Document:

Exhibit 10.20

 

AMENDMENT NO. 3 TO INTERCREDITOR AGREEMENT

 

This Amendment No. 3 to
Intercreditor Agreement (this “ Amendment “), is entered into as of February 22,
2008, by and among Carl E. Berg (“ Berg “), Heritage Bank of Commerce (“Bank”),
the purchasers identified on Exhibit A attached hereto (the “New
Purchasers “), the previous purchasers who entered into Amendment No. 1
(defined below) who are identified on Exhibit A attached hereto (“Original
Purchasers”), and Thomas O. Boucher, Jr., as agent for the New
Purchasers (“ Purchasers’ Agent “).  Capitalized terms used in this
Amendment without definition have the meanings ascribed to them in the
Intercreditor Agreement dated as of November 15, 2004, as amended by that
certain Amendment No. 1 to Intercreditor Agreement dated January 24,
2006 (“Amendment No. 1”) and Amendment No. 2 to Intercreditor
Agreement dated as of February 7, 2008 (the “ Agreement “).

 

WHEREAS, Berg, New
Purchasers, Purchasers Agent, and Venture Banking Group, a division of Greater
Bay Bank (“GBBK”) are parties to the Agreement;

 

WHEREAS, Focus Enhancements, Inc.
(“ Borrower “) has asked Bank to lend it money under a Loan and Security
Agreement of even date, as amended from time to time (the “Bank Loan
Agreement”), a portion of the proceeds of which Borrower will use to repay
all amounts owing to GBBK; and

 

WHEREAS, the parties hereto
wish to amend the Agreement to add the Bank as a party to the Agreement.

 

The parties hereto agree as
follows:

 

1.                     The Agreement is amended to add Bank as a party
to the Agreement, to the extent of total indebtedness of Borrower to Bank of up
to $6,500,000 in principal amount plus accrued interest, and fees and expenses
collectible under the Bank Loan Agreement (the “Maximum Priority Debt Amount”). 
“Bank Loan Agreement” under the Agreement has the meaning assigned in
the Recitals above. “Bank Collateral” shall continue to have the meaning
assigned in Section 1 of the Agreement. 
All references to “Venture Banking Group, a division of Greater Bay Bank
N.A.” or “Bank” shall mean and refer to Heritage Bank of Commerce, and Bank
shall have all of the rights of “Bank” under the Agreement.  Without limiting the generality of the
foregoing, Bank’s security interest in the Bank Collateral shall be prior to
any security interest of the Creditors in the Bank Collateral.  Bank and Berg agree that the New Purchasers
will not be bound by the Agreement in respect of any indebtedness of Borrower
owing to Bank in excess of the Maximum Priority Debt Amount.

 

2.                     Except to the extent amended hereby, all of the
definitions, terms, provisions and conditions set forth in the Agreement are
hereby ratified and confirmed and shall remain in full force and effect. 
The Agreement and this Amendment shall be read and construed together as a
single agreement.  This Amendment may be signed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the
parties to this Amendment have caused this Amendment to be executed and
delivered as of the date first written above.

 

1

 

	
   

  	
  BERG:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Carl E. Berg

  
	
   

  	
  CARL E.
  BERG

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  HERITAGE BANK OF COMMERCE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Roxanne Vane

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Roxanne Vane

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PURCHASERS’
  AGENT

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Thomas O.
  Boucher, Jr.

  
	
   

  	
   

  	
   Thomas
  O. Boucher, Jr.

  
								

 

 

SIGNATURE PAGE TO AMENDMENT NO. 3 TO INTERCREDITOR AGREEMENTExhibit 10.22(a)

 

STANDARD INDUSTRIAL LEASE — NET

 

AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

 

1.  Parties.
This Lease, dated, for reference purposes only, July 6, 1994, is made by
and between H-K Associates, a California Limited Partnership (herein called “Lessor”)
and Videonics, Inc. (herein called “Lessee”).

 

2.  Premises.
Lessor hereby leases to Lessee and Lessee leases from Lessor for the term, at
the rental, and upon all of the conditions set forth herein, that certain real
property situated in the County of Santa Clara State of California commonly
known as 

1370 Dell Avenue, Campbell California 95008 and described as Approximately 27,500
square feet of space. APN 424-33-70 

Said real property including the land and all improvements therein, is herein
called “the Premises”.

 

3.  Term.

 

3.1  Term.
The term of this Lease shall be for Five (5) years, commencing on August 1,
1994  and ending on July 31, 1999 unless
sooner terminated pursuant to any provision hereof.

 

3.2  Delay
in Possession. Notwithstanding said commencement date,
if for any reason Lessor cannot deliver possession of the Premises to Lessee on
said date, Lessor shall not be subject to any liability therefor, nor shall
such failure affect the validity of this Lease or the obligations of Lessee
hereunder or extend the term hereof, but in such case, Lessee shall not be
obligated to pay rent until possession of the Premises is tendered to Lessee;
provided, however, that if Lessor shall not have delivered possession of the
Premises within sixty (60) days from said commencement date, Lessee may, at
Lessee’s option, by notion in writing to Lessor within ten (10) days
thereafter, cancel this Lease, in which event the parties shall be discharged
from all obligations hereunder; provided further, however, that if such written
notice of Lessee is not received by Lessor within said ten (10) day
period, Lessee’s right to cancel this Lease hereunder shall terminate and be of
no further force or effect.

 

3.3  Early
Possession. If Lessee occupies the Premises prior to
said commencement date, such occupancy shall be subject to all provisions
hereof, such occupancy shall not advance the termination date and Lessee shall
pay rent for such period at the initial monthly rates set forth below.

 

4.  Rent.
Lessee shall pay to Lessor as rent for the Premises, monthly payments of $16,500.00**,
in advance, on the 1st day of each month of the term hereof. Lessee shall pay
Lessor upon the execution hereof $14,100.00 as rent for August 1994.  **Rent for the period 8/1/94 to 8/31/94 shall
be $14,100.00. Rent for the period 9/1/94 to 7/31/96 shall be $16,500.00 per
month. Rent for the period 8/1/96 to 7/31/99 shall be $17,875.00 per month.  

