Document:

Exhibit 10.13

 

SETTLEMENT AGREEMENT

 

This SETTLEMENT  AGREEMENT (this “Settlement Agreement”)
is made and entered into as of November 12, 2004 (the “Effective Date”)
by and between, on the one hand, Polycom, Inc., a Delaware corporation,
having offices at 4750 Willow Road, Pleasanton, CA 94588 (“Polycom”),
and, on the other hand, Avistar Communications Corporation, a Delaware
corporation, having offices at 555 Twin Dolphin Drive, Suite 360, Redwood
Shores, California 94065 together with its wholly owned subsidiary
Collaboration Properties, Inc., a Nevada corporation, having offices at
555 Twin Dolphin Drive, Suite 360, Redwood Shores, California 94065 (collectively, “Avistar “) (Polycom
and Avistar are individually referred to herein as a “party,” and collectively
as the “parties”).

 

WITNESSETH

 

WHEREAS, Avistar has filed claims against
Polycom for patent infringement in an action styled Collaboration Properties, Inc.
v. Polycom, Inc., Case # 02-CV-04591, pending in the United
States District Court for the Northern District of California, and Polycom has
asserted counterclaims for, inter alia,
patent infringement, invalidity and unenforceability, against Avistar (the “Litigation”);

 

WHEREAS, Polycom denies that it does now or
has ever infringed any of Avistar’s patents or committed any act that would
entitle Avistar, under the law of any jurisdiction anywhere in the world, to
any of the relief it is seeking in the Litigation against Polycom;

 

WHEREAS, Avistar asserts that Polycom does
infringe the Avistar patents asserted in the Litigation, that those patents are
valid and enforceable, and that it is entitled to the relief it is seeking in
the Litigation against Polycom;

 

WHEREAS, Avistar and Polycom are concurrently
entering into that certain Patent Cross-License Agreement of even date herewith
and attached hereto as Exhibit C (the “Patent License Agreement”);
and

 

WHEREAS, Avistar and Polycom desire to avoid
the time and expense of litigation, and in compromise of the disputed claims,
to fully and finally resolve and settle the Litigation through the exchange of
mutual releases, licenses and other valuable and adequate consideration as set
forth in this Settlement Agreement and the Patent License Agreement.

 

NOW, THEREFORE, in consideration of the above
and the mutual covenants and promises hereinafter contained, the parties agree
as follows:

 

ARTICLE I – DEFINITIONS

 

As used in this Settlement Agreement, the
following terms shall have the following meanings:

 

1.1                                 “Avistar
Patents” shall have the meaning set forth in Section 1.1 of the Patent
License Agreement.

 

 

1.2                                 “Person”
shall have the meaning set forth in Section 1.10 of the Patent License
Agreement. 

 

1.3                                 “Polycom
Patents” shall have the meaning set forth in Section 1.14 of the
Patent License Agreement.  

 

1.4                                 “Subsidiary”
shall have the meaning set forth in Section 1.13 of the Patent License
Agreement. 

 

1.5                                 “Third Party”
shall have the meaning set forth in Section 1.14 of the Patent License
Agreement.  

 

1.6                                 “Voting
Power” shall have the meaning set forth in Section 1.15 of the Patent
License Agreement.  

 

ARTICLE II – RELEASES

 

2.1                                 Releases by
Avistar.

 

(a)          Subject to ARTICLE V below,
Avistar, on behalf of itself and its Subsidiaries, irrevocably releases,
acquits and forever discharges (and will cause its Subsidiaries to irrevocably
release, acquit and forever discharge) Polycom and its Subsidiaries and its and
their respective officers, directors, employees, agents, predecessors,
successors, assigns, representatives, and attorneys from and against any and
all causes of action, actions, rights of action, suits, judgments, liens,
indebtedness, damages, losses, claims, liabilities, obligations, attorneys’
fees, costs, expenses and demands of every kind and character (i) arising
from, included in or relating to the Litigation, or (ii) which otherwise
accrued against Polycom or its Subsidiaries prior to the Effective Date or
arises out of any act or alleged act done prior to the Effective Date, whether
known or unknown, suspected or unsuspected, disclosed or undisclosed, up to and
as of the Effective Date, including misappropriation of trade secrets, unfair
business practices, anticompetitive acts, and infringement of any Avistar
Patents, including Patents asserted by Avistar in the Litigation, whether
direct, contributory or by inducement, and whether or not willful.

 

(b)                                       Subject to ARTICLE V
below, Avistar, on behalf of itself and its Subsidiaries, irrevocably releases,
acquits and forever discharges (and will cause its Subsidiaries to irrevocably
release, acquit and forever discharge) Polycom’s and its Subsidiaries’ direct
and indirect manufacturers, distributors, dealers, resellers, customers
(including OEM customers), and end users, (each direct and indirect
manufacturer, distributor, dealer, reseller, customer (including OEM customer),
and end user is a “Purchaser”, and all are collectively “Purchasers” for the
purposes of this section and section 2.2(b) below) from and
against any and all causes of action, actions, rights of action, suits,
judgments, liens, indebtedness, damages, losses, claims, liabilities,
obligations, attorneys’ fees, costs, expenses and demands of every kind and
character, whether known or unknown, suspected or unsuspected, disclosed or
undisclosed (i) arising from, included in or relating to the Litigation,
or (ii) arising from infringement of Avistar Patents, including Patents
asserted by Avistar in the Litigation (whether direct, contributory or by
inducement, and whether or not willful) based on acts prior to the Effective
Date that would have been licensed under the Patent License Agreement if
conducted after the Effective Date.  For
the avoidance

 

 

of
doubt, this release extends to a Purchaser only with respect to their permitted
manufacture, sale, distribution, import or use (as the case may be) of products
of Polycom or its Subsidiaries, and does not extend to any other actions or
omissions of a Purchaser that may give rise to a claim or cause of action by
Avistar. The foregoing shall not be construed as limiting the covenants not to
sue set forth in the Patent License Agreement, which the parties acknowledge
shall apply to products of Polycom and its Subsidiaries (and subject to the
limitations set forth in Section 4.2 of the Patent License Agreement, to
new Subsidiaries) whether sold prior to or after the Effective Date.

 

2.2                                 Releases by
Polycom.

 

(a)                                        Subject to ARTICLE V
below, Polycom, on behalf of itself and its Subsidiaries, irrevocably releases,
acquits and forever discharges (and will cause its Subsidiaries to irrevocably
release, acquit and forever discharge) Avistar and its Subsidiaries and its and
their respective officers, directors, employees, agents, predecessors,
successors, assigns, representatives, and attorneys from and against any and
all causes of action, actions, rights of action, suits, judgments, liens,
indebtedness, damages, losses, claims, liabilities, obligations, attorneys’
fees, costs, expenses and demands of every kind and character (i) arising
from, included in or relating to the Litigation, or (ii) which otherwise
accrued against Avistar or its Subsidiaries prior to the Effective Date or
arises out of any act or alleged act done prior to the Effective Date, whether
known or unknown, suspected or unsuspected, disclosed or undisclosed, up to and
as of the Effective Date, including misappropriation of trade secrets, unfair
business practices, anticompetitive acts and infringement of any Polycom
Patents, including Patents asserted by Polycom in the Litigation, whether
direct, contributory or by inducement, and whether or not willful.

 

(b)                                       Subject to ARTICLE V
below, Polycom, on behalf of itself and its Subsidiaries, irrevocably releases,
acquits and forever discharges (and will cause its Subsidiaries to irrevocably
release, acquit and forever discharge) Avistar’s and its Subsidiaries’ direct
and indirect Purchasers from and against any and all causes of action, actions,
rights of action, suits, judgments, liens, indebtedness, damages, losses,
claims, liabilities, obligations, attorneys’ fees, costs, expenses and demands
of every kind and character, whether known or unknown, suspected or
unsuspected, disclosed or undisclosed (i) arising from, included in or
relating to the Litigation, or (ii) arising from infringement of Polycom
Patents including Patents asserted by Polycom in the Litigation (whether
direct, contributory or by inducement, and whether or not willful) based on
acts prior to the Effective Date that would have been licensed under the Patent
License Agreement if conducted after the Effective Date.  For the avoidance of doubt, this release
extends to a Purchaser only with respect to their permitted manufacture, sale,
distribution, import or use (as the case may be) of products of Avistar or its
Subsidiaries, and does not extend to any other actions or omissions of a
Purchaser that may give rise to a claim or cause of action by Polycom. The
foregoing shall not be construed as limiting the covenants not to sue set forth
in the Patent License Agreement, which the parties acknowledge shall apply to
products of Avistar and its Subsidiaries (and subject to the limitations set
forth in Section 4.2 of the Patent License Agreement, to new Subsidiaries)
whether sold prior to or after the Effective Date.

 

2.3                                 General
Releases. The releases between Avistar and Polycom in this
Settlement Agreement include an express, informed, knowing and voluntary waiver
and relinquishment to the

 

 

fullest
extent permitted by law of rights under Section 1542 of the California
Civil Code, which reads as follows, and under any similar or comparable laws
anywhere in the world:

 

A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.

 

ARTICLE III – DISMISSAL OF LITIGATION

 

3.1                                 Dismissal.  In accordance with ARTICLE V below,
Avistar and Polycom shall cause their respective counsel to execute and file a
stipulation and order in the form set forth in Exhibit A dismissing with
prejudice all claims and counterclaims in the Litigation. The parties shall
cooperate in taking any and all additional procedures needed to dismiss the
Litigation with prejudice.

 

3.2                                 No Admission.  The parties agree that the settlement of the
Litigation is intended solely as a compromise of disputed claims and
counterclaims.  Neither the fact of a
party’s entry into this Settlement Agreement nor the terms hereof nor any acts
undertaken pursuant hereto shall constitute an admission or concession by any
party regarding liability or the validity of any claim or counterclaim in the
Litigation.  

 

3.3                                 Attorneys’ Fees
and Costs.  Except as
set forth in Section 4.1, The parties agree that they shall bear their own
costs and attorneys’ fees relating to the Litigation and settlement thereof,
including expert fees and court costs, and the preparation, negotiation and
execution of this Settlement Agreement and the Patent License Agreement. 

 

ARTICLE IV – CONSIDERATION

 

4.1                                 Polycom shall
pay to Avistar a total of twenty-seven million five hundred thousand U.S.
dollars (US$27,500,000) in accordance with ARTICLE V below, some of which
is related to Avistar’s attorneys’ fees. 
Such payment shall be made by check or wire transfer of immediately
available funds to a bank account designated by Avistar at execution.  Such payment shall be the sole and exclusive
payment required to be made by Polycom and its Subsidiaries in connection with
this Settlement Agreement and shall be Avistar’s sole remuneration hereunder.

 

ARTICLE V – CLOSING PROCESS

 

5.1                                 Closing.  The closing of the transactions contemplated
by this Settlement Agreement and the Patent License Agreement (the “Closing”)
shall take place on Friday, November 12, 2004 at 9:30 am Pacific Time at
the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill
Road, Palo Alto, California, or at such other place and time as the parties may
mutually determine.

 

5.2                                 Deliveries at
Closing.  At the Closing, the parties
shall execute and deliver this Settlement Agreement, the Patent License
Agreement, and the stipulation and order in the form set forth in Exhibit A.  Polycom’s counsel shall hold the executed
stipulation and order pending payment as described in Section 5.3.

 

 

5.3                                 Payment.  At the Closing or within one (1) business
day after the Closing, Polycom shall pay to Avistar the amount set forth in Section 4.1
in the manner set forth therein.  Upon
such payment, the releases, licenses and covenants and all other rights and
benefits of both parties under this Settlement Agreement and the Patent License
Agreement shall become fully effective.

 

5.4                                 Filing of
Dismissal.  Within two (2) court
days after the date of payment as described in Section 5.3, Polycom shall
cause its counsel to file the executed stipulation and order delivered pursuant
to Section 5.2.

 

ARTICLE VI – MISCELLANEOUS PROVISIONS

 

6.1                                 Representations
and Warranties.

 

(a)                                        Each of the parties hereto
represents and warrants that it has the right to grant the releases granted by
such party under this Settlement Agreement. 

 

(b)                                       Each of the parties hereto
represents and warrants that (i) it has the right to grant releases of the
full scope set forth herein with respect to all Patents owned by such party and
its Subsidiaries as of the Effective Date, including all Patents asserted by
such party or its Subsidiaries in the Litigation; (ii) no Third Party has
any right to enforce or obtain damages for past infringement of any Patents
owned by such party or its Subsidiaries as of the Effective Date (including
Patents asserted by such party or its Subsidiaries in the Litigation), (iii) neither
such party nor any of its Subsidiaries has any parent, affiliate or joint
venture (other than such party or its Subsidiaries under this Settlement
Agreement) who owns or controls any Patents as of the Effective Date; (iv) neither
it nor any of its Subsidiaries has assigned or otherwise transferred to any
other Person any rights to any claims, counterclaims, causes of action, damages
or other remedies relating to the Litigation; and (vi) neither it nor any
of its Subsidiaries has assigned or otherwise transferred its rights to any
Patents in the one (1) year period prior to the Effective Date.

 

6.2                                 Confidentiality
of Terms.  Neither
party shall disclose the terms of this Settlement Agreement without the prior
written consent of the other party except:

 

(a)                                        In the press
releases as set forth in 6.3 below, or any republication of those press
releases;

 

(b)                                       to Subsidiaries
of the parties in confidence;

 

(c)                                        to any
governmental body having jurisdiction and specifically requiring such
disclosure (in confidence to the extent allowed);

 

(d)                                       in response to
a valid subpoena or as otherwise may be required by law (in confidence to the
extent allowed);

 

(e)                                        to the extent
required, for the purposes of disclosure in connection with the Securities
Exchange Act of 1934, as amended, the Securities Act of 1933, as amended, and
any other reports filed with the Securities and Exchange Commission, or any
other filings, reports or disclosures that may be required under applicable
laws or regulations, provided however, that in the event either party
determines it is necessary to disclose any terms beyond those included in the

 

 

press
releases attached hereto as Exhibit B or that it is required to publicly
file this Settlement Agreement or the Patent License Agreement, the disclosing
party agrees to use commercially reasonable efforts to receive confidential
treatment for information deemed sensitive and shall give the other party
reasonable prior notice of its intention to disclose such information; 

 

(f)                                          to a party’s
accountants, legal counsel and other financial and legal advisors, subject to
obligations of confidentiality;

 

(h)                                       as required
during the course of litigation, subject to protective orders or other similar
protections as applicable; or

 

(i)                                           to a Third
Party’s outside counsel in connection with a potential merger or acquisition
by, of or with the party provided that such disclosure shall be (i) on a
strictly limited, need-to-know basis, (ii) when such transaction is
reasonably certain to take place, and (iii) on terms applicable to the
most confidential information disclosed by such party in connection with such
transaction provided such terms are at least as restrictive as set forth
herein;

 

provided, however, that prior to any such
disclosure pursuant to paragraphs (d) and/or (h) hereof, the party
seeking to make such disclosure shall notify the other party and take
reasonable actions in an effort to minimize the nature and extent of such
disclosure.

