Document:

Exhibit 4.3

 

INVESTORS’ RIGHTS AGREEMENT

 

This Investors’ Rights Agreement (this “Agreement”) is made as of the
2nd day of December 1997, by and between OMP Acquisition Corporation, a
California corporation (the “Company”), Mandarin Partners LLC (“Mandarin”) and
Zein and Samar Obagi Family Trust (“Obagi”). Mandarin and Obagi are referred to
collectively as the “Investors”.

 

RECITALS

 

WHEREAS, the Company and the Investors are parties to certain stock
purchase agreements of even date herewith (collectively, the “Purchase
Agreements”);

 

WHEREAS, in order to induce the Company to enter into the Purchase
Agreements and to induce the Investors to invest funds in the Company pursuant
to the Purchase Agreements, the Investors and the Company hereby agree that
this Agreement shall govern the rights of the Investors to cause the Company to
register shares of Common Stock issued or issuable to the Investors and certain
other matters as set forth herein;

 

NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

 

1.             Definitions.
For purposes of this Agreement:

 

(a)           The term “Act” means the Securities Act of
1933, as amended.

 

(b)           The term “Co-Sale Stock” means any shares of
the Company’s capital stock now owned or subsequently acquired by any Investor.

 

(c)           The term “Form S-3” means such form under the
Act as in effect on the date hereof or any registration form under the Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company with
the SEC.

 

(d)           The term “Holder” means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 8.2 hereof.

 

(e)           The term “1934 Act” shall mean the Securities
Exchange Act of 1934, as amended.

 

(f)            The term “register”, “registered,” and
“registration” refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.

 

 

(g)           The
term “Registrable Securities” means (i) any common stock (“Common Stock”) of
the Company held or hereafter acquired by a Holder and (ii) any capital stock
held or hereafter acquired by a Holder which capital stock is convertible into
Common Stock, excluding in all cases, however, any Registrable Securities sold
by a person in a transaction in which his rights under Section 2 are not
assigned.

 

(h)           The number of shares of “Registrable
Securities then outstanding” shall be determined by the number of shares of
Common Stock then outstanding which are Registrable Securities.

 

(i)            The term “SEC” shall mean the Securities and
Exchange Commission.

 

2.             Registration Rights. The Company covenants and agrees as follows:

 

2.1           Request for Registration.

 

(a)           If the Company shall receive at any time at
least three (3) months after the effective date of the first registration
statement for a public offering of securities of the Company (other than a
registration statement relating either to the sale of securities to employees
of the Company pursuant to a stock option, stock purchase or similar plan or a
SEC Rule 145 transaction), a
written request from the Holders of a majority of the Registrable Securities
then outstanding that the Company file a registration statement under the Act
covering the registration of at least fifty percent (50%) of the Registrable
Securities then outstanding (or a lesser percent if the anticipated aggregate
offering price, net of underwriting discounts and commissions, would exceed
$7,500,000), then the Company shall:

 

(i)            within ten (10) days of the receipt thereof,
give written notice of such request to all Holders; and

 

(ii)           effect as soon as practicable, and in any
event within sixty (60) days of
the receipt of such request, the registration under the Act of all Registrable
Securities which the Holders request to be registered, subject to the
limitations of subsection 2.1(b), within twenty (20) days of the mailing of
such notice by the Company in accordance with Section 5.7.

 

(b)           If the Holders initiating the registration
request hereunder (“Initiating Holders”) intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to subsection
2.1(a) and the Company shall include such information in the written notice
referred to in subsection 2.l(a). The underwriter will be selected by the
Company and shall be reasonably acceptable to a majority in interest of the
Initiating Holders. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder’s participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the

 

2

 

Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in subsection 2.3(e)) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 2.1, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder; provided, however, that the number of
shares of Registrable Securities to be included in such underwriting shall not
be reduced unless all other securities are first entirely excluded from the
underwriting.

 

(c)           Notwithstanding the
foregoing, if the Company shall furnish to Holders requesting a registration
statement pursuant to this Section 2.1, a certificate signed by the Chief
Executive Officer of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such registration statement to be filed and it
is therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer taking action with respect to such filing
for a period of not more than 120 days after receipt of the request of the
Initiating Holders.

 

(d)           In addition, the
Company shall not be obligated to effect, or to take any action to effect, any
registration pursuant to this Section 2.1:

 

(i)            After the Company has
effected two (2) registrations pursuant to this Section 2.1 and such
registrations have been declared or ordered effective;

 

(ii)           During the period
starting with the date sixty (60) days prior to the Company’s good faith
estimate of the date of filing of, and ending on a date one hundred eighty
(180) days after the effective date of, a registration subject to Section 2.2
hereof; provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or

 

(iii)          If the Initiating
Holders propose to dispose of shares of Registrable Securities that may be
immediately registered on Form S-3 pursuant to a request made pursuant to
Section 2.11 below.

 

2.2           Company Registration.
If (but without any obligation to do so) the Company proposes to register
(including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its stock or other securities under
the Act in connection with the public offering of such securities solely for
cash (other than a registration relating solely to the sale of securities to
participants in a Company stock plan, a registration on any form which does not
include substantially the same information as would be required to be

 

3

 

included in a
registration statement covering the sale of the Registrable Securities, or a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities which are also being registered),
the Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within twenty
(20) days after mailing of such notice by the Company in accordance with
Section 8.7, the Company shall, subject to the provisions of Section 2.7, cause
to be registered under the Act all of the Registrable Securities that each such
Holder has requested to be registered.

 

2.3           Obligations of the
Company. Whenever required under this Section 2 to effect the registration
of any Registrable Securities, the Company shall, as expeditiously as
reasonably possible:

 

(a)           Prepare and file with
the SEC a registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to become
effective, and, upon the request of the Holders of a majority of the Registrable
Securities registered thereunder, keep such registration statement effective
for a period of up to one hundred twenty (120) days or until the distribution
contemplated in the Registration Statement has been completed; provided,
however, that (i) such 120-day period shall be extended for a period of time
equal to the period the Holder refrains from selling any securities included in
such registration at the request of an underwriter of Common Stock (or other
securities) of the Company; and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such Registrable
Securities are sold, provided that Rule 415, or any successor rule under the
Act, permits an offering on a continuous or delayed basis, and provided further
that applicable rules under the Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
which (I) includes any prospectus required by Section 10(a)(3) of the Act or
(II) reflects facts or events representing a material or fundamental change in
the information set forth in the registration statement, the incorporation by
reference of information required to be included in (I) and (II) above to be
contained in periodic reports filed pursuant to Section 13 or 15(d) of the 1934
Act in the registration statement.

 

(b)           Prepare and file with
the SEC such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.

 

(c)           Furnish to the Holders
such numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as they
may reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.

 

4

 

(d)           Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.

 

(e)           In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.

 

(f)            Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.

 

(g)           Cause all such Registrable Securities
registered pursuant hereunder to be listed on each securities exchange on which
similar securities issued by the Company are then listed.

 

(h)           Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.

 

2.4           Furnish Information.

 

(a)           It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 2 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such
securities as shall be required to effect the registration of such Holder’s
Registrable Securities.

 

(b)           The Company shall have no obligation with
respect to any registration requested pursuant to Section 2.1 or Section 2.11
if, due to the operation of subsection 2.4(a), the number of shares or the
anticipated aggregate offering price of the Registrable Securities to be included
in the registration does not equal or exceed the number of shares or the
anticipated aggregate offering price required to originally trigger the
Company’s obligation to initiate such registration as specified in subsection
2.1(a) or subsection 2.11(b)(2), whichever is applicable.

 

2.5           Expenses of Demand Registration. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 2.1, including (without limitation) all
registration, filing and qualification fees, printers’ and accounting fees,
fees and disbursements of counsel for the Company

 

5

 

(including fees
and disbursements of counsel for the Company in its capacity as counsel to the
selling Holders hereunder; if Company counsel does not make itself available
for this purpose, the Company will pay the reasonable fees and disbursements of
one counsel for the selling Holders) shall be borne by the Company; provided,
however, that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 2.1 if the registration
request is subsequently withdrawn at the request of the Holders of a majority
of the Registrable Securities to be registered (in which case all Participating
Holders shall bear such expenses), unless the Holders of a majority of the
Registrable Securities agree to forfeit their right to one demand registration
pursuant to Section 2.1.