 

Rent for any period during the term hereof which is for less than one
month shall be a pro rata portion of the monthly installment. Rent shall be
payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other places as Lessor may designate
in writing.

 

5.  Security Deposit.
Lessee shall deposit with Lessor upon execution hereof ($10,075.00) On Account
as security for Lessee’s faithful performance of Lessee’s obligations
hereunder. If Lessee fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Lease, Lessor may use,
apply or retain all or any portion of said deposit for the payment of any rent
or other charge in default or for the payment of any other sum to which Lessor
may become obligated by reason of Lessee’s default, or to compensate Lessor for
any loss or damage which Lessor may suffer thereby. If Lessor so uses or
applies all or any portion of said deposit, Lessee shall within ten (10) days
after written demand therefor deposit cash with Lessor in an amount sufficient to
restore said deposit to the full amount herein above stated and Lessee’s
failure to do so shall be a material breach of this Lease. If the monthly rent
shall, from time to time, increase during the term of this Lease, Lessee shall
thereupon deposit with Lessor additional security deposit so that the amount of
security deposit held by Lessor shall at all times bear the same proportion to
current rent as the original security deposit bears to the original monthly
rent set forth in paragraph 4 hereof. Lessor shall not be required to keep said
deposit separate from its general accounts. If Lessee performs all of Lessee’s
obligations hereunder, said deposit, or so much thereof as has not theretofore been
applied by Lessor, shall be returned, without payment of interest or other
increment for its use, to Lessee (or, at Lessor’s option, to the last assignee,
if any, of Lessee’s interest hereunder) at the expiration of the term hereof,
and after Lessee has vacated the Premises. No trust relationship is created
herein between Lessor and Lessee with respect to said Security Deposit.

 

6.  Use.

 

6.1 
Use. The Premises shall be used and occupied
only for Office, Research and Development, Sales, Manufacturing and Warehousing
or any other use which is reasonably comparable and for no other purpose.

 

6.2  Compliance with Law.

 

(a)  Lessor warrants to Lessee that the Premises, in its state
existing on the date that the Lease term commences, but without regard to the
use for which Lessee will use the Premises, does not violate any Environmental,
Health or Safety Laws, 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, then it
shall be the obligation of the Lessor, after written notice from Lessee, to
promptly, at Lessor’s sole cost and expense, rectify any such violation.

 

(b)  Except as provided in paragraph 6.2(a), Lessee shall, at
Lessee’s expense, comply promptly with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements in effect during the term or any part of the term hereof, regulating
the use by Lessee of the Premises. Lessee shall not use nor permit the use of
the Premises in any manner that will tend to create waste or a nuisance or, if
there shall be more than one tenant in the building containing the Premises,
shall tend to disturb such other tenants.

 

6.3  Condition
of Premises.

 

(a)  Lessor shall deliver the Premises of Lessee clean and free of
debris on Lease commencement date (unless Lessee is already in possession) and
Lessor further warrants to Lessee that the plumbing, lighting, air
conditioning, heating, and loading doors in the Premises shall be in good
operating condition on the Lease commencement date. In the event that it is
determined that this warranty has been violated, then it shall be the
obligation of Lessor, after receipt of written notice from Lessee setting forth
with specificity the nature of the violation, to promptly, at Lessor’s sole
cost, rectify such violation. Lessee’s failure to give such written notice to
Lessor within thirty (30) days after the Lease commencement date shall cause
the conclusive presumption that Lessor has complied with all of Lessor’s
obligations hereunder. The warranty contained in this paragraph 6.3(a) shall
be of no force or effect if prior to the date of this Lease, Lessee was the
owner or occupant of the Premises.

 

(b)  Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises in their condition existing as of the Lease commencement
date or the date that Lessee takes possession of the Premises, whichever is
earlier, subject to all applicable zoning, municipal, county and state laws,
ordinances and regulating governing and regulating the use of the Premises, and
any covenants or restrictions of record, and accepts this Lease subject thereto
and to all matters disclosed thereby and by any exhibits attached hereto.
Lessee acknowledges that neither Lessor nor Lessor’s agent has made any
representation or warranty as to the present or future suitability of the
Premises for the conduct of Lessee’s business.

 

7.  Maintenance, Repairs and
Alterations.

 

7.1 
Lessee’s Obligations. Lessee shall keep in good
order, condition and repair the Premises and every part thereof, structural and
non structural, (whether or not such portion of the Premises requiring repair,
or the means of repairing the same are reasonably or readily accessible to
Lessee, and whether or not the need for such repairs occurs as a result of
Lessee’s use, any prior use, the elements or the age of such portion of the
Premises) including, without limiting the generality of the foregoing, all
plumbing, electrical, lighting facilities and equipment within the Premises,
fixtures, walls (interior and exterior), foundations, ceilings, roofs (interior
and exterior), floors, windows, doors, plate glass and skylights located within
the Premises, and all landscaping, driveways, parking lots, fences and signs
located on the Premises and sidewalks and parkways adjacent to the Premises.

 

7.2 
Surrender. On the last day of the term hereof,
or on any sooner termination, Lessee shall surrender the Premises to Lessor in
the same condition as when received, ordinary wear and tear excepted, clean and
free of debris. Lessee shall repair any damage to the Premises occasioned

 

 

by the installation or removal of Lessee’s trade fixtures, furnishings
and equipment. Notwithstanding anything to the contrary otherwise stated in
this Lease. Lessee shall leave the air lines, power panels, electrical
distribution systems, lighting fixtures, space heaters, air conditioning,
plumbing and fencing on the premises in good operating condition.

 

7.3  Lessor’s
Rights.  If Lessee
fails to perform Lessee’s obligations under this Paragraph 7, or under any
other paragraph of this Lease, Lessor may at its option (but shall not be
required to) enter upon the Premises after ten (10) days’ prior written
notice to Lessee (except in the case of an emergency, in which case no notice
shall be required), perform such obligations on Lessee’s behalf and put the
same in good order, condition and repair, and the cost thereof together with
interest thereon at the maximum rate then allowable by law shall become due and
payable as additional rental to Lessor together with Lessee’s next rental
installment.