 

6.3                                 Press Releases.  At approximately 5AM Pacific Time on November 15,
2004, each party shall issue its corresponding press release regarding this
Settlement Agreement and the Patent License Agreement, the content of which is
set forth in Exhibit B hereto. 
Except as expressly authorized in Section 6.2 hereunder, or in the
Patent License Agreement, neither party shall issue any other press release or
other public communication regarding this Settlement Agreement or the Patent
License Agreement without the prior written consent of the other party.  

 

6.4                                 Notices.  All notices required or permitted to be given
hereunder shall be in writing and shall be delivered by hand, or if dispatched
by prepaid air courier or by registered or certified airmail, postage prepaid,
addressed as follows:

 

	
  If to Avistar:

  	
   

  	
  Avistar Communications Corporation

  
	
   

  	
   

  	
  Attn: Chief Financial Officer

  
	
   

  	
   

  	
  555 Twin Dolphin Drive

  
	
   

  	
   

  	
  Suite 360

  
	
   

  	
   

  	
  Redwood Shores, California 94065

  
	
   

  	
   

  	
   

  
	
  If to Polycom:

  	
   

  	
  Polycom, Inc.

  
	
   

  	
   

  	
  Attn: General Counsel

  
	
   

  	
   

  	
  4750 Willow Road

  
	
   

  	
   

  	
  Pleasanton, CA 94588

  

 

 

	
  with a copy to:

  	
   

  	
  Polycom, Inc.

  
	
   

  	
   

  	
  Attn: Chief Financial Officer

  
	
   

  	
   

  	
  4750 Willow Road

  
	
   

  	
   

  	
  Pleasanton, CA 94588

  

 

Such notices shall be deemed to have been
served when received by addressee or, if delivery is not accomplished by reason
of some fault of the addressee, when tendered for delivery.  Either party may give written notice of a
change of address and, after notice of such change has been received, any
notice or request shall thereafter be given to such party as above provided at
such changed address.

 

6.5                                 Assignment.  Neither party may assign this Settlement
Agreement or any right or obligation under this Settlement Agreement without
the prior written consent of the other party, except to a successor-in-interest
of all or substantially all of its business or assets, whether by sale, merger
or otherwise. Subject to the foregoing, this Settlement Agreement shall be
binding upon and inure to the benefit of the parties and their permitted
successors and assigns.

 

6.6                                 Governing Law.  This Settlement Agreement and matters
connected with the performance thereof shall be construed, interpreted, applied
and governed in all respects in accordance with the laws of the United States
of America and the State of California, without reference to conflict of laws
principles.

 

6.7                                 Dispute
Resolution.  If a
dispute arises regarding this Settlement Agreement, or the interpretation,
breach, termination or validity thereof, the senior management of both parties
shall meet to attempt to resolve such disputes. 
If the senior management cannot resolve the dispute, the parties agree
to meet for one (1) day with an impartial mediator to attempt to resolve
such dispute.  If the dispute is not
resolved by such mediation, then the parties agree that such dispute shall be
resolved by binding arbitration in San Francisco, California before three (3) arbitrators
in accordance with the rules of the International Chamber of Commerce (“ICC”)
in effect as of the Effective Date of this Settlement Agreement. The parties,
their representatives, other participants and arbitrators shall hold the
existence, content and result of arbitration in confidence, except as otherwise
required or advisable in connection with securities filings or otherwise
required by law.  The award of the
arbitrators may be entered in any court having jurisdiction thereof.  This Section 6.7 shall not be construed
as restricting or limiting either party’s ability to immediately assert a
license or other defense in any litigation or other proceeding against such
party, such party’s Subsidiaries, or its or their products or the resellers,
distributors or customers of such products, regardless of jurisdiction or
venue.

 

6.8                                 Further Acts.  Each party to this Settlement Agreement
agrees to perform any further acts and to cause its Subsidiaries to perform
such further acts, and execute and deliver and to cause its Subsidiaries to
execute and deliver any further documents that may be reasonably necessary to
carry out the provisions of this Settlement Agreement.

 

6.9                                 Severability.  If any provision of this Settlement Agreement
is held to be illegal or unenforceable, such provision shall be limited or
eliminated to the minimum extent necessary so that the remainder of this
Settlement Agreement will continue in full force and effect and be

 

 

enforceable.
The parties agree to negotiate in good faith an enforceable substitute
provision for any invalid or unenforceable provision that most nearly achieves
the intent of such provision.

 

6.10                           Entire Agreement.  This Settlement Agreement, together with the
Patent License Agreement, embodies the entire understanding of the parties with
respect to the subject matter hereof, and merge all prior discussions between
them, and neither of the parties shall be bound by any conditions, definitions,
warranties, understandings, or representations with respect to the subject
matter hereof other than as expressly provided herein.  No oral explanation or oral information by
either party hereto shall alter the meaning or interpretation of this
Settlement Agreement.

 

6.11                           Modification;
Waiver.  No modification or amendment
to this Settlement Agreement, nor any waiver of any rights, will be effective
unless assented to in writing by the party to be charged, and the waiver of any
breach or default will not constitute a waiver of any other right hereunder or
any subsequent breach or default.

 

6.12                           Construction.  Any rule of construction to the effect
that ambiguities are to be resolved against the drafting party will not be applied
in the construction or interpretation of this Settlement Agreement. As used in
this Settlement Agreement, the words “include” and “including,” and variations
thereof, will not be deemed to be terms of limitation, but rather will be
deemed to be followed by the words “without limitation.”  The headings in this Settlement Agreement
will not be referred to in connection with the construction or interpretation
of this Settlement Agreement. 

 

6.13                           Counterparts.  This Settlement Agreement may be executed in
counterparts or duplicate originals, both of which shall be regarded as one and
the same instrument, and which shall be the official and governing version in
the interpretation of this Settlement Agreement.  This Settlement Agreement may be executed by
facsimile signatures and such signatures shall be deemed to bind each party as
if they were original signatures.

 

 

[The remainder of this page has
been intentionally left blank]

 

 

IN WITNESS WHEREOF, the parties hereto have
caused this Settlement Agreement to be signed below by their respective duly
authorized officers.

 

 

	
  Avistar Communications Corporation

  	
   

  	
  Polycom, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  

  	
   

  	
  By:

  	
  

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  WILLIAM L. CAMPBELL

  	
   

  	
  Name:

  	
  Michael R. Kourey

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  VICE CHAIRMAN & CHIEF ADMIN OFCR

  	
   

  	
  Title:

  	
  CFO

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  11/12/04

  	
   

  	
  Date:

  	
  11/12/04

  	
   

  

 

 

Collaboration Properties, Inc.

 

 

	
  By:

  	
  

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  WILLIAM L. CAMPBELL

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  Title:

  	
  President & CEO

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  11/12/04

  	
   

  

 

 

EXHIBIT A

 

Stipulation
and Order

 

 

 

SIMPSON
THACHER & BARTLETT LLP

GEORGE
M. NEWCOMBE (202898)

JEFFREY
E. OSTROW (213118)

HARRISON
J. FRAHN IV (206822)

JONATHAN
C. SANDERS (228785)

3330
Hillview Avenue

Palo
Alto, California 94304

Telephone: (650)
251-5000

Facsimile: 
(650) 251-5002

 

SIMPSON
THACHER & BARTLETT LLP

HENRY
B. GUTMAN (admitted pro hac vice)

JEREMY
S. PITCOCK (admitted pro hac vice)

425
Lexington Avenue

New
York, New York 10017

Telephone:  (212) 455-2000

Facsimile:
  (212)
455-2502

 

Attorneys
for Plaintiff/Counterdefendant

COLLABORATION
PROPERTIES, INC.

 

UNITED STATES DISTRICT COURT

 

FOR THE NORTHERN DISTRICT OF CALIFORNIA

 

SAN FRANCISCO DIVISION

 

	
  COLLABORATION
  PROPERTIES, INC., a

  Nevada Corporation

  	
  )

  )

  	
  Case
  No.C02-4591 MMC (EMC)

  
	
   

  	
  )

  	
   

  
	
  Plaintiff,

  	
  )

  )

  	
  STIPULATION
  AND ORDER OF

  DISMISSAL

  
	
  v.

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  POLYCOM,
  INC., A Delaware corporation,

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  Defendant.

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  POLYCOM,
  INC., a Delaware corporation,

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  Counterplaintiff,

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  v.

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  COLLABORATION
  PROPERTIES, INC., a

  	
  )

  	
   

  
	
  Nevada
  corporation and

  	
  )

  	
   

  
	
  AVISTAR
  COMMUNICATIONS

  	
  )

  	
   

  
	
  CORPORATION,
  a Delaware Corporation,

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  Counterdefendants.

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  

 

 

STIPULATION AND ORDER OF DISMISSAL

CASE NO. C02-4591 MMC (EMC)

 

 

The parties hereby stipulate, by and through their respective counsel,
that (1) the claims set forth in Collaboration Properties, Inc.’s
Complaint in the above-captioned action and (2) the counterclaims set
forth in Polycom, Inc.’s Second Amended Answer and Counterclaims in the
above-captioned action are dismissed with prejudice pursuant to
Rule 41(a)(ii) of the Federal Rules of Civil Procedure.

 

Each party to bear its own costs.

 

	
  Dated : November    , 2004

  	
   

  	
  SIMPSON THACHER & BARTLETT LLP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ George M. Newcombe

  	
   

  
	
   

  	
   

  	
   

  	
  George M. Newcombe 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attorneys for Plaintiff/Counterdefendants

  COLLABORATION PROPERTIES, INC.

  and AVISTAR COMMUNICATIONS

  CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated : November    , 2004

  	
   

  	
  KEKER & VAN NEST, LLP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  John W. Keker

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attorneys for Defendant/Counterplaintiff

  
	
   

  	
   

  	
  POLYCOM, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SO ORDERED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated : November    , 2004

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Maxine M. Chesney

  
	
   

  	
   

  	
  United States District Judge

  
						

 

 

STIPULATION AND ORDER OF DISMISSAL

CASE NO. C02-4591 MMC (EMC)

 

 

EXHIBIT B

 

Press
Releases

 

Avistar Press Release

 

 

 

	
   

  	
  Contact:

  
	
   

  	
  Robert J. Habig

  
	
   

  	
  CFO - Avistar

  
	
   

  	
  650-610-2900

  
	
   

  	
  bhabig@avistar.com

  

 

Avistar Announces Cross-Licensing Agreement with Polycom, Inc.

Avistar agrees to settle patent litigation against Polycom

 

Redwood Shores, Calif. — November 15,
2004.  Avistar Communications Corporation (NASDAQ:
AVSR), a provider of business video collaboration solutions, and
Collaboration Properties, Inc. (CPI), its wholly owned subsidiary, today
announced that they have reached an agreement with Polycom, Inc. (NASDAQ:
PLCM), wherein the companies have cross-licensed each others’ patent
portfolios. Additionally, Avistar has agreed to dismiss its pending lawsuit
against Polycom regarding infringement of four Collaboration Properties
patents. In addition, both companies intend to pursue other business
relationships.  

 

Under the terms of the patent cross-licensing and settlement agreement,
Polycom has agreed to make a one-time payment of $27.5 million dollars to
Avistar in exchange for a fully-paid up license to Avistar’s patent portfolio
and settlement of CPI’s claims.  Net of
Avistar’s contingent legal fees related to the litigation, the payment amounts
to approximately $21 million dollars.  

 

“We are extremely pleased with
this initial licensing of our patent portfolio,” said Gerald Burnett, CEO of
Avistar. “We believe the technology covered by our portfolio is important to
accelerating the adoption of desktop video, and that it is a natural fit with
Polycom’s market leading products.  We
look forward to working with them on ways to use each others’ capabilities to
broaden this market.  We strongly believe
this settlement is in the best interests of all parties, and we are pleased to
be able to concentrate our future efforts and resources on expanding the market
for rich-media collaboration."

 

Under the cross-licensing and settlement agreement, CPI is dismissing
with prejudice its infringement suit against Polycom.  The original litigation was initiated in
September, 2002, in the Federal District Court for the Northern District of
California and involved the following CPI

 

 

patents: U.S. Patent Nos. 5,867,654; 5,896,500; 6,212,547; and
6,343,314.  In addition, the
cross-licensing and settlement agreement includes patent licenses spanning each
company’s extensive patent portfolios. 

 

About
Avistar Communications Corporation

Avistar
develops, markets, and supports video collaboration solutions for the
enterprise, all powered by the AvistarVOSTM software. From the desktop, Avistar
delivers TV-quality video calling, recording, publishing to web and emails,
video-on-demand, broadcast origination and distribution, and document
sharing.  Avistar delivers on vBusiness – video-enabling business – by
integrating visual communications into the daily workflow and connecting
communities of users within and across enterprises.  By offering both IP
and circuit-switched products, which are fully interoperable, Avistar provides
customers with a unique choice of how they implement high-quality video.

 

Founded
in 1993, Avistar Communications Corporation is headquartered in Redwood Shores,
California, with sales offices in New York and London.  Avistar’s
technology is used in more than 35 countries. Collaboration Properties, Inc., a
wholly owned subsidiary of Avistar Communications Corporation, holds a current portfolio of 65 patents for inventions in primary areas of video
technology, including Avistar’s video operating system and networked
video collaboration products in both digital and analog networks.  Inquiries regarding CPI's
licensing may be directed to Paul Carmichael, primary licensing advisor, by
arrangement with Amanda Redd at 650/610-2900. 
For more information, visit
www.avistar.com.

 

Forward
Looking Statements 

This press release contains
forward-looking statements that involve risks and uncertainties, including but
not limited to statements concerning possible future business arrangements
among Avistar, CPI and Polycom, future use of licensed technology among the
companies and the impact of any relationship between the companies on the
market for rich-media collaboration products. 
Actual events or results may differ materially from those described in
this press release due to a number of risks and uncertainties.