 

2.6           Expenses of Company
Registration. The Company shall bear and pay all expenses incurred in
connection with any registration, filing or qualification of Registrable
Securities with respect to the registrations pursuant to Section 2.2 for each
Holder (which right may be assigned as provided in Section 8.2), including
(without limitation) all registration, filing, and qualification fees, printers
and accounting fees relating or apportionable thereto and the fees and
disbursements of counsel for the Company in its capacity as counsel to the
selling Holders hereunder; if Company counsel does not make itself available
for this purpose, the Company will pay the reasonable fees and disbursements of
one counsel for the selling Holders selected by them, but excluding
underwriting discounts and commissions relating to Registrable Securities.

 

2.7           Underwriting
Requirements. In connection with any offering involving an underwriting of
shares of the Company’s capital stock, the Company shall not be required under
Section 2.2 to include any of the Holders’ securities in such underwriting
unless they accept the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it (or by other persons entitled to
select the underwriters), and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders)
but in no event shall (i) the amount of securities of the selling shareholders
included in the offering be reduced below twenty percent (20%) of the total
amount of securities included in such offering, unless such offering is the
initial public offering of the Company’s securities in which case the selling
shareholders may be excluded if the underwriters make the determination
described above and no other shareholder’s securities are included or (ii)
notwithstanding (i) above, any shares being sold by a shareholder exercising a
demand registration right similar to that granted in Section 2.1 be excluded
from such offering. For purposes of the preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such Holder,

 

6

 

or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single “selling
shareholder”, and any pro-rata reduction with respect to such “selling
shareholder” shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
“selling shareholder”, as defined in this sentence.

 

2.8           Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.

 

2.9           Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 2:

 

(a)           To the extent permitted
by law, the Company will indemnify and hold harmless each Holder, any
underwriter (as defined in the Act) for such Holder and each person, if any,
who controls such Holder or underwriter within the meaning of the Act or the
1934 Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a “Violation”); (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Act, the 1934
Act or any state securities law; and the Company will pay to each such Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 2.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by any such Holder, underwriter or
controlling person.

 

(b)           To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the Company within
the meaning of the Act, any underwriter, any other Holder selling securities in
such registration statement and any controlling person of any such underwriter
or other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such losses,
claims, damages, or

 

7

 

liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred
by any person intended to be indemnified pursuant to this subsection 2.9(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 2.9(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this subsection
2.9(b) exceed the gross proceeds from the offering received by such Holder.

 

(c)           Promptly after receipt
by an indemnified party under this Section 2.9 of notice of the commencement of
any action (including any governmental action), such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 2.9, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party (together with all other indemnified parties which
may be represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
2.9.

 

(d)           If the indemnification provided for in this
Section 2.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the
other in connection will the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties’ relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission.

 

8

 

(e)           Notwithstanding the
foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall control.

 

(f)            The obligations of the
Company and Holders under this Section 2.9 shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Section 2, and otherwise.

 

2.10         Reports Under
Securities Exchange Act of 1934. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Act and any other rule
or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:

 

(a)           make and keep public
information available, as those terms are understood and defined in SEC Rule
144, at all times after ninety (90) days after the effective date of the first
registration statement filed by the Company for the offering of its securities
to the general public;

 

(b)           file with the SEC in a
timely manner all reports and other documents required of the Company under the
Act and the 1934 Act; and

 

(c)           furnish to any Holder,
so long as the Holder owns any Registrable Securities, forthwith upon request
(i) a written statement by the Company that it has complied with the reporting
requirements of SEC Rule 144 (at any time after ninety (90) days after the
effective date of the first registration statement filed by the Company), the
Act and the 1934 Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing any Holder of any rule or regulation
of the SEC which permits the selling of any such securities without
registration or pursuant to such form.

 

2.11         Form S-3 Registration.
In case the Company shall receive from any Holder or Holders a written request
or requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:

 

(a)           promptly give written
notice of the proposed registration, and any related qualification or
compliance, to all other Holders; and

 

(b)           as soon as practicable,
effect such registration and all such qualifications and compliances as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Holder’s or Holders’ Registrable Securities as are

 

9

 

specified in such
request, together with all or such portion of the Registrable Securities of any
other Holder or Holders joining in such request as are specified in a written
request given within fifteen (15) days after receipt of such written notice
from the Company; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
section 2.11: (1) if Form S-3 is not available for such offering by the
Holders; (2) if the Holders, together with the holders of any other securities
of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate price
to the public (net of any underwriters’ discounts or commissions) of less than
$1,000,000; (3) If the Company shall furnish to the Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its shareholders for such Form S-3 Registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more than
sixty (60) days after receipt of the request of the Holder or Holders under
this Section 2.11; (4) if the
Company has, within the twelve (12) month period preceding the date of such
request, already effected one registration on Form S-3 for the Holders pursuant
to this Section 2.11; or (5) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.

 

(c)           Subject to the
foregoing, the Company shall file a registration statement covering the
Registrable Securities and other securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Holders.
All expenses incurred in connection with a registration requested pursuant to
Section 2.11, including (without limitation) all registration, filing,
qualification, printer’s and accounting fees and the reasonable fees and
disbursements of counsel for the selling Holder or Holders and counsel for the
Company, but excluding any underwriters’ discounts or commissions associated
with Registrable Securities, shall be borne pro rata by the Holder or Holders
participating in the Form S-3 Registration. Registrations effected pursuant to
this Section 2.11 shall not be counted as demands for registration or
registrations effected pursuant to Sections 2.1 or 2.2, respectively.

 

2.12         Limitations on
Subsequent Registration Rights. From and after the date of this Agreement,
the Company shall not, without the prior written consent of the Holders of a
majority of the outstanding Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder (a) to include such securities in
any registration filed under Section 2.1 hereof, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of his securities will
not reduce the amount of the Registrable Securities of the Holders which is
included or (b) to make a demand registration which could result in such
registration statement being declared effective prior to the earlier of either
of the dates set forth in subsection 2.1(a) or within one hundred twenty (120)
days of the effective date of any registration effected pursuant to Section
2.1.

 

10

 

2.13         “Market Stand-Off”
Agreement. Each Investor hereby agrees that, during the period of duration
specified by the Company and an underwriter of common stock or other securities
of the Company, following the effective date of a registration statement of the
Company filed under the Act, it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any securities of the Company held by it at
any time during such period except common stock included in such registration;
provided, however, that:

 

(a)           such agreement shall be
applicable only to the first two such registration statements of the Company
which covers common stock (or other securities) to be sold on its behalf to the
public in an underwritten offering;

 

(b)           all officers and
directors of the Company and all other persons with registration rights
(whether or not pursuant to this Agreement) enter into similar agreements; and

 

(c)           such market stand-off
time period shall not exceed one hundred eighty (180) days.

 

In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.

 

Notwithstanding the foregoing, the obligations described in this
Section 2.13 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-14 or Form S-15 or similar forms which may be promulgated
in the future.

 

2.14         Termination of Registration
Rights.

 

(a)           No Holder shall be
entitled to exercise any right provided for in this Section 1 after three (3)
years following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with
the initial firm commitment underwritten offering of its securities to the
general public.

 

(b)           In addition, the right
of any Holder to request registration or inclusion in any registration pursuant
to Section 2.2 shall terminate on the closing of the first Company-initiated
registered public offering of Common Stock of the Company if all shares of
Registrable Securities held or entitled to be held upon conversion by such
Holder may immediately be sold under Rule 144 during any 90-day period, or on
such date after the closing of the first Company-initiated registered public
offering of Common Stock of the Company as all shares of Registrable Securities
held or entitled to be held upon conversion by such Holder may

 

11

 

immediately be
sold under Rule 144 during any 90-day period; provided, however, that the
provisions of this Section 2.14(b) shall not apply to any Holder who owns more
than two percent (2%) of the Company’s outstanding stock until such time as
such Holder owns less than two percent (2%) of the outstanding stock of the
Company.