 

7.4  Lessors’
Obligations. 
Except for the obligations of Lessor under Paragraph 6.2(a) and 6.3(a) (relating
to Lessor’s warranty), Paragraph 9 (relating to destruction of the Premises)
and under Paragraph 14 (relating to condemnation of the Premises), it is
intended by the parties hereto that Lessor have no obligation, in any manner
whatsoever, to repair and maintain the Premises nor the building located
thereon nor the equipment therein, whether structural or non structural, all of
which obligations are intended to be that of the Lessee under Paragraph 7.1
hereof. Lessee expressly waives the benefit of any statute now or hereinafter
in effect which would otherwise afford Lessee the right to make repairs at
Lessor’s expense or to terminate this Lease because of Lessor’s failure to keep
the premises in good order, condition and repair.

 

7.5  Alterations
and Additions.

 

(a) Lessee shall not, without Lessor’s prior written consent make
any alterations, improvements, additions, or Utility Installations in, on or
about the Premises, except for nonstructural alterations not exceeding $2,500
in cumulative costs during the term of this Lease. In any event, whether or not
in excess of $2,500 in cumulative cost, Lessee shall make no change or
alteration to the exterior of the Premises nor the exterior of the building(s) on
the Premises without Lessor’s prior written consent. As used in this Paragraph
7.5 the term “Utility Installation” shall mean carpeting, window coverings, air
lines, power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing, and fencing. Lessor may require that
Lessee remove any or all of said alterations, improvements, additions or
Utility Installations at the expiration of the term, and restore the Premises
to their prior condition. Lessor may require Lessee to provide Lessor, at
Lessee’s sole cost and expense, a lien and completion bond in an amount equal
to one and one-half times the estimated cost of such improvements, to insure
Lessor against any liability for mechanic’s and materialmen’s liens and to
insure completion of the work. Should Lessee make any alterations,
improvements, additions or Utility Installations without the prior approval of
Lessor, Lessor may require that Lessee remove any or all of the same.

 

(b) Any alterations, improvements, additions or Utility
Installations in, or about the Premises that Lessee shall desire to make and
which requires the consent of the Lessor shall be presented to Lessor in
written form, with proposed detailed plans. If Lessor shall give its consent,
the consent shall be deemed conditioned upon Lessee acquiring a permit to do so
from appropriate governmental agencies, the furnishing of a copy thereof to
Lessor prior to the commencement of the work and the compliance by Lessee of
all conditions of said permit in a prompt and expeditious manner.

 

(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanics’ or
materialmen’s lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days’ notice prior to the commencement
of any work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Lessee shall,
in good faith, contest the validity of any such lien, claim or demand, then
Lessee shall, at its sole expense defend itself and Lessor against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof against the Lessor or the Premises, upon the
condition that if Lessor shall require, Lessee shall furnish to Lessor a surety
bond satisfactory to Lessor in an amount equal to such contested lien claim or
demand indemnifying Lessor against liability for the same and holding the Premises
free from the effect of such lien or claim. In addition, Lessor may require
Lessee to pay Lessor’s attorneys fees and costs in participating in such action
if Lessor shall decide it is to its best interest to do so.

 

(d) Unless Lessor requires their removal, as set forth in
Paragraph 7.5(a), all alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made on the Premises, shall become the
property of Lessor and remain upon and be surrendered with the Premises at the
expiration of the term. Notwithstanding the provisions of this Paragraph 7.5(d),
Lessee’s machinery and equipment, other than that which is affixed to the
Premises so that it cannot be removed without material damage to the Premises,
shall remain the property of Lessee and may be removed by Lessee subject to the
provisions of Paragraph 7.2.

 

8.  Insurance
Indemnity.

 

8.1  Insuring
Party. As used in this Paragraph 8, the term “insuring
party” shall mean the party who has the obligation to obtain the Property
Insurance required hereunder. The insuring party shall be designated in
Paragraph 46 hereof. In the event Lessor is the insuring party, Lessor shall
also maintain the liability insurance described in paragraph 8.2 hereof, in
addition to, and not in lieu of, the insurance required to be maintained by
Lessee under said paragraph 8.2, but Lessor shall not be required to name
Lessee as an additional insured on such policy. Whether the insuring party is
the Lessor or the Lessee, Lessee shall, as additional rent for the Premises,
pay the cost of all insurance required hereunder, except for that portion of
the cost attributable to Lessor’s liability insurance coverage in excess of
$1,000,000 per occurrence. If Lessor is the insuring party Lessee shall, within
ten (10) days following demand by Lessor, reimburse Lessor for the cost of
the insurance so obtained.

 

8.2  Liability
Insurance. Lessee shall, at Lessee’s expense obtain
and keep in force during the term of this Lease a policy of Combined Single
Limit, Bodily Injury and Property Damage Insurance insuring Lessor and Lessee
against any liability arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such insurance
shall be a combined single limit policy in an amount not less than $500,000 per
occurrence. The policy shall insure performance by Lessee of the indemnity
provisions of this Paragraph 8. The limits of said insurance shall not,
however, limit the liability of Lessee hereunder.

 

8.3  Property
Insurance.

 

(a) The insuring party shall obtain and
keep in force during the term of this Lease a policy or policies of insurance
covering loss or damage to the Premises, in the amount of the full replacement
value thereof, as the same may exist from time to time, which replacement value
is now $1,000,000.00, but in no event less than the total amount required by
lenders having liens on the Premises, against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief, flood
(in the event same is required by a lender having a lien on the Premises), and
special extended perils (“all risk” as such term is used in the insurance
industry). Said insurance shall provide for payment of loss thereunder to
Lessor or to the holders of mortgages or deeds of trust on the Premises. The
insuring party shall, in addition, 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 Lessor, which insurance shall also cover all real estate
taxes and insurance costs for said period. A stipulated value or agreed amount
endorsement deleting the coinsurance provision of the policy shall be procured
with said insurance as well as an automatic increase in insurance endorsement
causing the increase in annual property insurance coverage by 2% per quarter.
If the insuring party shall fail to procure and maintain said insurance the
other party may, but shall not be required to, procure and maintain the same,
but at the expense of Lessee. If such insurance coverage has a deductible
clause, the deductible amount shall not exceed $1,000 per occurrence, and
Lessee shall be liable for such deductible amount.

