for the planning and completion
of the installation of the Tenant Improvements (as defined in Paragraph 2
below) to be constructed in the Additional Premises based on a target
Additional Premises Commencement Date of January 1, 1998 (“Target Additional
Premises Commencement Date”). The Work Schedule shall set forth each of the
various items of work to be done by or approval to be given by Landlord and
Tenant in connection with the completion of the Tenant Improvements. The Work
Schedule shall be submitted to Tenant for its approval and, upon approval by
both Landlord and Tenant, Landlord and Tenant agree to comply with that Work
Schedule, and it shall become the basis for the parties’ performance under this
Agreement. If Tenant shall fail to deliver to Landlord Tenant’s written
disapproval of the Work Schedule, as it may be modified after discussions
between Landlord and Tenant, within seven (7) days after the date the Work
Schedule is first received by Tenant, Landlord’s space planner for the Office
Building Project shall determine the final Work Schedule in its sole, good
faith judgment within ten (10) days after request by either Landlord or Tenant,
which determination shall be final and binding on all parties.

 

2.                          TENANT IMPROVEMENTS. “Tenant Improvements” shall include
all work to be done and improvements installed in the Additional Premises by
Landlord pursuant to the Tenant Improvement Plans (defined in Paragraph 3
below), including, but not limited to, partitioning, doors, ceilings, floor
coverings, wall finishes (including paint and wallcovering), electrical
(including lighting, switching, outlets, etc.), plumbing, heating, ventilating
and air conditioning, fire protection, cabinets and other millwork. All Tenant
Improvements and components thereof shall at all times be and remain the sole
property of Landlord.

 

3.                          TENANT
IMPROVEMENT PLANS. Within five (5) business days after execution of the
Amendment, Tenant agrees to meet with Landlord’s architect or space planner for the purpose of promptly preparing
a space plan (“Space Plan”). The Space Plan will provide a partition layout
depicting the configuration of the Additional Premises. If Tenant fails to
deliver to Landlord Tenant’s written disapproval of the Space Plan within five
(5) business days after the date the Space Plan, or any revised Space Plan, is
first received by Tenant, such failure shall constitute

 

EXHIBIT
"B"

 

 

a Tenant Delay and
the Commencement Date shall be accelerated one day for each day of such Tenant
Delay. Within fifteen (15) business days after the Space Plan is approved by
Tenant pursuant to this Paragraph (which approval shall not be unreasonably
withheld), Landlord’s architect or space planner shall promptly prepare final
working drawings and specifications for the Tenant Improvements. Those working
drawings and specifications are referred to herein as the “Tenant Improvement
Plans” and shall be approved by Landlord and Tenant pursuant to Paragraph 5
below. The Tenant Improvement Plans must be consistent with Landlord’s standard
specifications (the “Standards”) for tenant improvements for the Building, as
the same may be changed from time to time by Landlord.

 

4.                          NON-STANDARD TENANT IMPROVEMENTS. Landlord shall permit Tenant to deviate from
the Standards for the Tenant Improvements provided that (a) the deviations
shall not be of a lesser quality than the Standards; (b) the total lighting for
the Additional Premises shall comply with the provisions of Title 24 of the
California Administrative Code; (c) the deviations conform to applicable
governmental regulations, and necessary governmental permits and approvals have
been secured; (d) the deviations do not require building service beyond the
level normally provided to other tenants in the Building and do not overload
the weight-bearing capacity of the floors; (e) the deviations will not delay
completion of the Tenant Improvements unless Tenant agrees that any such delay
will constitute a Tenant Delay; and (f) Landlord has determined in its sole
discretion that the deviations are of a nature and quality that are consistent
with the overall objectives of the Landlord for the Building.

 

5.                          FINAL PRICING AND DRAWING SCHEDULE. After preparation by Landlord’s architect or space planner, the
Tenant Improvement Plans shall be submitted to Tenant for approval, which shall
not be unreasonably withheld. If Tenant fails to deliver to Landlord Tenant’s
written disapproval of the Tenant Improvement Plans, or any revised Tenant
Improvement Plans, within five (5) days after the date the Tenant Improvement
Plans, or any revised Tenant Improvement Plans, are received by Tenant, such
failure shall constitute a Tenant Delay and the Commencement Date shall be
accelerated one day for each day of such Tenant Delay. If the Tenant
Improvement Plans, or any revised Tenant Improvement Plans, are timely
disapproved by Tenant pursuant to this Paragraph, Tenant shall provide to
Landlord a written explanation of the reason(s) for such disapproval
concurrently with that disapproval, and the Tenant Improvement Plans shall be
revised and resubmitted to Tenant for approval. If Tenant fails to provide a
written explanation as and when required by this Paragraph, such failure shall
constitute a Tenant Delay and the Commencement Date shall be accelerated one
day for each day of such Tenant Delay. Within five (5) days after the Tenant
Improvement Plans are so approved by Tenant, the Tenant Improvement Plans shall
be submitted to the appropriate

 

EXHIBIT
"B"

 

 

governmental body
by Landlord for plan checking and the issuance of a building permit. Landlord
reserves the right to disapprove any proposed Tenant Improvements which
Landlord reasonably believes will adversely affect the Building or any Building
systems. Landlord, with Tenant’s cooperation, shall cause to be made to the
Tenant Improvement Plans any changes necessary to obtain the building permit
and to comply with the requirements of the Police and Fire Departments of the
City of Long Beach. Concurrently with the plan checking, Landlord shall have
prepared a final pricing for Tenant’s approval in accordance with the Work
Schedule, taking into account any modifications which may be required to
reflect changes in the Tenant Improvement Plans required by the City of Long
Beach or other agencies. Landlord shall have the option to increase or decrease
the final pricing, before or after Tenant approves the final pricing, to
reflect changes in the cost of performing the Tenant Improvements caused by
plan modifications required by the City of Long Beach or other agencies. After
final approval of the Tenant Improvement Plans no further changes may be made
thereto without the prior written approval from both Landlord and Tenant, and
then only after agreement by Tenant to pay any excess costs resulting from the
design or construction of such changes. Tenant acknowledges that any such
changes shall be subject to the terms of Paragraph 8 below.

 

6.                          CONSTRUCTION
OF TENANT IMPROVEMENTS. After a building permit for the Tenant Improvements
has been issued, Landlord shall cause its contractor to begin installation of
the Tenant Improvements in accordance with the Tenant Improvement Plans.
Landlord shall supervise the completion of such work and shall use its best
efforts to secure substantial completion of the work in accordance with the
Work Schedule. The cost of such work shall be paid as provided in Paragraph 7
below. Landlord shall not be liable for any direct or indirect damages as a
result of delays in construction beyond Landlord’s reasonable control,
including, but not limited to, acts of God, inability to secure governmental
approvals or permits, governmental restrictions, strikes, lack of availability
of materials or labor, or delays by Tenant (or its architect or anyone
performing services on behalf of Tenant).

 

7.                          PAYMENT
FOR THE TENANT IMPROVEMENTS.

 

(a)                      Landlord
grants to Tenant a “Tenant Improvement Allowance” of Nine and 00/100 Dollars
($9.00) per Rentable Square Foot of the Additional Premises. This Allowance
shall be automatically adjusted and finally determined upon the Rentable Square
Footage of the Additional Premises being finally determined by the Space
Accountant. The Tenant Improvement Allowance shall only be used for:

 

(i)                         Payment
of the cost of preparing the Space Plan and the Tenant Improvement Plans,
including mechanical, electrical, plumbing and structural drawings, and of all

 

EXHIBIT
"B"

 

 

other aspects
necessary to complete the Tenant Improvement Plans. The Tenant Improvement
Allowance will not be used for the payment of extraordinary design work not
included within the scope of Landlord’s Standards or for payments to any other
consultants, designers or architects other than Landlord’s architect, space
planner or Space Accountant, all of which other costs shall be paid for by
Tenant.

 

(ii)                      Payment
of plan check, permit and license fees relating to construction of the Tenant
Improvements.

 

(iii)                   Construction
of the Tenant Improvements, including, without limitation, the following:

 

(aa)                 Installation
within the Additional Premises of all partitioning, doors, floor coverings,
ceilings, wallcoverings and painting, millwork and similar items;

 

(bb)               All
electrical wiring, lighting fixtures, outlets and switches, and other
electrical work to be installed within the Additional Premises, excluding
however computer cable and wiring;

 

(cc)                 The
furnishing and installation of all duct work, terminal boxes, diffusers and
accessories required for the completion of the heating, ventilation and air
conditioning systems within the Additional Premises, including the cost of
meter and key control for after-hour air conditioning;

 

(dd)               Any
additional tenant requirements including, but not limited to, air quality
control, special heating, ventilation and air conditioning, noise or vibration
control or other special systems;

 

(ee)                 All
fire and life safety control systems such as fire walls, sprinklers, fire
alarms, including piping and wiring, installed within the Additional Premises;

 

(ff)                     All
plumbing, including fixtures and pipes, to be installed within the Additional
Premises;

 

(gg)               Testing
and inspection costs;

 

(hh)               Demolition
and/or removal of any existing improvements contained in the Additional
Premises which must be demolished in connection with construction of the Tenant
Improvements; and

 

(ii)                       Contractors’
fees, including, but not limited to, any fees based on general conditions.

 

EXHIBIT
"B"

 

 

(iv)                  Payment
to Landlord of a space improvement fee (“Improvement Fee”) to, among other
things, pay Landlord’s space improvement costs for the Additional Premises,
including without limitation costs for the following: plan check and permits;
utilities, including electrical and water consumption; elevator usage; and a
tenant supervision fee. The Improvement Fee shall be five percent (5%) of the
Tenant Improvement Allowance.

 

(v)                     All other costs to be expended by Landlord in
the construction of the Tenant Improvements, including those costs incurred by Landlord for construction of
elements of the Tenant Improvements in the Additional Premises, which
construction was performed by Landlord prior to the execution of the Amendment
and which construction is for the benefit of tenants and is customarily
performed by Landlord prior to the execution of leases for space in the
Building for reasons of economics (examples of such construction would include,
but not be limited to, the extension of mechanical, HVAC and electrical
distribution systems outside of the core of the Building, wall construction,
column enclosures and painting outside of the core of the Building, ceiling
hanger wires and window treatment).

 

(b)                     If the actual
costs of purchasing and installing the Tenant Improvements exceed the Tenant
Improvement Allowance, or if any of the Tenant Improvements are not to be paid
out of the Tenant Improvement Allowance as provided in Paragraph 7(a) above,
the excess shall be paid by Tenant to Landlord prior to the commencement of
construction of the Tenant Improvements.

 

(c)                      If, after the Tenant Improvement Plans have
been prepared and a price therefor has been established by Landlord, Tenant
shall require any changes or substitutions to the Tenant Improvement Plans, any
additional costs related thereto shall be paid by Tenant to Landlord prior to
the commencement of construction of the Tenant Improvements. Landlord shall
have the right to decline Tenant’s request for a change to the Tenant
Improvement Plans if such changes are inconsistent with the provisions of
Paragraphs 3 or 4 above, or if the change would, in Landlord’s subjective good
faith opinion, unreasonably delay construction of the Tenant Improvements.

 

(d)                     If increases in the cost of the Tenant
Improvements as set: forth in Landlord’s final pricing are due to
the requirements of any governmental agency, Tenant shall pay Landlord the
amount of such increase within five (5) days of Landlord’s written notice;
provided, however, that Landlord shall first apply toward such increase any
remaining balance in the Tenant Improvement Allowance.

 

(e)                      Any unused portion of the Tenant Improvement
Allowance upon completion of the Tenant Improvements shall not be

 

EXHIBIT
"B"

 

 

refunded to Tenant
or available to Tenant as a credit against any obligations of Tenant under the
Lease.

 

8.                          COMPLETION
AND RENTAL COMMENCEMENT DATE. The Term of the Lease applicable to the
Additional Premises, and Tenant’s obligation for the payment of rent for the
Additional Premises under the Amendment, shall commence on the “Additional
Premises Commencement Date”, which shall be the earlier of: (i) the date on
which the Tenant first conducts any business from all or part of the Additional
Premises; or (ii) the date on which the Tenant Improvements have been
substantially completed as determined by a certificate from Landlord’s
architect (the earlier of which dates shall be deemed to be the date on which
Landlord has tendered possession of the Additional Premises to Tenant under the
Amendment); provided that, if there shall be a delay in substantial completion
of the Tenant Improvements as a result of:

 

(a)                      Tenant’s
failure to approve any item or perform any other obligation in accordance with
and by the date specified in the Work Schedule;

 

(b)                     Tenant’s
request for materials, finishes or installations other than those readily
available, whether or not approved by Landlord or reflected in the Tenant
Improvement Plans;

 

(c)                      Tenant’s
changes in the Tenant Improvement Plans after Tenant approves the Tenant
Improvement Plans;

 

(d)                     Tenant’s
request to deviate from the Standards for the Building; or

 

(e)                      Tenant’s
failure to timely make any payment due from Tenant under this Work Letter
Agreement or the Lease;

 

then, as provided
for in the Lease, the commencement of the Term shall be accelerated by the
number of days of such delay. The Tenant Improvements shall be deemed
substantially complete notwithstanding the fact that minor items of the Tenant
Improvements (such as construction, mechanical adjustments, or decorations)
which do not materially interfere with Tenant’s use of the Additional Premises
remain to be performed (items normally referred to as “punch list” items),
which items Landlord shall promptly complete or correct.

 

EXHIBIT
"B"

 

 

CATALINA LANDING

FIRST AMENDMENT TO AMENDED AND RESTATED OFFICE LEASE

 

This FIRST AMENDMENT TO AMENDED AND RESTATED OFFICE LEASE (this “Amendment”),
dated as of April 20, 2005, is by and between AC-CATALINA LANDING LLC, a
Delaware limited liability company (“Landlord”), and OMP, INC., a Delaware
corporation, as successor-in-interest to Obagi Medical Products, Inc. (“Tenant”).

 

RECITALS

 

A.                      Landlord and
Tenant previously entered into that certain Amended and Restated Office Lease
dated May 9th, 2003, (the “Lease”), whereby Landlord leases to
Tenant 12,023 Rentable Square Feet of space commonly known as 310 Golden Shore,
Suite 120, Long Beach, California (the “Original Premises”).

 

B.                        Tenant now
desires to expand the Premises by taking an additional 2,698 Rentable Square
Feet of space in the Office Building Project (as defined in the Original Lease),
and Landlord agrees to lease such additional space to Tenant, subject to the
terms and conditions contained herein. Landlord and Tenant hereby express their
mutual desire and Intent to expand the Original Premises, and to otherwise
amend the Lease, as provided below.

 

AGREEMENT

 

IN WITNESS HEREOF, the parties hereto hereby agree as follows:

 

1.                          CAPITALIZED
TERMS. Unless otherwise expressly defined in this Amendment, initially
capitalized terms used in this Amendment shall have the meanings assigned in
the Original Lease.

 

2.                          EXPANSION
SPACE. Upon and following the Expansion Date (as defined in paragraph 5 below),
the “Premises” leased by Tenant under the Lease shall be deemed to Include the
1,393 additional Rentable Square Feet of space located at 330 Golden Shore,
Suite 450, Long Beach, California (“Suite 450”), and 1,305 additional Rentable
Square Feet of space located at 310 Golden Shore, Suite 100, Long Beach,
California (“Suite 100”), each, and as more particularly shown on Exhibit “A”
attached hereto. Suite 450 and Suite 100 shall herein be referred to
collectively as the “Expansion Space”. Tenant’s use and occupancy of the
Expansion Space shall be subject to all of the terms and conditions contained
in the Lease applicable to the Original Premises, provided that Tenant shall be
allowed to use Suite 450 as a conference room and employee training center.
Commencing upon the Expansion Date, any and all references in the Lease to the “Premises”
shall include both the Original Premises and the Expansion Space. After giving
effect to the Expansion Space, the entire Premises leased from Landlord by
Tenant shall be deemed to contain 14,721 Rentable Square Feet of space, as more
particularly shown on Exhibit “A” attached hereto.

 

3.                          TENANT’S
SHARE. After giving effect to the Expansion Space, Tenant’s Share under the
Lease shall be increased to 1.59%.

 

4.                          MONTHLY
BASE RENT. Upon and following the Expansion Date, monthly Base Rent to be paid
by Tenant for the entire Premises shall be payable in accordance with the
following schedule:

 

	
  Effective Date

  	
   

  	
  Base Rent

  	
   

  
	
  May 1, 2005 to June 30,
  2005

  	
   

  	
  $

  	
  21,671.00

  	
   per month

  	
   

  
	
  July 1, 2005 to July 31,
  2005

  	
   

  	
  $

  	
  26,689.00

  	
   per month

  	
   

  
	
  August 1, 2005 to July 31,
  2006

  	
   

  	
  $

  	
  27,381.00

  	
   per month

  	
   

  
	
  August 1, 2006 to July 31,
  2007

  	
   

  	
  $

  	
  28,117.00

  	
   per month

  	
   

  
	
  August 1, 2007 to July 31,
  2008

  	
   

  	
  $

  	
  29,000.00

  	
   per month

  	
   

  

 

5.                          EXPANSION
DATE. The “Expansion Date” shall mean the date on which Landlord has “Substantially
Completed” construction of the “Tenant Improvements” (each as defined below) to
be contained within Suite 450. For purposes hereof, “Substantial Completion”
(and any derivation thereof) means the Tenant Improvements have been
sufficiently completed to enable Tenant to use Suite 450 of the Premises, with
the exception of any Punch List Items (as defined below) and Tenant’s
controlled Improvements, If any (e.g., Tenant’s fixtures, telephones, data
lines, computers, furniture, etc.) to be installed by Tenant and/or under the
supervision of Landlord’s contractor. For

 

1

 

purposes hereof, “Substantial
Completion” (and any derivation thereof) means that (1) Landlord has
substantially completed the construction of the Tenant Improvements. “Punch
List Items” means uncompleted or improperly completed items of the Tenant
improvements which, in the aggregate, do not materially interfere with Tenant’s
occupancy of the Premises for the Permitted Use, as reasonable determined by
Landlord and Tenant. Subject to “Tenant Delays” and “Force Majeure Events”
(each as defined below). Landlord and Tenant anticipate that the Expansion Date
will fall on or about May 1, 2005.

 

Any delay(s) in the occurrence of Substantial Completion which result
directly, indirectly, partially, or totally from any acts, fault or omissions
of Tenant, or any of its agents, employees, and/or contractors, shall
constitute a “Tenant Delay”. If there shall be any Tenant Delay(s), then,
notwithstanding anything to the contrary set forth in the Lease, and regardless
of the actual date of the Substantial Completion, the Expansion Date shall be
the date on which Substantial Completion would have occurred if no Tenant
Delay(s) had occurred. If Tenant Delays exist, as reasonably determined by
Landlord, then upon the Substantial Completion of the Tenant Improvements,
Landlord shall notify Tenant of (i) the aggregate period of the Tenant Delays
and (ii) the Expansion Date as determined pursuant hereto. Tenant shall, within
five (5) days following receipt of such notice, perform or cause to be
performed all obligations under the Lease (including, without limitation, the
payment of Rent) that have accrued from the Expansion Date, as determined
pursuant hereto, to the data on which Tenant received Landlord’s notice, and
the Expansion Date shall, for all purposes under this Lease, be the Expansion
Date as determined pursuant hereto. Nothing contained herein shall be deemed to
relieve Landlord of its obligation to use commercially reasonable efforts to
complete the Tenant Improvements in a timely manner, subject to Tenant Delays
and delays due to the occurrence of any Force Majeure Event.

 

The time for performance by either party of any obligation under this
Lease (other than the payment of rent or other monetary obligations) shall be
extended for the period of delay resulting from fire, earthquake, explosion,
flood, the elements, acts of God or the public enemy, strike, other labor
trouble, interference of governmental authorities or agents, or shortages of
fuel, supplies or labor resulting therefrom or any other cause, whether similar
or dissimilar to the above, beyond the reasonable control of the party
obligated for such performance, financial inability excepted (collectively, any
“Force Majeure Event”).

 

6.                          TENANT
IMPROVEMENTS. Attached hereto as Exhibit “B” is a list of the work that
Landlord or its agents shall perform, as well as space plans (the “Landlord’s
Plans”) for certain Improvements to Suite 450 (the “Tenant Improvements”),
which Landlord’s Plans are hereby approved by Landlord and Tenant. Landlord
shall commence to construct, or cause to be constructed, the Tenant
Improvements in substantial conformance with the Landlord’s Plans.

 

7.                          BASE
YEAR. As to the Expansion Space only, the Base Year shall be the calendar year
of 2005; the parties acknowledge and agree that 2003 shall remain the Base Year
for the remainder of the Premises.

 

8.                          TENANT’S
WORK. The parties acknowledge and agree that Tenant may, In accordance with
this Paragraph 8 and this Lease, complete certain improvements (“Tenant’s
Initial Improvement Work”) within the Expansion Space. Except as may be
otherwise provided in the Lease, Tenant’s Initial Improvement Work shall become
the property of Landlord upon the expiration or earlier termination of the
Lease and shall remain on the Premises at all times during the term of the
Lease.

 

(a)                     Plans and
Specifications.

 

(1)                              Space
Plans. Attached hereto, as Exhibit “C”, are space plans (the “Space Plans”)
for Tenant’s Initial Improvement Work prepared by Tenant’s architect/designer (“Tenant’s
Designer”). Landlord and Tenant hereby approve the Space Plans.

 

(2)                              Cost
of Design and Engineering. The cost of all architectural and design work,
as well as the cost of all engineering and all permits, licenses and fees
relating to the development of Tenant’s Initial Improvement Work, shall be paid
by Tenant.

 

(3)                              Landlord’s
Review of Plans. Tenant agrees and understands that Landlord shall not be
the guarantor of, or responsible for, the correctness or accuracy of the Space
Plans or compliance of the Space Plans with any applicable laws.

 

(b)                    Permits.
Tenant shall be solely responsible for obtaining all governmental approvals in
the full extent necessary for the issuance of a building permit for Tenant’s
Initial Improvement Work based on the Space Plans. Thereafter, Tenant shall
also be solely responsible for obtaining all other necessary approvals and
permits, Including temporary and permanent certificates of occupancy from all
governmental agencies having authority over the construction and installation
of Tenant’s Initial Improvement Work, and shall undertake all steps necessary
to insure that the construction of Tenant’s Initial Improvement Work is
accomplished in strict compliance with the Space

 

2

 

Plans, all applicable laws and the requirements and standards of any
insurance underwriting board, inspection bureau or insurance carrier insuring
the Premises pursuant to this Lease.

 

(c)                     Construction. Tenant shall employ a contractor of Tenant’s
choosing, subject to Landlord’s reasonable approval (the “Contractor”) to
promptly and diligently construct Tenant’s Initial Improvement Work in
conformance with the approved Space Plans. The performance of Tenant’s Initial
Improvement Work by the Contractor shall be subject to the following
conditions:

 

(1)                      Landlord or Landlord’s agents shall have the
right at all times to inspect the construction of Tenant’s Initial Improvement
Work by Tenant during the progress thereof. If Landlord shall give notice of
faulty construction or any other deviation from the Space Plans, Tenant shall
cause the Contractor to make corrections promptly. However, neither the
inspections nor the right to make such inspections shall operate as a waiver of
any rights of Landlord to require good and workmanlike construction of Tenant’s
Initial Improvement Work in accordance with the Space Plans and applicable
laws.

 

(2)                      Tenant hereby indemnifies and holds Landlord
harmless with respect to any and all costs, losses, damages, injuries and liabilities
related in any way to any act or omission of Tenant or Tenant’s contractor(s),
or anyone directly or indirectly employed by any of them, or in connection with
Tenant’s non- payment of any amount arising out of Tenant’s Initial Improvement
Work. Such indemnity by Tenant, as set forth above, shall also apply with
respect to any and all costs, losses, damages, injuries and liabilities related
in any way to Landlord’s performance of any ministerial acts reasonably
necessary (i) to permit Tenant to complete Tenant’s Initial Improvement Work,
and (ii) to enable Tenant to obtain any building permit or certificate of
occupancy for the Expansion Space. Tenant shall ensure lien-free completion of
Tenant’s Initial Improvement Work, and Tenant shall comply with all provisions
of the Lease regarding liens.