 

3.             Covenants of the
Company.

 

3.1           Delivery of
Financial Statements. The Company shall deliver to each Investor:

 

(a)           as soon as practicable,
but in any event within ninety (90) days after the end of each fiscal year of
the Company, an income statement for such fiscal year, a balance sheet of the
Company and statement of shareholder’s equity as of the end of such year, and a
cash flow statement for such year, such year-end financial reports to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles (“gaap”), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company;

 

(b)           as soon as practicable,
but in any event within forty-five (45) days after the end of each of the first
three (3) quarters of each fiscal year of the Company, an unaudited income
statement, a cash flow statement for such fiscal quarter and an unaudited
balance sheet as of the end of such fiscal quarter;

 

(c)           as soon as practicable,
but in any event thirty (30) days prior to the end of each fiscal year, a
budget and business plan for the next fiscal year, prepared on a monthly basis,
including income statements, balance sheets, and cash flow statements for such
months and, as soon as prepared, any other budgets or revised budgets prepared
by the Company;

 

(d)           with respect to the
financial statements called for in subsection (b) of this Section 3.1, an instrument
executed by the Chief Financial Officer or President of the Company and
certifying that such financials were prepared in accordance with gaap
consistently applied with prior practice for earlier periods (with the
exception of footnotes that may be required by gaap) and fairly present the
financial condition of the Company and its results of operation for the period
specified, subject to year-end audit adjustment;

 

(e)           such other information
relating to the financial condition, business, prospects or corporate affairs
of the Company as the Investor or any assignee of the Investor may from time to
time request, provided, however, that the Company shall not be obligated under
this subsection (e) or any other subsection of Section 3.1 to provide information
which it deems in good faith to be a trade secret or similar confidential
information.

 

12

 

3.2           Inspection. The
Company shall permit each Investor, at such Investor’s expense, to visit and
inspect the Company’s properties, to examine its books of account and records
and to discuss the Company’s affairs, finances and accounts with its officers,
all at such reasonable times as may be requested by the Investor; provided,
however, that the Company shall not be obligated pursuant to this Section 3.2
to provide access to any information which it reasonably considers to be a
trade secret or similar confidential information.

 

4.             Co-Sale Rights.

 

4.1           Sales by Mandarin.

 

(a)           If Mandarin proposes to
sell or transfer any shares of Co-Sale Stock in one or more related
transactions, then Mandarin shall promptly give written notice (the “Notice”)
to the Company and Obagi at least twenty (20) days prior to the closing of such
sale or transfer. The Notice shall describe in reasonable detail the proposed
sale or transfer including, without limitation, the class, series and number of
shares of Co-Sale Stock to be sold or transferred, the nature of such sale or
transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the sale or transfer is
being made pursuant to the provisions or Sections 4.1 or 4.2 hereof, the Notice
shall state under which Section of this Agreement the sale or transfer is being
made.

 

(b)           Obagi shall have the right, exercisable upon
written notice to Mandarin within fifteen (15) days after receipt of the
Notice, to participate in such sale of Co-Sale Stock on the same terms and
conditions; provided, that Obagi owns shares of the same class or classes as
the Co-Sale Stock identified in the Notice. The parties acknowledge that the
Series A Preferred Stock and the Series B Preferred of the Company are of the
same class of stock and are to be treated as such for the purposes of this
Section 4.

 

(c)           Obagi may sell all or any part of that number
or shares of Co-Sale Stock, of the same class and/or series as that identified
in the Notice, equal to the product obtained by multiplying (i) the aggregate
number of shares of Co-Sale Stock covered by the Notice by (ii) a fraction the
numerator of which is the number of shares of Co-Sale Stock of the same class
and/or series identified in the Notice owned by Obagi at the time of the sale
or transfer and the denominator of which is the total number of shares of
Co-Sale Stock of the same class and/or series identified in the Notice owned by
Mandarin and Obagi at the time of the sale or transfer.

 

(d)           Obagi shall effect its participation in the
sale by promptly delivering to Mandarin for transfer to the prospective
purchaser one or more certificates, properly endorsed for transfer, which
represent the type and number of shares of Co-Sale Stock which Obagi elects to
sell.

 

(e)           The stock certificate or certificates that
Obagi delivers to Mandarin pursuant to Section 4.l(d) shall be transferred to
the prospective purchaser in consummation of the sale of the Co-Sale Stock
pursuant to the terms and conditions specified in the Notice, and Mandarin
shall concurrently therewith remit to Obagi that portion of the sale proceeds
to which

 

13

 

Obagi is entitled by reason of its participation in such sale. To the
extent that any prospective purchaser or purchasers prohibits such assignment
or otherwise refuses to purchase shares or other securities from Obagi,
Mandarin shall not sell to such prospective purchaser or purchasers any Co-Sale
Stock unless and until, simultaneously with such sale, Mandarin shall purchase
such shares from Obagi for the same consideration and on the same terms and
conditions as the proposed transfer described in the Notice.

 

(f)            The exercise or non-exercise of the rights of
Obagi to participate in one or more sales of Co-Sale Stock made by Mandarin
shall not adversely affect Obagi’s rights to participate in subsequent sales of
Co-Sale Stock subject to Section 4.l (a).

 

(g)           If Obagi does not elect to participate in the
sale of the Co-Sale Stock subject to the Notice, Mandarin may, not later than
ninety (90) days following delivery to the Company and Obagi of the Notice,
conclude a transfer of not less than all of the Co-Sale Stock covered by the
Notice on terms and conditions not more favorable to the transferor than those
described in the Notice. Any proposed transfer on terms and conditions more
favorable than those described in the Notice, as well as any subsequent
proposed transfer of any of the Co-Sale Stock by Mandarin, shall again be
subject to the co-sale rights of Obagi and shall require compliance by Mandarin
with the procedures described in this Section 4.1.

 

4.2           Exempt Transfers.

 

(a)           Notwithstanding the foregoing, the co-sale
rights of Obagi shall not apply to (i) any pledge of Co-Sale Stock made
pursuant to a bona fide loan transaction that creates a mere security interest,
(ii) any bona fide gift or charitable donation or (iii) any distribution to the
members of Mandarin; provided that (A) Mandarin shall inform Obagi of such
pledge, transfer, gift, donation or distribution prior to effecting it and (B)
the pledgee, transferee, donee or distributee shall furnish Obagi with a
written agreement to be bound by and comply with all provisions of Section 4 of
this Agreement. Such transferred Co-Sale Stock shall remain “Co-Sale Stock”
hereunder, and such pledgee, transferee or donee shall be treated as “Mandarin”
for purposes of this Agreement.

 

(b)           Notwithstanding the foregoing, the provisions
of Section 4 shall not apply to the sale of any Co-Sale Stock (i) to the public
pursuant to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission under the Act or (ii) to the Company.

 

4.3           Prohibited Transfers.

 

(a)           In the event Mandarin should sell any Co-Sale
Stock in contravention of the co-sale rights of Obagi under this Agreement (a
“Prohibited Transfer”), Obagi in addition to such other remedies as may be
available at law, in equity or hereunder, shall have the put option provided
below, and Mandarin shall be bound by the applicable provisions of such option.

 

14

 

(b)           In the event of a
Prohibited Transfer, Obagi shall have the right to sell to Mandarin the type
and number of shares of Co-Sale Stock equal to the number of shares Obagi would
have been entitled to transfer to the purchaser under Section 4.1 hereof had the
Prohibited Transfer been effected pursuant to and in compliance with the terms
hereof. Such sale shall be made on the following terms and conditions:

 

(i)            The price per share at
which the shares are to be sold to Mandarin shall be equal to the price per
share paid by the purchaser to Mandarin in the Prohibited Transfer.

 

(ii)           Within thirty (30) days
after the later of the dates on which the Obagi (A) received notice of the
Prohibited Transfer or (B) otherwise become aware of the Prohibited Transfer,
Obagi shall, if exercising the option created hereby, deliver to Mandarin the
certificate or certificates representing shares to be sold, each certificate to
be properly endorsed for transfer.

 

(iii)          Mandarin shall, upon
receipt of the certificate or certificates for the shares to be sold by Obagi,
pursuant to this Section 4.3, pay the aggregate purchase price therefor, in
cash or by other means acceptable to Obagi.

 

(iv)          Notwithstanding the
foregoing, any attempt by Mandarin to transfer Co-Sale Stock in violation of
Section 4 hereof shall be void and the Company agrees it will not effect such a
transfer nor will it treat any alleged transferee as the holder of such shares
without the written consent of Obagi.

 

5.             Participation in
Certain Transactions.

 

5.1           Approved Sale.
If, at any time prior to the termination of this Agreement, the Company’s Board
of Directors (acting in accordance with its fiduciary duties) and the holders
of a majority of the Co-Sale Stock shall approve a sale of a majority of the
stock or substantially all of the assets of the Company (each, an “Approved
Sale”), then subject to Section 5.2 below: (i) Obagi shall consent to and raise
no objection against the Approved Sale; (ii) if the Approved Sale is structured
in whole or in part as a merger or consolidation, or a sale of all or
substantially all assets, Obagi shall waive any dissenter’s rights, appraisal
rights or similar rights in connection with such merger, consolidation or asset
sale; (iii) if the Approved Sale is structured in whole or part as a sale of
securities, Obagi agrees to sell its respective securities on the terms and
conditions approved by the Company’s shareholders in connection with the
consummation of the Approved Sale, including the execution of such agreements
and such instruments and other actions reasonably necessary to provide the
representations, warranties, indemnities, covenants, conditions, escrow
agreements and other provisions and agreements relating to such Approved Sale,
and effectuate the allocation and distribution of the aggregate consideration
upon the Approved Sale.