 

(b) If the Premises are part of a larger
building, or if the Premises are part of a group of buildings owned by Lessor
which are adjacent to the Premises, then Lessee shall pay for any increase in
the property insurance of such other building or buildings if said increase is
caused by Lessee’s acts, omissions, use or occupancy of the Premises.

 

(c) If the Lessor is the insuring party
the Lessor will not insure Lessee’s fixtures, equipment or tenant improvements
unless the tenant improvements have become a part of the Premises under
paragraph 7, hereof. But if Lessee is the insuring party the Lessee shall
insure its fixtures, equipment and tenant improvements.

 

8.4  Insurance
Policies. Insurance required hereunder shall be in
companies holding a “General Policyholders Rating” of at least B plus, or such
other rating as may be required by a tender having a lien on the Premises, as
set forth in the most current issue of “Best’s Insurance Guide”. The insuring
party shall deliver to the other party copies of policies of such insurance or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses as required by this paragraph 8. No such policy shall be
cancellable or subject to reduction of coverage or other modification except
after thirty (30) days’ prior written notice to Lessor. If Lessee is the
insuring party Lessee shall, at least thirty (30) days prior to the expiration
of such policies, furnish Lessor with renewals or “binders” thereof, or Lessor
may order such insurance and charge the cost thereof to Lessee, which amount
shall be payable by Lessee upon demand. Lessee shall not do or permit to be
done anything which shall invalidate the insurance policies referred to in
Paragraph 8.3. If Lessee does or permits to be done anything which shall
increase the cost of the insurance policies referred to in Paragraph 8.3, then
Lessee shall forthwith upon Lessor’s demand reimburse Lessor for any additional
premiums attributable to any act or omission or operation of Lessee causing
such increase in the cost of insurance. If Lessor is the insuring party, and if
the insurance policies maintained hereunder cover other improvements in
addition to the Premises, Lessor shall deliver to Lessee a written statement
setting forth the amount of any such insurance cost increase and showing in
reasonable detail the manner in which it has been computed.

 

8.5  Waiver
of Subrogation. Lessee and Lessor each hereby release
and relieve the other, and waive their entire right of recovery against the
other for loss or damage arising out of or incident to the perils insured
against under paragraph 8.3, which perils occur in, on or about the Premises,
whether due to the negligence of Lessor or Lessee or their agents, employees,
contractors and/or invitees. Lessee and Lessor shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in
this Lease.

 

8.6  Indemnity.
Lessee shall indemnify and hold harmless Lessor from and against any and all
claims arising from Lessee’s use of the Premises, or from the conduct of Lessee’s
business or from any activity, work or things done, permitted or suffered by
Lessee in or about the Premises or elsewhere and shall further indemnify and
hold harmless Lessor from and against any and all claims arising from any
breach or default in the performance of any obligation on Lessee’s part to be
performed under the terms of this Lease, or arising from any negligence of the
Lessee, or any of Lessee’s agents, contractors, or employees, and from and
against all costs, attorney’s fees, expenses and liabilities incurred in the
defense of any such claim or any action or proceeding brought thereon; and in
case any action or proceeding be brought against Lessor by reason of any such
claim, Lessee upon notice from Lessor shall defend the same at Lessee’s expense
by counsel satisfactory to Lessor. Lessee, as a material part of the
consideration to Lessor, hereby assumes all risk of damage to property or
injury to persons, in, upon or about the Premises arising from any cause and
Lessee hereby waives all claims in respect thereof against Lessor.

 

8.7  Exemption
of Lessor from Liability. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee’s business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Lessee, Lessee’s employees, invitees, customers, or any other
person in or about the Premises, nor shall Lessor be liable for injury to the
person of Lessee. Lessee’s employees, agents or contractors, whether such
damage or injury is caused by or results from 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 the said damage or injury results
from conditions arising upon the Premises or upon other portions of the
building of which the Premises are a part, or from other sources or places and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Lessee. Lessor shall not be liable for
any damages arising from any act or neglect of any other tenant, if any, of the
building in which the Premises are located.

 

2

 

9.  Damage or Destruction.

 

9.1  Definitions.

 

(a)  “Premises Partial Damage” shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is less than
50% of the then replacement cost of the Premises. “Premises Building Partial
Damage” shall herein mean damage or destruction to the building of which the
Premises are a part to the extent that the cost of repair is less than 50% of
the then replacement cost of such building as a whole.

 

(b)  “Premises Total Destruction” shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is 50% or
more of the then replacement cost of the Premises. “Premises Building Total
Destruction” shall herein mean damage or destruction to the building of which
the Premises are a part to the extent that the cost of repair is 50% or more of
the then replacement cost of such building as a whole.

 

(c)  “Insured Loss” shall herein mean damage or destruction which
was caused by an event required to be covered by the insurance described in
paragraph 8.

 

9.2  Partial
Damage — Insured Loss. Subject to the provisions of
paragraphs 9.4, 9.5 and 9.6, 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
Premises Partial Damage or Premises Building Partial Damage, then Lessor shall,
at Lessor’s expense, repair such damage, but not Lessee’s fixtures, equipment
or tenant improvements unless the same have become a part of the Premises
pursuant to Paragraph 7.5 hereof as soon as reasonably possible and this Lease
shall continue in full force and effect. Notwithstanding the above, if the
Lessee is the insuring party, and if the insurance proceeds received by Lessor
are not sufficient to effect such repair, Lessor shall give notice to Lessee of
the amount required in addition to the insurance proceeds to effect such
repair. Lessee shall contribute the required amount to Lessor within ten days
after Lessee has received notice from Lessor of the shortage in the insurance.
When Lessee shall contribute such amount to Lessor, Lessor shall make such
repairs as soon as reasonably possible and this Lease shall continue in full
force and effect. Lessee shall in no event have any right to reimbursement for
any such amounts so contributed.