 

###

 

Copyright (c) 2004 Avistar Communications
Corporation. All rights reserved. Avistar, AvistarVOS, and the Avistar logo are
trademarks or registered trademarks of Avistar Communications Corporation.

 

 

Polycom Press Release

 

 

EXHIBIT C

 

Patent
Cross-License AgreementExhibit 10(i) D(3)

 

TABLE OF CONTENTS

 

	
  1.

  	
  DEFINITIONS:

  	
   

  
	
   

  	
  Lease Year:

  	
   

  
	
   

  	
  Common Area (if any):

  	
   

  
	
   

  	
  Open Parking Area (if any):

  	
   

  
	
   

  	
  Controlled Parking Area (if any):

  	
   

  
	
   

  	
  Floor Area:

  	
   

  
	
   

  	
  MRWPCA:

  	
   

  
	
   

  	
  Center:

  	
   

  
	
  2.

  	
  PREMISES:

  	
   

  
	
  3.

  	
  TERM OF LEASE:

  	
   

  
	
  4.

  	
  RENTAL:

  	
   

  
	
  5.

  	
  CHRONIC
  DELINQUENCY:

  	
   

  
	
  6.

  	
  ADJUSTMENT OF FIXED
  RENT:

  	
   

  
	
  7.

  	
  SECURITY DEPOSIT:

  	
   

  
	
  8.

  	
  GOVERNMENTAL
  INTERVENTION:

  	
   

  
	
  9.

  	
  DESIGNATION,
  MAINTENANCE, REPAIR AND COST REIMBURSEMENT OF COMMON AREAS AND MANAGEMENT

  	
   

  
	
  10.

  	
  PARKING IN OPEN
  PARKING AREA:

  	
   

  
	
  11.

  	
  PURPOSE:

  	
   

  
	
  12.

  	
  COMPLIANCE WITH LAW:

  	
   

  
	
  13.

  	
  USE AND CLEANLINESS:

  	
   

  
	
  14.

  	
  ASSIGNMENTS
  AND SUBLETTING:

  	
   

  
	
  15.

  	
  ACCEPTANCE
  OF PREMISES:

  	
   

  
	
  16.

  	
  LIENS:

  	
   

  
	
  17.

  	
  ACCESSION:

  	
   

  
	
  18.

  	
  WASTE:

  	
   

  
	
  19.

  	
  HOLD-OVER TENANCY:

  	
   

  
	
  20.

  	
  REAL PROPERTY, GLASS
  AND OTHER INSURANCE:

  	
   

  
	
  21.

  	
  LIABILITY
  AND WORKERS’ COMPENSATION INSURANCE:

  	
   

  
	
  22.

  	
  PERSONAL
  PROPERTY TAXES AND REIMBURSEMENT FOR REAL PROPERTY TAXES:

  	
   

  
	
  23.

  	
  DAMAGE OR
  DESTRUCTION OF DEMISED PREMISES:

  	
   

  
	
  24.

  	
  PROHIBITED
  ACTS:

  	
   

  
	
  25.

  	
  INSPECTION:

  	
   

  
	
  26.

  	
  BANKRUPTCY OR INSOLVENCY:

  	
   

  
	
  27.

  	
  DEFAULT AND REENTRY:

  	
   

  
	
  28.

  	
  LESSOR-LESSEE
  LIABILITY:

  	
   

  
	
  20.

  	
  INTEREST OR
  DELINQUENCIES:

  	
   

  
	
  30.

  	
  ATTORNEY’S
  FEES:

  	
   

  
	
  31

  	
  NON-WAIVER
  OF BREACH:

  	
   

  
	
  32.

  	
  CONDEMNATION:

  	
   

  
	
  33.

  	
  UTILITIES:

  	
   

  
	
  34.

  	
  HEIRS AND ASSIGNS:

  	
   

  
	
  35.

  	
  NOTICES:

  	
   

  
	
  36.

  	
  CONSTRUCTION:

  	
   

  
	
  37.

  	
  LAYOUT OF THE
  DEMISED PREMISES AND SURROUNDING AREA OWNED BY LESSOR:

  	
   

  
	
  38.

  	
  NUMBER AND
  GENDER:

  	
   

  
	
  39.

  	
  MARGINAL
  TITLES:

  	
   

  
	
  40.

  	
  MODIFICATION:

  	
   

  
	
  41.

  	
  TIME OF
  ESSENCE:

  	
   

  
	
  42.

  	
  PAYMENTS NOT
  IN SUBSTITUTION:

  	
   

  
	
  43.

  	
  CONVEYANCE BY
  LESSOR:

  	
   

  
	
  44.

  	
  SIGNS AND
  ADVERTISING:

  	
   

  
	
  45.

  	
  STATEMENT
  OF LESSEE:

  	
   

  
	
  46.

  	
  JANITORIAL
  SERVICE:

  	
   

  
	
  47.

  	
  SUBORDINATION:

  	
   

  
	
  48.

  	
  COMPETITION:

  	
   

  

 

 

	
  49.

  	
  GOVERNMENT
  FEES:

  	
   

  
	
  50.

  	
  LESSEE’S
  IMPROVEMENTS:

  	
   

  
	
  51.

  	
  GARBAGE, REFUSE,
  TRASH, COLLECTION & REIMBURSEMENT:

  	
   

  
	
  52.

  	
  SPRINKLER
  SYSTEM:

  	
   

  
	
  53.

  	
  MERCHANT’S
  ASSOCIATION:

  	
   

  
	
  54.

  	
  RIGHT OF FIRST REFUSAL:

  	
   

  
	
  55.

  	
  TRANSFER FEE:

  	
   

  
	
  56.

  	
  NO PARTNERSHIP:

  	
   

  
	
  57.

  	
  HAZARDOUS
  MATERIALS:

  	
   

  
	
  58.

  	
  WATER USE/SHORTAGE
  DISCLOSURE/FINES, ASSESSMENTS AND FINES:

  	
   

  
	
  59.

  	
  QUITCLAIM
  DEED:

  	
   

  
	
  60.

  	
  RECORDING:

  	
   

  
	
  61.

  	
  SURRENDER OF
  PREMISES:

  	
   

  
	
  62.

  	
  LIMIT OF
  LESSOR’S PERSONAL LIABILITY:

  	
   

  
	
  63.

  	
  ALTERATION &
  IMPROVEMENTS:

  	
   

  
	
  64.

  	
  AMERICANS
  WITH DISABILITIES ACT (ADA):

  	
   

  
	
  65.

  	
  NOTICE OF
  SURRENDER:

  	
   

  
	
  66.

  	
  REAL ESTATE
  BROKERAGE FEE:

  	
   

  
	
  67.

  	
  LESSOR LOAN
  OR SALE

  	
   

  
	
  68.

  	
  ATTORNMENT:

  	
   

  
	
  69.

  	
  MUTUAL WAIVER OF
  RIGHT OF SUBROGATION:

  	
   

  
	
  70.

  	
  MISCELLANEOUS
  PROVISIONS:

  	
   

  

 

2

 

LEASE

 

This
Lease, made and entered into on the date appearing in the signature block
hereof, by and between John A. Crivello Family
Partnership, L.P. ,hereinafter referred
to as Lessor),  and  Monterey County Bank, jointly and
severally, (hereinafter referred to as Lessee), without regard to number or
gender.

 

WITNESSETH:

 

1.  DEFINITIONS:

 

Lease Year:
For the purpose of this Lease, a “lease year” is a period during the lease term
commencing on the first day of the lease term (except that if the lease term
commences on a day other than the first day of a calendar month, then the “lease
year’ shall commence on the first day of the next succeeding calendar month)
and ending at midnight twelve (12) full calendar months thereafter; provided,
however, that the last lease year shall end at the end of the lease term,
except that if such period includes less than the whole of a calendar month,
that portion of the calendar month, included within the period is a “month.”

 

Common Area
(if any): As used in this Lease, the term “common area” shall include all areas
and facilities in, upon or about the Center and the adjoining parking areas (if
any, excluding any Controlled Parking Areas) owned by Lessor for the non-exclusive
use of Lessee in common with other authorized users. It is understood and
agreed that the common area is not a portion of the premises demised to Lessee
hereunder.

 

Open Parking Area
(if any): The term “open parking area” shall include vehicle parking spaces,
driveways, access ways, ingress and egress, streets and any other areas owned
by Lessor and adjacent to the demised premises and improved in order that
automobiles and other vehicles can be driven and parked thereon, but excluding “Controlled
Parking Areas”. Parking areas may be designed for co-exclusive use of the
Lessee and Lessor or for common use of Lessee and others as provided for
herein.

 

Controlled Parking
Area (if any): The term “Controlled Parking Area” shall mean an area for
parking automobiles that is separate from the open parking area defined above
by and including, but not limited to, gates, signs, barriers, exhibits to
lease, markings upon the land or pavement, or as otherwise indicated by Lessor
or his agent from time to time, and is not part of the common area or the open
parking areas.

 

It is agreed that Lessee shall have the exclusive use
of six (6) parking spaces as has been agreed o by Lessor and Lessee.
Lessee shall be solely responsible for marking the designated parking spaces
and for enforcement of the exclusive right to such spaces. Such exclusive
parking spaces are marked by “x’s” on the parking plan attached as Exhibit” D”.

 

Floor Area:
The term “floor area” means that actual number of square feet of floor space
within the exterior faces of the exterior walls (except party and interior
walls, in which case the center thereof instead of exterior faces shall be
used) of the buildings, including vacant space therein. However, the term “floor
area” shall not include any basement space or subterranean areas, parking
facility, or employer’s parking area. The term “floor area” refers to gross
leasable floor area, and no deductions shall be made from the “floor area” by
reason of columns, stairs, hallways, escalators, elevators, conveyers, or other
interior construction or equipment. The total “floor area” of the demised
premises and the total “floor area” of the buildings, including the “floor area”
of the demised premises is hereby defined, fixed, determined and agreed by
Lessee and Lessor as set forth above and on Exhibit ”A,” attached hereto,
and shall be conclusive upon the parties hereto,

 

MRWPCA:  The term “MRWPCA” shall mean Monterey
Regional Water Pollution Control Agency.

 

Center:
The term “Center” is defined as: shopping center, professional office building,
mixed-use properties, single and multi-tenant properties, industrial, retail,
warehouse, and other general commercial properties, all of which may be
improved or unimproved, owned by Lessor.

 

Lessor:
The term “Lessor’ shall mean and include Owner, Landlord and Lessor.

 

Lessee:
The term “Lessee” shall mean and include Tenant and Lessee.

 

3

 

2.  PREMISES: In consideration of the terms, covenants, conditions and
obligations herein contained, to be kept, performed and complied with by
Lessee, and upon the condition that Lessee keeps, performs and complies with
said terms, covenants, conditions and obligations, Lessor does hereby demise
certain premises described in Exhibit ”B”, attached hereto, (hereinafter
demised premises), located at, as specified in Exhibit ”A,” “Demised
Premises.”

 

Square
footage is an approximate figure and may not be the sole basis for the monthly
value.  Lessee should measure the
premises to verify square footage prior to signing the Lease, and must
communicate any discrepancy to the Lessor or
Lessor’s Agent prior
to signing the Lease. If Lessee elects
not to measure the premises and or not to communicate any discrepancy to Lessor
or Lessor’s Agent and signs the Lease, Lessee will have no recourse if during
the term of this Lease, or later, a discovery of inaccurate square footage is
made to the Lessor or Lessor’s Agent. The Lessee hereby acknowledges that they
physically visited and viewed the premises and acknowledges that regardless of
square footage, they are accepting and renting the premises as viewed. Upon
mutual execution of this Lease Agreement by Lessor and Lessee, Lessee will not
thereafter challenge the square footage and or the determination of the square
footage as contained in this Lease Agreement.

 

3.  TERM OF LEASE: The term of this Lease shall be for the
approximate number of years appearing as the Term on Exhibit ”A,” attached
hereto, and shall commence on the Date of Commencement of Lease as it appears
in said Exhibit ”A.” If Lessor, for any reason whatsoever, cannot deliver
possession of said premises to Lessee at the commencement of the term hereof,
this Lease shall not be void or voidable, nor shall Lessor be liable to Lessee
for any loss or damage resulting there from, but in that event there shall be a
proportionate reduction of rent covering the period between the commencement of
the said term and the time when Lessor can deliver possession.

 

4.  RENTAL: Lessee hereby covenants to pay to Lessor, at the time and
place and computed in the manner hereinafter set forlh, as rental for the
demised premises for each month, as hereinafter defined during the term of this
Lease, no less than the Initial Fixed Rent appearing in Exhibit ”A” as
adjusted from time to time in accordance with the provisions of Paragraph 5,
below.   Initial Fixed Rent as so
adjusted shall be called the Then Fixed Rent and shall be paid monthly in
advance on the first day of each month during the lease term. Rental payments
received after the fifth day of the month shall be subject to a late fee equal
to 5% of the amount then due and shall be paid along with the rent. Lessee
further agrees to pay $25.00 for each dishonored bank check. Rental payments
shall not be reduced by any claims, demands, or offsets against Lessor of any
kind whatsoever. Notwithstanding anything in this Lease to the contrary, all
amounts payable by Lessee to or on behalf of Lessor under this Lease, whether
or not expressly denominated as rent, shall constitute rent for the purposes of
the Bankruptcy Code, 11 U.S,C. Section 502(b)(6). No payment by Lessee or
receipt by Lessor of a lesser amount than the rental shall be deemed to be
other than on account of the rental, nor shall any endorsement or statement on
any check or any letter accompanying any check payment as rent be deemed an
accord and satisfaction, and Lessor may accept such check or payment without
prejudice to Lessor’s right to recover the balance of the rental or pursue any
other remedy provided for in this lease.

 

5.  CHRONIC DELINQUENCY: Chronic delinquency by Lessee in the payment
of rent or any other monthly amounts required to be paid by Lessee under this
Lease shall constitute a material breach of this Lease. “Chronic delinquency”
shall mean the occurrence of any of the following for any three (3) months
(consecutive or nonconsecutive) during any twelve (12) month period: (a) failure
by Lessee to pay or submit within five (5) days of the due date its Base
Monthly Rent and/or other monthly charges, or (b) payment of any
reconciliation of operating expenses or payment to vendors when due. This
Paragraph shall not limit in anyway, nor be construed as a waiver of the rights
and remedies of Lessor provided hereunder or by law in the event of even one instance
of delinquency. In the event of chronic delinquency, at Lessor’s option, Lessor
shall have the right, in addition to all other rights under this Lease and at
law, to require that all rent be paid by Lessee quarterly, in advance.