 

15

 

5.2           Conditions to
Obagi’s Obligations. The obligations of Obagi with respect to an Approved
Sale are subject to the satisfaction of the following conditions: (i) if any
holder of a class and series of stock held by Obagi is given an option as to
the form and amount of consideration to be received, Obagi will be given the
same option; and (ii) Obagi’s maximum indemnification liability pursuant to the
Approved Sale shall not exceed the amount of proceeds received by Obagi from
such Approved Sale.

 

5.3           Approved Sale
Expenses. Obagi shall bear its pro-rata share (based upon the number of
shares sold) of the reasonable out-of-pocket costs of an sale of Co-Sale Stock
pursuant to an Approved Sale to the extent such costs are incurred for the
benefit of all holders of Co-Sale Stock and are not otherwise paid by the
Company or the acquiring party.

 

6.             Restrictions on
Transfer.

 

6.1           Obagi shall be prohibited
from selling or otherwise transferring any shares of Registrable Securities or
Co-Sale Stock issued or issuable to it or from selling or otherwise
transferring any right to acquire such securities to any party other than
Mandarin at any time prior to the earlier of (i) the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Act covering the offer and sale of the Company’s Common
Stock at an aggregate offering price of not less than $7,500,000, (ii) the
closing of the Company’s sale of all or substantially all of its assets or the
acquisition of the Company by another entity by means of merger or
consolidation resulting in the exchange of the outstanding shares of the
Company’s capital stock for securities or consideration issued, or caused to be
issued, by the acquiring entity or its subsidiary or (iii) the tenth
anniversary of the date of this Agreement (provided that in the case of clause
(iii) hereof, after such tenth anniversary Obagi may sell or otherwise transfer
such Registered Securities or Co-Sale Stock only in compliance with Section 6.2
below).

 

6.2           If an event specified
in clause (i) or (ii) of Section 6.1 shall have not yet occurred as of the
tenth anniversary of the date of this Agreement and Obagi desires to sell or
otherwise transfer any such Registrable Securities or Co-Sale Stock (the
“Target Stock”) at any time after such tenth anniversary, then Obagi shall
promptly deliver to the Company and Mandarin written notice of the intended
disposition and the terms and conditions thereof, including the identity of any
proposed purchaser and the price per share of the securities to be so disposed
(the “Offer Notice”). Thereafter, the Company and Mandarin or either of them
may elect to purchase any or all of the Target Stock on the terms and
conditions set forth in the Offer Notice, such purchase to occur within twenty
(20) business days after receipt by the Company and Mandarin of the Offer
Notice (the “Wait Period”). The Company and Mandarin shall each negotiate in
good faith in determining any allocation between them of the Target Stock
offered in the Offer Notice. If the Company and Mandarin or either of them have
not purchased all such Target Stock prior to expiration of the Wait Period, the
Company’s and Mandarin’s right to purchase any Target Stock not so purchased by
them shall lapse, expire and be of no further effect. Any Target Stock not
purchased by the Company or by Mandarin which is thereafter transferred by
Obagi to a third party shall be subject to the provisions of Sections 5 and 6,
and

 

16

 

such transferee
shall, as a condition precedent to such transfer, agree to be bound by the
provisions of Sections 5 and 6 and shall be treated as “Obagi” for the purposes
of Sections 5 and 6.

 

7.             Repurchase
Obligations.

 

7.1           In the event Zein
Obagi, M.D.’s employment with the Company is terminated under that certain
Employment Agreement of even date herewith by and between Zein Obagi, M.D. and
the Company (the “Employment Agreement”) on any ground articulated in Sections
6(b)(i) (but only if such employment is terminated due to Zein Obagi, M.D.’s
failure to devote at least 20 hours per week of his business time and attention
to the business of OMP as an employee thereof), 6(b)(ii), 6(b)(iii), 6(b)(iv)
or 6(b)(vi) of such Employment Agreement, then the Company may, in its sole
discretion, elect to repurchase any shares of Common Stock held by Obagi at the
then fair market value per share of such stock if the Company also repurchases
any and all Series B Preferred Stock of the Company held by Obagi at a price
per share equal to the original price per share paid by Obagi for such shares
plus an amount equal to any accrued and unpaid dividends associated with each
such share, and in such event Obagi agrees to so sell such Common Stock and
Series B Preferred Stock to the Company. The amount to be paid by the Company
for each share of Common Stock and Series B Preferred Stock shall be adjusted
to give effect to any stock splits, reverse stock splits or recapitalizations
effecting such shares.

 

7.2           The fair market value
of Obagi’s Common Stock for the purposes of Section 7.1 shall be determined as
follows: each of Obagi and the Company shall promptly pick a third party
independent appraisal firm of national recognition and each such appraisal firm
shall promptly value the Common Stock to be so repurchased. If the aggregate
valuations of such stock by such two appraisal firms are within ten percent (10%)
of each other, the value of such stock shall be the average of such appraisal
valuations. If such valuations are not within ten percent (10%) of each other,
then such two appraisal firms shall promptly choose a third appraisal firm of
national recognition and such third appraisal firm shall promptly determine the
aggregate valuation of such stock, such valuation to be binding on the parties.
The Company shall bear the costs of such appraisals.

 

8.             Miscellaneous.

 

8.1           Legend. In
addition to any legends required by applicable federal and state securities
laws, certificates representing Registrable Securities and/or Co-Sale Stock
shall be endorsed with the following legend:

 

“THE SECURITIES
REPRESENTED BY THIS CERTIFICATE AND THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN INVESTORS’ RIGHTS AGREEMENT BY AND BETWEEN THE
SHAREHOLDER, THE COMPANY AND CERTAIN HOLDERS OF STOCK OF THE CORPORATION.
COPIES OF

 

17

 

SUCH AGREEMENT MAY
BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.”

 

Mandarin agrees that the Company may instruct its transfer agent to
impose transfer restrictions on the shares represented by certificates bearing
the legend referred to in this Section 8.1 to enforce the provisions of this
Agreement and the Company agrees to promptly do so. The legend shall be removed
upon termination of this Agreement.

 

8.2           Assignment of Rights.
The rights provided by this Agreement may be assigned (but only with all
related obligations) by a Holder or Investor to a transferee or assignee of all
or part of such Investor’s or Holder’s Registrable Securities and/or Co-Sale
Stock, provided; (a) the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound
by and subject to the terms and conditions of this Agreement, including without
limitation the provisions of Section 2.13 above; and (c) such assignment shall
be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted
under the Act. For the purposes of determining the number of shares of
Registrable Securities and/or Co-Sale Stock held by a transferee or assignee,
the holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities and/or Co-Sale Stock by gift, will or intestate succession) shall be
aggregated together and with the partnership; provided that all assignees and
transferees who would not qualify individually for assignment of rights
pursuant to this Agreement shall have a single attorney-in-fact for the purpose
of exercising any rights, receiving notices or taking any action under this
Agreement.

 

8.3           Successors and
Assigns. Except as otherwise provided herein, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any shares of
Registrable Securities). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

 

8.4           Term. The
provisions set forth in Sections 3 through 6 of this Agreement shall terminate upon the earlier of (i) the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Act covering the offer and sale of
the Company’s Common Stock at an aggregate offering price of not less than
$7,500,000 and (ii) the closing of the Company’s sale of all or substantially
all of its assets or the acquisition of the Company by another entity by means
of merger or consolidation resulting in the exchange of the outstanding shares
of the Company’s capital stock for securities or consideration issued, or
caused to be issued, by the acquiring entity or its subsidiary. The provisions
set forth in Section 2 of this Agreement shall terminate in the manner set
forth in Section 2.14 above.

 

18

 

8.5           Governing law.
This Agreement shall be governed by and construed under the laws of the State
of California as applied to agreements among California residents entered into
and to be performed entirely within California.

 

8.6           Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

 

8.7           Titles and Subtitles.
The titles and subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this Agreement.

 

8.8           Notices. Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
to the party to be notified or upon deposit with the United States Post Office,
by registered or certified mail, postage prepaid and addressed to the party to
be notified at the address indicated for such party on the signature page
hereof, or at such other address as such party may designate by ten (10) days’
advance written notice to the other parties.