 

9.3  Partial
Damage — Uninsured Loss. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, 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 Partial Damage or Premises Building Partial Damage,
unless caused by a negligent or willful act of Lessee (in which event Lessee
shall make the repairs at Lessee’s expense). Lessor may at Lessor’s option
either (i) repair such damage as soon as reasonably possible at Lessor’s
expense, in which event this Lease shall continue in full force and effect, or (ii) give
written notice to Lessee within thirty (30) days after the date of the
occurrence of such damage of Lessor’s intention to cancel and terminate this
Lease, as of the date of the occurrence of such damage. In the event Lessor
elects to give such notice of Lessor’s intention to cancel and terminate this
Lease, Lessee shall have the right within ten (10) days after the receipt
of such notice to give written notice to Lessor of Lessee’s intention to repair
such damage at Lessee’s expense, without reimbursement from Lessor, in which
event this Lease shall continue in full force and effect, and Lessee shall
proceed to make such repairs as soon as reasonably possible. If Lessee does not
give such notice within such 10-day period this Lease shall be cancelled and
terminated as of the date of the occurrence of such damage.

 

9.4  Total
Destruction. If at any time during the term of this
Lease there is damage, whether or not an Insured Loss, (including destruction
required by any authorized public authority), which falls into the
classification of Premises Total Destruction or Premises Building Total
Destruction, this Lease shall automatically terminate as of the date of such
total destruction.

 

9.5  Damage
Near End of Term.

 

(a)  If at any time during the last six months of the term of this
Lease there is damage, whether or not an Insured Loss, which falls within the
classification of Premises Partial Damage, Lessor may at Lessor’s option cancel
and terminate this Lease as of the date of occurrence of such damage by giving
written notice to Lessee of Lessor’s election to do so within 30 days after the
date of occurrence of such damage.

 

(b)  Notwithstanding paragraph 9.5(a), in the event that Lessee
has an option to extend or renew this Lease, and the time within which said
option may be exercised has not yet expired, Lessee shall exercise such option,
if it is to be exercised at all, no later than 20 days after the occurrence of
an Insured Loss falling within the classification of Premises Partial Damage
during the last six months of the term of this Lease. If Lessee duly exercises
such option during said 20 day period, Lessor shall, at Lessor’s expense,
repair such damage as soon as reasonably possible and this Lease shall continue
in full force and effect. If Lessee fails to exercise such option during said
20 day period, then Lessor may at Lessor’s option terminate and cancel this
Lease as of the expiration of said 20 day period by giving written notice to
Lessee of Lessor’s election to do so within 10 days after the expiration of
said 20 day period, notwithstanding any term or provision in the grant of
option to the contrary.

 

9.6  Abatement
of Rent; Lessee’s Remedies.

 

(a)  In the event of damage described in paragraphs 9.2 or 9.3,
and Lessor or Lessee repairs or restores the Premises pursuant to the
provisions of this Paragraph 9, the rent payable hereunder for the period
during which such damage, repair or restoration continues shall be abated in
proportion to the degree to which Lessee’s use of the Premises is impaired.
Except for abatement of rent, if any, Lessee shall have no claim against Lessor
for any damage suffered by reason of any such damage, destruction, repair or
restoration.

 

(b)  If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence such
repair or restoration within 21 days after such obligations shall accure,
Lessee may at Lessee’s option cancel and terminate this Lease by giving Lessor
written notice of Lessee’s election to do so at any time prior to the
commencement of such repair or restoration. In such event this Lease shall
terminate as of the date of such notice.

 

9.7  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 Lessee to Lessor. Lessor shall, in addition, return to Lessee
so much of Lessee’s security deposit as has not theretofore been applied by
Lessor.

 

9.8  Waiver.
Lessor and Lessee waive the provisions of any statutes
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. Lessee
shall pay the real property tax, as defined in paragraph 10.2, applicable to
the Premises during the term of this Lease. All such payments shall be made at
least ten (10) days prior to the delinquency date of such payment. Lessee
shall promptly furnish Lessor with satisfactory evidence that such taxes have
been paid. If any such taxes paid by Lessee shall cover any period of time
prior to or after the expiration of the term hereof. Lessee’s share of such
taxes shall be equitably prorated to cover only the period of time within the
tax fiscal year during which this Lease shall be in effect, and Lessor shall
reimburse Lessee to the extent required. If Lessee shall fail to pay any such
taxes, Lessor shall have the right to pay the same, in which case Lessee shall
repay such amount to Lessor with Lessee’s next rent installment together with
interest at the maximum rate then allowable by law.

 

10.2 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 Premises by any authority having the direct or
indirect power to tax, including any city, 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 Lessor in the
Premises or in the real property of which the Premises are a part, as against
Lessor’s right to rent or other income therefrom, and as against Lessor’s
business of leasing the Premises. 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 transfer, either partial or total,
of Lessor’s interest in the Premises or which is added to a tax or charge
hereinbefore included within the definition of real property tax by reason of
such transfer, or (v) which is imposed by reason of this transaction, any
modifications or changes hereto, or any transfers hereof.

 

10.3 Joint Assessment. If
the Premises are not separately assessed, Lessee’s liability shall be an
equitable proportion of the real property taxes for all of the land and
improvements included within the tax parcel assessed, such proportion to be
determined by Lessor from the respective valuations assigned in the assessor’s
work sheets or such other information as may be reasonably available. Lessor’s
reasonable determination thereof, in good faith, shall be conclusive.

 

10.4 Personal Property Taxes.

 

(a)  Lessee shall pay prior to
delinquency all taxes assessed against and levied upon trade fixtures,
furnishings, equipment and all other personal property of Lessee contained in
the Premises or elsewhere. When possible, Lessee shall cause said trade
fixtures, furnishings, equipment and all other personal property to be assessed
and billed separately from the real property of Lessor.

 

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

 

11.  Utilities. Lessee
shall pay for all water, gas, heat, light, power, telephone and other utilities
and services supplied to the Premises, together with any taxes thereon. If any
such services are not separately metered to Lessee, Lessee shall pay a
reasonable proportion to be determined by Lessor of all charges jointly metered
with other premises.