 

(3)                      All Tenant’s Initial Improvement Work
performed shall comply with the Americans with Disabilities Act – 1990, as the
same may be amended from time to time. The Contractor and the subcontractors
utilized by the Contractor shall guarantee to Tenant and for the benefit of
Landlord that the portion of Tenant’s Initial Improvement Work for which it is
responsible shall be free from any defects in workmanship and materials for a
period of not less than one (1) year, and free from latent defects for a period
of not less then ten (10) years, each time period being measured from the date
of completion of such Tenant’s Initial Improvement Work. The Contractor and the
subcontractors utilized by the Contractor shall be responsible for the
replacement or repair, without additional charge, of all work done or furnished
in accordance with its contract that shall become defective within one (1) year
after the later to occur of (i) completion of the work performed by the Contractor
or subcontractors and (ii) the first day of the Original Term. The correction
of such work shall include, without additional charge, all additional expenses
and damages incurred in connection with such removal or replacement of all or
any part of Tenant’s Initial Improvement Work, and/or the Building and/or
common areas that may be damaged or disturbed thereby. All such warranties or
guarantees as to materials or workmanship of or with respect to Tenant’s
Initial Improvement Work shall be contained in the contract or subcontract and
shall be written such that such guarantees or warranties shall inure to the
benefit of both Landlord and Tenant, as their respective interests may appear,
and can be directly enforced by either. Tenant covenants to give to Landlord
any assignment or other assurances which may be necessary to affect such right
of direct enforcement.

 

(4)                      Landlord shall have the right at all times to
enter the Expansion Space to post notices of non-responsibility.

 

(d)                    Insurance Requirements.

 

(1)                      General Coverages. The Contractor and any of its subcontractors
shall carry workers’ compensation insurance covering all of their respective
employees, and shall also carry public liability insurance, including property
damage, all with limits, in form and with companies as are required to be
carried by Tenant as set forth in the Lease.

 

(2)                      Special Coverages. Tenant shall carry “Builder’s All Risk”
Insurance in an amount approved by Landlord covering the construction of Tenant’s
Initial Improvement Work, and such other insurance as Landlord may require, it
being understood and agreed that Tenant’s Initial Improvement Work shall be
insured by Tenant pursuant to the Lease immediately upon completion thereof.
Such insurance shall be in amounts and shall include such extended coverage
endorsements as may be reasonably required by Landlord including, but not
limited to, the requirement that the Contractor shall carry excess liability
and Products and Completed Operation Coverage insurance, each in amounts not
less than $500,000 per incident, $1,000,000 in aggregate, and in form and with
companies as are required to be carried by Tenant as set forth in the Lease.

 

(3)                      General Terms. Certificates for all insurance carried
pursuant to this Paragraph 8 must comply with the requirements of this Lease
and shall be delivered to Landlord before the commencement of construction of
Tenant’s Initial Improvement Work and before the Contractor’s equipment is
moved onto the

 

3

 

Expansion Space.
In the event that Tenant’s Initial Improvement Work are damaged by any cause
during the course of the construction thereof, Tenant shall immediately repair
the same at Tenant’s sole cost and expense. The Contractor shall maintain all
of the foregoing insurance coverage in force until Tenant’s Initial Improvement
Work are fully completed and accepted by Landlord, except for any Products and
Completed Operation Coverage insurance required by Landlord, which is to be
maintained for ten (10) years following completion of the work and acceptance
by Landlord and Tenant. All policies carried under this Paragraph 8 shall
insure Landlord and Tenant, as their interests may appear, as well as the
Contractor. All insurance, except Workers’ Compensation, maintained by the
Contractor shall preclude subrogation claims by the Insurer against anyone
insured thereunder. Such insurance shall provide that it is primary insurance
as respects the owner and that any other insurance maintained by owner is
excess and noncontributing with the Insurance required hereunder.

 

(a)                     Delivery
of Warranties. At the conclusion of construction, Tenant shall deliver to
Landlord a copy of all warranties, guaranties, and operating manuals and
information relating to the improvements, equipment, and systems in the
Premises.

 

9.                          SECURITY
DEPOSIT. Tenant has on deposit with Landlord a Security Deposit in the amount
of $17,433.35. Upon execution of this Amendment, and in addition to all other
amounts due hereunder. Tenant will pay Landlord an additional deposit of
$5,316.00, thereby increases the total Security Deposit to $22,749.35.

 

10.                    PARKING. Commencing upon the Expansion Date,
Landlord shall offer Tenant the ability to secure three (3) additional
non-reserved parking stalls within the parking structure serving the Premises,
at the current rate then being charged for such stalls.

 

11.                    INSURANCE. Prior to the Expansion Date, Tenant
shall deliver to Landlord a Certificate of Insurance showing evidence of
current insurance coverage as required under the Lease for the entire Premises.
The Abbey Management Company LLC, Abbey-Properties LLC, and AC-CATALINA LANDING
LLC must be named as additional insureds. Tenant’s failure to satisfy the
foregoing requirement shall be deemed a material default under the Lease.

 

12.                    ENTIRE AGREEMENT. This Amendment represents
the entire agreement among the parties with respect to the matters contained in
this Amendment and supersedes any prior negotiations, representations, or
agreements, whether written or oral, with respect to the Amendment. Nothing in
this Amendment shall be deemed to waive or modify any of the provisions of the
Lease, except as expressly stated herein. This Amendment may be amended,
modified, or altered only by written instrument, signed by Landlord and Tenant.

 

13.                    EFFECT OF AMENDMENT; INCONSISTENCIES. Except
as modified or amended herein, each and all of the terms, covenants and
conditions of the Lease are hereby acknowledged and confirmed and remain in
full force and effect. If there are any inconsistencies between this Amendment
and the Lease with respect to the provisions of this Amendment, the provisions
of the Amendment shall prevail.

 

14.                    LEGAL ADVICE; NEUTRAL INTERPRETATION;
HEADINGS. Each party has received independent legal advice from their attorneys
with respect to the advisability of executing this Amendment and the meaning of
the provisions hereof. The provisions of this Amendment shall be construed as
to their fair meaning, and not for or against any party based upon any attribution
to such party as the source of the language in question. Headings used in this
Amendment are for convenience of reference only and shall not be used in
construing this Amendment.

 

15.                    AUTHORITY TO EXECUTE AGREEMENT. Each
Individual executing this Amendment on behalf of Tenant represents that he or
she is duly authorized to execute and deliver this Amendment on behalf of the
corporation and agrees to deliver evidence of his or her authority if requested
by Landlord.

 

16.                    CHOICE OF LAW. This Amendment shall be
governed by and construed in accordance with the domestic laws of the State of
California applicable to agreements executed and to be fully performed therein
without giving effect to any choice of law provision or rules (whether of the
State of California or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of California. The parties
hereto agree that any suit, action or proceeding arising out of or relating to
this Amendment shall be instituted and prosecuted in the United States District
Court for the district in which the Premises are located, or in any court of
competent jurisdiction of the State of California located in the county in
which the Premises are located, and the parties hereto irrevocably submit to
the jurisdiction of said courts and waive any rights to object to or challenge
the appropriateness of said forums. Service of process shall be in accordance
with the laws of the State of California.

 

17.                    SEVERABILITY. If any term, covenant, condition
or provision of this Amendment, or the application thereof to any person or
circumstance, shall to any extent be held by a court of competent jurisdiction
to be invalid, void or unenforceable, the remainder of the terms, covenants, conditions
or provisions of this Amendment, or the application

 

4

 

thereof to any
person or circumstance, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby.

 

18.                    SUBMISSION
OF AGREEMENT. The submission of this Amendment to Tenant, Tenant’s agent or
attorney for review or signature does not constitute an offer to Tenant. This
Amendment shall have no binding force or effect until its execution and
delivery by both Landlord and Tenant.

 

19.                    COUNTERPARTS.
This Amendment may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which when taken together shall
constitute one and the same instrument. The signature page of any counterpart
may be detached therefrom without impairing the legal effect of the
signature(s) thereon provided such signature page is attached to any other
counterpart identical thereto except having additional signature pages executed
by other parties to this Amendment attached thereto.

 

IN WITNESS HEREOF,
the parties have executed this Amendment as of the date first written above.

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
  AC-CATALINA LANDING LLC, a 

  	
   

  	
  OMP, INC., a Delaware corporation

  
	
  Delaware limited liability company

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By: 

  	
  /s/ Steve Carlson

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  	
   

  	
  Name:

  	
  Steve Carlson

  	
   

  
	
   

  	
   

  	
  Donald
  G. Abbey

  	
   

  	
   

  	
  Title: 

  	
  President

  	
   

  
	
   

  	
  Its: 

  	
  President

  	
   

  	
   

  	
   

  
	
  or

  	
   

  	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  David
  J. Gullen

  	
   

  	
  Title: 

  	
   

  	
   

  
	
   

  	
  Its: 

  	
  Vice
  President

  	
   

  	
   

  	
   

  	
   

  
									

 

5

 

EXHIBIT “A”

 

The Expansion Space &
The Premises

 

[see
attached]

 

6

 

EXHIBIT “B”

 

Landlord’s Plans

 

[see
attached]

 

7

 

EXHIBIT “C”

 

The Space Plans

 

[see
attached]

 

8Exhibit 10.4

 

STANDARD SUBLEASE

 

(NOTE: DO NOT USE IF LESS
THAN ENTIRE PREMISES ARE BEING SUBLET. FOR SITUATIONS WHERE THE PREMISES ARE TO
BE OCCUPIED BY MORE THAN ONE TENANT OR SUBTENANT USE THE “STANDARD
SUBLEASE-MULTI-TENANT” FORM)

 

1.                         Basic Provisions (“Basic
Provisions”).

 

1.1                  Parties:
This Sublease (“Sublease”), dated
for reference purposes only July 26, 2004, is made by and between Marlog
Cargo USA, Inc., a California corporation dba “Schumacher Cargo Lines” (“Sublessor”) and OMP, Inc., a Delaware
corporation (“Sublessee”), (collectively
the “Parties”, or individually a “Party”).

 

1.2      Premises:
That certain real property, including all improvements therein, and commonly
known by the street address of 2205 E. Carson Street., Units B-1 &
B-2, Carson 90810 located in the County of Los Angeles, State of California and
generally described as (describe briefly the nature of the property) an
approximately 19,275 square foot portion of a larger multi-tenant concrete
tilt-up industrial building (“Premises”).

 

1.3      Term:
four (4) years and three (3) months commencing August 1, 2004 (“Commencement Date”) and ending October 31,
2008 (“Expiration Date”).

 

1.4                  Early
Possession: July 30, 2004 (“Early
Possession Date”).

 

1.5                  Base Rent:
$12,143.25 per month (“Base Rent”),
payable on the first (1st) day of each month commencing September 1, 2004.

 

ý
If this box is checked, there are provisions in this Lease for the Base Rent to
be adjusted. SEE ADDENDUM PARAGRAPH 14.

 

1.6                  Base Rent and
Other Monies Paid Upon Execution:

 

(a)                     Base Rent:
$12,143.25 for the period

 

(b)                     Security
Deposit:  $12,143.25 (“Security Deposit”).

 

(c)      Association
Fees:  $                                          
for the period

 

(d)                      Other:  $2,447.93 for September 1, 2004 to September 30,
2004 Operating Expenses. Sublessee shall pay on a pro-rated basis its share of
Operating Expenses for the month of August 2004.

 

(e)                     Total Due
Upon Execution of this Lease:  $26,734.43

 

1.7                  Agreed Use:
General administrative, office, freight forwarding, and uses related thereto. 

 

1.8                  Real
Estate Brokers:

 

(a)                      Representation:
The following real estate brokers (the “Brokers”)
and brokerage relationships exist in this

 

	
   

  	
   

  	
  [ILLEGIBLE]

  
	
  INITIALS

  	
   

  	
  INITIALS

  

 

1

 

transaction (check
applicable boxes):

ý The Klabin
Company - Courtney Bell represents Sublessor exclusively (“Sublessor’s Broker”);

ý
Penta Pacific - Jacquelyn Smith represents Sublessee exclusively (“Sublessee’s Broker”); or

o
                                                 represents
both Sublessor and Sublessee (“Dual Agency”).

 

(b)                      Payment to
Brokers: Upon execution and delivery of this Sublease by both Parties,
Sublessor shall pay to the Brokers the brokerage fee agreed to in a separate
written agreement (or if there is no such agreement, the sum of      
or      % of the total Base Rent) for the brokerage
services rendered by the Brokers.

 

1.9                  Guarantor.
The obligations of the Sublessee under this Sublease shall be guaranteed by                                                                                                                                                                      (“Guarantor”).

 

1.10           Attachments.
Attached hereto are the following, all of which constitute a part of this
Sublease:

 

ý an Addendum
consisting of Paragraphs 14 through 15;

o
a plot plan depicting the Premises;

o
a Work Letter;

ý
a copy of the Master Lease;

o
other (specify): 

 

 

                                                                                                                                                                                                               .

 

2.                         Premises.

 

2.1                  Letting.
Sublessor hereby subleases to Sublessee, and Sublessee hereby subleases from
Sublessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Sublease. Unless otherwise
provided herein, any statement of size set forth in this Sublease, or that may have
been used in calculating Rent, is an approximation which the Parties agree is
reasonable and any payments based thereon are not subject to revision whether
or not the actual size is more or less. Note:
Sublessee is advised to verify the actual size prior to executing this
Sublease.

 

2.2                  Condition.
Sublessor shall deliver the Premises to Sublessee broom clean and free of
debris on the Commencement Date or the Early Possession Date, whichever first
occurs, (“Start Date”), and
warrants that the existing electrical, plumbing, fire sprinkler, lighting,
heating, ventilating and air conditioning systems (“HVAC”), and any items which the Sublessor is obligated to
construct pursuant to the Work Letter attached hereto, if any, other than those
constructed by Sublessee, shall be in good operating condition on said
date. If a non-compliance with such warranty exists as of the Start Date, or if
one of such systems or elements should malfunction or fail within the
appropriate warranty period, Sublessor shall, as Sublessor’s sole obligation
with respect to such matter, except as otherwise provided in this Sublease,
promptly after receipt of written notice from Sublessee setting forth with
specificity the nature and extent of such non-compliance, malfunction or
failure, rectify same at Sublessor’s expense. The warranty periods shall be as
follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to
the remaining systems and other elements. If Sublessee does not give Sublessor
the required notice within the appropriate warranty period, correction of any
such non-compliance, malfunction or failure shall be the obligation of
Sublessee at Sublessee’s sole cost and expense.

 

2.3                  Compliance.
Sublessor warrants that any improvements, alterations or utility installations
made or installed by or on behalf of Sublessor to or on the Premises comply
with all applicable covenants or restrictions of record and applicable building
codes, regulations and ordinances (“Applicable
Requirements”) in effect on the date that they were made or
installed. Sublessor makes no warranty as to the use to which Sublessee will
put the Premises or to modifications which may be required by the
Americans with Disabilities Act or any similar laws as a result of Sublessee’s
use. NOTE: Sublessee is responsible for
determining whether or not the zoning and other Applicable Requirements are
appropriate for Sublessee’s intended use, and acknowledges that past uses of
the Premises may no longer be allowed. If the Premises do not
comply with said warranty, Sublessor shall, except as otherwise provided,
promptly after receipt of written notice from Sublessee setting forth with
specificity the nature and extent of such non-compliance, rectify the same, notwithstanding Sublessee’s maintenance and
repair obligations.

 

2.4                  Acknowledgements.
Sublessee acknowledges that: (a) it has been advised by Sublessor and/or
Brokers to satisfy itself with respect to the condition of the Premises
(including but not limited to the electrical, HVAC and fire sprinkler systems,
security, environmental aspects, and compliance with Applicable Requirements and
the Americans with Disabilities Act), and their suitability for Sublessee’s
intended use. (b) Sublessee has made such investigation as it deems
necessary with reference to such matters and

 

2

 

assumes all responsibility
therefor as the same relate to its occupancy of the Premises, and (c) neither
Sublessor, Sublessor’s agents, nor Brokers have made any oral or written
representations or warranties with respect to said matters other than as set
forth in this Sublease. In addition, Sublessor acknowledges that: (i) Brokers
have made no representations, promises or warranties concerning Sublessee’s
ability to honor the Sublease or suitability to occupy the Premises, and (ii) it
is Sublessor’s sole responsibility to investigate the financial capability
and/or suitability of all proposed tenants.

 

2.5                    Americans
with Disabilities Act. In the event that as a result of Sublessee’s use, or
intended use, of the Premises the Americans with Disabilities Act or any
similar law requires modifications or the construction or installation of
improvements in or to the Premises, Building, Project and/or Common Areas, the
Parties agree that such modifications, construction or improvements shall be
made at: o Sublessor’s expense ý
Sublessee’s expense.

 

3.                          Possession.

 

3.1                    Early
Possession. if Sublessee totally or partially occupies the Premises prior
to the Commencement Date, the obligation to pay Base Rent shall be abated for
the period of such early possession. All other terms of this Sublease
(including but not limited to the obligations to pay Sublessee’s Share of
Common Area Operating Expenses, Real Property Taxes and insurance premiums and
to maintain the Premises) shall, however, be in effect during such period. Any
such early possession shall not affect the Expiration Date.

 

3.2                    Delay
in Commencement. Sublessor agrees to use its best commercially reasonable
efforts to deliver possession of the Premises by the Commencement Date. If,
despite said efforts. Sublessor is unable to deliver possession as agreed, the
rights and obligations of Sublessor and Sublessee shall be as set forth in Section 2.2
Paragraph-3.3 of the Master Lease (as modified by Paragraph 7.3
of this Sublease), provided that the second sentence of Section 2.2 is not incorporated into
this Sublease.

 

3.3                    Sublessee
Compliance. Sublessor shall not be required to tender possession of the
Premises to Sublessee until Sublessee complies with its obligation to provide
evidence of insurance. Pending delivery of such evidence. Sublessee shall be
required to perform all of its obligations under this Sublease from and
after the Start Date, including the payment of Rent, notwithstanding Sublessor’s
election to withhold possession pending receipt of such evidence of insurance.
Further, if Sublessee is required to perform any other conditions prior to
or concurrent with the Start Date, the Start Date shall occur but Sublessor may elect
to withhold possession until such conditions are satisfied.

 

4.                          Rent and
Other Charges.

 

4.1                    Rent
Defined. All monetary obligations of Sublessee to Sublessor under the terms
of this Sublease (except for the Security Deposit) are deemed to be rent (“Rent”). Rent shall be payable in lawful
money of the United States to Sublessor at the address stated herein or to such
other persons or at such other places as Sublessor may designate in
writing.

 

4.2                    Utilities.
Sublessee shall pay for all water, gas, heat, light, power, telephone,
trash disposal and other utilities and services supplied to the Premises, together
with any taxes thereon.

 

5.                          Security
Deposit. The rights and obligations of Sublessor and Sublessee as to said
Security Deposit shall be as set forth in Section 1.6 of this Sublease. Paragraph
5 of the Master Lease (as modified by Paragraph 7.3 of this Sublease).
Sublessor shall return the Security Deposit to Sublessee within thirty days
after the expiration or termination of this Sublease.

 

6.                          Agreed
Use. The Premises shall be used and occupied only for general
administrative, office, freight forwarding, and uses related thereto and for no
other purpose.

 

7.                          Master
Lease.

 

7.1                    Sublessor
is the lessee of the Premises by virtue of a lease, hereinafter the “Master Lease”, wherein Cypress - Southbay,
LLC is the lessor, hereinafter the “Master
Lessor”.

 

7.2                    This
Sublease is and shall be at all times subject and subordinate to the Master
Lease.

 

7.3                    The
terms, conditions and respective obligations of Sublessor and Sublessee to each
other under this Sublease shall be the terms and conditions of the Master Lease
except for these the following provisions of the Master Lease: which
are directly contradicted by this Sublease in which event the terms of this
Sublease document shall control over the Master Lease.

 

3

 

1.5, 1.8, 1.9, 1.11,
1.12, 2.3, 2.4, Article 3, Sections 6.1, 10.4, and the Construction Rider.

 

Therefore, for the
purposes of this Sublease, wherever in the Master Lease the word “Landlord” “Lessor”
is used it shall be deemed to mean the Sublessor herein and wherever in the
Master Lease the word “Tenant” “Lessee” is used it shall be deemed to
mean the Sublessee herein.

 

7.4                    During
the term of this Sublease, and for all periods subsequent for obligations
which have arisen prior to the termination of the Sublease, Sublessee does
hereby expressly assume and agree to perform and comply with, for the
benefit of Sublessor and Master Lessor, each and every obligation of Sublessor
under the Master Lease except for the following paragraphs which-are
excluded therefrom: as provided in Section 7. 3 above.

 

7.5                    The
obligations that Sublessee has assumed under paragraph 7.4 hereof are hereinafter referred to as the
“Sublessee’s Assumed Obligations”.
The obligations that sublessee has not assumed under paragraph 7.4 hereof are
hereinafter referred to as the “Sublessor’s
Remaining Obligations”.

 

7.6                    Sublessee
shall hold Sublessor and Master Lessor free and harmless from all liability, judgments,
costs, damages, claims or demands, including reasonable attorneys fees, arising
out of Sublessee’s failure to comply with or perform Sublessee’s Assumed Obligations.

 

7.7                    Sublessor
agrees to maintain the Master
Lease in full force and effect during the entire term of this Sublease, and
will not amend the same without the consent of Sublesses subject, however, to
any earlier termination of the Master Lease without the fault of the Sublessor,
and to comply with or perform Sublessor’s Remaining Obligations and to
hold Sublessee free and harmless from all liability, judgments, costs, damages,
claims or demands arising out of Sublessor’s failure to comply with or perform Sublessor’s
Remaining Obligations.

 

7.8                    Sublessor
represents to Sublessee that the Master Lease is in full force and effect and
that no default exists on the part of any Party to the Master Lease, and
that a full and complete copy of
the Master Lease is attached hereto.

 

8.                          Assignment
of Sublease and Default.

 

8.1                    Sublessor
hereby assigns and transfers to Master Lessor Sublessor’s interest in this
Sublease, subject however to the provisions of Paragraph 8.2 hereof.

 

8.2                    Master
Lessor, by executing this document, agrees that until a Default shall occur in
the performance of Sublessor’s Obligations under the Master Lease, that
Sublessor may receive, collect and enjoy the Rent accruing under this
Sublease. However, if Sublessor shall Default in the performance of its
obligations to Master Lessor then Master Lessor may, at its option, receive and
collect, directly from Sublessee, all Rent owing and to be owed under this
Sublease. In the event, however, that the amount collected by Master Lessor
exceeds Sublessor’s obligations any such excess shall be refunded to Sublessor.
Master Lessor shall not, by reason of this assignment of the Sublease nor by
reason of the collection of the Rent from the Sublessee, be deemed liable to
Sublessee for any failure of the Sublessor to perform and comply with
Sublessor’s Remaining Obligations. Notwithstanding the foregoing, if Master
Leasor assumes Sublessor’s position under this Sublease, Sublessor shall remain
liable to Sublessee for all
events arising prior to such assumption.

 

8.3                    Sublessor
hereby irrevocably authorizes and directs Sublessee upon receipt of any written
notice from the Master Lessor stating that a Default exists in the performance
of Sublessor’s obligations under the Master Lease, to pay to Master Lessor the
Rent due and to become due under the Sublease. Sublessor agrees that Sublessee
shall have the right to rely upon
any such statement and request from Master Lessor, and that Sublessee shall pay
such Rent to Master Lessor without any obligation or right to inquire as to
whether such Default exists and notwithstanding any notice from or claim from
Sublessor to the contrary and Sublessor shall have no right or claim against
Sublessee for any such Rent so paid by Sublessee.

 

8.4                    No
changes or modifications shall be made to this Sublease without the consent of
Master Lessor.

 

9.                          Consent
of Master Lessor.

 

9.1                    In
the event that the Master Lease requires that Sublessor obtain the consent of
Master Lessor to any subletting by Sublessor then, this Sublease shall not be
effective unless, within 10 days of the date hereof. Master Lessor signs this
Sublease

 

4

 

thereby giving its
consent to this Subletting.

 

9.2                    In
the event that the obligations of the Sublessor under the Master Lease have
been guaranteed by third parties then neither this Sublease, nor the Mastor
Lessor’s consent, shall be effective unless, within 10 days of the date hereof,
said guarantors sign this Sublease thereby giving their consent to this
Sublease.

 

9.3                    In
the event that Master Lessor does give such consent then:

 

(a)                      Such
consent shall not release Sublessor of its obligations or alter the primary
liability of Sublessor to pay the Rent and perform and comply with all of
the obligations of Sublessor to be performed under the Master Lease.

 

(b)                     The
acceptance of Rent by Master Lessor from Sublessee or any one else liable under
the Master Lease shall not be deemed a waiver by Master Lessor of any
provisions of the Master Lease.

 

(c)                      The
consent to this Sublease shall not constitute a consent to any subsequent
subletting or assignment.

 

(d)                     In
the event of any Default of Sublessor under the Master Lease, Master Lessor may proceed
directly against Sublessor, any guarantors or any one else liable under the
Master Lease or this Sublease without first exhausting Master Lessor’s remedies
against any other person or entity liable thereon to Master Lessor.

 

(e)                      Master
Lessor may consent to subsequent sublettings and assignments of the Master
Lease or this Sublease or any amendments or modifications thereto without
notifying Sublessor or any one else liable under the Master Lease and without
obtaining their consent and such action shall not relieve such persons from
liabitity.