 

8.9           Expenses. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorneys’
fees, costs and necessary disbursements in addition to any other relief to
which such party may be entitled.

 

8.10         Amendments and Waivers.
Any term of this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and the holders of a majority of the Registrable Securities then
outstanding. Any amendment or waiver effected in accordance with this Section
shall be binding upon each holder of any Registrable Securities then
outstanding, each future holder of all such Registrable Securities, and the
Company.

 

8.11         Severability. If
one or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.

 

19

 

8.12         Aggregation of Stock.
All shares of Registrable Securities and Co-Sale Stock held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.

 

8.13         Entire Agreement;
Amendment; Waiver. This Agreement (including the Exhibits hereto, if any)
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.

 

20

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

 

 

	
   

  	
  THE COMPANY:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  OMP
  ACQUISITION CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ian G. Walker

  
	
   

  	
   

  	
  Ian G. Walker, Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  c/o Polar Vision

  625 Alaska Avenue

  Torrance, California 90503

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
  MANDARIN
  PARTNERS LLC

  
	
   

  	
   

  
	
   

  	
  By
  its Manager:   Mandarin Management 

  Partners, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter P. Tong

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Peter P. Tong

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  c/o Polar Vision

  	
   

  
	
   

  	
   

  	
  625 Alaska Avenue,
  Torrance, CA 90503

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZEIN
  AND SAMAR OBAGI FAMILY TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Zein Obagi

  	
   

  
	
   

  	
   

  	
  Zein
  Obagi, Trustee

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  c/o Zein Obagi, M.D.

  9033 Wilshire Boulevard

  Beverly Hills, California 90211

  
						

 

21

DEC 11 2000

FIRST AMENDMENT TO

INVESTORS’ RIGHTS AGREEMENT

THIS
FIRST AMENDMENT TO INVESTORS’ RIGHTS AGREEMENT (this “Agreement”)
is entered into as of November 15, 2000, by and between Obagi Medical Products,
Inc., a California corporation (the “Company”) (formerly known as OMP
Acquisition Corporation), Mandarin Partners LLC (“Mandarin”) and the
Zein and Samar Obagi Family Trust (the “Obagi Trust”) (collectively
referred to as the “Parties”).

RECITALS

WHEREAS,
the Parties entered into an Investors’ Rights Agreement, dated December 2, 1997
(the “Investors’ Rights Agreement”); and

WHEREAS
the Parties desire to amend the Investors’ Rights Agreement
to increase to three (3) from two (2) the number of registrations (as that term
is defined in the Investors’ Right Agreement) filed in compliance with the
Securities Act of 1933 after which the Company shall not be obligated to take
any action to effect any further registrations; and

WHEREAS
the Parties desire to amend the Investors’ Rights Agreement to provide that no
Holder (as that term is defined in the Investors’ Rights Agreement) shall be
held jointly and severally liable with any other Holder for any indemnification
arising under Section 2.9(b) of the Investors’ Rights Agreement; and

WHEREAS
the Parties desire to amend the Investors’ Rights Agreement to provide that a
selling Holder’s indemnification obligation under Section 2.9(d) of the
Investors’ Rights Agreement shall not exceed the amount of gross proceeds from
the offering received by such selling Holder; and

WHEREAS
the Parties desire to amend the Investors’ Rights Agreement to provide that the
Company shall pay all expenses incurred in connection with a registration
requested pursuant to Section 2.11 of the Investors’ Rights Agreement as
further described below, but excluding any underwriter’s discounts or
commissions associated with Registrable Securities (as that term is defined in
Investors’ Rights Agreement); and

WHEREAS
the Parties desire to amend Section 2.14(a) of the Investors’
Rights Agreement to increase to five (5) the number of years after which no
Holder shall be entitled to exercise any right provided under Section 2 of the
Investors’ Rights Agreement following the consummation of the sale of
securities pursuant to a registration statement filed by the Company under the
Act, and to delete the words “Section 1” and replace such words with “Section
2” to accurately reflect the intent of the parties.

NOW,
THEREFORE, in consideration of the mutual premises and
promises herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

 

AGREEMENT

1. Section 2.1(d)(i) of
the Investors’ Rights Agreement is hereby amended by deleting all of said
Section 2. l(d)(i) and replacing it with the following:

“(i)
After the Company has effected three (3) registrations pursuant to this Section
2.1 and such registrations have been declared or ordered effective;”.

2. Section 2.9(b) of the
Investors’ Rights Agreement is hereby amended by deleting all of said Section
2.9(b) and replacing it with the following:

“(b)
To the extent permitted by law, each selling Holder will indemnify and hold
harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other Holder
selling securities in such registration statement and any controlling person of
any such underwriter or other Holder, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such
registration; and each such Holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 2.9(b), in connection with investigation or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, that, in no event shall any
indemnity under this subsection 2.9(b) exceed the gross proceeds from the
offering received by such Holder. In no event shall a selling Holder be jointly
and severally liable with any other selling Holder for any indemnification
arising under this Section 2.9(b).”

3. Section 2.9(d) of the
Investors’ Rights Agreement is hereby amended by deleting all of said Section
2.9(d) and replacing it with the following:

“(d)
If the indemnification provided for in this Section 2.9 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect
to any loss, liability, claim, damage, or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand

 

2

 

and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties’ relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission. Notwithstanding any provision to the contrary in
this Section 2.9(d), in the event that the indemnifying party is a selling
Holder, in no event shall the selling Holder’s obligation to contribute any
amounts hereunder exceed the amount of gross proceeds from the offering
received by such Holder.”

4. Section 2.11(c) of the
Investors’ Rights Agreement is hereby amended by deleting all of said Section
2.11(c) and replacing it with the following:

“(c)
Subject to the foregoing, the Company shall file a registration statement
covering the Registrable Securities and other securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Holders. All expenses incurred in connection with a registration requested
pursuant to Section 2.11, including (without limitation) all registration,
filing, qualification, printer’s and accounting fees and the reasonable fees
and disbursements of one counsel for the selling Holder or Holders if Company
counsel does not make itself available for this purpose, and counsel for the
Company, but excluding any underwriter’s discounts or commissions associated
with Registrable Securities, shall be borne and paid for by the Company.
Registrations effected pursuant to this Section 2.11 shall not be counted as
demands for registration or registrations effected pursuant to Sections 2.1 or
2.2, respectively.”

5. Section 2.14(a) of the
Investors’ Rights Agreement is hereby amended by deleting all of said Section
2.14(a) and replacing it with the following:

“(a)
No Holder shall be entitled to exercise any right provided for in this Section
2 after five (5) years following the consummation of the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the initial firm commitment underwritten offering of its
securities to the general public.”

6. Effect of Amendment.
All terms and provisions of the Investors’ Rights Agreement shall continue in
full force and effect except as expressly modified in this Agreement. Each
reference in the Investors’ Rights Agreement to “this Agreement,” “hereunder,”
“hereof,” or words of like import, and each reference to the Investors’ Rights
Agreement in any and all instruments or documents provided for in the
Investors’ Rights Agreement or delivered or to be delivered thereunder or in
connection therewith, shall, except where the context otherwise requires, be
deemed a reference to the Investors’ Rights Agreement as amended hereby.

 

3

 

7. No Third-Party Beneficiaries. Nothing expressed or
implied in this Agreement is intended to confer upon any person, other than the
parties hereto, or their respective successors or permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.

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

9. Choice of Law; Headings. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
California (regardless of such state’s conflict of laws principles), and without
reference to any rules of construction regarding the party responsible for the
drafting hereof. Headings in this Agreement are for the purposes of reference
only and shall not limit or otherwise affect any of the terms hereof.

10. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.

[Signature Page Follows]

 

4

 

IN WITNESS
WHEREOF, the parties have executed this Agreement on the day and year first above written.

 

	
   

  	
   

  	
  OBAGI MEDICAL PRODUCTS, INC.