 

ADJUSTMENTS OF FIXED RENT: Notwithstanding the provisions of
paragraph 4, the initial fixed rent shall be adjusted on the first day of the
second lease year and thereafter at twelve-month intervals for so long as this
Lease or any extension there of shall be in effect, unless otherwise agreed in
writing by Lessor and Lessee, as follows: on the first day of the second lease
year and on the first day of each lease year thereafter (the adjustment dates),
the Then Fixed Rent shall become the product of multiplying the Then Fixed Rent
by the annual percentage increase as reflected in the Consumer Price Index for
All Urban Consumers in the San Francisco-Oakland-San Jose area as published by
the Bureau of Labor Statistics, United States Department of Labor or any
successor index, for the calendar month preceding the adjustment dates or one
hundred four percent (104%) of the Then Fixed Rent, whichever is greater, but
in no event shall the increase in the Fixed Rent be greater than one hundred
seven percent (107%) of the Then Fixed Rent.  
Excepting, however, that the (104%) increase shall not be applicable to
adjustments during a period of less than twelve (12) months (a lease year).
Lessor delay in notifying Lessee of the adjustment shall not be a waiver of
Lessor’s rights to enforce the adjustment hereunder. If the Index is changed so

 

4

 

that
the base year differs from that in effect when the term commences, the Index
shall be converted in accordance with the conversion factor published by the
United States Department of Labor, Bureau of Labor Statistics. If the Index is
discontinued or revised during the term such other governmental index or
computation with which it is replaced shall be used in order to obtain
substantially the same as would be obtained if the Index had not been
discontinued or revised.

 

7.  SECURITY DEPOSIT: On or before the date of execution of this Lease,
Lessee has delivered to Lessor, receipt of which is hereby acknowledged by
Lessor, the Initial Payment as such payment appears in Exhibit ”A,”
attached hereto. That portion of the Initial Payment that equals the Initial
Fixed Rent plus all monthly charges (including, but not limited to common area
charges, MRWPCA charge, property taxes, assessments, and insurance) shall
represent advance payment of the monthly rent and charges for the first month
of the term of this Lease and the balance thereof shall represent a security
deposit for the full and faithful performance by Lessee of all of the terms,
covenants, conditions and obligations of this Lease to be performed and kept by
Lessee. If Lessee shall have fully and faithfully complied with all of the
terms, covenants, conditions and obligations of this Lease, the security
deposit shall be returned to Lessee within twenty-one (21) days after Lessee
has vacated the demised premises. If Lessee defaults in respect to any of the
terms, covenants, conditions and obligations of this Lease including, but not
limited to, nonpayment of rent, Lessor may use, apply or retain the whole or
any part of the security deposit for the payment of any rent in default or for
reimbursement of Lessor for any sums which Lessor may spend or be required to
spend by reason of Lessee’s default. The application by Lessor of all or any
part of said security deposit shall not preclude Lessor from thereafter
exercising each and all of Lessor’s other rights and remedies upon such default
of Lessee. Should Lessor resort to the security deposit was had and necessary
to restore the security deposit to the original sum required hereunder within
ten (10) days after written demand for some by Lessor. Lessee will be
entitled to no interest on any portion of the security deposit. Lessor’s
obligations with respect to the deposit are those of a debtor and not of a trustee,
and Lessor can commingle the security deposit with Lessor’s general funds.
Lessor shall not be required to pay Lessee interest on the deposit. Lessor
shall be entitled to immediately endorse and cash Lessee’s payment.

 

8.  GOVERNMENTAL INTERVENTION: In the event that Lessee’s occupancy of
the demised premises shall be prohibited, restricted, modified or interfered
with in any respect by or as a result of any action of any governmental
authority or agency then, and in that event, Lessee shall comply with any and
all lawful orders made by any such governmental agency having jurisdiction in
the premises, and in the event that Lessee’s occupancy shall be prohibited by
reason of the intervention of such governmental agency and in that event,
Lessee’s sole remedy hereunder shall be an option to cancel this Lease and
from, and after the giving of sixty (60) days advance written notice of the
exercise of such option to cancel this Lease, neither party hereto shall
thereafter have any further obligations whatsoever by reason of this Lease.
Lessee shall obtain any and all governmental approvals, authorizations, and
permits necessary or desirable to enable Lessee to operate Lessee’s business in
the premises and shall comply with any and all conditions and requirements
imposed thereon, all at Lessee’s sole cost and expense. Lessor shall have no
obligation whatsoever for obtaining any such approvals, authorizations or
permits nor shall Lessor have any obligations or responsibility whatsoever by
reason of any governmental intervention, prohibition, condition or
qualification with respect to Lessee’s occupancy of the demised premises or
Lessee’s business conducted therein regardless of whether any such governmental
action be based upon action or inaction of Lessor or action or inaction of
Lessee. Lessor makes no warranties or representations whatsoever with respect
to the status or need for any governmental approvals, authorizations or permits
by either Lessor or Lessee, and Lessee assumes full and complete responsibility
for determining what permits, approvals and authorizations, if any, are
required, necessary or desirable.

 

9.  DESIGNATION, MAINTENANCE, REPAIR AND COST REIMBURSEMENT OF THE CENTER AND COMMON
AREAS AND MANAGEMENT OF THE CENTER, (IF ANY): Within and about the
Center, Lessor will from time to time provide and designate for the general use
and convenience (among others) of Lessee and other Lessees of all or any part
of the Center, and their respective employees, patients, clients, customers,
and invitees, certain common areas. These shall include, but are not limited
to, driveways, entrances, exits, exterior lighting fixtures, water fountains,
exterior stairways, restrooms not located within Lessee’s space, arcades,
interior halls, patios, electrical, plumbing, other building systems, and
similar improvements, loading and delivery areas, refuse disposal areas,
elevators, if any, and other areas and facilities that may be provided and
designated by Lessor from time to time for the general use and convenience of
Lessee and other Lessees of the Center. Lessor may (if parking is being
provided), from time to time, provide certain hard-surfaced, marked and lighted
parking areas within or in the immediate vicinity of the Center. Lessor
reserves the right from time to time to make

 

5

 

changes in the shape,
size, location, number and extent of improvements, buildings, accommodation
areas, loading and delivery areas, driveways, entrances, exits, traffic flow
and any other improvements from time to time constituting common area to
eliminate or add any improvements or buildings to any portion of the Center and
surrounding land owned by Lessor. During the term of this Lease, Lessor shall
operate, manage and maintain, all of the above and other. The manner in which
such areas and facilities shall be maintained and protected by guards or
otherwise and the expenditures for maintenance and security by guards or
otherwise, shall be at the sole discretion of Lessor, and the use of such areas
and facilities shall be subject to reasonable regulations and changes as Lessor
shall make from time to time, including, without limitation, the right to
close, if necessary, all or any portion of such areas, roads, or facilities, to
such extent as may be legally sufficient in the opinion of the Lessor’s
counsel, to prevent a dedication thereof or the accrual of rights of any person
or of the public therein, or to dose temporarily for safety, maintenance,
construction or other purpose, all or any portion of such areas of facilities.

 

9.1  Lessee agrees to
reimburse Lessor for increased cost in excess of the initial lease year, Lessee’s
share (as defined below and specified in Exhibit ”A”) of all of the costs
incurred by Lessor in keeping the common area clean and clear, and in
maintaining and operating the same in good condition and repair. The initial
year shall be defined in Exhibit ”A”, Common Areas and Management Base
Year. The initial cost shall be the amount shown in Exhibit ”A”, Common
Areas and Management Base Cost. Such costs include, but are not limited to,
real property taxes and assessments and other taxes, against the common areas,
all sums expended by Lessor for the maintenance and/or operation of the common
areas, professional management of the Center, or a reasonable allowance to
Lessor for Lessor’s management and supervision of the Center. Costs for
maintenance and operation of the common areas shall include without limitation:
cost of repainting, including exterior of building, signage and stripping,
cleaning, sweeping and other janitorial services, and maintenance of refuse
receptacles, planting and relandscaping, directional or other signs and other
markers, lighting and other utilities, premiums on public liability and
property damage insurance, all maintenance and construction work as required to
preserve and maintain such common areas in the condition originally installed
and all other costs necessary in Lessor’s judgment for the maintenance and
operation of the common areas. Lessee’s share of all of the above-described and
other common area costs shall bear approximately the same proportionate
relationship to such total costs as does the area demised to Lessee bear to the
total leasable space of the Center and shall be expressed as a percent of the
total common area costs. Lessor shall fumish to Lessee, request, a statement
showing the total common area costs, Lessee’s share of common area costs for
the period, and the payments required by Lessee. Lessor shall keep as separate
account covering the common area costs and said account of Lessor shall be
retained and preserved for twelve months after the expiration of the accounting
period to which it applies and shall be made available to Lessee for reasonable
inspection during said period.

 

Notwithstanding anything
in the above to the contrary Lessor agrees that in no event shall it charge
more than 5% of gross income of the center for professiional managemen.

 

If Lessee defaults in
making any payments required by this subparagraph 3) Lessor may, in addition to
all other remedies under this Lease or provided by law, deny Lessee and its
employees, patients, clients, subtenants, licensees, agents, service suppliers,
customers and patrons, the right to use any part of the common area, and may
withhold all privileges herein granted so long as Lessee remains in such
default.

 

9.2 In addition to the other rights herein
reserved, Lessor shall have the right, in its sole discretion:

 

a.To establish and at any time change, alter, amend
and to enforce against Lessee and other users of the common area such
reasonable rules and regulations, of which Lessor shall give Lessee
written notice, as may be deemed necessary and advisable for the proper and
efficient operation and maintenance of the common area and the Center. Lessee
agrees to conform and abide by all such rules and regulations in its use
of the common area.

 

10.  PARKING IN OPEN PARKING AREA (if any): Lessee and Lessor agree
that the Open Parking Area, if any, shall be used solely for the purpose of the
daily parking of passenger automobiles owned, leased, controlled or authorized
by Lessee, Lessor or other tenants. Lessee agrees to use such parking area
solely for said purpose and in accordance with the provisions of this agreement
and releases Lessor of any and all obligation or responsibility to prevent the
use of said area by persons and vehicles not conforming to such purpose, not
licensed by Lessor or not authorized by Lessee or other tenants. Lessee further
releases and indemnifies Lessor against any claims for loss or damage to
vehicles, their occupants or contents that are parked in the Open Parking Area
by Lessee or in connection with the business or practice of Lessee. If there is
no parking, Lessee acknowledges that Lessor has made no

 

6

 

provision
for parking on the Premises and Lessee shall be responsible for all parking
associated with the use of the Premises for their employees and patrons.

 

11.  BUSINESS PURPOSE: Lessee covenants that during Lessee’s occupancy of
the demised premises, Lessee will use the demised premises solely for the
purpose of operating the practice or business appearing as Business Purpose,
and for the number of days per week and for the hours of operation as set forth
in Exhibit ”A”, attached hereto. Lessee further covenants that Lessee will
not at any time during Lessee’s occupancy, use the premises for any other
purpose or purposes without the written consent of Lessor first had and
obtained.

 

12.  COMPLIANCE WITH LAW:
Lessee covenants that during Lessee’s occupancy of the
demised premises, Lessee

 

shall at Lessee’s own
cost and expense, promptly and properly observe, comply with and execute, all present and future orders, regulations,
directions, rules, laws, ordinances and requirements of governmental
authorities, including, but not limited to, state, municipal, county and
federal governments and their departments, bureaus, boards and officials and
the Board of Fire Underwriters and any other board of organization exercising
similar functions arising from the use or occupancy of, or applicable in any manner to the demised
premises or privileges appurtenant to or connected with the enjoyment of the
demised premises, including Lessee’s share of a sprinkler system, if any
required or recommended. Lessee’s share shall be the same percentage as set
forth for the common area for the cost of said sprinkler system, prorated over
remaining term of the Lease, plus option.

 

13.  USE AND CLEANLINESS: Not withstanding article #11 “BUSINESS PURPOSE”,
Lessee covenants that during Lessee’s occupancy of the demised premises, Lessee
will not permit said premises to be used for any improper, illegal or immoral
purposes or permit Lessee’s business to be carried on in such a manner as to be
noisy or offensive to others in the vicinity of the demised premises. Lessee
further covenant to keep all windows therein clean at all times and free from
dust, dirt or other unsightly substances. Lessee shall not use the Premises in
any manner that will constitute a nuisance or unreasonable annoyance to other
tenants in the building in which the Premises are located, including, without
limitation, the use of loudspeakers, or sound or light apparatus that can be
heard or seen outside the Premises, or the living or sleeping in, washing
cloths, cooking, or the preparation, manufacture or mixing of anything that
might emit any odor or objectionable noises, lights or vibrations.  No machinery, apparatus or other appliance
shall be used or operated in or on the Premises that will in any manner injure,
overload, vibrate or shake building in which the Premises are located. Lessor
may from time to time promulgate rules and regulations for the use of the
real properly and Tenant agrees to abide by such rules and regulations.
Lessee shall not do anything on the premises, which will overload any existing
parking, utility service, and refuse or other areas to the Premises. Pets
and/or animals of any type shall not be kept on the Premises. Tenant will not
perform any act or carry on any practice that may injure the Premises or the
Center, or that may be a nuisance or menace to any other tenant in the Center.
No auctions are permitted.

 

Lessee
acknowledges that neither Lessor nor any agent of Lessor has made any representation
or warranty with respect to the Premises, concerning the zoning or uses
permissible or with respect to the suitability of the Premises for the conduct
of Lessee’s business, nor has Lessor agreed to undertake any modification,
alternation or improvement to the Premises, except as provided in writing in
the Lease. If sound insulation is required to muffle noise produced by Lessee
on the Premises, Lessee at its own cost shall provide all necessary insulation.