 

(f)                        In
the event that Sublessor shall Default in its obligations under the Master
Lease, then Master Lessor, at its option and without being obligated to do so, may require
Sublessee to attorn to Master Lessor in which event Master Lessor shall
undertake the obligations of Sublessor under this Sublease from the time of the
exercise of said option to termination of this Sublease but Master Lessor shall
not be liable for any prepaid Rent nor any Security Deposit paid by Sublessee,
unless actually received by Master Lessor nor shall Master Lessor be liable for
any other Defaults of the Sublessor under the Sublease.

 

(g)                     Unless
directly contradicted by other provisions of this Sublease, the consent of
Master Lessor to this Sublease shall not constitute an agreement to allow
Sublessee to exercise any options which may have been granted to Sublessor
in the Master Lease (see Paragraph 39.2 of the Master Lease).

 

9.4                    The
signatures of the Master Lessor and any Guarantors of Sublessor at the end of
this document shall constitute their consent to the terms of this Sublease.

 

9.5                    Master
Lesser acknowledges that, to the best of Master Lessor’s knowledge, no Default
presently exists under the Master Lease of obligations to be performed by
Sublessor and that the Master Lease is in full force and effect and a full and complete copy is attached hereto.

 

9.6                    In
the event that Sublessor Defaults under its obligations to be performed under
the Master Lease by Sublessor, Master Lessor agrees to deliver to Sublessee a
copy of any such notice of default. Sublessee shall have the right to cure any
Default of Sublessor described in any notice of default within ten days after
service of such notice of default on Sublessee. If such Default is cured by
Sublessee then Sublessee shall have the right of reimbursement and offset from
and against Sublessor.

 

40.                    Additional Brokers Commissions.

 

            10.1     Sublessor
agrees that if Sublessee exercises any option or right of first refusal as
granted by Sublessor herein, or any option or right substantially similar
thereto, either to extend the term of this Sublease, to renew this Sublease, to
purchase the Premises, or to lease or purchase adjacent property which
Sublessor may own or in which Sublessor has an interest, then Sublessor
shall pay to Broker a fee in accordance with the schedule of Broker in
effect at the time of the execution of this Sublease. Notwithstanding the
foregoing, Sublessor’s obligation under this Paragraph is limited to a transaction
in which Sublessor is acting as a Sublessor, lessor or seller.

 

            10.2       Master
Lessor agrees that if Sublessee shall exercise any option or right of first
refusal granted to Sublessee by Master Lessor in connection with this Sublease,
or any option or right substantially similar thereto, either to extend or renew
the Master Lease, to purchase the Premises or any part thereof, or to
lease or purchase adjacent property which Master Lessor may own or in
which Master Lessor has an interest, or if Broker is the procuring cause of any
other lease or sale entered into between Sublessee and Master Lessor pertaining
to the Premises, any part thereof, or any adjacent property which Master
Lessor owns or in which it has an interest, then as to any of said
transactions, Master Lessor shall pay to Broker a fee in cash, in accordance
with the schedule of Broker in effect at the time of the execution of this
Sublease.

 

          10.3    Any
fee due from Sublessor or Master Lessor hereunder shall be due and payable upon
the exercise of any option to

 

5

 

extend or renew,
upon the execution of any new lease, or, in the event of a purchase at the
close of escrow.

 

           10.4     Any
transferee of Sublessor’s interest in this Sublease, or of Master Lessor’s
interest in the Master Lease, by accepting an assignment thereof, shall be
deemed to have assumed the respective obligations of Sublessor or Master Lessor
under this Paragraph 10. Broker shall be deemed to be a third party beneficiary
of this paragraph 10.

 

11.                    Representations and Indemnities of Broker
Relationships. The Parties each represent and warrant to the other
that it has had no dealings with any person, firm, broker or finder (other then
the Brokers, if any) in connection with this Sublease, and that no one other
than said named Brokers is entitled to any commission or finder’s fee in
connection herewith. Sublessee and Sublessor do each hereby agree to indemnify,
protect, defend and hold the other harmless from and against liability for
compensation or charges which may be claimed by any such unnamed broker,
finder or other similar party by reason of any dealings or actions of the
indemnifying Party, including any costs, expenses, attorneys’ fees reasonably
incurred with respect thereto.

 

12.                    Attorney’s fees. If any Party or Broker
brings an action or proceeding involving the Premises whether founded in tort,
contract or equity, or to declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys’ fees. Such fees may be awarded in the
same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term, “Prevailing Party”
shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as
the case may be, whether by compromise, settlement, judgment, or the
abandonment by the other Party or Broker of its claim or defense. The attorneys’
fees award shall not be computed in accordance with any court fee schedule, but
shall be such as to fully reimburse all attorneys’ fees reasonably incurred. In
addition, Sublessor shall be entitled to attorney’s fees, costs and expenses
incurred in the preparation and service of notices of Default and consultations
in connection therewith, whether or not a legal action is subsequently
commenced in connection with such Default or resulting Breach ($200 is a
reasonable minimum per occurrence for such services and consultation).

 

13.                    No Prior or Other Agreements; Broker Disclaimer.
This Sublease and addendum attached hereto
contains all agreements between the Parties with respect to any matter
mentioned herein, and no other prior or contemporaneous
agreement or understanding shall be effective: unless signed by all parties.
Sublessor and Sublessee each represents and warrants to the Brokers that it has
made, and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Sublease and
as to the use, nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. The liability (including court costs and attorneys’
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Sublessor or Sublessee under this Sublease or any
amendment or modification hereto shall be limited to an amount up to the fee
received by such Broker pursuant to this Sublease; provided, however, that the
foregoing limitation on each Broker’s liability shall not be applicable to any
gross negligence or willful misconduct of such Broker.

 

ATTENTION:
NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL REAL ESTATE
ASSOCIATION OR BY ANY REAL ESTATE BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS SUBLEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:

 

1.                          SEEK
ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS SUBLEASE.

 

2.                          RETAIN
APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE
PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE
PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PROPERTY, THE STRUCTURAL
INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY
OF THE PREMISES FOR SUBLESSEE’S INTENDED USE.

 

WARNING:
IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE SUBLEASE MAY NEED TO BE REVISED TO COMPLY WITH LAWS OF
THE STATE IN WHICH THE PROPERTY IS LOCATED

 

6

 

	
  Executed
  at:

  	
  Paramount,
  CA

  	
   

  	
  Executed
  at:

  	
   

  
	
  On:

  	
   

  	
   

  	
  On:

  	
   

  
	
   

  	
   

  	
   

  
	
  By Sublessor:

  	
   

  	
  By Sublessee:

  
	
  Marlog Cargo USA, Inc., California 

  	
   

  	
  OMP, Inc.,
  a Delaware corporation

  
	
  corporation
  dba “Schumacher Cargo Line”

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Martin Baker

  	
   

  	
  By:

  	
  /s/
  Curtis A. Cluff

  
	
  Name
  Printed:

  	
  Martin
  Baker

  	
   

  	
  Name
  Printed:

  	
  Curtis
  A. Cluff

  
	
  Title:

  	
  President

  	
   

  	
  Title:

  	
  CFO,
  SVP

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Andrew
  Howden

  	
   

  	
  By:

  	
   

  
	
  Name
  Printed:

  	
  Andrew
  Howden

  	
  Name
  Printed:

  	
   

  
	
  Title:

  	
  Secretary

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
  15501
  Texaco Avenue

  	
   

  	
  Address:

  	
  310
  Golden Shore

  
	
  Paramount,
  CA 90723

  	
   

  	
  Long
  Beach, CA 90802

  
	
  Telephone:

  	
  (562)
  408.6677

  	
   

  	
  Telephone:

  	
  (562)628.1107

  
	
  Facsimile:

  	
  (562)
  408.6636

  	
   

  	
  Facsimile:

  	
  (562)628.1008

  
	
  Federal
  ID No.

  	
   

  	
   

  	
  Federal
  ID No.

  	
   

  
	
   

  	
   

  	
   

  
	
  BROKER:

  	
   

  	
  BROKER:

  
	
   

  	
   

  	
   

  
	
  The
  Klabin Company

  	
   

  	
  Penta
  Pacific

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attn:

  	
  Courtney
  Bell

  	
   

  	
   

  
	
  Title:

  	
  Agent

  	
   

  	
  Attn:

  	
  Jacquelyn
  Smith

  
	
  Address:

  	
  39750
  S. Vermont Avenue, Suite 100

  	
   

  	
  Title:

  	
   

  
	
  Torrance,
  CA 90502

  	
   

  	
  Address:

  	
  9500
  Norwalk Boulevard

  
	
  Telephone:

  	
  (310)329.9000

  	
   

  	
  Santa
  Fe Springs, CA 90670

  
	
  Facsimile:

  	
  (310)329.9088

  	
   

  	
  Telephone:

  	
  (562)699.1922

  
	
  Federal
  ID No.

  	
   

  	
   

  	
  Facsimile:

  	
  (562)699.6763

  
	
   

  	
   

  	
  Federal
  ID No.

  	
   

  

 

Consent to the above Sublease is hereby given.

 

7

 

CONSENT TO THE ABOVE SUBLEASE IS HEREBY GIVEN.

 

	
  Executed
  at:

  	
   

  	
   

  	
  Executed
  at:

  	
   

  
	
  On:

  	
   

  	
   

  	
  On:

  	
   

  

 

	
  By Master Lessor:

  	
   

  	
  By Guarantor(s):

  
	
  Cypress
  - Southbay, LLC; By Cypress

  	
   

  	
  By:

  	
   

  
	
  Management
  Company, Inc., a California

  	
   

  	
  Name
  Printed:

  	
   

  
	
  Corporation,
  Manager

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  
	
  By:

  	
  /s/ Brian
  J. Harvey

  	
   

  	
   

  
	
  Name
  Printed:

  	
  Brian
  J. Harvey

  	
   

  
	
  Title:

  	
  President

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name
  Printed:

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name
  Printed:

  	
   

  	
   

  	
  Address:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
  Address:

  	
  10940
  Wilshire Boulevard, Suite 1900

  	
   

  	
   

  
	
  Los
  Angeles, CA 90024

  	
   

  	
   

  
	
  Telephone:

  	
  (310)
  208.8077

  	
   

  	
   

  
	
  Facsimile:

  	
  (310)
  208.8127

  	
   

  	
   

  
	
  Federal
  ID No.

  	
   

  	
   

  	
   

  

 

NOTE:
These forms are often modified to meet changing requirements of law and needs
of the industry. Always write or call to make sure you are utilizing the most
current form: AIR COMMERCIAL REAL ESTATE ASSOCIATION, 700 So. Flower St., Suite 600,
Los Angeles, CA 90017. (213) 687-8777.

 

©
Copyright 1997 By AIR Commercial Real Estate Association. All rights reserved.
No part of these works may be reproduced in any form without
permission in writing.

 

8

 

ADDENDUM TO STANDARD SUBLEASE

BY AND BETWEEN

MARLOG CARGO USA, INC., A CALIFORNIA CORPORATION 

DBA “SCHUMACHER CARGO LINES” (SUBLESSOR)

AND

OMP, INC., A DELAWARE CORPORATION (SUBLESSEE)

FOR THE PROPERTY LOCATED AT

2205 E. CARSON STREET, UNITS B-1 & B-2, CARSON, CA 90810 

DATED: JULY 26, 2004

 

14.                  BASE RENT: The
Monthly Base Rent shall be payable pursuant to the following rent schedule:

 

	
  August 1, 2004 to August 31, 2004:

  	
   

  	
  Free of Base Rent

  
	
  September 1, 2004 to September 30, 2006:

  	
   

  	
  $12,143.00

  
	
  October 1, 2006 to October 31, 2008:

  	
   

  	
  $12,914.25

  

 

15.                  INDEMNITY: Sublessor and
Sublessee do hereby agree to indemnify and hold the Klabin Company harmless
from any liability or damages in connection with this Sublease as the drafting
party. Sublessor and Sublessee are hereby advised by broker to obtain legal
counsel’s advice, review, and approval prior to executing this sublease.

 

16.                  HAZARDOUS MATERIALS: Sublessor
represents and warrants that, to the best of its knowledge, the Property is
free from Hazardous Materials, as defined in the Master Lease, and that
Sublessor is currently and has been in full compliance with the provisions
regarding Hazardous Materials set forth in the Master Lease. Sublessor will
fully indemnify and defend Sublessee from any claims, losses, damages or causes
of action arising from a breach of the foregoing warranty.

 

 

INDUSTRIAL REAL ESTATE LEASE

 

BETWEEN

 

CYPRESS-SOUTHBAY, LLC

 

AND

 

MARLOG CARGO USA, INC.

 

for

 

2205 E. CARSON STREET, UNITS B-l AND B-2,

CARSON, CALIFORNIA

 

JULY 29, 2003

 

 

TABLE OF CONTENTS

 

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE ONE:      BASIC
  TERMS

  	
  1

  
	
  Section 1.1

  	
  Date of Lease

  	
  1

  
	
  Section 1.2

  	
  Landlord

  	
  1

  
	
  Section 1.3

  	
  Tenant

  	
  1

  
	
  Section 1.4

  	
  Property

  	
  1

  
	
  Section 1.5

  	
  Lease Term

  	
  2

  
	
  Section 1.6

  	
  Permitted Uses

  	
  2

  
	
  Section 1.7

  	
  [intentionally deleted]

  	
  2

  
	
  Section l.8

  	
  Initial Security
  Deposit

  	
  2

  
	
  Section 1.9

  	
  Rent and other Charges
  Payable by Tenant

  	
  2

  
	
  Section 1.10

  	
  Tenant’s Pro Rata Share

  	
  3

  
	
  Section 1.11

  	
  Riders

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE TWO:      LEASE
  TERM

  	
  3

  
	
  Section 2.1

  	
  Lease of Property for
  Lease Term

  	
  3

  
	
  Section 2.2

  	
  Delay in Commencement

  	
  3

  
	
  Section 2.3

  	
  Option to Extend

  	
  4

  
	
  Section 2.4

  	
  Early Occupancy

  	
  7

  
	
  Section 2.5

  	
  Holding Over

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE THREE:      BASE
  RENT

  	
  7

  
	
  Section 3.1

  	
  Time and Manner of
  Payment

  	
  7

  
	
  Section 3.2

  	
  Cost of Living
  Increases

  	
  7

  
	
  Section 3.3

  	
  Security Deposit;
  Increases

  	
  9

  
	
  Section 3.4

  	
  Termination, Advance Payments

  	
  10

  
	
  Section 3.5

  	
  Rent For New Mezzanine
  Area

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE FOUR:      OTHER
  CHARGES PAYABLE BY TENANT

  	
  11

  
	
  Section 4.1

  	
  Additional Rent

  	
  11

  
	
  Section 4.2

  	
  Property Taxes

  	
  11

  
	
  Section 4.3

  	
  Utilities

  	
  12

  
	
  Section 4.4

  	
  Insurance Policies

  	
  13

  
	
  Section 4.5

  	
  Late Charges

  	
  16

  
	
  Section 4.6

  	
  Interest on Past Due
  Obligations

  	
  16

  
	
  Section 4.7

  	
  Impounds for Insurance
  Premiums and Real Property Taxes

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE FIVE:      USE
  OP PROPERTY

  	
  17

  
	
  Section 5.1

  	
  Permitted Uses

  	
  17

  
	
  Section 5.2

  	
  Manner of Use

  	
  17

  
	
  Section 5.3

  	
  Hazardous Materials

  	
  18

  
	
  Section 5.4

  	
  Outside Storage

  	
  23

  
	
  Section 5.5

  	
  Signs and Auctions

  	
  23

  

 

 

	
  Section 5.6

  	
  Indemnity

  	
  23

  
	
  Section 5.7

  	
  Landlord’s Access

  	
  24

  
	
  Section 5.8

  	
  Quiet Possession

  	
  24

  
	
  Section 5.9

  	
  Future Easements and
  Governmental Requirements

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE SIX:      CONDITION
  OF PROPERTY, MAINTENANCE, REPAIRS AND ALTERATIONS

  	
  24

  
	
  Section 6.1

  	
  Condition

  	
  24

  
	
  Section 6.2

  	
  Exemption of Landlord
  from Liability

  	
  25

  
	
  Section 6.3

  	
  Landlord’s Obligations

  	
  26

  
	
  Section 6.4

  	
  Tenant’s Obligations

  	
  26

  
	
  Section 6.5

  	
  Alterations, Additions,
  and Improvements

  	
  28

  
	
  Section 6.6

  	
  Condition Upon
  Termination

  	
  29

  
	
  Section 6.7

  	
  Common Area and Parking

  	
  29

  
	
  Section 6.8

  	
  Security

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE SEVEN:      DAMAGE
  OR DESTRUCTION

  	
  35

  
	
  Section 7.1

  	
  Partial Damage to
  Property

  	
  35

  
	
  Section 7.2

  	
  Damage Caused by Tenant

  	
  36

  
	
  Section 7.3

  	
  Substantial or Total
  Destruction

  	
  36

  
	
  Section 7.4

  	
  Temporary Reduction of
  Rent

  	
  37

  
	
  Section 7.5

  	
  Damage During Last Six
  Months

  	
  37

  
	
  Section 7.6

  	
  Waiver

  	
  37

  
	
  Section 7.7

  	
  References to Shell and
  Tenant Improvements Under this Article Seven

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE EIGHT:      CONDEMNATION

  	
  38

  
	
  .

  	
   

  	
   

  
	
  ARTICLE NINE:      ASSIGNMENT
  AND SUBLETTING

  	
  38

  
	
  Section 9.1

  	
  Restrictions on
  Assignment or Subletting

  	
  38

  
	
  Section 9.2

  	
  Tenant’s Notice and
  Landlord’s Right of Termination

  	
  39

  
	
  Section 9.3

  	
  Consequences of
  Landlord’s Termination

  	
  40

  
	
  Section 9.4

  	
  Conditions to
  Assignment/Subletting

  	
  41

  
	
  Section 9.5

  	
  Binding on Tenant;
  Indemnification of Landlord

  	
  44

  
	
  Section 9.6

  	
  Tenant’s Failure to
  Complete

  	
  45

  
	
  Section 9.7

  	
  Profits on Assignment
  or Subleasing

  	
  45

  
	
  Section 9.8

  	
  Transfers of Interests
  in Tenant, and Assignment or Sublease to a Related Party

  	
  46

  
	
  Section 9.9

  	
  Assumption of
  Obligations

  	
  48

  
	
  Section 9.10

  	
  Tenant’s Liability

  	
  48

  
	
  Section 9.11

  	
  Lease Disaffirmance or
  Rejection

  	
  48

  
	
   

  	
   

  	
   

  
	
  ARTICLE TEN:      DEFAULTS;
  REMEDIES

  	
  49

  
	
  Section 10.1

  	
  Covenants and
  Conditions

  	
  49

  

 

 

	
  Section 10.2

  	
  Defaults

  	
  49

  
	
  Section 10.3

  	
  Remedies

  	
  50

  
	
  Section 10.4

  	
  Repayment of “Free”
  Rent

  	
  52

  
	
  Section 10.5

  	
  Cumulative Remedies

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE ELEVEN:      PROTECTION
  OF LENDERS

  	
  52

  
	
  Section 11.1

  	
  Subordination

  	
  52

  
	
  Section 11.2

  	
  Attornment

  	
  53

  
	
  Section 11.3

  	
  Signing of Documents

  	
  53

  
	
  Section 11.4

  	
  Estoppel Certificates

  	
  53

  
	
  Section 11.5

  	
  Tenant’s Financial
  Condition

  	
  54

  
	
   

  	
   

  	
   

  
	
  ARTICLE TWELVE:      LEGAL
  COSTS

  	
  54

  
	
  Section 12.1

  	
  Legal Proceedings

  	
  54

  
	
  Section 12.2

  	
  Landlord’s Consent

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE THIRTEEN:      MISCELLANEOUS
  PROVISIONS

  	
  55

  
	
  Section 13.1

  	
  Non-Discrimination

  	
  55

  
	
  Section 13.2

  	
  Landlord’s Liability,
  Certain Duties

  	
  55

  
	
  Section 13.3

  	
  Severability

  	
  56

  
	
  Section 13.4

  	
  Interpretation

  	
  56

  
	
  Section 13.5

  	
  Incorporation of Prior
  Agreements, Modifications

  	
  57

  
	
  Section 13.6

  	
  Notices

  	
  57

  
	
  Section 13.7

  	
  Waivers

  	
  57

  
	
  Section 13.8

  	
  Recordation

  	
  58

  
	
  Section 13.9

  	
  Binding Effect; Choice
  of Law

  	
  58

  
	
  Section 13.10

  	
  Corporate Authority
  Partnership Authority

  	
  58

  
	
  Section 13.11

  	
  Joint and Several
  Liability

  	
  59

  
	
  Section 13.12

  	
  Force Majeure

  	
  59

  
	
  Section 13.13

  	
  Execution of Lease

  	
  59

  
	
  Section 13.14

  	
  Survival

  	
  59

  

 

 

INDUSTRIAL REAL ESTATE LEASE

(MULTI-TENANT PROJECT NET LEASE)

 

ARTICLE ONE:      BASIC TERMS

 

This Article One contains the Basic Terms of this Lease between
the Landlord and Tenant named below. Other Articles, Sections and Paragraphs of
the Lease referred to in this Article One explain and define the Basic
Terms and are to be read in conjunction with the Basic Terms.

 

Section 1.1                    Date
of Lease:  July 29, 2003

 

Section 1.2                      Landlord:  Cypress-Southbay,
LLC, a California limited liability company

 

Address of Landlord:                          10940
Wilshire Boulevard, Suite 1900, Los Angeles, California 90024

 

Section 1.3                     Tenant:
  Marlog Cargo USA, Inc., a California corporation, d/b/a “Schumacher
Cargo Lines”

 

Address of Tenant:                                               2205
E. Carson Street, Unit B-l, Carson, California

 

Section 1.4                      Property:  The
“Property” shall refer to 2205 E. Carson Street, Units B-l and B-2, Carson,
California, which Property is part of a multi-tenant property development
(the “Project”). The Project consists of three (3) buildings known as
building A (2203 E. Carson Street), building B (2205 E. Carson Street), and
building C (2207 E. Carson Street). The Property is part of building B.
The Project includes the land, the buildings, and all other improvements
located on the land, and the Common Areas described in Paragraph 6.7, for all
three (3) buildings. The Property consists of approximately nineteen
thousand two hundred seventy-five (19,275) square feet, which square feet
consist of approximately fifteen thousand five hundred ninety-three (15,593)
square feet of ground floor warehouse area, ninety-five (95) square feet of
ground floor common electrical room area, two thousand four hundred
forty-seven (2,447) square feet of ground floor office area, and one thousand
one hundred forty (1,140) square feet of second floor mezzanine office area.
Additionally, there is currently existing unimproved second floor mezzanine
area consisting of approximately one thousand one hundred forty-six

 

1

 

(1,146) square
feet (“New Mezzanine Area”). If Tenant improves such New Mezzanine Area
pursuant to Section 3.5, then Tenant shall commence paying Base Rent and
additional rent for such New Mezzanine Area pursuant to Section 3.5.

 

Section 1.5                     Lease
Term:  Sixty-two (62) months beginning on September 1,
2003 (“Commencement Date”) and ending on October 31, 2008.

 

Section 1.6                     Permitted
Uses:   (See Article Five) General administrative,
office, freight forwarding, and uses related thereto.

 

Section 1.7                     [intentionally deleted]

 

Section 1.8                     Initial
Security Deposit:   (See Section 3.3) Twelve Thousand
One Hundred Forty-Three and 25/100 Dollars ($12,143.25). See Paragraph 3.3 (a) for
payment of Security Deposit.

 

Section 1.9                     Rent
and Other Charges Payable by Tenant:

 

(a)                     BASE RENT:   The Base Rent shall
be paid as provided in Section 3.1. The Base Rent for the first twenty
(20) months of the initial Lease Term shall be Twelve Thousand One Hundred
Forty-Three and 25/100 Dollars ($12,143.25) per month. The Base Rent for the
months of September and October 2003 shall be abated; provided,
however, that Tenant shall still owe all other amounts of taxes, insurance
premiums, Common Area Charges, and other amounts otherwise due under this Lease
for such abated rent period. The Base Rent shall be increased on the first day
of May 2005 and the first day of January 2007 (herein referred to
collectively as the “Rental Adjustment Dates”) pursuant to Section 3.2.
The Base Rent under each of the Rental Adjustment Dates specified under the
immediately preceding sentence shall be increased a minimum of five and 06/100
percent (5.06%) and a maximum of ten and 24/100 percent (10.24%) from the
applicable Comparison Base Rent.

 

(b)                    OTHER PERIODIC
PAYMENTS:   (i) Real Property Taxes (See Section 4.2); (ii) Utilities
(See Section 4.3); (iii) Insurance Premiums (See Section 4.4); (iv) Impounds
for Insurance Premiums and Property Taxes (See Section 4.7); (v) Maintenance,
Repairs, Common Area Charges and Alterations (See Article Six).