  
	
  

  	
   

  	
  By: 

  	
  

  /s/ Phillip J. Rose

  
	
   

  	
   

  	
   

  	
  Phillip J. Rose

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  President

  

 

	
   

  	
   

  	
  SHAREHOLDERS:

  
	
   

  	
   

  	
  

  MANDARIN PARTNERS LLC

  
	
  

  	
   

  	
  By: 

  	
  /s/ Peter P. Tong

  
	
   

  	
   

  	
   

  	
  Peter P. Tong

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Manager

  

 

	
   

  	
   

  	
  ZEIN AND SAMAR OBAGI 

  FAMILY TRUST

  
	
  

  	
   

  	
  By: 

  	
  

  /s/ Dr. Zein Obagi

  
	
   

  	
   

  	
   

  	
  Dr. Zein Obagi

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Trustee

  

 

 

5

 

SECOND AMENDMENT
TO

INVESTORS’ RIGHTS AGREEMENT

THIS
SECOND AMENDMENT TO INVESTORS’ RIGHTS AGREEMENT (this “Amendment”)
is entered into as of January    , 2001, by and among OMP, Inc.,
a Delaware corporation (the “Company”) (successor to Obagi Medical
Products, Inc. which was formerly known as OMP Acquisition Corporation),
Mandarin Partners LLC (“Mandarin”), and the Zein and Samar Obagi Family
Trust (“Obagi”) (collectively referred to as the “Parties”).

RECITALS

WHEREAS,
the Parties entered into an Investors’ Rights Agreement, dated as of December
2, 1997, as amended as of November 15, 2000 (the “Investors’ Rights
Agreement”); and

WHEREAS,
Mandarin has made a distribution of the Company’s capital stock owned by it to
its beneficial owners; Stonington Capital Appreciation 1994 Fund, L.P. (“Stonington”),
Peter P. Tong, Tong Family Limited Partnership, Ian G. Walker and Noel Urben
(collectively, the “Mandarin Investors”); and

WHEREAS,
the Company, Mandarin and Obagi desire to amend the Investors’ Rights Agreement
to eliminate all rights of Mandarin under the Investors’ Rights Agreement,
release Mandarin from its obligations under the Investors’ Rights Agreement and
allow each of the Mandarin Investors to join the Investors’ Rights Agreement as
if it or he was an original party thereto.

NOW,
THEREFORE, in consideration of the mutual premises and
promises herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

AGREEMENT

1.         Transfer of Mandarin’s Interest. Effective upon the
execution and delivery of this Amendment by the Parties and the Mandarin
Investors, Mandarin shall assign and transfer, and the Mandarin Investors agree
to assume, all of Mandarin’s rights and obligations under the Investors’ Rights
Agreement. Without limiting the generality of the foregoing, each of the
members of the Mandarin Investors shall be a “Holder” (as defined in the
Investors’ Rights Agreement) and agrees to be bound by and subject to the terms
and conditions of the Investors’ Rights Agreement, including, without
limitation, the provisions of Section 2.3 of the Investors’ Rights Agreement.
Effective upon the execution and delivery of this Amendment by the Mandarin
Investors, Mandarin shall be released from all rights and obligations it has
under the Investors’ Rights Agreement.

 

2.         Amendments to the Investors’ Rights
Agreement.

(a)       Definitions. Section 1 of the
Investors’ Rights Agreement is hereby amended by adding the following
definitions in the appropriate alphabetical order:

“The
term “Co-Sale Investors” shall mean, collectively, Obagi and each of the
Mandarin Individual Investors.

The
term “Mandarin Investors” shall mean, collectively, Stonington, Peter P. Tong,
Tong Family Limited Partnership, Ian G. Walker and Noel Urben.

The
term “Mandarin Individual Investors” shall mean, collectively, Peter P. Tong,
Tong Family Limited Partnership, Ian G. Walker and Noel Urben.

The
term “Stonington” shall mean Stonington Capital Appreciation 1994 Fund, L.P.”

(b) Co-Sale Rights.
Section 4 of the Investors’ Rights Agreement is hereby amended by deleting such
Section in its entirety and replacing it with the following:

“4.       Co-Sale Rights.

4.1       Sales by Stonington.

(a)       If Stonington proposes to sell or
transfer any shares of Co-Sale Stock in one or more related transactions, then
Stonington shall promptly give written notice (the “Notice”) to the Company and
each of the Co-Sale Investors at least twenty (20) days prior to the closing of
such sale or transfer. The Notice shall describe in reasonable detail the
proposed sale or transfer including, without limitation, the class, series and
number of shares of Co-Sale Stock to be sold or transferred, the nature of such
sale or transfer, the consideration to be paid, and the name and address of
each prospective purchaser or transferee. In the event that the sale or
transfer is being made pursuant to the provisions or Sections 4.1 or 4.2
hereof, the Notice shall state under which section of this Agreement the sale
or transfer is being made.

(b)       Each of the Co-Sale Investors shall have
the right, exercisable upon written notice to Stonington within fifteen (15)
days after receipt of the Notice, to participate in such sale of Co-Sale Stock
on the same terms and conditions; provided, that such Co-Sale Investor owns
shares of the same class or classes as the Co-Sale Stock identified in the Notice.

(c)       Each of the Co-Sale Investors may sell
all or any part of that number of shares of Co-Sale Stock, of the same class
and/or series as that identified in the Notice, equal to the product obtained
by multiplying (i) the aggregate number of shares of Co-Sale Stock covered by
the Notice by (ii) a fraction the numerator of which is the number of shares of
Co-Sale Stock of the same class and/or series identified in the Notice owned

 

2

 

by such Co-Sale Investor
at the time of the sale or transfer and the denominator of which is the total
number of shares of Co-Sale Stock of the same class and/or series identified in
the Notice owned by Stonington and all Co-Sale Investors at the time of the
sale or transfer.

(d)       Each of the Co-Sale Investors shall
effect its participation in the sale by promptly delivering to Stonington for
transfer to the prospective purchaser one or more certificates, properly
endorsed for transfer, which represent the type and number of shares of Co-Sale
Stock which such Co-Sale Investor elects to sell.

(e)       The stock certificate or certificates
that any Co-Sale Investor delivers to Stonington pursuant to Section 4.1(d)
shall be transferred to the prospective purchaser in consummation of the sale
of the Co-Sale Stock pursuant to the terms and conditions specified in the
Notice, and Stonington shall concurrently therewith remit to such Co-Sale
Investor that portion of the sale proceeds to which such Co-Sale Investor is
entitled by reason of its participation in such sale. To the extent that any
prospective purchaser or purchasers prohibits such assignment or otherwise
refuses to purchase shares or other securities from any Co-Sale Investor,
Stonington shall not sell to such prospective purchaser or purchasers any
Co-Sale Stock unless and until, simultaneously with such sale, Stonington shall
purchase such shares from such Co-Sale Investor for the same consideration and
on the same terms and conditions as the proposed transfer described in the
Notice.

(f)        The exercise or non-exercise of the
rights of each Co-Sale Investor to participate in one or more sales of Co-Sale
Stock made by Stonington shall not adversely affect any Co-Sale Investor’s
rights to participate in subsequent sales of Co-Sale Stock subject to Section
4.1 (a).

(g)       If any of the Co-Sale Investors does not
elect to participate in the sale of the Co-Sale Stock subject to the Notice,
Stonington may, not later than ninety (90) days following delivery to the
Company and the Co-Sale Investors of the Notice, conclude a transfer of not
less than all of the Co-Sale Stock covered by the Notice on terms and
conditions not more favorable to the transferor than those described in the
Notice. Any proposed transfer on terms and conditions more favorable than those
described in the Notice, as well as any subsequent proposed transfer of any of
the Co-Sale Stock by Stonington, shall again be subject to the co-sale rights
of each of the Co-Sale Investors and shall require compliance by Stonington with
the procedures described in this Section 4.1.

4.2       Exempt Transfers.

(a)       Notwithstanding the foregoing, the
co-sale rights of the Co-Sale Investors shall not apply to (i) any pledge of
Co-Sale Stock made pursuant to a bona fide loan transaction that creates a mere
security interest, (ii) any bona fide gift or charitable donation or (iii) any
distribution to the partners of Stonington; provided that (A) Stonington shall
inform each of the Co-Sale Investors of such pledge, transfer, gift,

 

3

 

donation or distribution
prior to effecting it and (B) the pledgee, transferee, donee or distributee
shall furnish each of the Co-Sale Investors with a written agreement to be
bound by and comply with all provisions of Section 4 of this Agreement. Such
transferred Co-Sale Stock shall remain “Co-Sale Stock” hereunder, and such
pledgee, transferee or donee shall be treated as “Stonington” for purposes of
this Agreement.

(b)       Notwithstanding the foregoing, the
provisions of Section 4 shall not apply to the sale of any Co-Sale Stock (i) to
the public pursuant to a registration statement filed with, and declared
effective by, the Securities and Exchange Commission under the Act or (ii) to
the Company,”

(c)       Restrictions on Transfer. Section
6 of the Investors’ Rights Agreement is hereby amended by deleting such Section
in its entirety and replacing it with the following:

“6.       Restrictions On Transfer.