 

14.  ASSIGNMENT AND SUBLETTING: Lessee shall not sell, transfer, assign,
mortgage or hypothecate this Lease or any interest in this Lease nor permit the
use of the demised premises by any person or persons other than Lessee, nor
sublet the premises or any part thereof without the written consent of Lessor
first had and obtained, which said written consent shall not be withheld
unreasonably. However, Lessor shall have the option  to 
terminate  the Lease rather  than approving an assignment or sublease of
all of the Premises to a third party. Consent to any of the aforementioned acts
shall not operate as a waiver of the necessity of first obtaining the written
consent of Lessor to any such subsequent act and the terms of any such consent
shall be binding upon any person holding by, under or through any such written
consent. Lessee agrees that the consent of Lessor shall not be deemed or
considered withheld by reason of the fact that in the event of the sale of the
business operated by Lessee on the demised premises, Lessor requires as a
condition of the assignment of the Lease that the terms and conditions of this
Lease be modified, including but not limited to those terms and conditions
concerning the security deposit, but Lessor shall not have the right to
require  the rental under this Lease be
changed as a condition  to approval of
any such Assignment or Subletting.. In any event, if Lessor shall consent to
any sublease, sale, transfer, assignment, mortgage or hypothecation of this
Lease or any interest in this Lease, or if 
the Lessee shall without such consent have subleased, sold, transferred,
assigned, mortgaged or hypothecated this Lease or any or all of Lessee’s
interest therein then, and in that event, without otherwise limiting any other
remedies Lessor may have by law or under the

 

7

 

provisions
of this Lease, Lessor shall be entitled 
to receive and Lessee shall assign to and promptly pay to Lessor, any
and all consideration (including, but not limited  to, all rent received by Lessee from any
sublessee that exceeds the amount of 
then Fixed Rent owed or paid by Lessee to Lessor and all transfer fees
and the like) to be received by Lessee for or in connection with any such
sublease, sale, transfer, assignment, mortgage or hypothecation of this Lease
or any interest in this Lease. Lessee shall pay Lessor a fee not in excess of
$2,000 for each instance, and shall also pay Lessors costs ,including attorney
fees (but such attorney’s fees shall not be in excess of $2,000 for each such
instance ) in connection with this Article

 

14.1  If this Lease is assigned to
any person or entity pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C.   
Section 101 et seq., any and all
monies or other considerations payable or otherwise to be delivered in connection
with such assignment shall be paid or delivered to Lessor, shall be and remain
the exclusive property of Lessor and shall not constitute property of  Lessee or of the estate of Lessee within the
meaning of said Bankruptcy Code. Any and all monies and/or other considerations
constituting Lessor’s property under the preceding sentence not paid or
delivered to Lessor shall be held in trust for the benefit of Lessor and be
promptly paid or delivered to Lessor.

 

14.2  Any person or entity to
which this Lease is assigned pursuant to the provisions of the Bankruptcy Code,
11 U.S.C.  Section 101 et seq.,
shall be deemed without further act or deed to have assumed all of the
obligations arising under this Lease on and after the date of such assignment.
Any such assignee shall, upon demand, execute and deliver to Lessor an
instrument confirming such assumption.

 

15.  ACCEPTANCE OF PREMISES/ “AS IS” CONDITION: The demised premises
including any fixtures and any personal property, is being Leased in  its “AS IS” condition without any expressed
or implied warranties. Any and all representations and warranties of Lessor set
forth elsewhere in this Lease are hereby deleted. Lessee hereby represents  that Lessee or Lessee’s agents have inspected
the subject property to the full extent deemed appropriate and that Lessee is
satisfied with its condition. Lessee acknowledges that as of the date of this
Lease, the subject property and the Premises and improvements are in good
order, repair and condition. Lessor shall not be liable to Lessee or any person
for any latent or existing defect in the subject property, or for any injury or
damage that may result to any person or property, including without limitation,
the person or property of Lessee, by or from any cause whatsoever arising out
of the present actual or latent conditions of the subject property. Lessee has
not relied on any acts, including any written or oral statements, by Lessor, or
any person acting on behalf of Lessor, in entering into this Lease, but rather
has relied on his, her or its own independent investigation of the subject
property. The entry by Lessee upon the demised premises shall be conclusive
evidence against Lessee as an admission that every part of the demised
premises, (interior and exterior), is accepted “AS IS”. Lessee hereby agrees
that Lessor has no responsibility whatsoever for any maintenance, replacements
or repair of any part of said demised premises, including, but not limited to,
telephone, security systems, computer wiring, cable, skylights,
heating/ventilation, fire sprinklers, electrical, plumbing, other building
systems, sewer blockages, all fixtures, air conditioning (if any), ceilings,
walls, floors, awnings, doors and windows and any contents situated therein,
however that Lessor shall maintain the roof and exterior walls, excluding doors
and windows. Lessor said obligation shall not include however, any damage or
repairs necessitated by the acts or omission of the Lessees, Lessees agents,
employees and/or customers or invitees. Lessor to engage a licensed HVAC
company to service the air conditioning system on the Lessee’s premises (if
any) and Lessee will pay  to Lessor the
actual cost of such servicing contract, either directly  to Lessor or 
to  the servicing company

 

If the use of the premises includes the preparation
and or consumption of food or beverage in, about, or away from the premises,
Lessee will be responsible for maintenance, repairs and replacement of sewer
lines, including sewer lines buried in the earth or concrete, except for sewer
lines lying outside the property line which shall be Lessor’s responsibility,
except where defects are caused or contributed to by Lessee’s use and or
occupancy of the premises. Lessee agrees to periodically have sewers flushed
and cleaned at Lessee’s expense and to provide Lessor with copies of invoice
confirming the cleaning.

 

If  the use of
the premises includes the preparation and or consumption of food or beverage
in, about, or away from the premises, Lessee will be responsible for maintenance,
repairs and replacement of sewer lines, including sewer lines buried in the
earth or concrete, except for sewer lines lying outside the property line which
shall be Lessor’s responsibility, except where defects are caused or
contributed to by Lessee’s use and or occupancy of the premises. Lessee agrees
to periodically have sewers flushed and cleaned at Lessee’s expense and to
provide Lessor with copies of invoice confirming the cleaning. Lessee, in
accordance with local and state governmental fire and health agencies and
regulations, shall install automatic fire suppression systems over commercial
cooking equipment and shall install non-combustible metal plates between deep
fat fryers and open flame units, all at Lessee’s expense and prior to the opening
of business. Additionally, Lessee shall:

 

8

 

a)         Service and wash said equipment on a
regular basis including the washing or exchanging of filters in the hood
systems and flues are to be cleaned on a quarterly basis by a licensed flue-cleaning
contractor and provide Lessor with copies of invoice or contract confirming the
cleaning

 

b)       Lessee shall also provide adequate fire
extinguishers as required by law

 

c)         Prior
to opening for business and throughout
the duration of this Lease, Lessee shall provide Lessor a
copy of a contract for pest control abatement for demised premises and the
Center (if needed) with a local, reliable and licensed pest control firm
providing a weekly or monthly pest abatement as may be needed.

 

Lessor shall have no responsibility in any respect for
damages to property of Lessee caused by water, flooding, waves or fluids of any
nature or origin whatsoever. As part of the consideration for the rental,
Lessee agrees to fully maintain the demised premises in a first class order and
condition and repair at all times during the term hereof, without cost to
Lessor and further covenants that said premises shall not be altered, improved,
or changed in any respect without the written consent of Lessor first had and
obtained. Lessor has not made a survey of the premises with regard to the
presence of hazardous materials and Lessor has no knowledge of the presence of
any hazardous materials. Lessee upon entry of the demised premises assumes all
risk with regard to same. Lessee hereby covenants to save and hold Lessor, his
agent or managers, harmless from and to defend and indemnify Lessor against any
suit or claim or demand for damage or injury to any person or property
sustained in, on, or about the demised premises caused by any hazardous
materials for which Lessee is responsible, or which Lessee has introduced to
the demised premises.  Lessee hereby
waives any and all benefits and rights which Lessee might become entitled to by
reasons of Sections 1941 and 1942 of the Civil Code of California and any and
all other provisions of any law that permit a Lessee to make repairs at the
expense of a Lessor or to terminate a Lease by reason of the condition of the
premises.

 

16.  LIENS: Lessee covenants to keep the demised premises and any
alterations, improvements and changes thereof, free and clear of liens of every
kind and character whatsoever during Lessee’s occupancy thereof, no matter what
the source thereof, or the reason thereof, which may arise from the use of
occupancy of said premises by Lessee, or from any work, labor or materials
furnished to or performed upon said premises. Lessee further covenants to
indemnify and hold Lessor free and harmless of and from any and all loss or
damage howsoever arising by virtue of any such liens or claims of lien
including any expense reasonably incurred by Lessor in defense against such
claims. Lessor shall have the right to post and maintain on the dernised
premises such notices of non-responsibility or non-liability as Lessor may deem
appropriate to avoid any liability for liens.

 

17.  ACCESSION: All alterations, improvements, additions or fixtures,
other than trade fixtures not permanently affixed to realty, that may be made,
constructed or installed upon the demised premises by either Lessee or Lessor
and that in any manner are attached to the floors, wells, ceilings, or roof
shall become and be the property of Lessor without cost and, at the termination
of this Lease, shall remain upon and be surrendered with the premises as a part
thereof without disturbance, molestation or damage thereto. Any floor covering
that may be cemented, nailed, tacked or otherwise affixed to the floor of the
dernised premises shall become and be the property of the Lessor. Any light
fixture that may be installed by Lessee in, upon or about the dernised premises
shall become and be the property of Lessor whether such fixture be affixed by
screws, bolts, nails or otherwise. All water, sewer, utility, and other
governmental use allocations, and all governmental permits shall remain with
Lessor, without cost to Lessor at the termination of this Lease.

 

18.  WASTE: Lessee shall not commit nor suffer to be committed any
waste, legal, equitable, or otherwise, to or upon the demised premises or any
part thereof and covenants that at the expiration of the term hereof or any
sooner termination thereof, Lessee will quit and surrender up said premises to
Lessor peaceably and quietly and in as clean and good condition as said
premises now are or may be put into, reasonable use and wear excepted.

 

19.  HOLD-OVER TENANCY: Lessor and Lessee agree that there shall be
no renewal of this Lease, except upon execution of a written agreement, and
that the fact that the Lessee may continue in possession of the premises
without the written consent of Lessor shall not operate to renew this Lease. If
Lessee should continue to occupy the demised premises after the expiration of
the term hereof without the written consent of Lessor, such hold-over shall be
deemed a month to month tenancy only, at 150% of the monthly rent in effect at
the expiration of the term, per month, payable on the first date of each and
every month thereafter until the tenancy is terminated by a 30 day notice in a
manner provided by law. Lessee shall hereby explicitly agrees to continue to be
bound, at Lessor’s discretion, by the terms and conditions of this Lease,
except that the monthly rent during said hold-over period will be 150% the
amount of the last month’s rent. The provision for holdover tenancy is not to
be construed as limiting the rights or

 

9

 

remedies
otherwise available to Lessor to remove Lessee, or, to limit the rights of
Lessor or Lessee to resolve any dispute.

 

20.  REAL PROPERTY, GLASS AND OTHER INSURANCE: During the term hereof,
Lessee shall maintain in full force and effect upon all of Lessee’s trade
fixtures, “tenant’s” betterment’s and improvements, equipment; inventory and
stock in trade in the demised premises a policy or policies of fire insurance
issued by an approved California insurance company rated A+ XIV with all risk
coverage endorsement to the extent of at least ninety percent (90%) replacement
cost of such items. As long as this Lease is in effect, the proceeds of any
such policy shall be used for the repair or replacement of the fixtures, “tenant’s”
betterment and improvements and equipment so insured. Lessor shall have no
interest in the insurance upon Lessee’s fixtures and equipment and Lessor will
cooperate with Lessee in the settlement of any claim or loss by Lessee,
provided that Lessee gives to Lessor satisfactory assurance that the proceeds
of such insurance will be used in compliance with the requirement hereinabove
contained respecting repair or replacement of said fixtures and equipment.
During the term hereof Lessee shall also maintain in full force and effect at
Lessee’s expense a policy or policies of glass insurance, insuring Lessor and
Lessee’s interests, as they may appear, covering exterior and interior glass of
the demised premises. Business Interruption Insurance, insuring that the rent
will be paid to Lessor for a period of not less than 1 year, if the premises be
destroyed or rendered inaccessible. Lessee shall also maintain at Lessee’s cost
fire legal liability equal to the value of the space rented by Lessee on a
replacement cost basis. Lessee shall also maintain at Lessee’s cost, sprinkler
leakage insurance upon Lessee’s property and the premises at all times if a
sprinkler system exists or is installed during the term of this Lease or any
extension hereof.

 

Lessor
is to be named as its interest may appear as regards Lessee’s “tenant’s
betterment’s” and improvements on the fire insurance policy for the Lessee, and
Lessee is to provide sufficient amount of coverage to at least ninety percent
(90%) of co-insurance with a replacement value, cost endorsement and inflation
guard endorsement of not less than a ten percent (10%) annual increase or cost-of-construction
average increase as published by F.W. Dodge Systems, McGraw Hill, in the Daily
Pacific Builder, or other index agreed upon by the Lessor and Lessee, whichever
is higher.

 

Lessee
covenants, during the term of this Lease to reimburse Lessor for increases
beyond the initial year for Lessee’s share of any and all insurance premiums
paid by Lessor for coverage of the real property and liability for the Center.
The initial year shall be defined in Exhibit ”A”, Real Property and
Liability and Glass Insurance Base Year. The initial cost shall be the amount
shown in Exhibit ”A”, Real Property and Liability and Glass Insurance Base
Cost. Lessee’s share shall be the percent appearing in Exhibit ”A”, Real
Property and Liability and Glass Insurance. Upon the anniversary of the
insurance policy year, Lessor shall notify Lessee of the new monthly amount to
be paid. It is understood that the insurance policy year may be different from
the lease year.