 

2

 

Section 1.10               Tenant’s
Pro Rata Shares:  Tenant’s “Pro Rata Share” shall mean
fourteen and 12/100 percent (14.12%), subject to Paragraph 6.7.

 

Section 1.11               Riders:
  The following Riders are attached to and made a part of this
Lease: Construction Rider.

 

Section 1.12               Termination
of Current Lease:   Tenant is currently leasing from
Landlord, the successor-in-interest to Cypress Land Company, the property known
as Unit B-4 at 2205 E. Carson Street, Carson, California, pursuant to a lease
dated April 18, 2002 (“Old Lease”). Upon the Commencement Date of this
Lease, the term of the Old Lease shall terminate, subject to the last sentence
of this Section 1.12. As a condition in favor of Landlord (which Landlord may waive
in writing), the Old Lease’s term shall only terminate if Tenant shall be
current in making all rental payments under the Old Lease, Tenant shall not
otherwise be in default under the Old Lease, and Tenant shall vacate the
property under the Old Lease on or before the Commencement Date of this Lease
and leave such property in a broom-swept condition subject to normal wear and
tear.

 

ARTICLE TWO:                             LEASE TERM

 

Section 2.1                        Lease of Property for Lease Term.  Landlord
leases the Property to Tenant and Tenant leases the Property from Landlord for
the Lease Term. The Lease Term is for the period stated in Section 1.5
above and shall begin and end on the dates specified in Section 1.5 above,
unless the beginning or end of the Lease Term is changed under any provision of
this Lease. The “Commencement Date” shall be the date specified in Section l.5
above for the beginning of the Lease Term, unless advanced or delayed under any
provision of this Lease.

 

Section 2.2                        Delay in Commencement.  Landlord
shall not be liable to Tenant if Landlord does not deliver possession of the
Property to Tenant on the Commencement Date. Landlord’s non-delivery of the
Property to Tenant on that date shall not affect this Lease or the obligations
of Tenant under this Lease except that the Commencement Date of this Lease (and
the termination of the Old Lease) shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month.

 

3

 

Section 2.3                     Option
to Extend.  

 

(a)                     Exercise.  Landlord
hereby grants to Tenant one (l) option (the “Option”) to renew and extend the
term of this Lease for a term of five (5) years (“Option Term”). The
Option must be exercised by written notice (“Option Notice”) received by
Landlord no later than that date which is six (6) months prior to the
expiration of the then current Lease Term. Furthermore, the Option shall not be
deemed to be properly exercised if Tenant is prohibited from exercising the
Option pursuant to subparagraphs (i) or (ii), below. If the Option is not
properly exercised within the Option Notice period in the manner prescribed
herein, it shall expire and be of no further force and effect. Time is of the
essence. Tenant may not revoke an election of the Option once Tenant makes
an election to exercise the Option. Provided that Tenant has properly exercised
the Option, the term of the Lease shall be extended for the Option Term, and
all terms, covenants and conditions of the Lease shall remain unmodified and in
full force and effect, except that the Base Rent shall be modified as set forth
in Paragraphs 2.3(b), (c) and (d), below.

 

(i)                         If
Tenant is in default under any provision of this Lease, then Tenant may not
exercise the Option. If Tenant’s default is due to the fact that Tenant has
failed to pay a monetary amount due under the Lease, then the Option may not
be exercised until such monetary amount is paid before the Option Notice period
expires. If such default is the
result of Tenant’s failure to perform a non-monetary obligation and Tenant
has received written notice of such default, then Tenant may only exercise
the Option if Tenant properly cures such non-monetary default within the stated
cure period before the Option Notice period expires. The period of time within
which the Option may be exercised shall not be extended or enlarged by
reason of Tenant’s inability to exercise the Option because of Tenant’s
default.

 

(ii)                      The
option granted to Tenant in this Lease is personal to Tenant and may not
be exercised or assigned, voluntarily or involuntarily, by or to any person or
entity (including, but not limited to, any consented to or permitted assignee
or sublessee under Article Nine of this Lease) other than the Tenant named
in Article One. The Option herein granted to Tenant is not assignable to any
person separate and apart from this Lease.

 

4

 

(b)                    Base Rent.  The Base Rent payable for
the first month of an Option Term shall be the greater of: (i) the Fair
Rental Value (as determined under Paragraph 2.3 (c)); or (ii) the Base
Rent immediately preceding the first month of the Option Term.

 

(c)                     Fair Rental Value.  For purposes of this Section 2.3,
the term “Fair Rental Value” shall mean the Fair Rental Value based upon a per
square foot basis and shall be determined as follows: After Landlord’s receipt
of Tenant’s election to exercise the Option, but not before that date which is
six (6) months prior to the expiration of the then current Lease term,
Landlord shall determine the Fair Rental Value and provide written notice of
such amount to Tenant. Tenant shall have fifteen (15) days (the “Tenant Review
Period”) after receipt of Landlord’s notice of the Fair Rental Value within
which to accept such rental or to reasonably object thereto in writing. In the
event that Tenant objects in writing to Landlord within the Tenant Review
Period of Landlord’s determination, then Landlord and Tenant shall attempt to
agree upon such Fair Rental Value. The failure of Tenant to so notify Landlord
in writing of Tenant’s objection of the Fair Rental Value within the Tenant
Review Period shall conclusively be deemed Tenant’s acceptance of the Fair
Rental Value determined by Landlord. If Landlord and Tenant fail to reach
agreement of the Fair Rental Value within ten (10) days of the end of
Tenant’s Review period, then each party shall place in a separate sealed
envelope its final proposed determination as to the Fair Rental Value (which
determination may be different than such party’s original determination),
and such determination shall be submitted to a Qualified Appraiser for
determination. Landlord shall deliver to Tenant a list of up to three (3) Qualified
Appraisers, and Tenant shall choose one (1) of such Qualified Appraisers
from such list within five (5) days of Tenant’s receipt of such list. If
Tenant fails to so choose such Qualified Appraiser within such five (5) day
period, then Landlord may choose such Qualified Appraiser from such list.
The Qualified Appraiser’s determination shall be limited solely to the issue of
whether Landlord’s or Tenant’s submitted Fair Rental Value per square foot for
the Property is the closest to the actual prevailing Fair Rental Value per
square foot, using the criteria described herein (in which case Landlord’s or
Tenant’s determination of the Fair Rental Value chosen by the Qualified
Appraiser shall be the Fair Rental Value). Such Qualified Appraiser shall
within thirty (30) days of appointment reach a decision and shall notify
Landlord and Tenant of such determination and such determination shall be
final.

 

5

 

(i)                         The
term “Qualified Appraiser” for purposes of this Paragraph 2.3 (c) shall
mean a professional real estate appraiser who is a Member of the Appraisal
Institute (sometimes known as an “MAI” appraiser) who shall have been active
over the five (5) preceding years ending on the date of such appointment
in the appraisal of similar properties within a twenty (20) mile radius of the
Property. The cost of the Qualified Appraiser shall be paid equally by Landlord
and Tenant. If at the time of the appointment of a Qualified Appraiser, the
designation “MAI” is no longer utilized, then a qualification for appraisers
most nearly equivalent to an MAI appraiser shall be utilized.

 

(ii)                      The
criteria by which the Qualified Appraiser, and the Landlord’s and Tenant’s
determination, of Fair Rental Value per month shall be as follows:

 

(A)                  Only
available first-class office/distribution building rentals of similar size
to the Property of at least equal quality to the Property, within a master
planned business park, with full dock loading, which are located closest to the
Property, shall be used. Comparable properties shall be compared on a rentable
square footage basis.

 

(B)                    Only
buildings in a planned business park of at least the same quality as the
business park in which the subject Property is located shall be used.

 

(C)                    The
appraiser in calculating comparable property rentals shall only consider a
tenant improvement allowance, if any, given to the tenant of such comparable
property as to that portion of such tenant improvement allowance for “cosmetic
items.” Any such permitted cosmetic items of such tenant improvement allowance
shall be amortized without interest over the entire lease term of the comparable
property. Cosmetic items shall solely mean the cost of interior wall painting
and floor coverings, and shall specifically exclude any costs associated with
moving walls, demolition, structural, new partition construction, new office
area, woodworking, plumbing, lighting, electrical, heating, ventilating and air
conditioning, or mechanical systems.

 

(d)                    Increase.  The monthly Base Rent
payable for the first (1st) month through the twentieth (20th) month of the
Option Term shall be the new monthly Base Rent for the Option Term as
determined under Paragraphs 2.3(b) and (c), above. Such Base Rent shall be
increased on the twenty-first (21st) month and forty-first (41st) month of the
Option Term (“Rental Adjustment Date(s)”) as

 

6

 

provided in Section 3.2,
provided that such rent increase on each Rental Adjustment Date shall be a
minimum of five and 06/100 percent (5.06%) and a maximum of ten and 24/100
percent (10.24%) from the Comparison Base Rent.

 

Section 2.4                       Early Occupancy.  If Tenant occupies the Property prior
to the Commencement Date, Tenant’s occupancy of the Property shall be subject
to all of the provisions of this Lease. Early occupancy of the Property shall
not advance the expiration date of this Lease. Tenant shall pay Base Rent and
all other charges specified in this Lease for the early occupancy period.

 

Section 2.5                        Holding Over.  Tenant shall vacate the Property upon
the expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnify Landlord against all damages which Landlord incurs from
Tenant’s delay in vacating the Property. If Tenant
does not vacate the Property upon the expiration or earlier termination of this
Lease and Landlord thereafter accepts rent from Tenant, Tenant’s occupancy of
the property shall be a “month-to-month” tenancy, subject to all of the terms
of this Lease applicable to a month-to-month tenancy, except that the Base Rent
then in effect shall be increased by fifty percent (50%).

 

ARTICLE THREE: BASE RENT

 

Section 3.1                       Time and Manner of Payment.  On November 1, 2003
Tenant shall pay Landlord the Base Rent in the amount stated in Paragraph 1.9(a) above
for the month of November 2003. On the first day of December 2003 and
each month thereafter, Tenant shall pay Landlord the Base Rent, in advance,
without offset, deduction or prior demand. The Base Rent shall be payable at
Landlord’s address or at such other place as Landlord may designate in
writing.

 

Section 3.2                        Cost of Living Increases.  The Base Rent shall be
increased on each date (the “Rental Adjustment Date”) stated in Paragraphs 1.9(a) and
2.3(d) above in accordance with the increase in the United States
Department of Labor, Bureau of Labor Statistics, Consumer Price Index for All
Urban Consumers (all items for the geographical Statistical Area in which the
Property is located on the basis of 1982-1984 = 100) (the “Index”) as follows:

 

(a)                     Calculation.  The Base Rent (the “Comparison
Base Rent”) in effect immediately before each Rental Adjustment Date shall be

 

7

 

increased on an
annual cumulative and annual compounded basis for each twelve (12) month period
(and any fractions thereof) by the amount of the increase in the Index during
each such twelve (12) month (and any fractional periods) from the date the
Comparison Base Rent began (the “Comparison Date”) through the month in which
the applicable Rental Adjustment Date occurs. If there is any abated rent under
this Lease, then for purposes of determining the Comparison Date under the
immediately preceding sentence, it shall be presumed there was no abated rent.
Therefore, the Comparison Base Rent shall first be increased (but not
decreased) by the percentage that the Index has increased from the Comparison
Date through that month which is twelve (12) months thereafter and such
calculation shall then be repeated for each consecutive twelve (12) month
period (and any fractional twelve (12) month period) to the month in which the
Rental Adjustment Date falls, but each such twelve (12) month Base Rent
increase calculation shall not be less than three percent (3%), nor more than
six percent (6%) (and for a period of less than 12 months the minimum 3% amount
and maximum 6% amount shall be prorated). In calculating the increase to the
Base Rent under this Paragraph (a), the calculation shall be performed in the
following manner in order that the increase in the Base Rent is calculated on
an annual cumulative and annual compounded basis: (i) the increase in the
Base Rent for the first twelve (12) month period starting with the Comparison
Date shall be first determined by the increase (but not decrease) in the Index
during such first twelve (12) month period (and applying the minimum and
maximum annual percentage increases thereto); (ii) the Base Rent as
increased for the twelve (12) month period under subparagraph (i), shall then
be increased for the next twelve (12) month period (or fraction thereof if
applicable) by the percentage that the Index has increased (but not decreased)
from the month immediately preceding the first month of such next applicable
twelve (12) month period through the last month of such next applicable twelve
(12) month period (and applying the minimum and maximum annual percentage
increases to such next applicable twelve (12) month period); and (iii) the
calculation under subparagraph (ii) shall then be performed on the
immediate prior twelve (12) month period’s calculated Base Rent (which Base
Rent has been increased by the immediate prior twelve (12) month period’s
calculation) for each successive twelve (12) month period (and any fractions
thereof) between the Comparison Date and the Rental Adjustment Date. The Base
Rent shall not be reduced by reason of such computation or if the Index
declines in any twelve (12) month (or fractional) period. Landlord shall notify
Tenant of each Rental Adjustment Date increase by a written statement of the
new Base Rent. Any increase in the Base Rent provided for in this paragraph
shall then be

 

8

 

subject to any
minimum or maximum increase, provided for in Paragraph 1.9(a) or 2.3(d),
as the case may be.

 

(b)                    Payment.  Tenant shall pay the new
Base Rent from the applicable Rental Adjustment Date until another new base
rent is calculated for the next Rental Adjustment Date. Landlord’s notice may be
given after the applicable Rental Adjustment Date of the increase, and Tenant
shall pay Landlord the accrued rental adjustment for the months elapsed between
the effective date of the increase and Landlord’s notice of such increase
within ten (10) days after Landlord’s notice. If the format or components
of the Index are materially changed after the Commencement Date, Landlord shall
substitute an index which is published by the Bureau of Labor Statistics or
similar agency and which is most nearly equivalent to the Index in effect on
the Commencement Date. The substitute index shall be used to calculate the
increase in the Base Rent unless Tenant objects to such index in writing within
fifteen (15) days after receipt of Landlord’s notice. If Tenant objects,
Landlord and Tenant shall submit the selection of the substitute index for
binding arbitration in accordance with the rules and regulations of the
American Arbitration Association at its office closest to the Property. The
costs of arbitration shall be borne equally by Landlord and Tenant.

 

Section 3.3            Security Deposit, Increases.  

 

(a)                     Payment.  Upon the execution of this
Lease, Tenant shall deposit with Landlord the amount of Four Thousand One
Hundred Eighty Dollars and Ninety-Six Cents ($4,180.96), which amount shall be
applied against the Twelve Thousand One Hundred Forty-Three Dollars and
Twenty-Five Cents ($12,143.25) Security Deposit amount set forth in Section 1.8
above. The remaining Seven Thousand Nine Hundred Sixty-Two Dollars and
Twenty-Nine Cents ($7,962.29) amount of the Security Deposit shall be credited
from the $7,962.29 security deposit amount currently being held by Landlord
under the Old Lease. If any of the security deposit amount under the Old Lease
is used or applied by Landlord under the terms of the Old Lease, then Tenant
shall pay to Landlord such used or applied amount to restore in full the
Security Deposit under this Lease. Landlord may apply all or part of
the Security Deposit to any unpaid rent or other charges due from Tenant or to
cure any other defaults of Tenant. If Landlord uses any part of the
Security Deposit (under this Lease or the Old Lease), Tenant shall restore the
Security Deposit to its full amount within ten (10) days after Landlord’s
written request. Tenant’s failure to do so shall be a

 

9

 

material default
under this Lease. No interest shall be paid on the Security Deposit. Landlord
shall not be required to keep the Security Deposit separate from its other
accounts and no trust relationship is created with respect to the Security
Deposit.

 

(b)                    Increase.  Each time the Base Rent is
increased, Tenant shall deposit additional funds with Landlord sufficient to
increase the Security Deposit to an amount which bears the same relationship to
the adjusted Base Rent as the initial Security Deposit bore to the initial Base
Rent.

 

Section 3.4            Termination, Advance Payments.  Within
sixty (60) days after termination of this Lease under Article Seven
(Damage or Destruction), Article Eight (Condemnation) or any other
termination not resulting from Tenant’s default, and after Tenant has vacated
the Property in the manner required by this Lease, provided that Tenant is not
then in default, Landlord shall refund or credit to Tenant the unused portion
of the Security Deposit and any amounts paid for real property taxes and other
reserves which apply to any time periods after termination of this Lease.

 

Section 3.5            Rent For New Mezzanine Area.  The
terms of this Lease shall apply to the New Mezzanine Area, except Tenant shall
not improve the New Mezzanine Area unless Tenant pays Base Rent for same. If
Tenant improves in any manner any part of the New Mezzanine Area, then
upon the first day of Tenant’s substantial completion of such improvement to
such New Mezzanine Area, Tenant shall commence paying additional Base Rent
equal to the “New Mezzanine Area Fair Rental Value” as defined below. Additionally,
on such date, Tenant shall pay any additional rent allocable to such New
Mezzanine Area. For purposes of this Lease, “New Mezzanine Area Fair Rental
Value” shall mean the fair rental value based upon a per square foot basis for
such New Mezzanine Area determined as follows: the New Mezzanine Area Fair
Rental Value per month shall be determined by the same criteria described in
Paragraph 2.3(c)(ii), and shall be determined by Landlord, in Landlord’s
discretion, based upon comparable properties’ space to the New Mezzanine Area.
Rental increases under Section 1.9 shall apply to such New Mezzanine Area
Base Rent on the Rental Adjustment Dates as if such New Mezzanine Area Base
Rent commenced on the date of the other Base Rent hereunder.

 

10

 

ARTICLE FOUR:              OTHER CHARGES PAYABLE BY TENANT

 

Section 4.1            Additional Rent.  All charges payable by
Tenant other than Base Rent are called “Additional Rent.” Unless this Lease
provides otherwise, Tenant shall pay all Additional Rent then due with the next
monthly installment of Base Rent. The term “rent” shall mean Base Rent and
Additional Rent.

 

Section 4.2            Property Taxes.  

 

(a)                     Real Property Taxes.  Tenant shall pay all real
property taxes on the Property (including any fees, taxes or assessments
against, or as a result of, any tenant improvements installed on the Property
by or for the benefit of Tenant) during the Lease Term. Landlord shall bill
Tenant for such real property taxes due, and Tenant shall pay Landlord such
taxes within fifteen (15) days of Landlord’s delivery of request for payment.
Landlord may bill Tenant for such taxes prior to Landlord’s payment of
such taxes to the governmental agency. If Tenant does not pay over any such
amount(s) to Landlord within fifteen (15) days of Landlord’s delivery of
request for payment to Tenant, then Tenant shall be required to pay such
amount(s) to Landlord with Tenant’s next rental installment, together with
interest from the date of Landlord’s payment of such taxes, at the maximum
interest rate then allowed by law. If Tenant continues to fail to pay such
amount(s) to Landlord, then such amount(s) shall be treated as a failure of
Tenant to pay Landlord a monetary amount due under the terms of this Lease, and
Tenant shall be deemed to be in default under this Lease.

 

(b)                    Definition of “Real Property Tax.” “Real
property tax” or “real property taxes” means (i) any fee, license fee,
license tax, business license fee, commercial rental tax, levy, charge,
assessment, penalty or tax imposed by any taxing authority against the
Property; (ii) any tax on the Landlord’s right to receive, or the receipt
of, rent or income from the Property or against Landlord’s business of leasing
the Property; (iii) any tax, assessment or charge for fire protection,
streets, sidewalks, road maintenance, landscaping, refuse or other services provided to the property
by any governmental agency; (iv) any tax imposed upon this transaction or
based upon a reassessment of the property due to a change in law, a change of
ownership, as defined by applicable law, or other transfer of all or part of
Landlord’s interest in the property; and (v) change in the property tax
laws and any charge or fee replacing any tax previously included within the
definition of

 

11

 

real property tax.
“Real property tax” does not, however, include Landlord’s federal or state
income, franchise, inheritance or estate taxes.

 

(c)                     Pro Rata Share of Real Property Tax.  Tenant’s
share of the real property taxes for the Property under Paragraph 4.2 (a) shall
be the real property taxes for the entire Project multiplied times Tenant’s Pro
Rata Share. Subject to Sections 4.7 and
6.7, Tenant shall pay such share of real property taxes to Landlord within
fifteen (15) days after receipt of Landlord’s written statement.

 

(d)                    Personal Property Taxes.  

 

(i)                         Tenant
shall pay all taxes charged against trade fixtures, furnishings, equipment or
any other personal property belonging to Tenant. Tenant shall use its best
efforts to have personal property taxed separately from the Property.

 

(ii)                      If
any of Tenant’s personal property is taxed with the Property, Tenant shall pay
Landlord the taxes for the personal property within fifteen (15) days after
Tenant receives a written statement from Landlord for such personal property
taxes.

 

Section 4.3            Utilities.  Tenant shall pay, directly
to the appropriate supplier, the cost of all natural gas, heat, light, power,
sewer service, telephone, water, refuse disposal, and other utilities and
services supplied to the Property. However, if any services or utilities are
jointly metered with other property, Landlord shall make a reasonable
determination of Tenant’s proportionate share of the cost of such utilities and
services and Tenant shall pay such share to Landlord within fifteen (15) days
after receipt of Landlord’s written statement. Landlord shall not be liable in
any way to Tenant for any failure, defect or interruption of, or change in the
supply, character and/or quantity of utility service furnished to the Property
for any reason, nor shall there by any allowance to Tenant for a diminution of
rental value, nor shall the same constitute an actual or constructive eviction
of Tenant, in whole or in part, or relieve Tenant from any of Tenant’s Lease
obligations, and no liabilities shall arise on the part of Landlord by
reason of inconvenience, annoyance or injury to business there is an
interruption of a utility.

 

12

 

Section 4.4            Insurance Policies.  

 

(a)                     Liability Insurance.  During the Lease Term,
Tenant shall maintain and pay all premiums thereon for a policy of commercial
general liability insurance (sometimes known as broad form comprehensive
general insurance) insuring Tenant against liability for bodily injury,
property damage (including loss of use of property) and personal injury arising
out of the operation, use or occupancy of the Property. Tenant shall name
Landlord as an additional named insured under such policy. The initial amount
of such insurance shall be at least Two Million Dollars ($2,000,000) per
occurrence and shall be subject to periodic increase based upon inflation,
increased liability awards, recommendation of Landlord’s professional insurance
advisers and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.4(a) shall: (i) be primary and
non-contributing; (ii) contain cross-liability endorsements; and (iii) insure
Landlord against Tenant’s performance under Section 5.6, if the matters
giving rise to the indemnity under Section 5.6 result from the acts or
negligence of Tenant. The amount and coverage of such insurance shall not limit
Tenant’s liability nor relieve Tenant of any other obligation under this Lease.
Landlord may also obtain comprehensive public liability insurance in an
amount and with coverage determined by Landlord insuring Landlord against
liability arising out of the ownership, operation, use or occupancy of the
Property. The policy obtained by Landlord shall not be contributory and shall
not provide primary insurance.

 

(b)                    Property and Rental Income Insurance.  During
the Lease Term, Landlord shall maintain (at Tenant’s cost) policies of
insurance covering loss of or damage to the Property (including any tenant
improvements constructed under any Construction Rider to this Lease) in the
full amount of its replacement value. The deductible amount under such policies
shall be an amount acceptable and determined by Landlord. Such policy shall
provide protection against perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, special extended perils (all
risk), and any other perils which Landlord deems reasonably necessary. Landlord
shall have the right (but no requirement) to obtain (at Tenant’s cost) flood or
earthquake insurance if required by any lender holding a security interest in
the Property. Tenant shall obtain insurance for Tenant’s equipment or fixtures
which Tenant owns and are installed by Tenant on the Property. During the Lease
Term, Landlord shall also obtain (at Tenant’s cost) a rental income insurance
policy, with loss payable to Landlord, in

 

13

 

an amount equal to
twelve (12) months’ Base Rent, plus estimated real property taxes and insurance
premiums. Tenant shall be liable for the payment of any deductible amount under
Landlord’s or Tenant’s insurance policies maintained by Landlord or Tenant
pursuant to this Section 4.4. Tenant shall not do or permit anything to be
done which invalidates any such insurance policies. All property insurance and
rental income insurance shall provide for all payments of proceeds to be made
to Landlord as the loss payee (and/or lender(s) designated by Landlord), and
that Landlord (and/or lender(s) designated by Landlord) shall be the primary
beneficiary of such policies.