 

12.  Assignment and Subletting.

 

12.1 Lessor’s Consent Required.
Lessee shall not voluntarily or by operation of law assign, transfer, mortgage,
sublet, or otherwise transfer or encumber all or any part of Lessee’s interest
in this Lease or in the Premises, without Lessor’s prior written consent, which
Lessor shall not unreasonably withhold. Lessor shall respond to Lessee’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 breach of this Lease.

 

12.2 Lessee Affiliate. Notwithstanding
the provisions of paragraph 12.1 hereof, Lessee may assign or sublet the
Premises, or any portion thereof, without Lessor’s consent, to any corporation
which controls, is controlled by or is under common control with Lessee, or to
any corporation resulting from the merger or consolidation with Lessee, or to
any person or entity which acquires all the assets of Lessee as a going concern
of the business that is being conducted on the Premises, provided that said
assignee assumes, in full, the obligations of Lessee under this Lease. Any such
assignment shall not, in any way, affect or limit the liability of Lessee 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  Lessee, the consent of whom shall not be
necessary.

 

12.3 No Release of Lessee.
Regardless of Lessor’s consent, no subletting or assignment shall release
Lessee of Lessee’s obligation or alter the primary liability of Lessee to pay
the rent and to perform all other obligations to be performed by Lessee
hereunder. The acceptance of rent by Lessor from any other person shall not be
deemed to be a waiver by Lessor of any provision hereof. Consent to one
assignment or subletting shall not be deemed consent to any subsequent
assignment or subletting. In the event of default by any assignee of Lessee or
any successor of Lessee, in the performance of any of the terms hereof, Lessor
may proceed directly against Lessee without the necessity of exhausting
remedies against said assignee. Lessor may consent to subsequent assignments or
subletting of this Lease or amendments or modifications to this Lease with
assignees

 

3

 

of Lessee, without notifying Lessee, or any successor of Lessee, and
without obtaining its or their consent thereto and such action shall not
relieve Lessee of liability under this Lease.

 

12.4  Attorney’s
Fees.  In the
event Lessee shall assign or sublet the Premises or request the consent of Lessor
to any assignment or subletting or if Lessee shall request the consent of
Lessor for any act Lessee proposes to do then Lessee shall pay Lessor’s
reasonable attorneys fees incurred in connection therewith, such attorneys fees
not to exceed $350.00 for each such request.

 

13.  Defaults; Remedies.

 

13.1  Defaults.
The occurrence of any one or more of the following events shall constitute a
material default and breach of this Lease by Lessee:

 

(a) The vacating or abandonment of the Premises by Lessee.

 

(b) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three days after written notice thereof
from Lessor to Lessee. In the event that Lessor serves Lessee 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.

 

(c) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed
by Lessee, other than described in paragraph (b) above, where such failure
shall continue for a period of 30 days after written notice thereof from Lessor
to Lessee; provided, however, that if the nature of Lessee’s default is such
that more than 30 days are reasonably required for its cure, then Lessee shall
not be deemed to be in default if Lessee commenced such cure within said 30-day
period and thereafter diligently prosecutes such cure to completion.

 

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

 

(e) The discovery by Lessor that any financial statement given to
Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee’s obligation
hereunder, and any of them, was materially false.

 

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

 

(a) Terminate Lessee’s right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event
Lessor shall be entitled to recover from Lessee all damages incurred by Lessor
by reason of Lessee’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 for the same period that Lessee proves could be reasonably avoided;
that portion of the leasing commission paid by Lessor pursuant to Paragraph 15
applicable to the unexpired term of this Lease.

 

(b) Maintain Lessee’s right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event Lessor shall be entitled to enforce all of Lessor’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 Lessor
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
Lessee 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 Lessor. Lessor
shall not be in default unless Lessor fails to perform obligations required of
Lessor within a reasonable time, but in no event later than thirty (30) days
after written notice by Lessee to Lessor and to the holder of any first
mortgage or deed of trust covering the Premises whose name and address shall
have theretofore been furnished to Lessee in writing, specifying wherein Lessor
has failed to perform such obligation; provided, however, that if the nature of
Lessor’s obligation is such that more than thirty (30) days are required for
performance then Lessor shall not be in default if Lessor commences performance
within such 30-day period and thereafter diligently prosecutes the same to
completion.

 

13.4 Late Charges.
Lessee hereby acknowledges that late payment by Lessee to Lessor of rent and to
other sums due hereunder will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Premises. Accordingly, if any installment of rent or
any other sum due from Lessee shall not be received by Lessor or Lessor’s
designee within ten (10) days after such amount shall be due, then, Lessee
shall pay to Lessor a late charge equal to 6% of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee’s default with respect to such overdue amount, nor prevent Lessor
from exercising any of the other rights and remedies granted hereunder. In the
event that a late charge is payable hereunder, whether or not collected, for
three (3) consecutive installments of rent, then rent shall automatically
become due and payable quarterly in advance, rather than monthly,
notwithstanding paragraph 4 or any other provision of this Lease to the
contrary.

 

13.5 Impounds. In
the event that a late charge is payable hereunder, whether or not collected,
for three (3) installments of rent or any other monetary obligation of
Lessee under the terms of this Lease, Lessee shall pay to Lessor, if Lessor
shall so request, in addition to any other payments required under this Lease,
a monthly advance installment, payable at the same time as the monthly rent, as
estimated by Lessor, for real property tax and insurance expenses on the
Premises which are payable by Lessee under the terms of this Lease. Such fund
shall be established to insure payment when due, before delinquency, of any or
all such real property taxes and insurance premiums. If the amounts paid to
Lessor by Lessee under the provisions of this paragraph are insufficient to
discharge the obligations of Lessee to pay such real property taxes and
insurance premiums as the same become due, Lessee shall pay to Lessor, upon
Lessor’s demand, such additional sums necessary to pay such obligations. All
moneys paid to Lessor under this paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In the event of a default in the
obligations of Lessee to perform under this Lease, then any balance remaining
from funds paid to Lessor under the provisions of this paragraph may, at the
option of Lessor, be applied to the payment of any monetary default of Lessee
in lieu of being applied to the payment of real property tax and insurance
premiums.