 

21.  LIABILITY INSURANCE AND WORKERS’ COMPENSATION: Lessee shall procure,
at Lessee’s own expense, on or before the date of the commencement of the term
of this Lease and shall maintain continuously during the entire term hereof
Workers’ Compensation as required by law and Public Liability insurance in the
amount of one million dollars ($1,000,000.00) for the injury or death of any
one person and two million dollars ($2,000,000.00) for the injury or death of
any number of persons in any one accident and property damage liability
insurance in the amount of one million dollars ($1,000,000,00). All of said
policies of insurance shall provide that among the additional insured
thereunder shall be included Lessor, Lessor’s agents herein, Lessor’s Property
Manager, and all other persons whom Lessor may elect to keep insured,
including, but not limited to, those named in Exhibit ”A”, “Named Insured”.
All of said policies of insurance shall be obtained from companies satisfactory
to Lessor and shall contain an endorsement that such insurance shall not be
canceled except after thirty-(30) days written notification to Lessor. Lessee
shall deliver to Lessor certificates evidencing the insurance coverage herein
provided for, Lessee shall pay the insurance premiums on all insurance coverage
herein provided for when due. If Lessee shall fail to pay the premiums on any
policy required to be kept and maintained by Lessee, Lessor may, but need not,
advance and pay said premiums, and the amount of any such advance or advances,
together with interest thereon at the rate of ten percent (10%) per annum,
shall become additional rent hereunder and one-sixth (1/6) of any total advance
shall be payable by Lessee to Lessor with each monthly installment of rent to
become due thereafter until such advance is paid in full.

 

Lessor
shall procure and shall continuously maintain during the entire  term herefo, Public Liability insurance in
the amount of One Million dollars ($1,000,000) for the death or lindury of any
one person, and two Million dollars ($2,000,000) for the injury or death of any
number of persons in any one accident, and

 

10

 

property
damage liability insurance in the amount of one Million dollars
($1,000,000).  At Lessee’s request,
Lessor shall request that Lessee be included in Lessor’s policy as an
additional insured, and Lessor shall provide a certificate of such insurance to
Lessee.

 

Lessor
shall also procure and shall continuously maintain during the enture term
hereof, a policy of insurance covering the building containing the demised
premsies against the ristks of fire and extended coverage (but not including
earthquake or flood) with a replacement cost endorsement, in an amount which
would enable Lessor to rebuild  the
demised premises in the event of an insured casualty.

 

22.  PERSONAL PROPERTY TAXES AND REIMBURSEMENT FOR INCREASED REAL PROPERTY TAXES: Lessee
shall pay before delinquency any and all taxes, assessment, license fees and
public charges levied, assessed, or imposed upon Lessee’s fixtures, or about
the demised premises, or personal property located in, upon, or about the
demised premises, or on account of or by reason of any business or other
activity conducted by Lessee in, upon or about the demised premises. Lessee
further covenants during the term of this Lease to pay, with the monthly rent,
Lessee’s share of any and all increases beyond the initial lease tax year of
real property taxes and assessments levied upon the land and improvements of
the Center, which such share shall be the percentage appearing in Exhibit ”A”,
Property Taxes, all those taxes and assessments which may from time to time be
levied upon the Center by the County of Monterey, City of Monterey or by any
other competent government body. The initial year shall be defined in Exhibit ”A”,
Real Property Taxes Base Year. The initial cost shall be the amount shown in Exhibit ”A”,
Real Property Taxes Base Cost.  All such
taxes and assessments which are payable by Lessee shall be paid by Lessee to
Lessor. Lessee’s said share shall be as set forth in Exhibit ”A”.  All such taxes and assesments which are payable by Lessee shall be paid by
Lessee to Lessor monthly along with the rent. Each
tax year the Lessor shall set forth the amount of such taxes monthly. The term “real
property taxes” shall also include all expenses reasonably incurred by Lessor
in seeking reduction by the taxing authorities of real property taxes
applicable to the Premises or in contesting said real property taxes.

 

Lessee
shall not be required to pay any municipal, county, state or federal income or
franchise taxes of Lessor, or any municipal, county, state or federal estate,
succession, inheritance or transfer taxes of Lessor.  If at any time during the term the laws
concerning the methods of real property
taxation prevailing at the commencement of the term are changed so that a tax
or excise on rents, Lessee’s share of any tax or excise on rent shall be
substantially the same as, and a substitute for, the payment of such real
property taxes as provided in this Lease,

 

23.  DAMAGE OR DESTRUCTION OF DEMISED PREMISES: If the demised premises
or the building in which they are situated are totally destroyed or damaged
more than thirty percent (30%) in value by fire or the elements during the term
of this Lease, Lessor shall thereupon have an election to terminate this Lease.
In the event that a government agency by ordinance, regulation, interference or
refusal to permit the restoration of the premises and/or the building to
substantially the same condition prior to such loss, or restrict the extent of
the reconstruction so as to make the property not economically feasible, in the
sole discretion of the Lessor, then the Lessor shall thereupon have the option
to terminate this Lease, and in the event that Lessor should exercise such
election to terminate this Lease, all rights and obligations herein shall cease
and terminate, except for rent and other sums accrued and unpaid to date of
such destruction or damage. Written notice terminating this Lease pursuant to
Lessor’s election aforesaid shall be given to Lessee not later than ninety (90)
days after such damage or destruction. If the dernised premises or the building
in which they are situated are so damaged by fire, or the elements, and Lessor
does not exercise Lessors election to terminate said Lease as hereinabove
provided, and Lessor restores said demised premises at its own expense then,
and in that event, this Lease shall remain in full force and effect. In the
event that repairs are to be made pursuant to this paragraph, Lessor shall be
entitled to and shall have possession of the necessary parts of said premises
for such purpose, and if there is any substantial interference with Lessee’s
business on account of such repairs, Lessee shall be entitled to a
proportionate reduction of rent during the time that said repairs are being
made.

 

If
Lessor should elect to repair or rebuild because of any damage or destruction,
as hereinabove provided, Lessor’s obligation shall be limited to restoration of
the demised premises or the building in which they are situated similar to the
condition that Lessor provided at the commencement of the term hereof, or any
reasonable substitute therefore so long as such substitute meets applicable
code requirements, and Lessee shall fully repair or replace all exterior signs,
trade fixtures, equipment, display cases, and other installations originally
installed by Lessee at its own expense, including, but not limited to, all of
Lessee’s betterment’s and leasehold improvements.

 

11

 

24.  PROHIBITED ACTS: Lessee covenants not to do and not permit to be done,
anything in, on or about the premises, and not to bring, nor keep anything
therein which will in any way affect fire or other insurance upon the entire
property, building, or any of its contents other than as shall be specifically
allowed elsewhere in the Lease, nor which will violate any law or regulation
which now may be or which may hereafter be enacted or promulgated by any public
authority, or which in any way may obstruct or interfere with the rights of
others, or injure, or annoy them. Lessee further covenant that should there be
an increase in fire or other insurance rates on any insurance held by Lessor on
the demised premises which increase is caused by or is attributable to the
equipment, installations, alterations, or the business conducted, or us of
occupancy by Lessee, the monthly rental to be paid by Lessee shall be raised
correspondingly to cover the full increase in such insurance rates.

 

25.  INSPECTION: Lessor
and Lessor’s agents shall have the right to enter into and upon  the demised premises during Lessee’s normal
and customary business hours, and in emergencies at all times, for the purposes
of inspecting the same, protecting Lessor’s reversion, making repairs,
additions, or alterations to the premises or to any property owned or
controlled by Lessor, or, for any lawful purposes. At any time within ninety
(90) days prior to the expiration of the term hereof, Lessor shall have access
to the premises during Lessee’s normal and customary business hours for  the purpose of exhibiting  them to prospective  tenants for their inspection and for posting “for
lease” or “for rent” signs upon the premises.

 

26.  BANKRUPTCY OR INSOLVENCY: If Lessee should execute a
voluntary assignment hereof without the written consent of Lessor first had and
obtained, or, if there should occur any assignment hereof by operation of law
on account of any act of Lessee, or, if Lessee, or any member of Lessee if
Lessee be a partnership of joint venture, should file any petition in bankruptcy
or any petition for extension or composition of creditors, or become insolvent,
or make any assignment of any of Lessee’s property for the benefit of Lessee’s
creditors, or, if any involuntary bankruptcy proceedings should be initiated
against Lessee (and Lessee fails to obtain the dismissal of such proceedings
within ninety (90) days after same arefiled) or, if any receiver be appointed
of the business or of the asstss of Lessee, this Lease, at the election
of Lessor, shall thereupon immediately terminate, and said Lease or any
interest in said leasehold, shall not be assignable by any process of law, or
treated as an asset of Lessee thereafter, nor shall it pass under the control
of any trustee or assignee of Lessee by virtue of any control of any such proceeding
or act of Lessee. If any such act or proceeding shall occur, Lessor may
terminate this Lease by the mailing of written notice to the Lessee’s Address
For Notice as shown in Exhibit ”A”, attached hereto, stating Lessor’s
election to so terminate, and all rights of Lessee hereunder shall thereupon
terminate, and Lessor may promptly reenter upon said premises.

 

27.  DEFAULT AND REENTRY: If Lessee
defaults in the payment of any rent as required hereby to be paid or, if Lessee
defaults in the performance of any term, covenant, condition, or obligation
required hereby to be performed by Lessee and such default continues for a
period of ten (10) days after written notice is mailed to Lessee of such
default, then, in addition to any other remedy Lessor may have by operation of
law, Lessor shall have the right, without any other or further notice or
demand, to enter upon the premises, and eject all persons from the premises and
remove all properly therefrom, using such lawful force as may be necessary to so
do, in which case Lessor shall not be responsible for the care or safety of
persons or property so removed and Lessee hereby waives any and all claims for
loss or damage to property or persons so removed from the demised premises by
Lessor pursuant hereto, and Lessor, in the case of any such default by Lessee
in the payment of rent or in the performance of any one of the terms,
covenants, conditions or obligations herein contained, may declare this Lease
terminated, take possession as above provided, and retain all prepaid rentals
and other prepaid expenses or deposits as Lessor’s damages or Lessor may,
without terminating this Lease or declaring a forfeiture of Lessee’s rights
hereunder, retain all prepaid rentals and other prepaid expenses or deposits,
re-let the premises or any part thereof, as the agent and for the account of
Lessee upon such terms and conditions as Lessor may deem advisable, either with
or without equipment or fixtures left remaining in the demised premises by
Lessee, in which event the rents received on such re-letting and retained
prepayments or deposits shall be applied first to the expenses of such re-letting
and collection of rent, including any necessary renovation and alteration of
the premises, and reasonable attorney’s fees, and any actual real estate
commissions paid, and thereafter the balance of any such rents, retained
prepayments or deposits shall be applied to the payment of all sums due or to
become due to Lessor hereunder and, if a sufficient sum shall not be thus realized
to pay such sums and other charges, Lessee shall pay to Lessor any deficiency
monthly, notwithstanding, Lessor may have received rental in excess of the
rental stipulated in this Lease in previous or subsequent months, and Lessor
may bring an action therefore as such monthly deficiency shall arise, in which
event Lessor shall be entitled to recover reasonable attorney’s fees for
commencing and prosecuting such suit. Lessor shall be entitled to each and all
of Lessor’s remedies, and the election to proceed with one may not be construed
as excluding

 

12

 

the subsequent use of any
other. The remedies herein granted to Lessor shall not be construed to be any
limitation of any rights, or remedies otherwise available to Lessor, but shall
be construed to be in addition thereto. Lessee shall allow any reentry by
Lessor as aforesaid without hindrance and Lessor shall not be liable in damages
for any such reentry, or be guilty of trespass or forcible entry.

 

28.  LESSOR-LESSEE LIABILITY: Lessor shall not be liable for any loss
or damage that may result to any property belonging to Lessee, located in, on,
or about said demised premises from any cause whatsoever, nor shall Lessor be
liable for any damage or injury or personal injury to any person or property
occurring or arising in, on, or about the demised premises from any cause
whatsoever. Lessee hereby covenants to save and hold Lessor, his agent and
manager harmless from and to defend and indemnify Lessor against any suit or
claim or demand for damage or injury to any person or property sustained in,
on, or about the demised premises from any cause whatsoever during the term.

 

29.  INTEREST ON DELINQUENCIES: Lessor shall be entitled to interest on
any amounts owing from time to time from Lessee to Lessor at the maximum rate
permitted by law.

 

The
foregoing shall apply to any and all payments that Lessor may from time to time
be entitled to receive from Lessee including, but not limited to, rents, real
property taxes and assessments, fire insurance premiums, common area
maintenance and repair costs, common area capital improvement costs, and any
and all other amounts that Lessor may from time to time be entitled to receive
from Lessee.

 

30.  ATTORNEYS FEES: If either party hereto should bring any suit against
the other party hereto for the breach of any term, covenant, condition or
obligation herein contained to be kept, by such other party, for the recovery
of any sum due hereunder, or to recover possession of the premises, or for any
summary action for forfeiture of this Lease, or to prevent further violations
of any of the terms, covenants, conditions or obligations, or, for any other
relief then, and in that event, the prevailing party in such suit for summary
action shall be entitled to a reasonable attorney’s fee to be fixed by the
court.

 

31.  NON-WAIVER OF BREACH: Lessors failure to take advantage of any
default or breach of covenant

 

on the
part of Lessee shall not be construed
to be a waiver thereof; nor shall any custom or practice which may grow up
between the parties hereto in the course of administering this Lease be
construed to waive or to lessen the right of Lessor to insist upon the
performance of any and all terms, covenants, conditions, and obligations hereof,
or to exercise any right given Lessor on account of any default.   A waiver of a particular breach or default
shall not be deemed to be waiver of the same or any other subsequent breach of
default. Lessor’s consent to or the approval of any act by Lessee requiring
Lessor’s consent or approval shall not be deemed to waive or render unnecessary
Lessor’s consent to or approval of any subsequent or similar act by Lessee.

 

32.  CONDEMNATION: If title to all of the premises is taken for any
public or quasipublic use under any statute, or by right of eminent domain, or
by private purchase in lieu of eminent domain, or if title to so much of the
premises is so taken that, in the sole opinion of Lessor, a reasonable amount
of reconstruction of the premises will not result in the premises being a
practical improvement, or reasonably suitable for Lessee’s continued occupancy
for the uses and purposes for which the premises are leased, then, in either
event, this Lease shall terminate on the date that possession of the premises,
or part of the premises, is taken, unless Lessor elects that said Lease
continue.

 

32.1  If this Lease continues
under provisions of Paragraph 1, above, the Then Fixed Rent shall be reduced in
the same proportion that the floor area of the portion of the premises so taken
(less any additions to the premises by reconstruction) bears to the original
floor area of the premises. Lessor shall, at Lessor’s own cost and expense,
make all necessary repairs or alterations to the building in which the premises
are located so as to constitute the portion of the building not taken a useable
unit. There shall be an equitable abatement of rent during such restoration
period.