 

(c)                     Payment of Premiums.  Subject to Sections 4.7 and 6.7,
Tenant shall pay all premiums for the insurance policies described in
Paragraphs 4.4 (a) and (b) (whether such insurance is obtained by
Landlord or Tenant) within fifteen (15) days after Tenant’s receipt of the
amount due prepared by Landlord or the insurance company. Before the
Commencement Date, Tenant shall deliver to Landlord a copy of any policy of
insurance which Tenant is required to maintain under this Section 4.4. At
least thirty (30) days prior to the expiration of any such policy, Tenant shall
deliver to Landlord a renewal of such policy. As an alternative to providing a
policy of insurance, Tenant shall have the right to provide Landlord a
certificate of insurance, executed by an authorized officer of the insurance
company, showing that the insurance which Tenant is required to maintain under
this Section 4.4 is in full force and effect and containing such other
information which Landlord reasonably requires (but Landlord shall from time to
time have the right to require Tenant to furnish Landlord with a copy of such
insurance policy).

 

(d)                    Tenant’s Share of Insurance Premiums.  Landlord shall obtain and pay the
premiums on insurance policies covering the Property (for which Tenant shall
reimburse Landlord hereunder) and other properties in the Project as to those
insurance policies described under Paragraph 4.4(b) required to be obtained
(or elected to be obtained) by Landlord. Landlord shall determine Tenant’s
share of the insurance premiums to be paid by Tenant based upon Tenant’s Pro
Rata Share of such insurance premium amount for the entire Project. Such amount
shall be paid by Tenant to Landlord within fifteen (15) days after Tenant’s
receipt of a copy of the bill from Landlord (regardless of whether the Landlord
has paid the insurance company at that time), and if Tenant fails to pay such
amount within such time period, then same shall be treated as a failure of
Tenant to pay a monetary amount under the terms of this Lease.

 

14

 

 

(e)                     General Insurance Provisions.  

 

(i)                         Any
insurance which Tenant is required to maintain under this Lease shall include a
provision which requires the insurance carrier to give Landlord not less than
thirty (30) days’ written notice prior to any cancellation or modification of
such coverage.

 

(ii)                      If
Tenant fails to deliver any policy, certificate or renewal to Landlord required
under this Lease within the prescribed time period or if any such policy is
canceled or modified during the Lease Term without Landlord’s consent, or if
Tenant fails to pay premiums for any insurance policy, Landlord may obtain
such insurance (or pay premiums on an existing insurance policy), in which case
Tenant shall reimburse Landlord for the cost of such insurance and premiums
within fifteen (15) days after receipt of a statement that indicates the cost
of such insurance and premiums.

 

(iii)                   Tenant
shall maintain all insurance required to be maintained by Tenant under this
Lease with companies holding a “General Policy Rating” of A-12 or better, as
set forth in the most current issue of “Best Key Rating Guide.” Tenant
acknowledges that the insurance described in this Section 4.4 is for the
primary benefit of Landlord. Landlord makes no representation as to the
adequacy of any insurance (whether such insurance is to be obtained by Landlord
or Tenant) to protect Landlord’s or Tenant’s interests or in the Property.
Tenant agrees that Landlord is not responsible for the performance of, nor is
Landlord guaranteeing the performance of, payment by or financial viability of,
any insurance company (whether insuring the Property or insuring any person for
any liability). Therefore, Tenant shall obtain any such additional property or
liability insurance which Tenant deems necessary to protect Landlord and
Tenant.

 

(iv)                  Unless
prohibited under any applicable insurance policies maintained, Landlord and
Tenant each hereby waive any and all rights of recovery against the other, or
against the officers, partners, employees, agents or representatives of the
other, for loss of or damage to its property or the property of others under
its control, to the extent such loss or damage is actually reimbursed from any
proceeds from an insurance policy in force (whether or not described in this
Lease) at the time of such loss or damage. Upon obtaining the required policies
of insurance, Landlord and Tenant shall give notice to the insurance carriers
of this mutual waiver of subrogation.

 

15

 

(v)                     If
Tenant’s use of the Property creates an extraordinary risk or increased
premium, so that the cost of the insurance premiums for any of the insurance
required to be maintained under Section 4.4(b) for the Project
increases, then the Tenant shall be solely responsible for paying for such
amount of increased premium.

 

Section 4.5            Late Charges.  Tenant’s failure to pay
rent promptly may cause Landlord to incur unanticipated costs. The exact
amount of such costs are impractical or extremely difficult to ascertain. Such
costs may include, but are not limited to, processing and accounting
charges and late charges which may be imposed on Landlord by any ground
lease, mortgage or trust deed encumbering the Property. Therefore, if Landlord
does not receive any rent payment within five (5) days after it becomes
due (“Late Charge Due Date”), Tenant shall immediately pay Landlord a late
charge equal to ten percent (10%) of the overdue amount. The parties agree that
such late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of such late payment. Tenant shall pay such late
charge to Landlord immediately after the Late Charge Due Date, and if Tenant
fails to so pay such amount to Landlord, then such nonpayment shall be
considered a monetary default by Tenant and a failure by Tenant to pay rent
under this Lease, and Tenant shall pay interest to Landlord on such unpaid late
charge amount pursuant to Section 4.6, below (but not greater than the
maximum amount permitted by law on such late charge and only to the extent
permitted by law) from the Late Charge Due Date. Tenant shall (in addition to
Landlord’s other remedies) pay to Landlord interest (at the rate specified in Section 4.6,
but not greater than the maximum rate permitted by law on such late charge) on
such late charge from the Late Charge Due Date.

 

Section 4.6            Interest on Past Due Obligations.  Any
amount owed by Tenant to Landlord under this Lease which is not paid when due
shall bear interest at the rate of fifteen percent (15%) per annum from the due
date of such amount (but not greater than the maximum interest rate permitted
by law). The payment of interest on such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this
Lease is higher than the rate permitted by law, the interest rate is hereby
decreased to the maximum legal interest rate permitted by law.

 

Section 4.7            Impounds for Insurance Premiums and Real Property
Taxes.  If requested by any ground lessor or
lender to

 

16

 

whom Landlord has
granted a security interest in the Property, or if Tenant is more than ten (10) days
late in the payment of rent more than once in any consecutive twelve (12) month
period, Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the
annual real property taxes and insurance premiums payable by Tenant under this
Lease, together with each payment of Base Rent. Landlord shall hold such
payments in a non-interest bearing impound account. If unknown, Landlord shall
reasonably estimate the amount of real property taxes and insurance premiums
when due. Tenant shall pay any deficiency of funds in the impound account to
Landlord upon written request. If Tenant defaults under this Lease, Landlord may apply
any funds in the impound account to any obligation then due under this Lease.

 

ARTICLE FIVE:                     USE OF PROPERTY

 

Section 5.1            Permitted Uses.  Tenant may use the
Property only for the Permitted Uses set forth in Section 1.6, above.

 

Section 5.2            Manner of Use.  Tenant shall not cause or
permit the Property to be used in any way which constitutes a violation of any
law, ordinance, or governmental regulation or order, which annoys or interferes
with the rights of any other tenants of Landlord or other parts of the Project,
or which constitutes a nuisance or waste. Tenant may not place any
equipment or items on the roof without Landlord’s written permission. Tenant
shall not keep any live animals inside or outside of the Property or Project,
nor shall Tenant leave food either inside or outside of the Property or Project
which would attract animals to the Property or Project. Subject to any specific
requirements in the Construction Rider for Landlord to obtain specific permits,
Tenant shall obtain and pay for all permits required for Tenant’s occupancy of
the Property and shall promptly take all actions necessary to comply with all
applicable statutes, ordinances, rules, covenants, conditional use permits,
conditions and restrictions, regulations, orders and requirements regulating
the use by Tenant of the Property, including, the Occupational Safety and
Health Act. Tenant acknowledges that this Lease and Tenant’s leasehold interest
under this Lease are subordinate to any covenants, conditions and restrictions
presently or in the future promulgated or recorded in connection with the
Property and as a requirement of any parcel map, and any amendments or
modifications thereto (referred to in this Lease as “CC&Rs”). Tenant agrees
to comply with any such CC&Rs and to pay any costs, assessments or charges
under such CC&Rs which are charged or assessed against the Property. Tenant
agrees

 

17

 

to execute and
acknowledge any document evidencing the subordination described in this
paragraph, as requested by Landlord from time to time. Tenant agrees to comply
with all of the provisions of such, including but not limited to use and
maintenance of the Property, requirements of any governmental body, including
but not limited to use and maintenance of the Property, provisions for earth
berms, landscaping, parking, storage and waste removal, trucking and load,
drainage care, maintenance and repair of signs. Tenant shall be responsible for
all costs of maintenance, and any assessments or charges, pertaining to such
CC&Rs, as related to Tenant’s Property or a proportionate amount for any common
area. Tenant shall pay its Pro Rata Share of any assessments against the entire
Project under any CC&Rs (unless such assessment is specifically against
Tenant’s Property in which case Tenant shall pay such entire assessment).

 

Section 5.3            Hazardous Materials.  

 

(a)                     Definitions.  As used in this Section 5.3,
the following definitions shall apply:

 

(i)                         “Environmental
Laws” shall mean all federal, state and local laws, ordinances, rules and
regulations now or hereafter in force, as amended from time to time, in any way
relating to or regulating human health or safety, or industrial hygiene or
environmental conditions, or protection of the environment, or pollution, or
contamination of the air, soil, surface water or ground water, including but
not limited to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery Act, the Clean
Water Act, the Hazardous Substance Account Act, California Health and Safety
Code provisions, the California Hazardous Waste Control Law, the California
Medical Waste Management Act, and the California Porter-Cologne Water Quality
Control Act.

 

(ii)                      “Hazardous
Material” shall mean any substance or material that is described as a toxic or
hazardous substance, waste or material, or a pollutant or contaminant, or words
of similar import, in any of the Environmental Laws, and includes asbestos,
petroleum (including crude oil or any fraction thereof, machine or other oils,
natural gas, natural gas liquids, liquified natural gas, or synthetic gas
useable for fuel, or any mixture thereof), petroleum products, polychlorinated
biphenyls, urea formaldehyde, radon gas, radioactive matter, medical waste, and
chemicals which may cause cancer or reproductive toxicity.

 

18

 

(iii)                   “Release”
shall mean any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing into the
environment, including but not limited to the continuing migration of Hazardous
Material into or through soil, surface water, or ground water.

 

(iv)                  For
purposes of this Section 5.3, the activities, acts, use, production,
processing, manufacturing, generation, treatment, handling, storage and Release
by “Tenant” shall mean those of Tenant, Tenant’s employees, contractors,
sublessees, customers, licensees, guests, invitees and/or agents.

 

(b)                    Covenant on Use of Property.  Tenant
shall not use, produce, process, manufacture, generate, treat, handle, store or
dispose of any Hazardous Material in, on or under the Property or Project, or
use the Property or Project for any such purposes, or Release any Hazardous
Material into any air, soil, surface water or ground water at, on or about the
Property or Project, or permit any person using or occupying the Property or
Project or any part thereof to do any of the foregoing, which are in
violation of any Environmental Laws. Tenant assumes the risk that Environmental
Laws may change in the future. Tenant shall comply, and shall cause all
persons using the Property or any part thereof to comply with all
Environmental Laws applicable to the Property, or the use or occupancy thereof,
or any operations or activities therein or thereon. Tenant shall obtain all
permits, licenses and approvals required by all applicable Environmental Laws
for the use and occupancy of, and all operations and activities in the
Property, comply fully with all such permits, licenses and approvals, and keep
all such permits, licenses and approvals in full force and effect. Landlord’s
consent in allowing Tenant to permit or engage in any activity relating to
Hazardous Material shall not be construed to mean Landlord in any way approves
of the manner in which the Tenant is engaging in such activities, or that
Landlord has determined that such activity or manner of activity is safe.

 

(c)                     No Storage Tanks Below Ground.  Tenant
shall not install or use any storage tanks on the Property below ground. In no
event shall Landlord be required to consent to the installation or use of any
storage tanks below ground on the Property.

 

(d)       Presence of Hazardous Material on Property.  In
the event that any Hazardous Material is present or Released, or there is a
threatened Release of Hazardous Material on or under the Property which has
violated or which may violate an Environmental Law (or

 

19

 

any nearby
property which can migrate into or onto the Property), or that any violation of
any Environmental Laws may have occurred at the Property, Tenant shall
immediately give notice to Landlord thereof. Additionally, Tenant shall
immediately furnish to Landlord copies of all written communications received
by Tenant from any person or given by Tenant to any person concerning any past or
present Release or threatened Release of Hazardous Material in, on or under the
Property (or any nearby property which could migrate to the Property), or any
past or present violation of any Environmental Laws which may affect the
Property. Landlord shall have the right, but not the obligation, to obtain from
Tenant, at any time, any additional information regarding Hazardous Material
generated, produced, brought onto, used, stored, treated or disposed of by
Tenant or any other person on or above the Property, and/or activities relating
thereto, on or about the Property. Tenant shall immediately comply with
Landlord’s requests.

 

(e)                     Landlord’s Right to Inspect and Audit.  Landlord
shall have the right, but not the obligation, to enter the Property to investigate
at any time the presence of Hazardous Material, and the compliance with
Environmental Laws, and to take all actions reasonably necessary to remediate
any threat or breach of any Environmental Laws or from any Release of Hazardous
Material on or about the Property. As requested from time to time by Landlord,
Tenant, at Tenant’s sole expense, shall have an environmental audit (which may,
in Landlord’s determination, include a Phase I and/or a Phase II environmental
report) or other appropriate investigation of the Property conducted by a third
party satisfactory to Landlord and approved by Landlord regarding the presence
of Hazardous Material and compliance with Environmental Laws. Tenant
acknowledges that any such inspections or reports undertaken by Tenant and
Landlord are solely for the protection of Landlord, and agrees that Landlord
has no duty to Tenant with respect to Hazardous Material or Environmental laws
as a result of any such inspections or reports.

 

(f)                       Remediation Work.  If any Release or
threatened Release of Hazardous Material in, on or under the Property exists or
occurs by any person during the term of this Lease or by Tenant at any time as
to the Property or the Project, Tenant shall immediately give notice of the
condition to Landlord, and Tenant shall promptly clean up and remove all
Hazardous Material and restore the Property (or Project, as the case may be)
to the same condition as such Property (or Project as the case may be) was
prior to such Release of Hazardous Materials, and additionally, shall restore
and cause the Property (or the Project as the case may be) to be in

 

20

 

compliance with
all Environmental Laws (the “Remediation Work”). Tenant shall comply with the
orders and directives of all persons having jurisdiction over the Property or
the Remediation Work. Landlord may review any plans and specifications for
the Remediation Work before such Remediation Work is performed. Any such plans
or specifications shall be prepared by a qualified, licensed engineer or
contractor, which Landlord shall have the right to approve, and shall comply
with all applicable Environmental Laws, and all other laws, ordinances, rules and
regulations. Tenant shall be responsible at Tenant’s sole expense to obtain all
permits, licenses and approvals for the Remediation Work and to complete the
Remediation Work diligently and in a timely manner. Tenant shall pay for all
Remediation Work, including the cost of plans, utilities, permits, fees, taxes
and insurance premiums in connection therewith. Tenant shall furnish to
Landlord promptly upon receipt, copies of all reports, studies, analysis,
investigations, contracts, correspondence, claims, complaints, pleadings and
other information and communications received or prepared by Tenant at any time
in connection with any Remediation Work.

 

(g)                    Right to Participate by Landlord.  Landlord
shall have the right, but not the obligation, to participate in any action or
proceeding relating to any past or present Release or threatened Release of any
Hazardous Material in, on or under the Property or Project, or any past or
present violation of any Environmental Laws at the Property, or the necessity
for or adequacy of any Remediation work. Tenant shall provide immediate notice
upon receipt to Landlord and allow Landlord to participate in any negotiations
or discussions with any federal, state or local governmental agency, including
environmental, occupational or public health and safety agencies with regard to
Hazardous Material or any Environmental Laws, including all settlement or
discussions regarding abatement or Remediation Work.

 

(h)                    Burden of Proof.  The burden of proof under
this Section regarding establishment of a date upon which a Hazardous
Material was or was not placed or appeared or did not appear in, on or under
the Property shall be upon the Tenant.

 

(i)                        Required Insurance.  In the event that Tenant
shall permit Hazardous Material upon the Property, or engage in activities
relating to Hazardous Material on, about or above the Property, Tenant shall,
at Tenant’s expense, procure and maintain insurance coverage insuring Tenant
and Landlord against any and all

 

21

 

liability arising
from such Hazardous Material or activities relating thereto. Tenant shall duly
provide Landlord with a certificate of such insurance coverage, in such amounts
and from such carriers as Landlord shall require.

 

(j)                        Indemnification by Tenant.  Tenant
shall indemnify, reimburse, defend and hold harmless Landlord (and its
employees, partners, agents, affiliates, successors, lenders and
representatives) against all claims, demands, liabilities, losses, damages,
costs and expenses in any way arising from, relating to, or connected with: (i) the
existence, location, nature, use, generation, manufacture, storage, disposal,
handling, or Release or threatened Release of any Hazardous Material in, on or
under the Property by any person during the term of this Lease or by Tenant at
any time as to the Property or the Project; (ii) any violation of
Environmental laws at the Property by any person during the term of this Lease
or by Tenant at any time as to the Property or the Project; (iii) any
breach of any duty to perform Remediation Work required of Tenant under
this Section 5.3; and/or (iv) any breach of any covenant,
representation or warranty made by Tenant hereunder, or any failure of Tenant
to perform any of Tenant’s covenants or obligations in accordance with
this Section. The foregoing indemnification shall include all expenses of
investigation and monitoring, costs of containment, abatement, removal, repair,
clean up, restoration and remedial work, penalties and fines, attorneys’ fees
and disbursements, environmental engineering fees and costs, and other response
costs. The foregoing indemnification shall also include any lost rental amounts
(including lost rental amounts after the term of this Lease), diminution in the
value of the Property or project, and other damages caused by or as a result of
the release of Hazardous Material, violation of Environmental Laws, or because
such Hazardous Material must be remediated from the Property or Project. If
Tenant fails to perform any obligation of Tenant in accordance with this
Section, Landlord shall have the right, but not the obligation, to perform such
obligation on behalf of Tenant. Tenant shall, on demand, pay to Landlord all
sums expended by Landlord in the performance of any such obligations of Tenant,
together with interest thereon after such demand at the maximum rate of
interest then provided by law. The term “attorneys’ fees” under this Section shall
mean fees charged by the attorneys in question based upon such attorneys’ then
prevailing hourly rates as opposed to any statutory presumption specified by
any statute then in effect in the State of California.

 

22

 

(k)                     Survivability.  All representations,
warranties and indemnifications by Tenant under this Section shall survive
the termination of the Lease. Tenant waives the right to assert any statute of
limitations as a bar to the enforcement of this Section or to any action
brought to enforce the provisions of this Section.

 

(1)                     Remedies Cumulative.  This Section shall
not affect, impair or waive any rights or remedies of Landlord or any
obligations of Tenant with respect to Hazardous Materials imposed or created by
Environmental Laws (including Landlord’s rights of reimbursement or
contribution under Environmental Laws). The remedies in this Section are
cumulative and in addition to all remedies provided by law.

 

Section 5.4            Outside Storage.  In addition to any other
provision specified in this Lease or as required by any law, rule or
regulation, Tenant agrees to not have any outside storage of inventory,
vehicles or materials and to keep the exterior of the Property free from
debris. In no event may Tenant store vehicles in the outside parking
areas, loading dock areas, or driveways of the Property of the Project for
shipping or otherwise.

 

Section 5.5            Signs and Auctions.  Tenant shall not place any
signs on the Property without Landlord’s prior written consent. Landlord
reserves the right to approve the size, type, and appearance of any sign.
Landlord may require that any sign be installed only be companies approved
by Landlord. Tenant shall not conduct or permit any auctions or sheriff’s sales
at the Property.

 

Section 5.6            Indemnity.  Tenant shall indemnify
Landlord against and hold Landlord harmless from any and all costs, claims or
liability arising from: (a) Tenant’s use of the Property or the Project; (b) the
conduct of Tenant’s business or anything else done or permitted by Tenant to be
done in or about the Property or the Project, including any contamination of
the Property, the Project, or any other property resulting from the presence or
use of Hazardous Material caused or permitted by Tenant; (c) any breach or
default in the performance of Tenant’s obligations under this Lease; (d) any
misrepresentation or breach of warranty by Tenant under this Lease; (e) any
claims brought against Landlord by another tenant of the Project or person
using the Project due to the negligence or acts of the Tenant; or (f) other
acts or omissions of Tenant. Tenant shall defend Landlord against any such
cost, claim or liability at Tenant’s expense with counsel reasonably acceptable
to Landlord or, at Landlord’s election,

 

23

 

Tenant shall
reimburse Landlord for any legal fees or costs incurred by Landlord in
connection with any such claim. As a material part of the consideration to
Landlord, Tenant assumes all risk of damage to property or injury to persons in
or about the Property or the Project arising from any cause, and Tenant hereby
waives all claims in respect thereof against Landlord. As used in this Section,
the term “Tenant” shall include Tenant’s employees, agents, contractors and
invitees, if applicable.

 

Section 5.7            Landlord’s Access.  Landlord or its agents may enter
the Property at all reasonable times to show the Property to potential buyers,
investors or tenants or other parties; to do any other act or to inspect and
conduct tests in order to monitor Tenant’s compliance with all applicable
Environmental Laws and all laws governing the presence and use of Hazardous
Material; or for any other purpose Landlord deems necessary. Landlord shall
give Tenant prior notice of such entry, except in the case of an emergency.
Landlord may place customary “For Sale” or “For Lease” signs on the
Property.

 

Section 5.8            Quiet Possession.  If Tenant pays the rent
and complies with all of the terms of this Lease, and is not in default under
the Lease, then Tenant may occupy and enjoy the Property for the full
Lease Term, subject to the provisions of this Lease.

 

Section 5.9            Future Easements and Governmental Requirements.  Tenant
agrees that Tenant shall cooperate with Landlord in granting any easements and
executing any covenants, conditions or restrictions which may be required
by any governmental agency or utility for the Property, or which Landlord may otherwise
require, provided that such easement, condition or restriction does not materially
interfere with Tenant’s use of the Property.

 

ARTICLE SIX:   CONDITION OF PROPERTY, MAINTENANCE, REPAIRS AND ALTERATIONS

 

Section 6.1            Condition.  

 

(a)                     Condition on Commencement
Date.  Landlord shall deliver the
Property to Tenant broom clean and free of debris on the Commencement
Date. On the Commencement Date, Landlord warrants that the existing electrical,
plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning (“HVAC”)
systems, and loading doors (other than items constructed by Tenant) shall be in
good operating condition on the Commencement Date. If

 

24

 

noncompliance with
such warranty in the immediately preceding sentence occurs as of the
Commencement Date, Landlord shall, at Landlord’s cost, promptly after receipt
of written notice from Tenant setting forth with specificity the nature and
extent of such noncompliance, rectify same at Landlord’s expense. Tenant shall
be required to give Landlord written notice of such failure, and such warranty
shall last, as follows; (i) six (6) months from the Commencement Date
as to the HVAC systems; and (ii) thirty (30) days from the Commencement
Date as to such other remaining systems described in the immediately preceding
sentence. If Tenant does not deliver to Landlord the required notice of breach
of warranty within the applicable warranty periods described in subparagraphs (i) and
(ii) of the immediately preceding sentence, then correction of any such
noncompliance, malfunction or failure shall be the obligation of Tenant, at
Tenant’s sole cost and expense.

 

(b)                    Tenant Takes Existing Condition.  Except
as provided in the Construction Rider and Paragraph 6.1(a), above, Tenant
accepts the Property and the Project in its condition as of the execution of
this Lease, subject to all recorded matters, laws, ordinances, conditional use
permits, and governmental regulations and orders. Except as provided herein,
Tenant acknowledges that neither Landlord nor any agent of Landlord has made
any representation as to the condition of the Property or the Project or the
suitability of the Property or the Project for Tenant’s intended use. Tenant
acknowledges that Tenant has investigated the adequacy and capacity of the
Property’s mechanical and electrical systems; use of the Property for Tenant’s
proposed purposes; and the laws, rules and regulations of federal, state
and local governmental bodies affecting the Property, including parking
requirements for any of Tenant’s present or proposed uses of the Property.
Specifically, Landlord is not responsible for the size or amount of the
Property’s electrical system, and Tenant has investigated the adequacy of same
for Tenant’s current and future needs. Tenant understands that the local
utility providers can restrict the supply and amount of any utility to the
Property. Tenant is relying upon Tenant’s own investigation, and neither
Landlord nor any agent of Landlord has made any representations or warranties
to Tenant regarding the items stated in the preceding sentence.

 

Section 6.2            Exemption of Landlord from liability.  Landlord
shall not be liable for any damage or injury to the person, business (or any
loss of income therefrom), goods, wares, merchandise or other property of
Tenant, Tenant’s employees, invitees, customers or any other person in or about
the Property, whether such damage or injury is caused by or results from:

 

25

 

(a) fire,
steam, electricity, water, gas or rain; (b) the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures or any other cause; (c) conditions
arising in or about the Property and the Project or from other sources or
places; or (d) any act or omission of any other tenant of Landlord,
including, but not limited to, another tenant of the Project. Landlord shall
not be liable for any such damage or injury even though the cause of or the
means of repairing such damage or injury are not accessible to Tenant.