 

14.  Condemnation.
If the Premises or any portion thereof 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. If more than 10% of the floor area of the building on
the Premises, or more than 25% of the land area of the Premises which is not
occupied by any building, is taken by condemnation, Lessee may, at Lessee’s
option, to be exercised in writing only within ten (10) days after Lessor
shall have given Lessee written notice of such taking (or in the absence of
such notice, within ten (10) days after the condemning authority shall
have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee 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 shall be
reduced in the proportion that the floor area of the building taken bears to
the total floor area of the building situated on the Premises. No reduction of
rent shall occur if the only area taken is that which does not have a building
located thereon. Any award for the taking of all or any part of the Premises
under the power of eminent domain or any payment made under threat of the
exercise of such power shall be the property of Lessor, 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 Lessee
shall be entitled to any award for loss of or damage to Lessee’s trade fixtures
and removable personal property. In the event that this Lease is not terminated
by reason of such condemnation, Lessor shall to the extent of severance damages
received by Lessor in connection with such condemnation, repair any damage to
the Premises caused by such condemnation except to the extent that Lessee has
been reimbursed therefor by the condemning authority. Lessee shall pay any
amount in excess of such severance damages required to complete such repair.

 

16.  Estoppel Certificate.

 

(a) Lessee shall at any time upon not less than ten (10) days’
prior written notice from Lessor execute, acknowledge and deliver to Lessor 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 Lessee’s knowledge, any uncured
defaults on the part of Lessor hereunder, or specifying such defaults if any
are claimed. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises.

 

(b) At Lessor’s option, Lessee’s failure to deliver such statement
within such time shall be a material breach of this Lease or shall be

 

4

 

conclusive upon Lessee (i) that this Lease is in full force and
effect, without modification except as may be represented by Lessor, (ii) that
there are no uncured defaults in Lessor’s performance, and (iii) that not
more than one month’s rent has been paid in advance or such failure may be
considered by Lessor as a default by Lessee under this Lease.

 

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

 

17.  Lessor’s Liability.  The term “Lessor” as
used herein shall mean only the owner or owners at the time in question of the
fee title or a lessee’s interest in a ground lease of the Premises, and except
as expressly provided in Paragraph 15, in the event of any transfer of such
title or interest, Lessor 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 Lessor’s obligations thereafter to be performed,
provided that any funds in the hands of Lessor or the then grantor at the time
of such transfer, in which Lessee has an interest, shall be delivered to the
grantee. The obligations contained in this Lease to be performed by Lessor
shall, subject as aforesaid, be binding on Lessor’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 Lessor not paid when due shall bear interest at the maximum rate
then allowable by law from the date due. Payment of such interest shall not
excuse or cure any default by Lessee under this Lease, provided, however, that
interest shall not be payable on late charges incurred by Lessee nor on any
amounts upon which late charges are paid by Lessee.

 

Maximum interest rate shall be 10%.

 

20.  Time of Essence.
Time is of the essence.

 

21.  Additional Rent. Any
monetary obligations of Lessee to Lessor under the terms of this Lease shall be
deemed to be rent.

 

22.  Incorporation of Prior Agreements;
Amendments. This Lease contains all agreements of the
parties with respect to any matter mentioned herein. No prior 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, Lessee hereby
acknowledges that neither the real estate broker listed in Paragraph 15 hereof
nor any cooperating broker on this transaction nor the Lessor or any employees
or agents of any of said persons has made any oral or written warranties or
representations to Lessee relative to the condition or use by Lessee of said
Premises and Lessee acknowledges that Lessee 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 except as otherwise
specifically stated in 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 mail, and if given personally
or by mail, shall be deemed sufficiently given if addressed to Lessee or to
Lessor at the address noted below the signature of the respective parties, as
the case may be. Either party may by notice to the other specify a different
address for notice purposes except that upon Lessee’s taking possession of the
Premises, the Premises shall constitute Lessee’s address for notice purposes. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at such addresses as
Lessor may from time to time hereafter designate by notice to Lessee.

 

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

 

25.  Recording.
Either Lessor or Lessee 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 Lessee, with Lessor’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 Lessee, but all options and rights of first refusal, 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.

 

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.  Covenants and Conditions. Each
provision of this Lease performable by Lessee 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 Lessee 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
wherein the Premises are located.

 

30.  Subordination.

 

(a) This Lease, at Lessor’s option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation or security now or
hereafter 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.
Notwithstanding such subordination, Lessee’s right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee 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 lessor 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 Lessee, 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.

 

(b) Lessee agrees to execute any documents required to effectuate
an attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee’s failure
to execute such documents within 10 days after written demand shall constitute
a material default be Lessee hereunder, or, at Lessor’s option, Lessor shall
execute such documents on behalf of Lessee as Lessee’s attorney-in-fact. Lessee
does hereby make, constitute and irrevocably appoint Lessor as Lessee’s
attorney-in-fact and in Lessee’s name, place and stead, to execute such
documents in accordance with this paragraph 30(b).

 

31.  Attorney’s Fees. If
either party or the broker named herein brings an action to enforce the terms
hereof or declare rights hereunder, the prevailing party in any such action, on
trial or appeal, shall be entitled to his reasonable attorney’s fees to be paid
by the losing party as fixed by the court. The provisions of this paragraph
shall inure to the benefit of the broker named herein who seeks to enforce a
right hereunder.

 

32.  Lessor’s Access.
Lessor and Lessor’s agents shall have the right to enter the Premises at
reasonable times for the purpose of inspecting the same, showing the same to
prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part as Lessor may deem necessary or desirable. Lessor may at any
time place on or about the Premises any ordinary “For Sale” signs and Lessor
may at any time during the last 120 days of the term hereof place on or about
the Premises any ordinary “For Lease” signs, all without rebate of rent or
liability to Lessee.

 

33.  Auctions.  Lessee shall not
conduct, nor permit to be conducted, either voluntarily or involuntarily, any
auction upon the Premises without first having obtained Lessor’s prior written
consent. Notwithstanding anything to the contrary in the Lease. Lessor shall
not be obligated to exercise any standard of reasonableness in determining
whether to grant such consent.