6.1       Obagi shall be prohibited from selling or
otherwise transferring any shares of Registrable Securities or Co-Sale Stock
issued or issuable to it or from selling or otherwise transferring any right to
acquire such securities to any party other than the Mandarin Investors at any
time prior to the earlier of (i) the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the Act
covering the offer and sale of the Company’s Common Stock at an aggregate
offering price of not less than $7,500,000, (ii) the closing of the Company’s
sale of all or substantially all of its assets or the acquisition of the
Company by another entity by means of merger or consolidation resulting in the
exchange of the outstanding shares of the Company’s capital stock for
securities or consideration issued, or caused to be issued, by the acquiring
entity or its subsidiary or (iii) the tenth anniversary of the date of this
Agreement (provided that in the case of clause (iii) hereof, after such tenth
anniversary Obagi may sell or otherwise transfer such Registered Securities or
Co-Sale Stock only in compliance with Section 6.2 below).

6.2       If an event specified in clause (i) or
(ii) of Section 6.1 shall have not yet occurred as of the tenth anniversary of
the date of this Agreement and Obagi desires to sell or otherwise transfer any
such Registrable Securities or Co-Sale Stock (the “Target Stock”) at any time
after such tenth anniversary, then Obagi shall promptly deliver to the Company
and each of the Mandarin Investors written notice of the intended disposition
and the terms and conditions thereof, including the identity of any proposed
purchaser and the price per share of the securities to be so disposed (the
“Offer Notice”). Thereafter, the Company and the Mandarin Investors or any of
them may elect to purchase any or all of the Target Stock on the terms and
conditions set forth in the Offer Notice, such purchase to occur within twenty
(20) business days after receipt by the Company and the Mandarin Investors of
the Offer Notice (the “Wait Period”). The Company and the Mandarin Investors
shall each negotiate in good faith in determining any allocation between them
of the Target Stock offered in the Offer Notice. If the Company and the
Mandarin Investors or any of them have not purchased all such Target Stock
prior to expiration of the Wait Period, the Company’s and the Mandarin
Investors’ right to

 

4

 

purchase any Target Stock
not so purchased by them shall lapse, expire and be of no further effect. Any
Target Stock not purchased by the Company or by the Mandarin Investors which is
thereafter transferred by Obagi to a third party shall be subject to the
provisions of Sections 5 and 6, and 16 such transferee shall, as a condition
precedent to such transfer, agree to be bound by the provisions of Sections 5 and 6 and shall be treated as “Obagi” for
the purposes of Sections 5 and 6.”

3.         Effect of Amendment. All terms and provisions of the
Investors’ Rights Agreement shall continue in full force and effect except as
expressly modified in this Amendment. Each reference in the Investors’ Rights
Agreement to “this Agreement,” “hereunder,” “hereof,” or words of like import,
and each reference to the Investors’ Rights Agreement in any and all
instruments or documents provided for in the Investors’ Rights Agreement or
delivered or to be delivered thereunder or in connection therewith, shall,
except where the context otherwise requires, be deemed a reference to the
Investors’ Rights Agreement as amended hereby.

4.         No Third-Party Beneficiaries. Nothing expressed or
implied in this Amendment is intended to confer upon any person, other than the
parties hereto, or their respective successors or permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this Amendment.

5.         Counterparts. This Amendment may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

6.         Choice of Law; Headings. This Amendment shall be
governed by and construed in accordance with the internal laws of the State of
California (regardless of such state’s conflict of laws principles), and
without reference to any rules of construction regarding the party responsible
for the drafting hereof. Headings in this Amendment are for the purposes of
reference only and shall not limit or otherwise affect any of the terms hereof.

7.         Successors and Assigns. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.

[Signature Pages Follow]

 

5

 

IN WITNESS
WHEREOF, the parties have executed this Amendment on the day and year first
above written.

 

	
   

  	
   

  	
  OBAGI MEDICAL PRODUCTS, INC.

  
	
  

  	
   

  	
  By: 

  	
  

  /s/ Phillip J. Rose

  
	
   

  	
   

  	
   

  	
  Phillip J. Rose, President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SHAREHOLDERS:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MANDARIN PARTNERS LLC

  
	
  

  	
   

  	
  By: 

  	
  

  /s/ Peter P. Tong

  
	
   

  	
   

  	
   

  	
  Peter P. Tong, Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZEIN AND SAMAR OBAGI FAMILY TRUST

  
	
   

  	
   

  	
  By: 

  	
  

  /s / Dr. Zein
  Obagi

  
	
   

  	
   

  	
   

  	
  Dr. Zein Obagi, Trustee

  

 

6

 

 

	
   

  	
   

  	
  NEW
  SHAREHOLDERS:

  
	
   

  	
   

  	
  STONINGTON CAPITAL APPRECIATION

  1994 FUND, L.P.

  
	
   

  	
   

  	
  By:

  	
  Stonington Partners, L.P., its general partner

  

 

	
   

  	
   

  	
   

  	
  By:

  	
  Stonington Partners, Inc.,

  its general partner

  

 

	
  

  	
   

  	
  By: 

  	
  

  
	
   

  	
   

  	
  Name: 

  	
   

  
	
   

  	
   

  	
  Title: 

  	
   

  
	
   

  	
   

  	
  767 Fifth Avenue

  New York, New York 10153

  
	
  

  	
   

  	
  

  /s/ Peter P. Tong

  
	
  

  	
   

  	
  Peter P. Tong

  685 Spring Street

  PMB 210

  Friday Harbor, Washington 98250

  
	
   

  	
   

  	
  TONG FAMILY LIMITED
  PARTNERSHIP

  

 

	
   

  	
   

  	
  By:

  	
  

  /s/ Peter P. Tong

  
	
   

  	
   

  	
   

  	
  Peter P. Tong, Trustee

  685 Spring Street

  PMB 210

  Friday Harbor, Washington 98250

  

 

	
  

  	
   

  	
  

  /s/ Ian G. Walker

  
	
  

  	
   

  	
  Ian G. Walker

  c/o 310 Golden Shore

  Long Beach, California 90802

  
	
  

  	
   

  	
  

  
	
  

  	
   

  	
  Noel Urben

  86 Doubling Road

  Greenwich, CT 06830

  

 

7

 

 

	
   

  	
   

  	
  NEW SHAREHOLDERS:

  
	
   

  	
   

  	
  STONINGTON CAPITAL APPRECIATION

  1994 FUND, L.P.

  

 

	
   

  	
   

  	
  By:

  	
  Stonington Partners, L.P., its general partner

  
	
   

  	
   

  	
   

  	
  By:

  	
  Stonington Partners, Inc.,

  its general partner

  

 

	
  

  	
   

  	
  By: 

  	
  

  
	
   

  	
   

  	
  Name: 

  	
   

  
	
   

  	
   

  	
  Title: 

  	
   

  
	
   

  	
   

  	
  767 Fifth Avenue

  New York, New York 10153

  
	
  

  	
   

  	
  

  
	
  

  	
   

  	
  Peter P. Tong

  685 Spring Street

  PMB 210

  Friday Harbor, Washington 98250

  
	
   

  	
   

  	
  TONG FAMILY LIMITED
  PARTNERSHIP

  

 

	
   

  	
   

  	
  By:

  	
  

  
	
   

  	
   

  	
   

  	
  Peter P. Tong, Trustee

  685 Spring Street

  PMB 210

  Friday Harbor, Washington 98250

  

 

	
  

  	
   

  	
  

  /s/ Ian G. Walker

  
	
  

  	
   

  	
  Ian G. Walker

  c/o 310 Golden Shore

  Long Beach, California 90802

  
	
  

  	
   

  	
  

  /s/ Noel Urben

  
	
  

  	
   

  	
  Noel Urben

  86 Doubling Road

  Greenwich, CT 06830

  

 

7Exhibit 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]

 

8

 

CATALINA
LANDING 

SECOND AMENDMENT TO AMENDED AND RESTATED OFFICE LEASE

 

This SECOND AMENDMENT TO AMENDED AND RESTATED OFFICE
LEASE (this “Amendment”), dated as of February 8, 2006, 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 9, 2003, as amended by that certain First Amendment to Amended
and Restated Office Lease dated as of April 20, 2005 (collectively, the
“Lease”), whereby Landlord leases to Tenant 14,721 rentable square feet of
space commonly known as 310 Golden Shore, Suites 120 & 100, Long Beach,
California and 330 Golden Shore, Suite 450, Long Beach, California
(collectively the “Current Premises”).