 

Section 6.3            Landlord’s obligations.  Subject
to Section 6.7 (Common Area and Parking), Article Seven (Damage or
Destruction), Article Eight (Condemnation), and the Construction Rider,
Landlord has absolutely no responsibility to repair, maintain or replace any
portion of the Property or the Project at any time. Tenant waives the benefit
of any present or future law which might give Tenant the right to repair the
Property at Landlord’s expense or to terminate the Lease due to the condition
of the Property.

 

Section 6.4            Tenant’s Obligations.  

 

(a)                     Tenant’s Maintenance and Repair Obligations.  Except
as provided in Section 6.7 (Common Area and Parking) Article Seven
(Damage or Destruction), Article Eight (Condemnation), and the
Construction Rider, Tenant shall keep, at Tenant’s sole cost and expense, all
portions of the Property (including interior, systems, mechanical systems,
plumbing, lighting, electrical and equipment) in good order, condition and
repair and maintain same (including interior repainting and refinishing, and
any changes, modifications, retrofitting or repairs to any part of the
Property by changes to governmental laws, rules or regulations effective
after the commencement Date). Tenant shall be responsible for the repair,
maintenance and remediation of the Property due to the presence of any molds.
All contractors used by Tenant, and all repairs and maintenance, are subject to
Landlord’s, review and approval, including the color and quality of any
replacement items, wall or floor coverings, or paint. For purposes of the
immediately preceding sentence, references to governmental laws shall include
all present and future laws, rules, orders, ordinances, regulations, statutes,
requirements, codes and executive orders of all governmental authorities,
including the Americans With Disabilities Act, and all rules, regulations and
governmental orders in connection therewith, and any of the foregoing relating
to Hazardous Material, environmental matters, public health and

 

26

 

safety matters,
any applicable fire rating bureau or other body exercising similar functions,
and all requirements of all insurance bodies or Landlord’s insurance companies
affecting the Property. Tenant (and not Landlord) shall be responsible for the
repair, maintenance and remediation of the Property due to the presence of any
molds, and for compliance (including all notices thereunder) with the Toxic
Mold Protection Act of 2001. If any portion of the Property or any system or
equipment in the Property which Tenant is obligated to repair cannot be fully
repaired or restored, Tenant shall promptly replace such portion of the
Property or system or equipment in the Property, regardless of whether the
benefit of such replacement extends beyond the Lease Term. If any part of
the Property or the Project is damaged by any act or omission of Tenant, Tenant
shall pay Landlord the cost of repairing or replacing such damaged property,
whether or not Landlord would otherwise be obligated to pay the cost of
maintaining or repairing such property under any other provision of this Lease.

 

(b)                    Maintenance Contracts.  Landlord
may obtain as a Common Area Cost, or require Tenant to obtain at Tenant’s
cost, a preventive maintenance contract providing for the regular inspection,
repair and maintenance of the heating, ventilating and air condition system by
a licensed heating and air conditioning contractor or service company. Landlord
may also obtain as a Common Area Cost, or require Tenant to obtain at
Tenant’s cost: (i) a contract with a roof inspection company to inspect
and/or service, maintain and repair on a regular basis the roof to the
Property; and (ii) a contract with a fire sprinkler company to inspect
and/or service, maintain and repair on a regular basis the fire sprinkler
system on the Property; and (iii) a contract with a company or companies
to inspect on a regular basis and/or service, maintain and repair the storm
water system and/or sewer system and pump systems relating thereto servicing
the Project. If Landlord elects under this paragraph (b) to obtain any
contract described herein at Tenant’s cost, then Landlord may require
Tenant to pay all amounts for such service, maintenance and/or inspection
contracts monthly, quarterly or annually (or as a Common Area Cost) as Landlord
shall determine in Landlord’s discretion. All amounts billed by Landlord to
Tenant under this paragraph shall be paid by Tenant to Landlord within fifteen
(15) days after Tenant’s receipt of a copy of an invoice from Landlord. Tenant
shall be responsible for any deductible amounts under any contract described in
this paragraph. If Tenant fails to timely pay such amounts to Landlord as
required under this paragraph (b), then such failure by Tenant to timely pay
shall be treated as a failure of Tenant to pay

 

27

 

Landlord a
monetary amount due under the terms of this Lease, and Tenant shall be deemed
to be in default under this Lease.

 

(c)                     Tenant’s Failure.  Tenant shall fulfill all of Tenant’s
obligations under this Section 6.4 at Tenant’s sole expense. If Tenant
fails to maintain, repair or replace the Property as required by this Section 6.4,
Landlord may, upon ten (10) days’ prior notice to Tenant (except that no
notice shall be required in the case of an emergency), enter the Property and
perform such maintenance or repair (including replacement, as needed) on
behalf of Tenant. In such case, Tenant shall reimburse Landlord for all costs
incurred in performing such maintenance or repair immediately upon demand.

 

Section 6.5            Alterations, Additions, and Improvements.  

 

(a)                     No Alterations Without Landlord’s Consent.  Tenant shall not make any
alterations, additions, or improvements to the Property without Landlord’s
prior written consent, except for non-structural alterations which do not exceed
Ten Thousand Dollars ($10,000) in cost cumulatively over the Lease Term and
which are not visible from the outside of any building of which the Property is
part. Tenant, under no circumstances, may do any construction or
improvements on the roof without Landlord’s written permission. Even for those
non-structural alterations which do not require Landlord’s approval under this
Paragraph 6.5(a), Tenant shall provide written notice to Landlord and a
description of such improvements prior to the commencement of construction of
same. Landlord may require Tenant to provide demolition and/or lien and
completion bonds in forms and amounts satisfactory to Landlord. Tenant shall
promptly remove any alterations, additions, or improvements constructed in
violation of this Paragraph 6.5 (a) upon Landlord’s written request. All
alterations, additions, and improvements shall be done in a good and
workmanlike manner, in conformity with all applicable laws and regulations, and
by a contractor approved by Landlord. Upon completion of any such work, Tenant
shall provide Landlord with “as built” plans, copies of all construction
contracts, and proof of payment for all labor and materials.

 

(b)                    Payment Required.  Tenant shall pay when due all
claims for labor and material furnished to the Property. Tenant shall give
Landlord at least twenty (20) days’ prior written notice of the commencement of
any work on the Property, regardless of whether

 

28

 

Landlord’s consent
to such work is required. Landlord may elect to record and post notices of
non-responsibility on the Property.

 

Section 6.6            Condition Upon Termination.  Upon the termination of this Lease,
Tenant shall surrender the Property to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required
to repair under Article Seven (Damage or Destruction). In addition,
Landlord may require Tenant to remove any alterations, additions or
improvements made by Tenant or at Tenant’s direction (whether or not made with
Landlord’s consent) prior to the expiration of this Lease (or after the expiration
of this Lease at Landlord’s discretion) and to restore the Property to its
prior condition, all at Tenant’s expense. All alterations, additions and
improvements which Landlord has not required Tenant to remove shall become
Landlord’s property and shall be surrendered to Landlord upon the expiration or
earlier termination of this Lease, except that Tenant may remove any of
Tenant’s machinery or equipment which can be removed without material damage to
the Property. Tenant shall repair, at Tenant’s expense, any damage to the
Property caused by the removal of any such machinery or equipment. In no event,
however, shall Tenant remove any of the following materials or equipment (which
shall be deemed Landlord’s property) without Landlord’s prior written consent:
any power wiring or power panels; lighting or lighting fixtures; wall
coverings; drapes, blinds or other window coverings; carpets or other floor
coverings; heaters, air conditioners or any other heating or air conditioning
equipment; fencing or security gates; or other similar building operating
equipment and decorations.

 

Section 6.7            Common Area and Parking.  Tenant shall pay Tenant’s Pro Rata
Share (as defined in Section 1.10) of Common Area Costs (as defined
below).

 

(a)                     Common Area.  As used in this Lease, “Common
Area” shall mean all Common Area in the Project which are available for the
common use of tenants of the Project and which are not leased or held for the
exclusive use of Tenant or other tenants including, but not limited to, parking
areas, driveways, sidewalks, access roads, corridors, landscaping and planted
area. Landlord, from time to time, may change the size, location, nature
and use of any of the Common Area, convert Common Area into leasable areas,
construct additional parking facilities in the Common Area, and

 

29

 

increase or
decrease Common Area land, parking space and/or facilities. Tenant acknowledges
that such activities may result in an inconvenience to Tenant and such
activities and changes are permitted by Landlord.

 

(b)                    Use of Common Area.                   Tenant shall have the nonexclusive
right in common with other tenants and all others to whom Landlord has granted
or may grant such rights to use the Common Area for the purposes intended,
subject to such rules and regulations as Landlord, may establish from
time to time. Upon the execution of this Lease, Landlord has not issued any
written rules and regulations; however, Landlord may promulgate and
issue such rules and regulations in the future, and Tenant agrees to
comply with same. Tenant shall abide by such rules and regulations and
shall cause others who use the Common Area with Tenant’s express or implied
permission to abide by Landlord’s rules and regulations. At any time
Landlord, may close any Common Area to perform any acts in the Common
Area as in Landlord’s judgment are desirable to improve the Project. Tenant
shall not interfere with the rights of Landlord, other tenants, or any other
person entitled to use the Common Area. Tenant may not construct any
improvements within the Common Areas.

 

(c)                     Vehicle Parking.       Tenant is hereby granted the right to utilize
twenty-five (25) parking spaces in the Project on a non-exclusive basis for
employee and visitor use only (and not for vehicle storage or vehicle
shipping). There may be other tenants of the Project which may have
reserved parking spaces, and Tenant agrees to not park in such designated
reserved spaces. Landlord reserves the right to designate specific parking
spaces for specific tenants of the Project (which cost of designation shall be
a Common Area Cost). Tenant’s parking shall be limited to vehicles no larger
than standard size automobiles or pickup utility vehicles, and such parking
shall not be used for vehicle storage or vehicle shipping. Tenant shall not
cause large trucks or other large vehicles to be parked overnight within the
Project or on adjacent public streets; provided, however, that Tenant may park
trucks or other large vehicles in Tenant’s Property’s designated loading dock
area provided that such vehicles are not blocking any driveways or parking
areas of other tenants in the Project. Temporary parking of large delivery
vehicles in the Project or on the Property shall only be permitted under rules and
regulations established by Landlord. Vehicles shall be parked only in striped
parking spaces and not in driveways, loading areas or other locations not
specifically designated for parking. Tenant agrees to comply with all parking
requirements, rules and regulations of

 

30

 

all governmental
authorities as to the Project and as to any public streets. Handicap spaces
shall only be used by those legally permitted to use them. If Tenant parks more
vehicles in the parking area than the number set forth in this Lease or uses
parking areas for storage of vehicles or shipping of vehicles, such conduct
shall be a material breach of this Lease, subject to written notice to Tenant
of such violation(s). In addition to Landlord’s other remedies under this
Lease, Tenant shall pay a daily charge determined by Landlord for each such
additional or violating vehicle(s).

 

(d)                    Maintenance of Common Area.  Tenant
shall pay Tenant’s Pro Rata Share (as defined above) of all costs incurred by
Landlord for the operation, maintenance, cleaning, repairing and keeping in
good order of the Common Area (“Common Area Costs”). Common Area Costs shall
include, but are not limited to, costs and expenses for the following regarding
the Common Area: gardening and landscaping of the Common Area; utilities, water
and sewage charges for the Common Area; maintenance of signs (other than Tenant’s
signs which Tenant shall be responsible for paying for and maintaining);
premiums for liability, property damage, fire and other types of casualty and
other insurance on the Common Area (however, Landlord may, in Landlord’s
discretion, aggregate such insurance coverage on the Common Area with all of
the buildings and properties in the Project, and allocate the cost of same as
described in Paragraph 4.4(d)) and employee costs attributable to employees
working on the Project; all property taxes and assessments levied on or
attributable to the Common Area and all Common Area improvements (which shall
be paid by Tenant in the same proration as the Property’s taxes under Paragraph
4.2(c)); all personal property taxes levied on or attributable to personal
property used in connection with the Common Area, personal property owned by
Landlord which is used in the operation or maintenance of the Common Area;
rental or lease payments paid by Landlord for rented or leased personal
property used in the operation or maintenance of the Common Area; fees for
required licenses and permits of the Common Area; repairs, resurfacing, repaving,
maintaining, painting, cleaning, exterior wall painting of buildings in the
Project, striping, repairing, paving and maintenance of the parking areas;
irrigation and landscaping, and similar items; commercially reasonable
management fee; and replacement and exterior painting; cleaning and remediating
Hazardous Materials in the Common Area (unless caused by Tenant or Tenant’s
employees, contractors, agents, guests, customers or invitees, in which case
Tenant shall solely be responsible for same); other repairs and maintenance of
Common Area items; maintenance, replacement and repair of the roof

 

31

 

membrane; and
reserves for maintenance, replacement and repairs of the Common Area, including
the roof membrane. As to any reserves, Landlord shall not be required to
segregate such reserves or to hold such amounts in a separate account. Landlord
may cause any or all of such services to be provided by third parties, and
the cost of such service shall be included in Common Area Costs. Lighting of
the Common Area may be allocated by Landlord in Landlord’s discretion, by
having lights attached or wired to each adjacent property (including Tenant’s
Property) to light the Common Area (in which case Tenant shall operate such
lights during such hours as Landlord shall direct), and Tenant shall pay for
the cost of maintaining and operating such lighting and utilities on Tenant’s
separate electrical meter for which that Tenant shall solely pay as a
non-Common Area Cost. Landlord may place monitoring and switching devices
on all lighting of the Common Area as Landlord may determine in its
discretion. Landlord may bill to Tenant as a Common Area Cost the costs
for the roof inspection contract, fire sprinkler systems inspection contract,
and the heating, ventilating and air condition contract described in paragraph
6.4(b).

 

(e)                     Structural, Roof and Foundation.  This
Section 6.7 is subject to Article Seven (Damage or Destruction) and Article Eight
(Condemnation). Tenant shall not be responsible to pay for the repairs of the
structural elements of the foundations structural elements of the exterior
walls, or structural elements of the roof (except that the roof membrane
repairs, replacement and maintenance may be billed to Tenant as a Common
Area Cost, as described herein). Notwithstanding the above, Tenant shall be
solely responsible and shall directly pay Landlord for any damage to the
structure, exterior walls, foundation or roof caused by acts or negligence of
Tenant or Tenant’s employees, customers, licensees, invitees, representatives
or agents.

 

(f)                       Tenant’s Share and Payment.  

 

(i)                         The
Tenant’s Pro Rata Share, as defined in Section 1.10, may be modified
by Landlord from time to time, by Landlord considering the square footage of
improvements in the Project, the type of improvements in the Project, and such
other factors as Landlord shall determine in Landlord’s sole, complete and
absolute discretion.

 

(ii)                      Tenant
shall pay Tenant’s annual Pro Rata Share of all Common Area Costs (prorated for
any fractional month) within fifteen (15) days of receipt of written notice
from Landlord that such costs are due and payable. Landlord may, at Landlord’s

 

32

 

election, estimate
in advance and bill to Tenant all real property taxes for which Tenant is
liable under this Lease, all insurance premiums for which Tenant is liable
under this Lease, and all Common Area Costs payable by Tenant hereunder, and
Tenant shall pay same to Landlord within fifteen (15) days of billing. Landlord
may adjust such estimates at any time based upon Landlord’s experience and
reasonable anticipation of costs. Such adjustments shall be effective as of the
next rent payment date after notice to Tenant. If Landlord delivered to Tenant
a bill for periodic estimates of Common Area Costs, taxes and/or insurance
premiums, then each year Landlord shall deliver to Tenant a statement setting
forth in reasonable detail the Common Area Costs paid or incurred by Landlord
during the preceding calendar year and Tenant’s Pro Rata Share. Upon receipt of
such statement, there shall be an adjustment between Landlord and Tenant (with
payment to or credit given by Landlord as the case may be) so that
Landlord shall receive the entire amount of Tenant’s share of such costs and
expenses for such period.

 

(iii)                   At
Landlord’s election, such statements of estimated Common Area Costs (and at
Landlord’s election any real property taxes and/or insurance premiums which
Tenant is otherwise liable under this Lease) may be prorated and billed to
Tenant monthly, quarterly, or at any other periodic intervals to be determined
by Landlord. Tenant must pay such amounts, whether or not Tenant disagrees with
such costs or their amounts, and if Tenant does so disagree, then Tenant’s sole
recourse shall be to make any objections pursuant to subparagraph (g), below,
and to bring a separate legal cause of action against Landlord (and Tenant
shall have the burden of proof in such action).

 

(g)                    Tenant’s Right to Review Books and Records.  Tenant
shall have ninety (90) days from the receipt of any Landlord’s statement or
invoice for Common Area Costs, taxes or insurance premiums to object to same in
a writing delivered to Landlord. Any such objection must be in writing and must
specify the particular item objected to. If Tenant fails to so object in
writing within such ninety (90) day period, then such Common Area Costs, taxes
and insurance premiums, as the case may be, shall be conclusively deemed
correct. Tenant may not object to any Common Area Costs, taxes or
insurance premiums if Tenant is then in default under the terms of this Lease.
Tenant shall have the right to review, at Tenant’s sole cost and expense.
Landlord’s books and records during normal business hours relating to the
Common Area Costs, taxes and insurance premiums for the Project. Such
inspection of Landlord’s records may only be conducted by an employee of
Tenant or by a

 

33

 

certified public
accountant (which accountant is a member of a reputable independent nationally
or regionally recognized certified public accounting firm, who has had previous
experience in reviewing financial operating records of landlords of buildings;
provided that such accountant is not retained by Tenant on a contingency fee
basis). Such inspection of Landlord’s records must be completed by the Tenant
not later than thirty (30) days after such records are made available to the
Tenant, and any reports prepared by Tenant’s employees or accountants or
otherwise shall be delivered concurrently to the Landlord and the Tenant. If
Landlord and Tenant are unable to resolve a dispute regarding the calculation
of Common Area Costs, taxes or insurance premiums, then Tenant shall have the
right to bring a legal action against Landlord in order to determine the
correct amount of same under the Lease, which shall be Tenant’s exclusive
remedy (and the Tenant may not setoff any rent or other amounts due by
Tenant under the terms of the Lease). Tenant and any of Tenant’s employees,
accountants, attorneys and other representatives shall keep any information
gained from Tenant’s inspection of Landlord’s records confidential and shall
not disclose same to any other person (including any other tenant of Landlord),
except as may be required by law. If requested by Landlord, Tenant shall
require Tenant’s employees, accountants, agents or other representatives
inspecting Landlord’s records to sign a confidentiality agreement as a
condition of Landlord making Landlord’s accounting records’ available to them.
If Tenant fails to timely exercise its rights to review or object to Landlord’s
records in accordance with this Paragraph (g), then such failure shall be
conclusively deemed to constitute Tenant’s approval of Landlord’s statements of
Common Area Costs, taxes or insurance premiums, as the case may be for the
applicable period in question. Tenant agrees that this Paragraph (g) shall
be the sole method to be used by Tenant to dispute the amount of any Common
Area Costs, taxes and insurance premiums owed by Tenant pursuant to the Lease,
and Tenant hereby waives any of its rights at law or in equity relating
thereto.

 

(h)                    Other Items Which May Be Classified as a Common
Area Cost.  Landlord may classify (as
determined by Landlord) as a Common Area Cost those electrical, mechanical,
structural, plumbing and irrigation systems, and other items used in common by
two (2) or more tenant spaces in the Project. Any such item which is
classified as a Common Area Cost by Landlord shall be maintained by Landlord
and billed to Tenant as a Common Area Cost hereunder.

 

34

 

Section 6.8            Security.  Landlord shall not be
responsible for the providing of security or guard services of any kind to the
Property or Project, and Tenant shall solely be responsible for the security of
Tenant, Tenant’s employees, customers, invitees, contractors and other persons
on Tenant’s Property, and any property of those persons.

 

ARTICLE SEVEN:   DAMAGE OR
DESTRUCTION

 

Section 7.1            Partial Damage to Property.  If
the Property is “partially damaged” (as defined below), then the following
provisions shall apply.

 

(a)                     Notice By Tenant.  Tenant shall notify Landlord in
writing immediately upon the occurrence of any damage to the Property. Subject
to Section 7.2, if the shell portion of the Property is only partially
damaged (i.e., less than seventy-five percent (75%) of the square feet of the
Property is damaged and remains untenable as a result of such damage) and if
the proceeds received by Landlord from the insurance policies described in
Paragraph 4.4 (b) are sufficient to pay for all of the necessary repairs
to the shell, then this Lease shall remain in effect and Landlord shall repair
the damage to the shell (plus the tenant improvements to the extent of the
remaining available insurance proceeds) as soon as reasonably possible (but
subject to force majeure events), and Tenant shall pay to Landlord any
deductible amounts under any insurance policy.

 

(b)                    Insurance Proceeds Not Sufficient.  Subject to Section 7.2, if the
insurance proceeds received by Landlord are not sufficient to pay the entire
cost of repair of the shell portion of the Property, or if the cause of the
damage to the shell is not covered by the insurance policies which are
maintained under Paragraph 4.4 (b), Landlord may elect either to: (i) repair
the damage to the shell portion of the Property (and not the tenant
improvements) as soon as reasonably possible, in which case this Lease shall
remain in full force and effect, or (ii) terminate this Lease as of the
date the damage occurred. Landlord shall notify Tenant within sixty (60) days
after receipt of notice of the occurrence of the damage whether Landlord elects
to repair the damage or terminate the Lease. If Landlord elects to repair the
damage, Tenant shall pay Landlord the “deductible amount” (if any) under any
insurance policies and shall be responsible to repair at Tenant’s cost the
tenant improvements portion of the Property, and if the damage was due to an
act, omission or negligence of Tenant, or Tenant’s

 

35

 

customers,
licensees, visitors, employees, agents, contractors or invitees, the difference
between the actual cost of repair and any insurance proceeds received by
Landlord for such repair. Tenant shall be responsible to pay for the repair of
the tenant improvements portion of the Property to the extent not paid for by
insurance. If Landlord elects to terminate this Lease, Tenant may elect to
continue this Lease in full force and effect, in which case Tenant shall repair
any damage to the Property (including the shell and tenant improvements) and
the entire building in which the Property is located. Tenant shall pay the cost
of such repairs under the immediately preceding sentence, except that upon
satisfactory completion of such repairs, Landlord shall deliver to Tenant any
insurance proceeds received by Landlord for the damage repaired by Tenant.
Tenant shall give Landlord written notice of such election within ten (10) days
after receiving Landlord’s termination notice. Landlord shall have the right to
supervise and manage any repair or construction under this Article Seven.

 

Section 7.2            Damage Caused by Tenant.  If
the insurance proceeds received by Landlord are not sufficient (without
considering any deductible amount) to pay the entire cost of repair or
reconstruction of the Property (including the shell and tenant improvements),
and such damage (whether partial or total) was caused by an act, omission or
negligence by Tenant or Tenant’s employees, customers, licensees, visitors,
contractors, invitees or agents, then: (i) Tenant shall pay the cost
(including any insurance deductible amounts) of the repairs or reconstruction
of the Property not covered by insurance; and (ii) Landlord may elect
by written notice to Tenant for this Lease to terminate or remain in effect.

 

Section 7.3            Substantial or Total Destruction.  Subject
to Section 7.2, if the shell portion of the Property is substantially or
totally destroyed by any cause (i.e., the damage to the shell portion of the
Property is greater than partial damage as described in Section 7.1), and
regardless of whether Landlord receives any insurance proceeds, this Lease
shall terminate as of the date the destruction occurred. Notwithstanding the
immediately preceding sentence, if the shell portion of the building on the
Property (excluding tenant improvements) can be rebuilt within twelve (12)
months after the date of destruction, Landlord may elect to rebuild such
shell portion of the Property, in which case this Lease shall remain in full
force and effect. If Landlord elects to reconstruct or repair the damage to the
shell portion of the Property, then Tenant shall pay for the costs of the
repair or reconstruction of any tenant improvements not paid for by insurance
proceeds, and

 

36

 

Landlord shall
reconstruct and repair such tenant improvements to the extent of such available
insurance proceeds or to the extent that Tenant pays for the repair or
reconstruction of the tenant improvements. Landlord shall notify Tenant of such
election to reconstruct the shell after such destruction, but not later than
one hundred twenty (120) days after Landlord’s receipt of Tenant’s written
notice to Landlord of the occurrence of total or substantial destruction.