 

32.2  All compensation awarded or
paid upon a total or partial taking of the fee title of the premises shall
belong to Lessor, whether such compensation be awarded or paid as compensation
for diminution in value of the leasehold or of the fee provided, however, that
Lessor shall not be entitled to any award made to Lessee for depreciation or
damage to, or cost of removal of stock and fixtures, if any.

 

32.3  Each party agrees to
execute and deliver to the other all instruments that may be required to
effectuate the provisions of this paragraph, and Lessee shall assign to Lessor
and appoint Lessor to act for Lessee in all matters of condemnation except for
Lessee’s specific rights to damages as set forth in Paragraph 3, above.

 

13

 

33.  UTILITIES AND ANCILLARY SERVICES: Lessee will, during the term of this
Lease, pay for all charges for utilities and ancillary services furnished,
delivered to or performed upon the demised premises including, but not limited
to, electricity, gas, telephone, telecommunication systems, water, sewer
(including MRWPCA charges), city, county, district, state or federal surcharges
and or user fees, storm drain fees, taxes or assessments, cable, garbage/refuse
collection and recycling, insect and rodent control, neighborhood improvement
and traffic impact assessments, fees and taxes and all other ancillary user
cost, including interest, late fees and fines, resulting from the occupancy of
the premised by the Lessee. Lessee shall, if feasible, pay for the above
services directly to the public utility or other suppliers. In the case of
MRWPCA and other charges, which are attributable to the demised premises but
are billed to Lessor, Lessee agrees to reimburse Lessor as provided for herein,
monthly along with the rent. Lessor or his agent makes no representation or
warranty whatsoever as to the availability of water, gas, electricity, or any
other utility and ancillary services for Lessee’s intended use and Lessee
acknowledges that Lessee has made Lessee’s own investigation with respect to
the availability of any and all utility and ancillary services required by
Lessee and that Lessee is satisfied with respect to such availability, and that
Lessor has no obligation whatsoever with respect thereto. Lessee shall obtain,
install, and pay for, an individual meter for each of the utility services
required by Lessee upon Lessee’s dernised premises; except that Lessor shall
provide a gas meter and an electric meter for the premises.

 

If,
for any reason, Lessee cannot obtain an individual or separate meter or billing
for Lessee’s demised premises then, and in that event, Lessor shall utilize
Lessor’s best efforts to make any such required utility services available to
Lessee through Lessor’s existing common meters and Lessor shall bill to Lessee
and the Lessee shall pay to Lessor within ten (10) days of the statement
therefore such amount as Lessor shall determine to be Lessee’s fair and
equitable share of any such utilities and Lessor’s determination in this regard
shall be final, binding and conclusive upon Lessee. All such statements for
utility services shall be presented to Lessee on a regular basis and within a
reasonable period of time after receipt of Lessor’s statement from the
applicable utility. Lessor shall not be liable in damages or otherwise for any
failure or interruption of any utility service being furnished the Premises and
no such failure or interruption shall entitle Lessee to terminate or modify
this Lease in any way.

 

Not
withstanding anything to the contrary contained herein, Lessee agrees that
Lessor may arrange for professional direct billing to Lessee for the commonly
provided metered utilities and ancillary services provided to Lessee though or
by the Lessor, and Lessee agrees to pay for such direct billing and cost
separate from the rent payment owed to Lessor, according to this Lease and that
the costs and direct billings for utilities and ancillary services shall not be
considered a reduction or offset in the rental payment due Lessor but shall be
in addition to the rent. It is understood and agreed between Lessor and Lessee
that in the event such direct billing payments are not made when due, it shall
be considered a substantial default under the Lease and Lessee agrees that
Lessor may bring summary proceedings for payment and or eviction as if the rent
were not paid.

 

34.  HEIRS AND
ASSIGNS: Except as herein otherwise provided, all terms, conditions,
covenants and obligations contained in this Lease shall be binding upon the
inure to the benefit of the heirs, successors, legal representatives and
assigns of the parties hereto.

 

35.  NOTICES: All notices, statements, demands, requests, approvals,
authorizations, offers, agreements, appointments or designations under this
Lease by either party to the other shall be in writing and shall be served
personally upon the other party or deposited in the United States mail,
certified mail, return receipt requested, postage prepaid, and addressed to
Lessee at Lessee’s Address For Notice as it appears on Exhibit ”A”,
attached hereto, or to such other address as Lessee may from time to time
designate to Lessor in writing, and addressed to Lessor as it appears on Exhibit ”A”,
or at such other address as Lessor or his agent may from time to time
designate, to Lessee in writing.

 

36.  CONSTRUCTION: Each term, covenant, condition and obligation of
this Lease to be performed by Lessee shall be construed to be both a covenant
and condition.

 

37  LAYOUT OF THE DEMISED PREMISES AND SURROUNDING AREA OWNED BY LESSOR: Lessor
does not guarantee a continuance of the passage of light and air over the
demised premises or over any of the real property adjoining the demised
premises and Lessor expressly reserves all air space over the demised premises.
Any reference in this Lease with respect to the location of reference in this
Lease with respect to the location of buildings, parking areas, if any, and
other improvements shall not be deemed to be a warranty or representation.
Lessor hereby reserves the right at any time to make any

 

14

 

alterations
or additions to or to build additional stories on any presently existing
building owned by Lessor. Lessor also reserves the right to construct other
buildings or improvements upon the surrounding real property, which may be
owned by Lessor from time to time, and to make alterations or additions thereto
and to build additional stories on any such buildings and to modify and
reallocate space within the Center. Lessor further reserves rights-of-ways and
easements in, over, under, and through Lessee’s demised premises for sprinkler
and fire detection system purposes, power and telephone lines, plumbing lines,
air conditioning, heating and ventilation systems, and conduits for all
utilities, together with the right to locate, relocate, and maintain the same
at any and all times and from time to time in, upon, over, or under Lessee’s
dernised premises without any rebate of rent or liability for any interruption
or disturbance caused by Lessor, its agents, servants or employees, or by any
utility company employee or representative; provided, however, that Lessor
shall use reasonable discretion in exercising its rights pursuant to this
sentence,

 

38.  NUMBER AND GENDER: Whenever the singular number is used in this
Lease and when required by the context, the same shall include the plural, and
the masculine gender shall include the feminine and neuter genders, and the
word “person” shall include corporation, firm, partnership, or association. If
there be more than one Lessee, the obligations imposed herein upon Lessee shall
be joint and several.

 

39.  MARGINAL TITLES: The marginal headings or titles to the paragraphs of
this Lease are not a part of this Lease and shall have no effect upon the
construction and interpretation of any part of this Lease,

 

40.  MODIFICATION AND VOIDANCE OF PRIOR AGREEMENTS: This instrument
contains all the agreements and conditions made between the parties to this
Lease and may not be modified orally or in any other manner than by an
agreement in writing signed by all of the parties to this Lease or other
respective successor or successors in interest. This Lease supersedes any and
all prior written and oral agreements between Lessor and Lessee, which such
agreements, if any, are void and of no further effect.

 

41.  TIME OF ESSENCE: Time is of the essence of each term, covenant,
condition and obligation of this Lease.

 

42.  PAYMENTS NOT IN SUBSTITUTION: Except as otherwise expressly stated,
each payment requiredto be  made by
Lessee shall be in addition to and not in substitution for other payments to be
made by Lessee.

 

43.  CONVEYANCE BY LESSOR: If, during the term of this Lease, Lessor
shall sell Lessor’s interest in the demised premises, then from and after the
effective date of such sale, Lessor shall be released and discharged from any
and all obligations and responsibilities under this Lease, except those already
accrued; provided, however, that any such purchaser shall assume all of Lessor’s
obligations to be performed hereunder, including the obligation to refund the
security deposit at the expiration of this term.

 

44.  SIGNS AND ADVERTISING: No sign, advertisement, or notice shall be
inscribed, painted or otherwise displayed, or screens, awnings, shades,
decorations, symbols, fixtures or any other thing affixed on any part of the
outside of the demised premises (or inside of the demised premises where such
may be seen through windows or otherwise by passersby) except of such color,
size, or style, and in such place on or in said premises as shall first be
fixed, designated and approved by Lessor in writing. Lessor may at his option
provide one directory at a location and of a design to be determined by Lessor.
Such directory shall display Lessee’s practice or business name as agreed by
Lessee and Lessor. Lessee agrees to pay for the cost of such directory
identification.

 

Lessor
further acknowledges and agrees as a condition of this lease, to comply with
all Lessor’s existing building signage criteria, and or to any new signage
criteria that the Lessor, any governmental agency or business or trade
association may require from time to time. Lessee covenants to Lessor and
agrees to install all initial signage within 45 days from taking possession of
the premises, and for new signage within 60 days from written notice from
Lessor that a new sign is required, all of which is subject to the terms and
conditions of this article.

 

45.  STATEMENT OF LESSEE: Lessee shall at any time and from time to time
upon not less than ten (10) days prior written request by Lessor, execute,
acknowledge and deliver to Lessor a statement in writing certifying that this
Lease is unmodified and in full force and effect if such is the fact (or if
there has been any modification thereof that the same is in full force and
effect as modified and stating the modifications) and the dates to which
rentals and other charges have been paid in advance, if any. It is expressly
understood and agreed that any such statement delivered pursuant to this
paragraph may be relied upon by any prospective purchaser of the complex or
estate of Lessor or by

 

15

 

the
mortgagee or assignee of any mortgages of any mortgage or the trustee or
beneficiary of any deed of trust constituting a lien upon the leased premises
or upon property including the lease premises or any part thereof.

 

46.  JANITORIAL SERVICE: Lessor shall have no responsibility whatsoever for
the furnishing of any janitorial service to the demised premises. Janitorial
service within the dernised premises shall be the sole responsibility and at
the sole cost of Lessee. Lessee covenants and agrees to obtain sufficient
janitorial service to maintain the demised premises in a clean and orderly
condition at all times. Lessee further agrees to deposit Lessee’s refuse and
garbage only in those areas designated in writing by Lessor from time to time.

 

47.  SUBORDINATION: This Lease is and shall be subordinate to any
encumbrance now of record or recorded after the date of this Lease affecting
the building, other improvement, and land of which the premises are a part.
Such subordination is effective without any further act of Lessee. Lessee shall
from time to time upon request from Lessor execute and deliver any documents or
instruments that may be required by a lender to effect any subordination. If
Lessee fails to execute and deliver any such documents or instruments, within
ten (10) days, Lessee irrevocably constitutes and appoints Lessor as
Lessee’s special attorney in fact to execute and deliver any such documents or
instruments.

 

48.  COMPETITION: Lessee agrees that during the term of this Lease, it will
not operate, or be directly or indirectly connected with or interest in, any
other business or enterprise similar to or in competition with or interest in,
any other business or enterprise similar to or in competition with the one
conducted by Lessee on the demised premises within a radius of one (1) air
mile of the clemised premises.

 

49.  GOVERNMENT FEES: All governmental fees, charges, district assessment
fees or charges, including but limited to, fire, police, sanitary service,
water, utilities, parking, parking adjustments or parking assessments for the
Lessee’s use or occupancy of the premises shall be the responsibility of the
Lessee, and payable to Lessor along with the rent or paid direct to the
appropriate agency as required. Lessee further covenants and agrees to
encourage all Lessee’s employees to utilize long-term public parking lots and
garages (instead of public street parking), and agrees to purchase monthly
parking permits for said employees from the appropriate governmental agency.

 

50.  LESSEE’S IMPROVEMENTS: Insofar as the space demised to Lessee within,
said building is concerned, Lessee’s obligation shall be to complete those
items necessary for Lessee’s intended use of the demised premises, all of which
must be installed in conformity with the latest applicable local and state
rules, regulations, ordinances, and building codes, and in conformity with the
plans and specifications, to be prepared by Lessee’s architect and submitted to
Lessor for Lessors approval, in writing, prior to commencement of Lessee’s
work, which said approval by Lessor shall not be unreasonably withheld.
Construction shall be diligently prosecuted to completion by Lessee, provided,
however, that any prevention, delay or stoppage due to strikes, lock-outs,
labor disputes, Acts of God, inability to obtain labor or materials or
reasonable substitutes therefore, governmental restrictions, governmental
regulations, governmental controls, enemy or hostile governmental action, civil
commotion, fire or other casualty, and other causes beyond the reasonable
control of the party obligated to perform shall excuse performance by such
party for the period equal to any such prevention, delay or stoppage. The
acceptance of said premises for the purpose of performing Lessee’s work in the
premises, as hereinabove defined, shall constitute an acknowledgment by Lessee
that the premises are in the condition called for by this Lease and that Lessor
has performed all its work with respect to the premises.

 

All of
Lessee’s work shall be done on a lien-free basis and shall be completed free
and clear of all liens recorded or recordable pursuant to the provisions of the
Civil Code of the State of California relating to mechanic’s liens (Section 3109
et. seq.).

 

51.  GARBAGE, REFUSE, TRASH, COLLECTION & REIMBURSEMENT: Lessee
acknowledges that it is Lessor’s concern that all portions of the premises and
the building and adjoining lands within and upon which the premises are located
are at all  times clean and saniitary,
and Lessee therefore agrees to abide by Lessor’s judgment as to whether Lessee’s
garbage, refuse and  trash  removal services are adequate. In  the event 
that Lessor deems that more frequent or more effective service is
desirable, Lessee agrees to follow the directions of Lessor with respect to
improvements of said services under penalty of default and further agrees to
reimburse Lessor for all costs and expenses incurred by Lessor in removing
Lessee’s garbage, refuse and trash should Lessor, in his sole judgment,
determine that said action is desirable. Lessee further agrees to abide by
Lessor’s noticed rules and regulations relating to use of refuse
containers and storerooms that from time to time may be available to tenants
and to deposit Lessee refuse only within Lessee’s demised premises or in those
areas designated by Lessor in writing from time to time. Lessor may arrange for
the collection and removal of Lessee’s and other Lessee’s garbage and refuse
which is

 

16

 

so
deposited, and shall advance on behalf of Lessee and other Lessee’s for their
respective prorata shares of such costs. Lessee agrees to reimburse Lessor for
such advances within five (5) days of receipt of said bill.