 

B.                                                             Tenant
now desires to expand the Premises by taking an additional 2,599 rentable
square feet of space in the Office Building Project (as defined in the 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 Current 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.                                       SUITE
220. Upon and following February 15, 2006 (the “Expansion Date”), the
“Premises” leased by Tenant under the Lease shall be deemed to include the
2.599 additional Rentable Square Feet of space located at 310 Golden Shore,
Suite 220, Long Beach, California (“Suite 220”), as more particularly shown on
Exhibit “A” attached hereto. Tenant’s use and occupancy of Suite 220 shall be
subject to all of the terms and conditions contained in the Lease applicable to
the Current Premises. Commencing upon the Expansion Date, any and all
references in the Lease to the “Premises” shall include both the Current
Premises and Suite 220. After giving effect to the expansion into Suite 220,
the entire Premises leased from Landlord by Tenant shall be deemed to contain
17,320 rentable square feet of space, as more particularly shown on Exhibit “A”
attached hereto.

 

3.                                       TENANT’S
SHARE. After giving effect to the expansion into Suite 220, Tenant’s Share
under the Lease shall be increased to 6.27%.

 

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

  	
   

  
	
  February 15, 2006 to
  April 30, 2006

  	
   

  	
  $

  	
  27,381.00 per month

  	
   

  
	
  May 1, 2006 to July 31,
  2006

  	
   

  	
  $

  	
  32,215.00 per month

  	
   

  
	
  August 1, 2006 to July
  31, 2007

  	
   

  	
  $

  	
  33,081.00 per month

  	
   

  
	
  August 1, 2007 to July
  31, 2008

  	
   

  	
  $

  	
  34,120.00 per month

  	
   

  

 

5.                                       BASE
YEAR. As to Suite 220 only, the Base Year shall be the calendar year of 2006;
the parties acknowledge and agree that the Base Year for Suite 120 shall remain
2003, and 2005 shall remain the Base Year for Suites 450 and 100.

 

6.                                       TENANT’S
INITIAL IMPROVEMENT WORK. The parties acknowledge and agree that Tenant may, in
accordance with this Paragraph 6 and this Lease, complete certain improvements
(“Tenant’s Initial Improvement Work”) within Suite 220. 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. Landlord shall have no obligation to perform any tenant

 

1

 

improvement work in connection with any part of the Premises (including
Suite 220), nor to contribute any amount or reimbursement of any costs incurred
by Tenant in connection with Tenant’s Initial Improvement Work.

 

(a) Plans and
Specifications.

 

(1)                      Space
Plans. Once they have been prepared by Tenant’s architect/designer, the
parties shall attach to this Amendment as Exhibit “B”, the space plans (the
“Space Plans”) for Tenant’s Initial Improvement Work.

 

(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 to
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 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 Suite 220.
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 than 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.

 

2

 

(4)                      Landlord
shall have the right at all times to enter Suite 220 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 6
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 Suite 220. 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 6 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.

 

(e)                     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.

 

7.                          SECURITY
DEPOSIT. Tenant has on deposit with Landlord a Security Deposit in the amount
of $22,748.55. Upon execution of this Amendment, and in addition to all other
amounts due hereunder, Tenant will pay Landlord an additional deposit of
$5,120.00, thereby increases the total Security Deposit to $27,868.55.

 

8.                          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.

 

9.                          INSURANCE.
Prior to the Expansion Date, Tenant shall deliver to Landlord a Certificate of
Insurance showing evidence of current insurance coverage as required under
Exhibit “C” attached hereto.

 

10.                    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.

 

11.                    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 prevall.

 

12.                    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.

 

3

 

13.                    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.

 

14.                    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 rule (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.

 

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

 

16.                    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.

 

17.                    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

  	
   

  
	
  Delaware limited liability company

  	
  OMP, INC., a Delaware corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald G. Abbey

  	
   

  	
  By:

  	
  /s/ Jennifer Rougvie

  	
   

  
	
   

  	
   

  	
  Donald G. Abbey

  	
  Name:

  	
  Jennifer Rougvie

  	
   

  
	
   

  	
  Its:

  	
  President

  	
  Title:

  	
  OFFICE MANAGER

  	
   

  
							

 

or

 

	
   

  	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Stephen A. Garcia

  	
   

  
	
   

  	
   

  	
  David J. Gullen 

  	
   

  	
  Name:

  	
  Stephen A. Garcia 

  	
   

  
	
   

  	
  Its:

  	
  Vice President

  	
   

  	
  Title:

  	
  CFO

  	
   

  

 

4

 

EXHIBIT
“A”

 

 

Suite
220 & The Premises

 

 

[see attached]

 

5

 

EXHIBIT
“B”

 

 

The Space
Plans

 

 

[see attached]

 

6

 

EXHIBIT
“C”

 

TENANT’S
NEW 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.
All certificates must be amended to provide at least 30 days notice prior to
cancellation and/or expiration, with 10 days for non-payment of premium.
All certificates must be revised so that the following language is stricken
out in the notice of cancellation provision of the certificate of insurance:

 

•                            “Endeavor
to” and “but failure to do so shall impose no obligation or liability of any
kind to the company, its agents or representatives”.

 

Insurance Carriers/Coverage terms:

 

All carriers used by the
tenant must be licensed in the state in which the property is located.
Insurance carriers must have a financial rating of “A-” or better as defined by
the most recent AM Best’s rating. The financial size of the carrier must be “X”
or better as defined by the most recent AM Best’s rating.

 

Tenant may use admitted
or non-admitted insurance carrier(s) as long as the insurance carrier(s) is a licensed
carrier(s) in the state in which the property is located and that the insurance
carrier(s) meet the financial security as defined above. In addition:

 

•                            Tenant’s
coverage should be primary and non-contributing to Insurance provided by the
landlord.

 

•                            Tenant’s
policy must contain a waiver subrogation clause in favor of the landlord.

 

•                            Tenant’s
policy must provide severability of interest and may not contain “insured
versus insured” exclusions.

 

1.                          Comprehensive
or Commercial General Liability Insurance (Minimum Limits):

 

$1,000,000 Combined
Single Limit, each occurrence

 

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

 

$2,000,000
Products/Completed Operations Aggregate

 

$1,000,000 Personal
Injury & Advertising Injury

 

$ 300,000 Fire Legal
Liability Limit

 

$ 5,000-$10,000 Medical
Payments

 

•                            Deductible
or Self Insured Retention not greater than $5,000.

 

•                            Occurrence
based on ISO Form (1986 edition or newer). Claims made and/or modified
occurrence

forms are not acceptable.

 

2.                          Umbrella/Excess
Liability Insurance:

 

$2,000,000 per occurrence
(annual aggregate)

 

Coverage must be as broad
as the primary and meet the same requirements as noted in Section 1.

 

3.                          Tenant’s
Property Insurance:

 

“All Risks” coverage or
utilizing the ISO Special Cause of Loss form. Coverage should include
earthquake sprinkler damage. Coverage to be written on a replacement costs
basis sufficient to cover 100% of the replacement cost. Co-insurance must be
waived. Policy must contain a waiver subrogation clause in favor of the landlord.

 

4.                          Tenant’s
Business Interruption Insurance:

 

All Risks coverage of
operations at leased premises: covering a least 12 months due to insured peril.
Policy must contain a waiver subrogation clause in favor of the landlord.

 

5.                          Tenant’s
Workers’ Compensation and Employer’s Liability Insurance:

 

Statutory Limits and
terms required by law with subject statutory limits. Employer Liability should
be provided at limits not less than (1) $500,000 each accident or injury,
$500,000 each employee/disease and

 

7

 

$500,000 disease/policy
limit, or (2) current limit carried, whichever is greater. Coverage should
include a waiver of subrogation in favor of the landlord.

 

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

 

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

 

7.                          Additional
Insured Endorsement (required on endorsement form CG 2026 1185 or its
equivalent):

 

“AC-Catalina Landing LLC,
Abbey-Properties LLC, The Abbey Management Company LLC The Abbey Company and
their respective employees and agents, members, managers, officers and owners
(and their beneficiaries, if any) are additional insured, jointly and/or
severally, regarding any coverage afforded by this policy with respect to
services and for materials performed, furnished or supplied on, for or to such
properties.”

 

SEND
CERTIFICATE TO:

AC-Catalina Landing LLC

c/o The Abbey Management Company LLC

Attn.: Property Manager

310 Golden Shore, Suite 300

Long Beach, California 90638

Tel.: (562) 435-2100

 

8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}]]