 

Section 7.4            Temporary Reduction of Rent.  If
the Property is destroyed or damaged and Landlord or Tenant repairs or restores
the Property pursuant to the provisions of this Article Seven, any rent
payable during the period of such damage, repair and/or restoration shall be
reduced according to the degree, if any, to which Landlord receives the
proceeds of rental continuation insurance covering such period of time.
However, the reduction shall not exceed the sum of one year’s payment of Base
Rent, insurance premiums and real property taxes. Except for such possible
reduction in Base Rent, insurance premiums and real property taxes, Tenant
shall not be entitled to any compensation, reduction, or reimbursement from
Landlord as a result of any damage, destruction, repair, or restoration of or
to the Property.

 

Section 7.5            Damage During Last Six Months.  If
the damage to the Property is by a casualty and occurs during the last six (6) months
of the Lease Term (including any options to extend then exercised) and such
damage will require more than sixty (60) days to repair, Landlord may elect
to terminate this Lease as of the date the damage occurred. Landlord shall give
written notification to Tenant of such election within thirty (30) days after
Landlord’s actual knowledge of the occurrence of the damage.

 

Section 7.6            Waiver.  Tenant waives the
protection of any statute, code or judicial decision which grants a tenant the
right to terminate a lease in the event of the substantial or total destruction
of the leased property. Tenant agrees that the provisions of this Article Seven
shall govern the rights and obligations of Landlord and Tenant in the event of
any substantial or total destruction to the Property.

 

Section 7.7            References to Shell and Tenant Improvements Under this
Article Seven.  References to “shell” in this Article Seven
shall mean the roof, foundation, exterior walls, slab floor, hardscape, and
structural elements of the building, specifically excluding tenant
improvements. References to “tenant improvement”

 

37

 

in this Article Seven
shall mean floor coverings, wall coverings, interior electrical, lighting,
interior plumbing, mechanical systems, heating, ventilating and air
conditioning systems, restrooms and plumbing fixtures, drop ceilings and
finished ceilings, interior walls and doors, cabinetry, and any items described
as tenant improvements in the Construction Rider.

 

ARTICLE EIGHT:   CONDEMNATION

 

If all or any portion of the building portion of the Property (but not
the land) is taken under the power of eminent domain or sold under the threat
of that power (all of which are called “Condemnation”), this Lease shall
terminate as to the part taken or sold on the date the condemning
authority takes title or possession, whichever occurs first. If more than sixty
percent (60%) of the floor area of the portion of the building constituting the
Property (not including other buildings or portions of buildings in the
Project) which is located on the Property, is taken, either Landlord or Tenant may terminate
this Lease as of the date the condemning authority takes title or possession,
by delivering written notice to the other within ten (10) days after
receipt of written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority takes title or
possession). If neither Landlord nor Tenant terminates this Lease, this Lease
shall remain in effect as to the portion of the Property not taken, except that
the Base Rent shall be reduced in proportion to the reduction in the floor area
of the building constituting the Property. Any Condemnation award or payment shall
be distributed to Landlord for compensation for reduction in the value of the
leasehold, the taking of the fee, or otherwise. If this Lease is not
terminated, Landlord shall repair any damage to the Property caused by the
Condemnation, except that Landlord shall not be obligated to repair any damage
for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such
repair, Landlord shall have the right to either terminate this Lease or make
such repair at Landlord’s expense.

 

ARTICLE NINE:   ASSIGMENT AND SUBLETTING

 

Section 9.1            Restrictions on Assignment or Subletting.  

 

(a)                     Prohibition.  Except as expressly set
forth herein, Tenant shall not assign, mortgage, pledge, encumber, or otherwise
transfer this Lease, whether by operation of law or otherwise, and

 

38

 

shall not sublet
(or underlet), or permit the Property or any part thereof to be occupied
by others, without Landlord’s prior consent in each instance in compliance with
the provisions of this Article Nine. Notwithstanding the immediately
preceding sentence, Tenant shall be permitted to allow other persons to occupy
on a temporary basis up to a total of twenty percent (20%) in the aggregate of
the square footage of the Property at no charge, and not have to comply with
the provisions of this Article Nine as to such persons’ occupancy. Any
assignment, sublease, mortgage, pledge, encumbrance or transfer in
contravention of the provisions of this Article Nine shall be void.

 

(b)                    Collection of Rent.  If, without Landlord’s
consent, this Lease is assigned, or any part of the Property is sublet or
occupied by anyone other than Tenant or this Lease or the Property or any of
Tenant’s leasehold interest is encumbered (by operation of law or otherwise),
Landlord may collect rent from the assignee, subtenant or occupant, and
apply the net amount collected to the Base Rent or Additional Rent. No such
collection of rent shall be deemed to be (i) a waiver of the provisions of
this Article Nine, (ii) an acceptance of the assignee, subtenant or
occupant as tenant, or (iii) a release of Tenant from the performance of
Tenant’s covenants hereunder. Tenant shall remain fully liable for Tenant’s obligations
under this Lease, regardless of any assignment or subletting.

 

(c)                     Further Assignment/Subletting.  Landlord’s
consent to any assignment or subletting shall not relieve Tenant from the
obligation to obtain Landlord’s express consent to any further assignment or
subletting. In no event shall any permitted subtenant assign or encumber its
sublease or further sublet any portion of its sublet space, or otherwise suffer
or permit any portion of the sublet space to be used or occupied by others.

 

Section 9.2            Tenant’s Notice and Landlord’s Right of Termination.  If
Tenant contemplates an assignment of this Lease or a sublease of all or any
portion of the Property which would result, individually or when aggregated
with any prior subletting then remaining in effect, in Tenant occupying less
than ninety percent (90%) of the rentable square feet of the Property, then
Tenant shall give Landlord written notice (the “Intention to Transfer Notice”)
thereof (whether or not an assignee or sublessee or the terms of the
contemplated assignment or sublease have been determined), which Intention to
Transfer Notice shall specify (a) the date Tenant desires the contemplated
assignment or sublease to

 

39

 

be effective (the “Contemplated
Effective Date”), and (b) with respect to a contemplated sublease of all
or a part of the Property, a description of the portion of the Property
contemplated to be sublet (such portion of the Property, or in the case of an
intended assignment, the entire Property, hereinafter referred to as the “Contemplated
Transfer Space”), and (c) that such Intention to Transfer Notice is
delivered to Landlord pursuant to this Section 9.2 in order to allow Landlord to elect to
recapture the Contemplated Transfer Space. Such Intention to Transfer Notice
shall specify that it is delivered to Landlord pursuant to this Section 9.2
and shall be deemed an offer from Tenant to Landlord whereby Landlord (or
Landlord’s designee) shall be granted the right, at Landlord’s option: (i) to
terminate this Lease with respect to the Contemplated Transfer Space, upon the
terms and conditions hereinafter set forth, or (ii) if the contemplated
transaction is an assignment of this Lease or a subletting of at least ten
percent (10%) of the rentable square footage of the Property, to terminate this
Lease with respect to the entire Property. Such option may be exercised by
written notice from Landlord to Tenant within forty-five (45) days after
Landlord’s receipt of the Contemplated Transfer Notice. If Landlord declines,
or fails to elect in writing in a timely manner, to terminate this Lease with
respect to the Contemplated Transfer Space or the entire Property, as the case may be,
under this Section 9.2, then, subject to the other terms of this Article Nine,
for a period of three (3) months (the “Three-Month Period”) commencing on
the last day of such forty-five (45) day period, Landlord shall not have any
right to recapture the Contemplated Transfer Space with respect to any assignment
or subletting made in writing during the Three-Month Period to the sublessee or
assignee designated in the Intention to Transfer Notice, provided that any such
assignment or subletting is substantially on the terms set forth in the
Intention to Transfer Notice, and provided further that any such assignment or
subletting shall be subject to the remaining terms of this Article Nine.
If such an assignment or subletting is not so consummated in writing within the
Three-Month Period (or if an assignment or subletting is so consummated, then
upon the expiration of the term of any assignment or subletting of such
Contemplated Transfer Space consummated within such Three-Month Period), Tenant
shall again be required to submit a new Intention to Transfer notice to
Landlord with respect any contemplated assignment or subletting, as provided
above in this Section 9.2.

 

Section 9.3            Consequences
of Landlord’s Termination.  If Landlord exercises its option to
terminate all or a portion of this Lease pursuant to Section 9.2: (a) this
Lease shall end and expire

 

40

 

with respect to
all or a portion of the Property for which Landlord elects in writing to
terminate, as the case may be, on the Contemplated Effective Date; (b) Base
Rent and Tenant’s payments for Additional Rent shall be apportioned, paid or
refunded as of such date; (c) Tenant, upon Landlord’s request, shall enter
into an amendment of this Lease ratifying and confirming such total or partial
termination, and setting forth any appropriate modifications to the terms and
provisions hereof; (d) Landlord shall be free to lease the Contemplated
Transfer Space or the Property, as the case may be, or any part thereof,
to Tenant’s prospective assignee or subtenant; (e) if this Lease shall end
with respect to a portion of the Property, Tenant shall, at Tenant’s sole cost
and expense, separately demise (in a manner acceptable to Landlord and in
compliance with all laws and regulations) such portion of the Property, and
make available all utility services (and separate meters) so as to make such
portion of the Property a self-contained rental unit satisfactory in all
respects to Landlord and in compliance with all legal requirements and building
code; and (f) Landlord and Tenant shall have no further liability under
this Lease with respect to that portion of the Property so terminated, provided
that Tenant shall remain liable, with respect to the period of its tenancy
prior to such termination, for the performance of all obligations under the
Lease with respect to such portion of the Property so terminated (including,
without limitation, Tenant’s payment of reconciliation of common area
expenses), and Landlord shall have all the rights and remedies with respect to
such obligations as set forth in the Lease, and provided further that any
provisions of this Lease which would otherwise expressly survive the expiration
or earlier termination of this Lease shall survive such termination pursuant to
Section 9.2.

 

Section 9.4            Conditions to Assignment/Subletting.  

 

(a)                     Required Items of Tenant.  If
Landlord does not exercise any of Landlord’s options provided under Section 9.2,
and provided that no event of default by Tenant then exists, Landlord’s consent
to the proposed assignment or subletting shall not be unreasonably withheld.
Such consent shall be granted or denied, as the case may be, within thirty
(30) days after Landlord’s receipt of: (a) a true and complete statement
reasonably detailing the identity of the proposed assignee or subtenant, the
nature of its business, its proposed use of any Hazardous Material, and its
proposed use of the Property; (b) a nonrefundable deposit of an amount
equal to One Thousand Five Hundred Dollars ($1,500) (which amount shall be
increased from the Commencement Date by the increase in the Index (described in
Section 3.2, above) which deposit amount shall be

 

41

 

applied by
Landlord against Landlord’s attorneys’ fees and legal costs for which Tenant is
obligated to reimburse Landlord under this Article Nine); (c) current
financial information with respect to the proposed assignee or subtenant,
including its most recent financial statements; and (d) any other
information Landlord may reasonably request, provided that:

 

(A)                  in
Landlord’s reasonable judgment, the proposed assignee or subtenant is engaged
in a business or activity, and the Property will be used in a manner, which: (a) is
in keeping with the then standards of the Project and business park in which
the Property is located; (b) limits the use of the Property to uses
permitted under this Lease; and (c) does not violate any restrictions set
forth in this Lease, any loan which may encumber the Property or Project,
the business of the proposed assignee or subtenant and the proposed use of the
Property including, but not limited to, the use of any Hazardous Material; or
any negative covenant as to use of the Property binding on Landlord;

 

(B)                    in
Landlord’s reasonable judgment the proposed assignee or subtenant has
sufficient financial means to perform all of its obligations under this
Lease or the sublease, as the case may be, and Landlord has been furnished
with reasonable proof thereof, and Landlord or any affiliate of Landlord is not
litigating against or has not been threatened with litigation by such proposed
assignee of subtenant or its affiliates within the prior six (6) months;

 

(C)                    the
form of the proposed sublease or instrument of assignment shall be
reasonably satisfactory to Landlord and shall comply with the provisions of
this Article Nine;

 

(D)                   there
shall be not more than two (2) separately demised subtenants of the
Property;

 

(E)                     Tenant
shall, upon demand, reimburse Landlord for all expenses incurred by Landlord in
connection with such assignment or sublease, including any investigations as to
the acceptability of the proposed assignee or subtenant, reviewing any plans
and specifications for alterations or modifications of the Property proposed to
be made in connection therewith, and all legal fees and legal costs reasonably
incurred in connection with the granting of any requested consent;

 

(F)                     if
the proposed subtenant or assignee is an entity organized under the laws of any
jurisdiction other than the United

 

42

 

States or any
state thereof, or is not a United States citizen, if an individual, such person
shall waive any immunity to which it may entitled, and shall be subject to
the service of process in, and the jurisdiction of the courts of, the State of
California; and

 

(G)                    in
Landlord’s reasonable judgment, the proposed assignee or subtenant shall not be
of a type or character, or engaged in a business or activity, or owned or
controlled by or identified with any entity, which may result in protests
or civil disorders at, or other disruptions of the normal business activities
in, the Property, Project or business park in which the Property is located.

 

(b)                    Agreements.  With respect to each and
every subletting and/or assignment authorized by Landlord under the provisions
of this Lease, it is further agreed that:

 

(i)                         the
form of the proposed assignment or sublease shall be satisfactory to
Landlord and shall comply with the provisions of this Article Nine;

 

(ii)                      no
sublease shall be for a term ending later than the expiration date of this
Lease, and no sublease of the entire Property shall be for a term ending later
than one day prior to the expiration date of this Lease or such sublease of the
entire Property shall be classified as an assignment;

 

(iii)                   no
sublease and/or assignment shall be effective, and no subtenant or assignee
shall take possession of any part of the Property, until an executed
counterpart of such sublease or assignment has been delivered to Landlord
and approved by Landlord as provided in Paragraph 9.4 (a);

 

(iv)                  if
an event of default by Tenant shall occur at any time prior to the effective
date of such assignment or subletting, then Landlord’s consent thereto, if
previously granted, shall be immediately deemed revoked without further notice
to Tenant, and if such assignment or subletting would have been permitted
without Landlord’s consent pursuant to Section 9.8, such permission shall
be void and without force and effect, and in either such case, any such
assignment or subletting shall constitute a further event of default by Tenant
hereunder; and

 

(v)                     each
sublease and/or assignment shall be subject and subordinate to this Lease and
to the matters to which this Lease is or shall be subordinate, it being the
intention of Landlord and

 

43

 

Tenant that Tenant
shall assume and be liable to Landlord for any and all acts and omissions of
all subtenants and assignees, and anyone claiming under or through any
subtenants or assignees, which, if performed or omitted by Tenant, would be a
default under this Lease; and Tenant and each subtenant shall be deemed to have
agreed that upon the occurrence and during the continuation of an event of
default by Tenant hereunder, Tenant has hereby assigned to Landlord, and
Landlord may, at its option, accept such assignment of, all right, title and
interest of Tenant as sublandlord under such sublease, together with all
modifications, extensions and renewals thereof then in effect, and such
subtenant shall, at Landlord’s option and upon notice from Landlord, attorn to
Landlord pursuant to the then executory provisions of this Lease other than the
monetary terms of this Lease, which monetary terms shall be governed by the
executory terms of such sublease, except that Landlord shall not be: (a) liable
for any previous act or omission
of Tenant under such sublease; (b) subject to any counterclaim, offset or
defense, which theretofore accrued to such subtenant against Tenant; (c) bound
by any previous modification of such sublease not consented to by Landlord, or
by any prepayment of more than one month’s rent and additional rent under such
sublease; (d) bound to return such subtenant’s security deposit, if any,
except to the extent that Landlord shall receive actual possession of such
deposit and such subtenant shall be entitled to the return of all or any
portion of such deposit under the terms of its sublease; or (e) obligated
to make any payment to or on behalf of such subtenant, or to perform any
work in the subleased space or the Property, or in any way to prepare the
subleased space for occupancy, beyond Landlord’s obligations under this Lease.
The provisions of this Paragraph 9.4 (b) (v) shall be self-operative,
and no further instrument shall be required to give effect to this provision,
provided that the subtenant shall execute and deliver to Landlord any
instruments Landlord may reasonably request to evidence and confirm such
subordination and attornment.

 

Section 9.5            Binding on Tenant, Indemnification of Landlord.  Notwithstanding
any assignment or subletting or any acceptance of monies or payment by Landlord
from any assignee or subtenant, Tenant shall remain fully liable for the
payment of all Base Rent and Additional Rent due and for the performance of all
other terms, covenants and conditions contained in this Lease on Tenant’s part to
be observed and performed, and any default under any term, covenant or
condition of this Lease by any subtenant or assignee or anyone claiming under
or through any subtenant or assignee shall be deemed to be a default under this
Lease by Tenant. Tenant shall indemnify, defend, protect and hold harmless
Landlord from and

 

44

 

against any and
all losses or liabilities resulting from any claims that may be made
against Landlord by the proposed assignee or subtenant or anyone claiming under
or through any subtenant or by any brokers or other persons claiming a
commission or similar compensation in connection with the proposed assignment
or sublease, irrespective of whether Landlord shall give or decline to give its
consent to any proposed assignment or sublease, or if Landlord shall exercise
any of its options under this Article Nine.

 

Section 9.6            Tenant’s Failure to Complete.  If
Landlord consents to a proposed assignment or sublease and Tenant fails to
execute and deliver to Landlord such assignment or sublease within ninety (90)
days after the giving of such consent, then Tenant shall again comply with all
of the provisions and conditions of Sections 9.2 and 9.4 hereof before
assigning this Lease or subletting all or part of the Property.

 

Section 9.7            Profits on Assignment or Subleasing.  If
Tenant shall enter into any assignment or sublease permitted hereunder or
consented to by Landlord, Tenant shall, within sixty (60) days of Landlord’s
consent to such assignment or sublease, deliver to Landlord a complete list of
Tenant’s reasonable brokerage fees actually paid to third-party brokers not
affiliated or related to Tenant (which brokerage fees may in no event may be greater than five
percent (5%) of the total rents to be received by Tenant for such assignment or
sublease), together with a list of all of Tenant’s personal or other property
to be transferred to such assignee or sublessee, or any affiliates thereof.
Tenant shall deliver to Landlord evidence of the payment of such fees promptly
after the same are paid. In consideration of such assignment or subletting,
Tenant shall pay to Landlord the following amounts:

 

(a)                     Assignment.  In the case of an
assignment, on the effective date of the assignment, an amount equal to fifty
percent (50%) of all sums and other consideration paid to Tenant by the
assignee for or by reason of such assignment (including sums paid for the sale
or rental of Tenant’s personal property, less, in the case of a sale or rental
thereof, the then fair market rental or sale value, as the case may be,
but not deducting more than the amount which was added under this sentence for
such sale or rental) after first deducting Tenant’s reasonable third-party
brokerage fees (which brokerage fee deduction is subject to the limits under
the first paragraph of this Section 9.7) in connection with such
transaction; or

 

45

 

(b)                    Sublease. In the case of a sublease, fifty
percent (50%) of all sums and any other consideration payable under the
sublease to Tenant by the subtenant which exceeds on a per square foot basis
the Base Rent accruing during the term of the sublease in respect of the
subleased space (together with any sums paid for the sale or rental of Tenant’s
personal property, less, in the case of the sale or rental thereof the
then fair market rental or sale value, but not deducting more than the amount
which was added under this sentence for such sale or rent under this sentence)
after first deducting Tenant’s reasonable third-party brokerage fees (which
brokerage fee deduction is subject to the limits under the first paragraph of
this Section 9.7) in connection with such transaction. The sums payable
under this clause shall be paid by Tenant to Landlord as and when paid by the
subtenant to Tenant.

 

(c)                     Written Statement. Tenant shall provide to
Landlord a written statement certifying all amounts to be paid from any
assignment or sublease of the Property, and any transaction related thereto,
within ten (10) days after the transactional documentation is executed,
and Landlord may inspect from time to time Tenant’s books and records to
verify the accuracy of the amounts due by Tenant under this Section 9.7.
Upon written request, Tenant shall promptly furnish to Landlord certified
photocopies of all transactional documentation, which shall be certified by
Tenant as being true and correct.

 

Section 9.8            Transfers of Interests in Tenant, and Assignment or
Sublease to a Related Party.

 

(a)                     Entity Transfers. If Tenant is a
corporation, the transfer by one or more transfers, directly or indirectly, by
merger, assignment, operation of law or otherwise, of a majority of the number
of shares of stock and/or voting control of Tenant shall be deemed a voluntary
assignment of this Lease; provided, however, that the provisions of this Article Nine
shall not apply to the transfer of shares of stock of Tenant if and so long as
Tenant is publicly traded on a United States domestic nationally recognized
stock exchange. For purposes of this Section 9.8 the term “transfers”
shall be deemed to include the issuance of new stock or of treasury stock which
results in a majority of the stock of Tenant being held by a person or persons
that do not hold a majority of the stock of Tenant on the Commencement Date. If
Tenant is a partnership or limited liability company, the transfer by one or
more transfers, directly or indirectly, by operation of law or otherwise, of a
majority interest in the capital or profit

 

46

 

interest of the
partnership or limited liability company, or transfer of control of the
partnership or limited liability company, shall be deemed a voluntary
assignment of this Lease. If Tenant is a limited liability company, trust, or
any other legal entity (including a corporation or a partnership), the transfer
by one or more transfers, directly or indirectly, of control of such entity,
however characterized, shall be deemed a voluntary assignment of this Lease.
The provisions of Section 9.1 shall not apply to transactions with an
entity into or with which Tenant is merged or consolidated so long as; (i) such
transfer was made for a legitimate independent business purpose and not for the
purpose of transferring this Lease; (ii) the successor to Tenant has a net
worth computed in accordance with generally accepted accounting principles at
least equal to the greater of (a) the net worth of Tenant immediately
prior to such merger, consolidation or transfer, and (b) the net worth of
the original Tenant on the date of this Lease; (iii) the persons who owned
a controlling interest in Tenant on the Commencement Date also own a
controlling interest in the surviving entity in such merger; (iv) proof
satisfactory to Landlord of such net worth is delivered to Landlord at least
ten (10) days prior to the effective date of any such transaction; and (v) Landlord
receives copies of all relevant documents regarding such merger, including the
filed certificate of merger, prior to or within twenty (20) days of such
merger.

 

(b)                    Sublease or assignment to a Related Entity.
Tenant may, without the receipt of Landlord’s consent and without the
application of Landlord’s termination rights under Section 9.2 or Landlord’s
right to share in profits under Section 9.7, permit any person of which
the original Tenant named in Article One of this Lease owns at least
eighty percent (80%) of the voting stock (a “Related Entity”) to sublet or be
assigned all or part of the Property for any permitted use for so long as
such Person remains a Related Entity, provided that: (i) Tenant provides
Landlord with prior written notice of such sublease or assignment to such
Related Entity and any documentation or information reasonably requested by
Landlord regarding such assignment or subletting or such Related Entity; (ii) such
assignment or subletting is not a subterfuge by Tenant to avoid its obligations
under this Lease; and (iii) the Related Entity is, in Landlord’s
reasonable judgment, of a character and engaged in a business which is in
keeping with the standards for the Property and the occupancy thereof. Such
sublease shall not be deemed to vest in any such Related Entity any right or
interest in this Lease or the Property nor shall it relieve, release, impair or
discharge any of Tenant’s obligations hereunder.

 

47

 

(c)                     Applicability. The limitations set forth in
this Section 9.8 shall apply to subtenant(s), assignee(s) and guarantor(s)
of this Lease, if any, and any transfer by any such entity in violation of this
Section 9.8 shall be a transfer in violation of Section 9.1, and this
Article Nine.

 

(d)                    Modifications; Takeover Agreements. Any
modification, amendment or extension of a sublease and/or any other agreement
by which a landlord (or its affiliate) of a building other than the Property
agrees to assume or perform the obligations of the Tenant under this Lease
shall be deemed a sublease for the purposes of Section 9.1 hereof.

 

Section 9.9            Assumption of Obligations. Any assignment,
sublease or transfer, whether made with Landlord’s consent or without Landlord’s
consent, if and to the extent permitted hereunder, shall not be effective
unless and until the assignee or sublessee executes, acknowledges and delivers
to Landlord: (i) an agreement in form and substance satisfactory to
Landlord whereby the assignee or sublessee (a) assumes Tenant’s
obligations under this Lease and (b) agrees that, notwithstanding such
assignment, sublease or transfer, the provisions of Section 9.1 hereof
shall be binding upon it in respect of all future assignments, subleases and
transfers; and (ii) certificates or policies of insurance as required of
the Tenant under this Lease.

 

Section 9.10      Tenant’s Liability. The joint and several
liability of Tenant and any successors-in-interest of Tenant and the due
performance of Tenant’s obligations under this Lease shall not be discharged,
released or impaired by any agreement or stipulation made by Landlord, or any
grantee, sublessee or assignee of Landlord, extending the time, or modifying
any of the terms and provisions of this Lease, or by any waiver or failure of
Landlord, or any grantee, sublessee or assignee of Landlord, to enforce any of
the terms and provisions of this Lease.