 

34.  Signs. Lessee
shall not place any sign upon the Premises without Lessor’s prior written
consent except that Lessee shall have the right, without the prior permission
of Lessor to place ordinary and usual for rent or sublet signs thereon.

 

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

 

36.  Consents.  Except for paragraph 33 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.

 

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

 

38.  Quiet Possession. Upon
Lessee paying the rent for the Premises and observing and performing all of the
covenants, conditions and provisions on Lessee’s part to be observed and
performed hereunder, Lessee 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 Lessor represent and warrant to
Lessee that they are fully authorized and legally capable of executing this
Lease on behalf of Lessor and that such execution is binding upon all parties
holding an ownership interest in the Premises.

 

39.  Options.

 

39.1 Definition.  As used in this paragraph the word “Options”
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 Lessee
has on other property of Lessor: (2) the option or 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 property of Lessor or the right of first
offer to lease other properly of Lessor: (3) the right or option to
purchase the Premises, or the right of first refusal to purchase the Premises,
or the right of first offer to purchase the Premises or the right or option to
purchase other property of Lessor, or the right of first refusal to purchase
other property of Lessor or the right of first offer to purchase other property
of Lessor.

 

5

 

39.2 Options Personal. Each
Option granted to Lessee in this Lease are personal to Lessee and may not be
exercised or be assigned, voluntarily or involuntarily, by or to any person or entity
other than Lessee, provided, however, the Option may be exercised by or assigned
to any Lessee Affiliate as defined in paragraph 12.2 of this Lease. The Options
herein granted to Lessee are not assignable separate and apart from this Lease.

 

39.3 Multiple Options.  In the event that Lessee 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) Lessee 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 Lessor gives to Lessee a notice of default
pursuant to paragraph 13.1(b) or 13.1(c) and continuing until the
default alleged in said notice of default is cured, or (ii) during the
period of time commencing on the day after a monetary obligation to Lessor is
due from Lessee and unpaid (without any necessity for notice thereof to Lessee)
continuing until the obligation is paid, or (iii) at any time after an event
of default described in paragraphs 13.1(a), 13.1(d), or 13.1(c) (without
any necessity of Lessor to give notice of such default to Lessee), or (iv) in
the event that Lessor has given to Lessee three or more notices of default
under paragraph 13.1(b), where a late charge has become payable under paragraph
13.4 for each of such defaults, or paragraph 13.1(c), whether or not the
defaults are cured, during the 12 month period prior to the time that Lessee
intends to exercise the subject Option.

 

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

 

(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee’s due
and timely exercise of the Option, if, after such exercise and during the term
of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of 30 days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessee
fails to commence to cure a default specified in paragraph 13.1(c) within
30 days after the date that Lessor gives notice to Lessee of such default
and/or Lessee fails thereafter to diligently prosecute said cure to completion,
or (iii) Lessee commits a default described in paragraph 13.1(a), 13.1(d) or
13.1(e) (without any necessity of Lessor to give notice of such default to
Lessee), or (iv) Lessor gives to Lessee three or more notices of default
under paragraph 13.1(b), where a late charge becomes payable under paragraph
13.4 for each such default, or paragraph 13.1(c), whether or not the defaults
are cured.

 

40.  Multiple Tenant Building. In
the event that the Premises are part of a larger building or group of buildings
then Lessee agrees that it will abide by, keep and observe all reasonable rules and
regulations which Lessor may make from time to time for the management, safety,
care, and cleanliness of the building and grounds, the parking of vehicles and
the preservation of good order therein as well as for the convenience of other
occupants and tenants of the building. The violations of any such rules and
regulations shall be deemed a material breach of this Lease by Lessee.

 

41.  Security Measures.
Lessee hereby acknowledges that the rental payable to Lessor hereunder does not
include the cost of guard service or other security measures, and that Lessor
shall have no obligation whatsoever to provide same. Lessee assumes all responsibility
for the protection of Lessee, its agents and invitees from acts of third
parties.

 

42.  Easements.
Lessor reserves to itself the right, from time to time, to grant such easements,
rights and dedications that Lessor 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 Lessee. Lessee shall sign any of the aforementioned
documents upon request of Lessor and failure to do so shall constitute a
material breach of this Lease.

 

43.  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.

 

44.  Authority. If
Lessee is a corporation, trust, or general or limited partnership, each
individual executing this Lease on behalf of such entity represents and
warrants that he or she is duly authorized to execute and deliver this Lease on
behalf of said entity. If Lessee is a corporation, trust or partnership, Lessee
shall, within thirty (30) days after execution of this Lease, deliver to Lessor
evidence of such authority satisfactory to Lessor.

 

45.  Conflict.
Any Conflict between the printed provisions of this Lease and the typewritten
or handwritten provisions shall be controlled by the typewritten or handwritten
provisions.

 

46.  Insuring Party. The
insuring party under this lease shall be the Lessor.

 

47.  Addendum. Attached
hereto is an addendum or addenda containing paragraphs 48 through 54 which
constitutes a part of this Lease.

 

 

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH
TERM AND PROVISION CONTAINED HEREIN AND, BY 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 LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.

 

IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY
THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER OR
ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS 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 CONSEQUENCES OF THIS LEASE.

The parties hereto have executed this Lease at the place on the dates
specified immediately adjacent to their respective signatures.

 

	
  Executed at

  	
   

  	
   

  	
  H-K Associates

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  on

  	
   

  	
   

  	
  By

  	
  [ILLEGIBLE]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  	
  By

  	
  General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  “LESSOR” (Corporate seal)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Executed at

  	
  Campbell, CA

  	
   

  	
   

  	
  Videonics, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  on

  	
  07/24/94

  	
   

  	
  By

  	
  [ILLEGIBLE] VP Finance

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  “LESSEE” (Corporate seal)

  
										

 

For these forms write or call the American Industrial Real Estate
Association, 350 South Figueroa St., Suite 275, Los Angeles, CA 90071
(213) 687-8777

 

© 1980 — By American Industrial Real Estate Association. All rights
reserved. No part of these words may be reproduced in any from without
permission in writing.

 

Form 204n 780

 

6

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