 

Section 9.11      Lease Disaffirmance or Rejection. If at any
time after an assignment by Tenant named herein, this Lease is not affirmed or
rejected in any Federal bankruptcy proceeding of the types described in Section 10.2
hereof or any similar proceeding, or upon a termination of this Lease due to
any such proceeding, Tenant named herein, upon written request of Landlord
given within thirty (30) days after such disaffirmance, rejection or
termination (and actual notice thereof to Landlord in the event of a
disaffirmance or rejection or in the event of termination other

 

48

 

than by act of
Landlord), shall: (i) pay to Landlord all Base Rent, Additional Rent, and
other charges due and owing by the assignee to Landlord under this Lease to and
including the date of such disaffirmance, rejection or termination; and (ii) as
“tenant,” enter into a new lease of the Property with Landlord for a term commencing
on the effective date of such disaffirmance, rejection or termination and
ending on the expiration date of this Lease, unless sooner terminated in
accordance therewith, at the same rent and upon the then executory terms,
covenants and conditions contained in this Lease, except that (a) the
rights of Tenant named herein under the new lease shall be subject to the
possessory rights of any persons claiming through or under such assignee or by
virtue of any statute or of any order of any court; (b) such new lease
shall require all defaults existing under this Lease to be cured by Tenant
named herein with due diligence; and (c) such new lease shall require
Tenant named herein to pay all Base Rent and other amounts which, had this
Lease not been so disaffirmed, rejected or terminated, would have become due
under the provisions of this Lease after the date of such disaffirmance,
rejection or termination with respect to any period prior thereto. If Tenant
named herein defaults in its obligations to enter into such new lease for a
period of ten (10) days after Landlord’s request, then, in addition to all
other rights and remedies by reason of default, either at law or in equity,
Landlord shall have the same rights and remedies against Tenant named herein as
if it had entered into such new lease and such new lease had thereafter been
terminated as of the commencement date thereof by reason of Tenant’s default
thereunder.

 

ARTICLE TEN:   DEFAULTS, REMEDIES

 

Section 10.1                Covenants
and Conditions. Tenant’s performance of each of Tenant’s obligations
under this Lease is a condition as well as a covenant. Tenant’s right to
continue in possession of the Property is conditioned upon such performance.
Time is of the essence in the performance of all covenants and conditions.

 

Section l0.2                    Defaults.
Tenant shall be in material default under this Lease:

 

(a)                     Abandonment. If Tenant abandons the
property or if Tenant’s vacation of the Property results in the cancellation of
any insurance described in Section 4.4;

 

49

 

(b)                    Failure to Pay. If Tenant fails to pay rent
or any other charge or amount when due.

 

(c)                     Nonperformance. If Tenant fails to perform any
of Tenant’s non-monetary obligations under this Lease for a period of thirty (30)
days after written notice from Landlord; provided that if more than thirty (30)
days are required to complete such performance, Tenant shall not be in default
if Tenant commences such performance within the thirty (30) day period and
thereafter diligently pursues its completion. However, Landlord shall not be
required to give such notice if Tenant’s failure to perform constitutes a
non-curable breach of this Lease. The notice required by this paragraph is
intended to satisfy any and all notice requirements imposed by law on Landlord
and is not in addition to any such requirement.

 

(d)                    General Assignment and Bankruptcy. (i) If
Tenant makes a general assignment or general arrangement for the benefit of
creditors; (ii) if a petition for adjudication of bankruptcy or for
reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is
appointed to take possession of substantially all of Tenant’s assets located at
the Property or of Tenant’s interest in this Lease and possession is not
restored to Tenant within thirty (30) days; or (iv) if substantially all
of Tenant’s assets located at the Property or of Tenant’s interest in this
Lease is subjected to attachment, execution or other judicial seizure which is
not discharged within thirty (30) days. If a court of competent jurisdiction
determines that any of the acts described in this paragraph (d) is not a
default under this Lease, and a trustee is appointed to take possession (or if
Tenant remains a debtor in possession) and such trustee or Tenant transfers
Tenant’s interest hereunder, then Landlord shall receive, as Additional Rent,
the excess, if any, of the rent (or any other consideration) paid in connection
with such assignment or sublease over the rent payable by Tenant under this
Lease.

 

(e)                     Guaranty Not Revocable. If any guarantor of
the Lease revokes or otherwise terminates, or purports to revoke or otherwise
terminate, any guaranty of all or any portion of Tenant’s obligations under the
Lease. Unless otherwise expressly provided in writing, no guaranty of the Lease
is revocable.

 

Section 10.3                            Remedies. On the occurrence of any default by Tenant, Landlord
may, at any time thereafter, with or without

 

50

 

notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:

 

(a)                     Types of Remedies. Terminate Tenant’s right
to possession of the Property by any lawful means, in which case this Lease
shall terminate and Tenant shall immediately surrender possession of the
Property to Landlord. In such event, Landlord shall be entitled to recover from
Tenant all damages incurred by Landlord by reason of Tenant’s default,
including: (i) the worth at the time of the award of the unpaid Base Rent,
Additional Rent and other charges which Landlord had earned at the time of the
termination; (ii) the worth at the time of the award of the amount by
which the unpaid Base Rent, Additional Rent and other charges which Landlord
would have earned after termination until the time of the award exceeds the
amount of such rental loss that Tenant proves Landlord could have reasonably
avoided; (iii) the worth at the time of the award of the amount by which
the unpaid Base Rent, Additional Rent and other charges which Tenant would have
paid for the balance of the Lease Term after the time of the award exceeds the
amount of such rental loss that Tenant proves Landlord could have reasonably
avoided; and (iv) any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant’s failure to perform its
obligations under the Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to, any costs or
expenses Landlord incurs in maintaining or preserving the Property after such
default, the cost of recovering possession of the Property, expenses of
reletting, including necessary renovation or alteration of the Property,
Landlord’s reasonable attorneys’ fees incurred in connection therewith, and any
real estate commission paid or payable. As used in subparts (i) and (ii) above,
the “worth at the time of the award” is computed by allowing interest on unpaid
amounts at the rate of fifteen percent (15%) per annum, or such lesser amount
as may then be the maximum lawful rate. As used in subpart (iii) above,
the “worth at the time of the award” is computed by discounting such amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
the award, plus one percent (1%). If Tenant has abandoned the Property,
Landlord shall have the option of (i) retaking possession of the Property
and recovering from Tenant the amount specified in this Paragraph 10.3 (a), or (ii) proceeding
under Paragraph 10.3(b).

 

(b)                    Maintain Tenant’s Right of Possession.
Maintain Tenant’s right to possession (in California under California Civil
Code Section 1951.4, as amended, or its successor provision), in which
case this Lease shall continue in effect whether or not Tenant has

 

51

 

abandoned the
Property. In such event, Landlord shall be entitled to enforce all of Landlord’s
rights and remedies under this Lease, including the right to recover the rent
as it becomes due. Landlord and Tenant agree that the limitations on assignment
and subletting contained in Article Nine of this Lease are reasonable.
Landlord and Tenant specifically agree that Landlord’s acts, if any, of
maintenance or preservation, and Landlord’s efforts to relet the Property, or
the appointment of a receiver to protect Landlord’s interest under this Lease,
shall not constitute a termination of Tenant’s right to possession.

 

(c)                     Other Remedies. Pursue any other remedy now
or hereafter available to Landlord under the laws or judicial decisions of the
state in which the Property is located.

 

Section 10.4  Repayment
of “Free” Rent. If this Lease provides for a postponement of any
monthly rental payments, a period of “free” rent or other rent concession, such
postponed rent or “free” rent is called the “Abated Rent”. Tenant shall be
credited with having paid all of the Abated Rent on the expiration of the Lease
Term only if Tenant has fully, faithfully, and punctually performed all of
Tenant’s obligations hereunder, including the payment of all rent (other than
the Abated Rent) and all other monetary obligations and the surrender of the
Property in the physical condition required by this Lease. Tenant acknowledges
that its right to receive credit for the Abated Rent is absolutely conditioned
upon Tenant’s full, faithful and punctual performance of its obligations under
this Lease. If Tenant defaults and does not cure within any applicable grace
period, the Abated Rent shall immediately become due and payable in full, and
this Lease shall be enforced as if there were no such rent abatement or other
rent concession, and in such case the Abated Rent shall be calculated based on
the full initial rent payable under this Lease, increased as if there had never
been such Abated Rent.

 

Section 10.5  Cumulative
Remedies. Landlord’s exercise of any right or remedy shall not
prevent it from exercising any other right or remedy.

 

ARTICLE ELEVEN:   PROTECTION OF LENDERS

 

Section 11.1  Subordination.
This Lease is subordinated to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
renewals, modifications, consolidations, replacements or extensions

 

52

 

thereof, whenever
made or recorded. Tenant shall cooperate with Landlord and any lender which is
acquiring a security interest in the Property or the Lease. Tenant shall
execute such further documents and assurances as such lender may require,
provided that Tenant’s obligations under this Lease shall not be increased in
any material way (the performance of ministerial acts or providing notices
shall not be deemed material). Notwithstanding any provision of this section 11.1,
Tenant’s right to quiet possession of the Property during the Lease Term shall
not be disturbed if Tenant pays the rent and performs all of Tenant’s
obligations under this Lease and is not otherwise in default. If any ground
lessor, beneficiary or mortgagee elects to have this Lease prior to the lien of
its ground lease, deed of trust or mortgage and gives written notice thereof to
Tenant, this Lease shall be deemed prior to such ground lease, deed of trust or
mortgage whether this Lease is dated prior or subsequent to the date of said
ground Lease, deed of trust or mortgage or the date of recording thereof.

 

Section 11.2  Attornment.
If Landlord’s interest in the Property is acquired by any ground lessor,
beneficiary under a deed of trust, mortgagee, or purchaser at a foreclosure
sale, Tenant shall attorn to the transferee of or successor to Landlord’s
interest in the property and recognize such transferee or successor as Landlord
under this Lease. Tenant waives the protection of any statute or rule of
law which gives or purports to give Tenant any right to terminate this Lease or
surrender possession of the Property upon the transfer of Landlord’s interest.

 

Section 11.3  Signing
of Documents. Tenant shall sign and deliver any instrument or
documents necessary or appropriate to evidence any such attornment or
subordination or agreement to do so. If Tenant fails to do so within ten (10) days
after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.

 

Section 11.4  Estoppel
Certificates.

 

(a)                     Requirements. Upon Landlord’s written
request, Tenant shall execute, acknowledge and deliver to Landlord a written
statement certifying: (i) that none of the terms or provisions of this
Lease have been changed (or if they have been changed, stating how they have
been changed) ; (ii) that this Lease has not been canceled or terminated; (iii) the
last date of payment of the Base

 

53

 

Rent and other
charges and the time period covered by such payment; (iv) that Landlord is
not in default under this Lease (or, if Landlord is claimed to be in default,
stating why); and (v) such other representations or information with
respect to Tenant or the Lease as Landlord may reasonably request or which
any prospective purchaser or encumbrancer of the Property may require.
Tenant shall deliver such statement to Landlord within ten (10) days after
Landlord’s request. Landlord may give any such statement by Tenant to any
prospective purchaser or encumbrancer of the Property. Such purchaser or
encumbrancer may rely conclusively upon such statement as true and
correct.

 

(b)                    Tenant’s Nondelivery. If Tenant does not
deliver such statement to Landlord within such ten (10) day period,
Landlord, and any prospective purchaser or encumbrancer, may conclusively
presume and rely upon the following facts: (i) that the terms and
provisions of this Lease have not been changed except as otherwise represented
by Landlord; (ii) that this Lease has not been canceled or terminated
except as otherwise represented by Landlord; (iii) that not more than one
month’s Base Rent or other charges have been paid in advance; and (iv) that
Landlord is not in default under the Lease. In such event, Tenant shall be
estopped from denying the truth of such facts.

 

Section 11.5  Tenant’s
Financial Condition. Within ten (10) days after written request
from Landlord, Tenant and any guarantor of Tenant’s obligations shall deliver
to Landlord such financial statements and tax returns as Landlord reasonably
requires to verify the net worth of Tenant or any assignee, subtenant, or
guarantor of Tenant. In addition, Tenant shall deliver to any lender designated
by Landlord any financial statements required by such lender to facilitate the
financing or refinancing of the Property. Tenant represents and warrants to
Landlord that each such financial statement is a true and accurate statement as
of the date of such statement. All financial statements shall be confidential
and shall be used only for the purposes set forth in this Lease.

 

ARTICLE TWELVE:   LEGAL COSTS

 

Section 12.1  Legal
Proceedings. If Tenant or Landlord shall be in breach or default
under this Lease, such party (the “Defaulting Party”) shall reimburse the other
party (the “Nondefaulting Party”) upon demand for any legal fees and legal
costs which the Nondefaulting Party incurs in connection with any

 

54

 

breach or default
of the Defaulting Party under this Lease, whether or not suit is commenced or
judgment entered. Such attorneys’ fees and costs shall include legal fees and
costs incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the
provisions of this Lease is commenced, the court in such action shall award to
the party in whose favor a judgment is entered, a reasonable sum as attorneys’
fees and costs. The losing party in such action shall pay such attorneys’ fees
and costs. Tenant shall also indemnify Landlord against and hold Landlord
harmless from all costs, expenses, demands and liability Landlord may incur
if Landlord becomes or is made a party to any claim or action (a) instituted
by Tenant against any third party, or by any third party against Tenant, or by
or against any person holding any interest under or using the Property by
license of or agreement with Tenant; (b) for foreclosure of any lien for
labor or material furnished to or for Tenant or such other person; (c) otherwise
arising out of or resulting from any act or transaction of Tenant or such other
person; or (d) necessary to protect Landlord’s interest under this Lease
in a bankruptcy proceeding, or other proceeding under Title 11 of the United
States Code, as amended. Tenant shall defend Landlord against any such claim or
action at Tenant’s expense with counsel reasonably acceptable to Landlord or,
at Landlord’s election, Tenant shall reimburse Landlord for any legal fees or
costs Landlord incurs in any such claim or action.

 

Section 12.2  Landlord’s
Consent. Tenant shall pay Landlord’s attorneys’ fees incurred in
connection with Tenant’s request for Landlord’s consent under Article Nine
(Assignment and Subletting), or in connection with any other act which Tenant
proposes to do and which requires Landlord’s consent.

 

ARTICLE THIRTEEN:   MISCELLANEOUS
PROVISIONS

 

Section 13.1  Non-Discrimination.
Tenant promises, and it is a condition to the continuance of this Lease, that
there will be no discrimination against, or segregation of, any person or group
of persons on the basis of race, color, sex, creed, national origin or ancestry
in the leasing, subleasing, transferring, occupancy, tenure or use of the
Property or any portion thereof.

 

Section 13.2  Landlord’s
Liability; Certain Duties.

 

(a)                     “Landlord”. As used in this Lease, the term
“Landlord” means only the current owner or owners of the fee title to the

 

55

 

Property or the
leasehold estate under a ground lease of the Property at the time in question.
Each Landlord is obligated to perform the obligations or Landlord under
this Lease only during the time such Landlord has title to the fee interest in
the Property. Any Landlord who transfers its title or interest is relieved of
all liability with respect to the obligations of Landlord under this Lease to
be performed on or after the date of transfer. However, each Landlord shall
deliver to its transferee all funds that Tenant previously paid if such funds
have not yet been applied under the terms of this Lease.

 

(b)                    Tenant’s Notice of Landlord’s Default.
Tenant shall give written notice of any failure by Landlord to perform any
of its obligations under this Lease to Landlord and to any ground lessor,
mortgagee or beneficiary under any deed of trust encumbering the Property whose
name and address have been furnished to Tenant in writing. Landlord shall not
be in default under this Lease unless Landlord (or such ground lessor,
mortgagee or beneficiary) fails to cure such non-performance within thirty (30)
days after receipt of Tenant’s notice. However, if such non-performance
reasonably requires more than thirty (30) days to cure, Landlord shall not be
in default if such cure is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.

 

(c)                     Liability. Notwithstanding any term or
provision herein to the contrary, the liability of Landlord for the performance
of its duties and obligations under this Lease is limited to Landlord’s
interest in the Property, and neither the Landlord nor its partners,
shareholders, officers or other principals shall have any personal liability under
this Lease.

 

Section 13.3  Severability.
A determination by a court of competent jurisdiction that any provision of this
Lease or any part thereof is illegal or unenforceable
shall not cancel or invalidate the remainder of such provision or this Lease,
which shall remain in full force and effect.

 

Section 13.4  Interpretation.
The captions of the Articles or Sections of this Lease are to assist the
parties in reading this Lease and are not a part of the terms or
provisions of this Lease. Whenever required by the context of this Lease, the
singular shall include the plural and the plural shall include the singular.
The masculine, feminine and neuter genders shall each include the other. In any
provision relating to the conduct, acts or omissions of Tenant, the term “Tenant”
shall include Tenant’s agents,

 

56

 

employees,
contractors, invitees, successors or others using the Property with Tenant’s
expressed or implied permission. This Lease, and any guaranty executed in
connection therewith, is to be deemed prepared jointly by the Landlord and the
Tenant, and any uncertainty or ambiguity existing therein, if any, shall not be
interpreted against any party, but instead, according to the application of the
rules of interpretation of contracts. Both Landlord and Tenant acknowledge
the right and opportunity to have been represented by legal counsel in the
preparation of this Lease and any accompanying guaranty. Therefore, this Lease
and any guaranty thereof shall be interpreted as if prepared by both the
Landlord and the Tenant.

 

Section 13.5  Incorporation
of Prior Agreements, Modifications. This Lease is the only agreement
between the parties pertaining to the lease of the Property and no other
agreements are effective. All amendments to this Lease shall be in writing and
signed by all parties. Any other attempted amendment shall be void.

 

Section 13.6  Notices. All notices required or permitted under this Lease shall
be in writing and shall be personally delivered, sent by facsimile, delivered
by next-day overnight delivery by a recognized overnight mail and delivery
company; or sent by certified mail, return receipt requested, postage prepaid,
or sent by United States mail postage prepaid. Notices to Tenant shall be
delivered to the address specified in Section 1.3 above, except that upon
Tenant’s taking possession of the Property, the property shall be Tenant’s
address for notice purposes. Notices to Landlord shall be delivered to the
address specified in section 1.2 above. All notices shall be effective
upon personal delivery; if mailed, then three (3) days after deposit in
the United States mail; if delivered by next-day delivery, then the next
business day; or if sent by facsimile, then upon the sending of such facsimile
provided a copy of same is mailed by United states mail to the address and in
the manner provided for in this paragraph. Either party may change its
notice address upon written notice to the other party.

 

Section 13.7  Waivers. All waivers must be in writing and signed by the waiving
party. Landlord’s failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a

 

57

 

payment check
shall be binding on Landlord. Landlord may, with or without notice to Tenant,
negotiate such check without being bound to the conditions of such statement.

 

Section 13.8  Recordation.
Tenant shall not record this Lease without prior written consent from Landlord.
Landlord may require that a “Short Form” memorandum of this Lease be
executed by both parties and be recorded.

 

Section 13.9  Binding
Effect; Choice of Law. This Lease binds any party who legally
acquires any rights or interest in this Lease from Landlord or Tenant. However,
Landlord shall have no obligation to Tenant’s successor unless the rights or
interests of Tenant’s successor are acquired in accordance with the terms of
this Lease. The laws of the State of California shall govern this Lease.

 

Section 13.10  Corporate
Authority; Partnership Authority. If Tenant is a corporation, each
person signing this Lease on behalf of Tenant represents and warrants that he
has full authority to do so and that this Lease binds the corporation. On the
date this Lease is signed, Tenant shall deliver to Landlord a certified copy of
a resolution of Tenant’s Board of Directors authorizing the execution of this
Lease or other evidence of such authority reasonably acceptable to Landlord. If
Tenant is a partnership, each person or entity signing this Lease for Tenant
represents and warrants that he or it is a general partner of the partnership,
that he or it has full authority to sign for the partnership and that this
Lease binds the partnership and all general partners of the partnership. Tenant
shall give written notice to Landlord of any general partner’s withdrawal or addition.
On the date this Lease is signed, Tenant shall deliver to Landlord a copy of
Tenant’s recorded statement of partnership or certificate of limited
partnership. If Tenant is a limited liability company, each person or entity
signing this Lease for Tenant represents and warrants that he or it is the
manager of the limited liability company, that he or it has full authority to
sign for the limited liability company, and that this Lease binds the limited
liability company. Tenant shall give written notice to Landlord of any limited
liability company’s manager’s withdrawal or addition. On the date this Lease is
signed, Tenant shall deliver to Landlord a copy of Tenant’s certificate of
organization and operating agreement of the limited liability company.

 

58

 

Section 13.11  Joint
and Several Liability. All parties signing this Lease as Tenant
shall be jointly and severally liable for all obligations of Tenant.

 

Section 13.12  Force
Majeure. If Landlord cannot perform any of its obligations due
to events beyond Landlord’s control, the time provided for performing such
obligations shall be extended by a period of time equal to the duration of such
events. Events beyond Landlord’s control include, but are not limited to, acts
of God, war, civil commotion, labor disputes, strikes, fire, flood or other
casualty, shortages of labor or material, government regulation or restriction
and weather conditions.

 

Section 13.13  Execution
of Lease. This Lease may be executed in counterparts and, when
all counterpart documents are executed, the counterparts shall constitute
a single binding instrument. Landlord’s delivery of this Lease to Tenant shall
not be deemed an offer to lease and shall not be binding upon either party until
executed and delivered by both parties.

 

Section 13.14  Survival.
All representations and warranties of Landlord and Tenant shall survive the
termination of this Lease.

 

Landlord and
Tenant have initialed and signed this Lease and have initialed all Riders which
are attached to or incorporated by reference in this Lease.

 

	
   

  	
  “LANDLORD”

  
	
   

  	
   

  
	
   

  	
  Cypress-Southbay,
  LLC,

  a California limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Cypress
  Management Company, Inc.,

  a California corporation, Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Brian L. Harvey

  	
   

  
	
   

  	
   

  	
   

  	
  Brian
  L. Harvey, President

  

 

59

 

	
   

  	
  “TENANT” 

  
	
   

  	
   

  
	
   

  	
  Marlog
  Cargo USA, Inc.,

  a California corporation,

  d/b/a Schumacher Cargo Lines

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ A. Howden

  	
   

  
	
   

  	
  Name:

  	
  A. Howden

  	
   

  
	
   

  	
  Its:

  	
  V President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Martin Baker

  	
   

  
	
   

  	
  Name:

  	
  Martin Baker

  	
   

  
	
   

  	
  Its:

  	
  President

  	
   

  
					

 

60

 

CONSTRUCTION RIDER

TO INDUSTRIAL REAL ESTATE LEASE

DATED JULY 29, 2003 BY AND BETWEEN

CYPRESS-SOUTHBAY, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY,

AND

MARLOG CARGO USA, INC.,
A CALIFORNIA CORPORATION

 

 

1.                          Repairs to Existing Building Improvements.
Landlord shall perform prior to the Commencement Date, at Landlord’s sole
cost and expense, the following described items (“Tenant Improvements”) to the
building portion of the Property under the following described, terms:

 

(i)                        Clean
the interior portion of the Property.

 

(ii)                     Freshly
paint the interior office areas and warehouse walls of the Property.

 

(iii)                  Verify
that the mechanical systems are in good and operating order.

 

(iv)                 Replace,
as necessary, light bulbs in the office area and warehouse area of the
Property.

 

(v)                    Install
new carpeting in the interior office areas of the Property.

 

All Tenant Improvements shall be done to Landlord’s normal and standard
qualities and quantities for properties similar to the Property.

 

2.                          No Setoff. In the event that Tenant
claims that there are defects in the performance or construction of the Tenant
Improvements or defective repairs of the building, Tenant may not setoff
against any amounts owed to Landlord for rent or otherwise under the Lease.

 

1

 

Landlord and
Tenant have executed this Construction Rider to Industrial Real Estate Lease on
the date of the Lease.

 

	
   

  	
  “Landlord”

  

  Cypress-Southbay, LLC,

  a California limited liability company

  
	
   

  	
  By:

  	
  

  Cypress Management Company, Inc.,

  a California corporation, Manager

  
	
  

  	
   

  	
  By:

  	
  

  /s/ Brian L. Harvey

  
	
   

  	
   

  	
   

  	
  Brian L. Harvey, President

  

 

	
   

  	
   

  	
   

  	
  “Tenant”

  

  Marlog Cargo USA, Inc.,

  a California corporation,

  d/b/a Schumacher Cargo Lines

  
	
   

  	
   

  	
  

  	
   

  	
  By:

  	
  

  /s/ A. Howden

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  A. Howden

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  V. President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Martin Baker

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Martin Baker

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  President

  
								

 

2

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