 

52.  SPRINKLER SYSTEM (IF ANY): Lessee acknowledges that if the premises
are currently provided with an automatic sprinkler system it is ISO rated.
Should Lessee’s occupancy, use, improvements or remodeling within, upon or
about the demised premises cause any reduction in the rating of said system
anywhere in the building, at any time, in which the premises are located, or
result in the requirement by insurance carrier or a governmental agency that a
sprinkler system be installed, Lessee shall immediately undertake all such
automatic sprinkler work, all at Lessee’s sole cost and expense. Furthermore,
Lessee shall at all times be responsible for and shall pay for any and all
modifications as are necessary to maintain the ISO rating on said system within
the demised premises. Lessee shall, during the term of this Lease and any
extension thereof, at Lessee’s sole cost and expense, maintain and service said
sprinkler system, detection and monitoring system, keeping it in good working
order, including but not limited to, periodic service and inspection charges,
periodic testing, water users fees, assessments and assessment district
charges, and all other governmental fees and charges thereto.

 

53.  MERCHANT’S ASSOCIATION: Lessee shall join at all times during the term
of this Lease maintain membership in any businessmen’s merchant association
that may exist for substantially all retail businesses located in the Center
area. Lessee shall abide by the rules and regulations of any such
organization and shall make such contribution to such joint advertising program
sponsored by such organization and shall make such contribution to such joint
advertising program as shall be determined in accordance with the bylaws or
other regulations of such association.

 

54.  RIGHT OF
FIRST REFUSAL:  This section has
been removed.

 

55.  TRANSFER FEE:
This section has been removed.

 

56.  NO
PARTNERSHIP: Lessor does not, in any way or for any purpose become
partners of Lessee in the conduct of its business, or otherwise, or joint
adventurer or a member of a joint enterprise with Lessee. The provisions of
this Lease relating to the percentage rent payable hereunder are included
solely for the purpose of providing a method whereby the rent is to be measured
and ascertained.

 

57.  HAZARDOUS MATERIALS: Lessee shall not at any time during the term of
this Lease use, or any extension, generate, store or dispose of, on, under, or
about the Premises any hazardous substance, hazardous material, hazardous
waste, toxic substance, pollutants, contaminants, or related materials (“Hazardous
Materials”), except, those, if any, listed in Exhibit ”A,”, attached
hereto and made a part hereof. For the purposes of this covenant, Hazardous
Materials shall include, but shall not be limited to, substances defined as “hazardous
substances” or “pollutants or contaminants” in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601
at seq., those substances defined as “hazardous waste” by the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 at seq.,
and by Section 25316 of the California Health and Safety Code, and those
substances defined as “hazardous substances” in Section 25316 of the
California Health and Safety Code, and the regulations adopted and publications
promulgated pursuant to said laws. Lessee shall indemnify, defend, and hold
Lessor harmless from and against all liability, including all foreseeable and
unforeseeable consequential damages, directly or indirectly arising out of the
use, generation, storage or disposal of Hazardous Materials, including, without
limitation, the cost of any required or necessary repair, clean-up, or
detoxification and preparation of any closure or other required plans, to the
full extent that such action is attributable, directly or indirectly, to the
use, generation, storage or disposal of Hazardous Materials on the Premises at
any time. Lessee shall provide written notice to the Lessor of any present or
future hazardous substance release that Lessee knows or has reasonable cause to
believe is or will be present on or under the Premises, within a reasonable
period of time after such release is discovered or believed by the Lessee to be
present. (See Health and Safety Code Section 25359.71).

 

57.1  HAZARDOUS
MATERIALS REPORT: Lessee
agrees that if Lessee is unable for any reason to complete the certification
provided for in Paragraph 57.2 below, Lessee shall obtain and deliver to Lessor
within thirty (30) days before or after the termination of this Lease a
hazardous substance report concerning the Premises (“Hazardous Materials Report”),
the purpose of which Hazardous Materials Report shall be to affirm that Lessee
shall be in compliance with all applicable laws, ordinances, rules and
regulations of any governmental agency having jurisdiction concerning the use,
storage and/or disposition of hazardous materials on the Premises at the
termination of this Lease or any extension thereof. Lessee shall obtain the
Hazardous Material Report at its sole cost and expense. For the purposes of
this report, a “Hazardous Material” is defined as any substance the existence
or effect

 

17

 

of which is subject to
any Federal, State or local regulation, investigation, correction or removal as
potentially injurious to public health or welfare. Lessor and Lessee
acknowledge that extensive local, State and Federal legislation establishes
broad liability upon owners and/or user of real property for the investigation
and correction of such hazardous material conditions. The Hazardous Materias
Report shall be in writing, and shall be prepared by a licensed contractor or
engineer competent to perform such investigation on behalf of Lessee. If the
Hazardous Materials Report shall indicate a condition requiring correction or
posing a potential liability to Lessor, Lessee shall forthwith cure the
condition(s) specified in the Hazardous Materials Report at Lessee’s sole cost
and expense, prior to the termination of this Lease.

 

57.2  HAZARDOUS MATERIALS CERTIFICATION BY LESSEE: Lessee
will execute an indemnification agreement and notarized certification under
penalty or perjury substantially as follows:

 

a.               That
no hazardous materials other than those, if any, listed in Exhibit ”A” has
been introduced to the Premises.

 

b.              That
there has been no spillage of hazardous materials listed in Exhibit ”A”
and that such materials have been properly stored in closed containers in
accordance with the law and disposed of in accordance with the law.

 

c.               That
Lessee agrees to pay the cost of cleaning up any contamination resulting from
Lessee’s use or occupancy of the Premises and hold harmless and indemnify
Lessor and Lessor’s agents for any claims that result therefrom. Lessee shall deliver
such certification to Lessor within five days before or after the termination
for any reason of Lessee’s occupancy of the Premises. If Lessee fails to so
deliver such certification within the time required, Lessee shall comply with
the provisions of Paragraph 57.1above.

 

57.3  EMISSION, STORAGE, USE AND DISPOSAL OF WASTE:

 

a.                                       Emissions.
Lessee shall not:

 

1)              Permit
any vehicle on the premises to emit exhaust, which is in violation of any
govemmental law, rule, regulation or requirement;

 

2)              Discharge,
emit or permit to be discharged or emitted, any liquid, solid or gaseous
matter, or any combination thereof, into the atmosphere, the ground or any body
of water which matter, as reasonably determined by Lessor or any governmental
entity, does, or may, pollute or contaminate the same, or is, or may become,
radioactive or does, or may, adversely affect the (a) health or safety of
persons, wherever located, whether on the Premises or anywhere else, (b) condition,
use or enjoyment of the Premises or any other real or personal property,
whether on the Premises or anywhere else, or (c) Premises or any of the
improvements thereto or thereon including buildings, foundation, pipes, utility
lines, landscaping or parking area;

 

3)              Produce,
or permit to be produced, any intense glare, light or heat except within an
enclosed or screened area and then only in such manner that the glare, light or
heat shall not be discernable from outside the Premises;

 

4)              Create,
or permit to be created, any sound pressure level which will interfere with the
quiet  enjoyment of any real property
outside the Premises, or which will create a nuisance or violate any
governmental law, rule, regulation or requirement.

 

5)              Create,
or permit to be created, any ground vibration that is discernable outside the
Premises.

 

6)              Transmit,
receive or permit to be transmitted or received, any electromagnetic, microwave
or other radiation which is harmful or hazardous to any person or property in,
or about the Premises, or anywhere else.

 

b.                                       Storage
and Use

 

1)              Storage.
Subject to the uses permitted and prohibited to Lessee under the lease. Lessee
shall store in appropriate leak proof containers all solid, liquid or gaseous
matter, or any combination thereof, which matter, if discharged or emitted into
the atmosphere, the ground or any body of water, does or may (a) pollute
or contaminate the same, or (b) adversely affect the (i) health or
safety of person, whether on the

 

18

 

Premises
or anywhere else, (ii) condition, use to enjoyment of the Premises or any
real or personal property, whether on the Premises or anywhere else, or (iii) Premises
or any of the improvements thereto or thereon.

 

2)              Use.
In addition, without Lessor’s prior consent, Lessee shall not use, store or
permit to remain on the Premises any solid,
liquid or gaseous matter, which is, or may become radioactive. If Lessor does
give its consent, Lessee shall store the materials in such a matter that no
radioactivity will be detectable outside a designated storage area and Lessee
shall use the materials in such a manner that (a) no real or personal
property outside the designated storage area shall become contaminated thereby
or (b) there are and shall be no adverse effects on the (i) health or
safety of person, whether on the Premises or anywhere else, (ii) condition,
use or enjoyment of the Premises or any real personal property thereon or
therein, or (iii) Premises to any of the improvements thereto or thereon.

 

c.                                       Disposal
of Waste

 

1)              Refuse
Disposal.   Lessee shall not keep any
trash, garbage, waste or other refuse on the Premises except in sanitary
containers and, except for normal trash removal by Lessee, shall regularly and
frequently remove extraordinary trash from the Premises. Lessee shall keep all
incinerators, containers or other equipment used for storage or disposal of
such materials in a clean and sanitary condition.

 

2)              Sewage
Dlsposal. Lessee shall properly dispose of all sanitary sewage and shall not
use the sewage disposal system (a) for the disposal of anything except
sanitary sewage or (b) excess of the lesser amount (i) reasonably
contemplated by the uses permitted under this Lease or (ii) permitted by
any governmental entity.Tenant shall keep the sewage disposal system free of all
obstructions and in good operating condition.

 

3)              Dlsposal
of Other Waste.  Lessee shall properly
dispose of all of the waste or other matter delivered to, stored upon, located
upon or within, used on, or removed from, the Premises in such a manner that it
does not, and will not, adversely affect the (a) health or safety of
person, wherever located, whether on the Premises or elsewhere (b) condition,
use or enjoyment of the Premises or any other real or personal property,
wherever located, whether on the Premises or anywhere else, or (c) Premises
or any of the improvements thereto or thereon including buildings, foundation,
pipes, utility lines, landscaping or parking areas.

 

d.                                       Information:
Lessee shall provide Lessor with any and all information regarding
hazardous or toxic materials, in the Premises, including copies of all filings
and reports to governmental entities at the time they are originated and any
information requested by Lessor. In the event of any accident, spill of other
incident involving hazardous or toxic matter of which Lessee has actual
knowledge, Lessee shall immediately report the same to Lessor and supply Lessor
with all information and reports with respect to the same. All information
described herein shall be provided to Lessor regardless of any claim by Lessee
that it is confidential or privileged.

 

e.                                      Compliance
with Law: Notwithstanding any other provision in this Lease to the
contrary, Lessee shall comply with all laws, statues, ordinances, regulations, rules and
other governmental requirements in complying with its obligations under this
lease, and in particular, relating to the storage, use and disposal of
hazardous or toxic matter.

 

58.  WATER USE I SHORTAGE DISCLOSURE I ASSESSMENTS AND FINES: All
parties to this lease acknowledge the following: In Monterey County water is a
scarce resource, due to recent drought years, limitations on water use and
consumption have been implemented to water users in the past and will continue
into the future. These limitations include, but are not limited to: water
rationing; limitation/restriction of new fixtures; limitation/restriction to
businesses due to potential increase in water use; implementation of fines for
overages of water use; implementation of fees resulting from new fixtures or water
hookups or increased water use. Lessee hereby agrees to comply and abide by all
rules, regulations and policies adopted by the Monterey Peninsula Water
Management District or its successors, including but not limited to the payment
of fines, fees and assessments, as a result of the occupancy and use of the
premises by Lessee. Lessee shall pay said amounts of pro-rata, or 100% if
solely resulting from Lessee’s use of premise promptly so as to avoid a lien being
placed upon Lessor’s property by the district. Lessee may appeal the decision
of the district, provided Lessee~s action does not create a lien upon Lessor’s
property. Lessee is hereby informed that if for any reason assessments, fees or
fines are imposed upon the property, Lessor may pay such assessments, fees or
fines and deduct them from the
prepaid rents and/or the security

 

19

 

deposit and Lessee shall
within ten (10) days from notice, restore the prepaid rents and/or the
security deposit, as provided for in this lease. In the event Lessee’s actions
or lack of actions results in a lien being placed upon Lessors property, Lessor
may, in his sole discretion, declare Lessee in default and terminate this lease
upon ten (10) days advance written notice. Lessor further acknowledges
that Lessor, aand/or its agents and representatives have made no representation
about the Lessee’s right to water use, increased use or installation of
additional water fixtures. Lessee agrees to hold harmless and indemnify Lessor,
and/or its agents or representatives from any liability and costs relating to
this issue, including but not limited to assessments, fines, fees, reasonable
attorney fees and court costs.

 

Notwithstanding  the foregoing, Lessor shall not charge Lessee
for any fines, fees, charges or expenses, including reasonable attorney’s fees,
when Lessor can reasonably determine that such fines, fees or charges have been
solely caused by some other  tenant
in  the center.

 

59.  QUITCLAIM DEED: This section has been eliminated.

 

60.  RECORDING: Lessee will
not record  this lease.

 

61.  SURRENDER OF PREMISES: Upon expiration or termination of this Lease,
Lessee shall surrender possession of the premises in the condition required by
this Lease, and Lessee shall, at Lessee’s expense, a) remove all signage from
the exterior and interior of the premises and or building and or common areas,
and (b) remove all Lessees trade fixtures and personal property and those
claiming under Lessee from the premises and the property, subject to the
limitation, of this Lease agreement, and (c) clean the premises including,
but not limited to windows, carpets, floors, walls, ceilings, (d) paint
the interior of the premises a color acceptable to Lessor, and (e) quit
and deliver up the premises peaceable and quietly and in as good order and
conditions as the same were in on the date the term of this Lease commenced,
ordinary wear and tear excepted. Additionally, all Lessee alterations of the
premises, at the election of the Lessor, will be removed and the premises will
be returned to the conditions as at the time of the commencement of this Lease,
at the expense of the Lessee, (e) surrender all keys, any key cards, and
any parking stickers or cards, to Landlord, and advise Landlord as to the combination
of any locks or vaults then remaining in the Premises.

 

62.  LIMITATION TO LESSOR’S PERSONAL LIABILITY: Lessee shall look solely to
Lessor’s interest in the building and the land of which the premises form a
part for the recovery of any claims, damages or judgment against Lessor, and if
Lessor is (i) a partnership, its partners whether general or limited, or (ii) a
corporation, its directors, officers or shareholders, or (iii) a limited
liability company, its members or (iv) a trust its beneficiaries, shall
never be personally liable for any such claims, damages or judgment.

 

63.  ALTERATIONS/IMPROVEMENTS: Lessee shall not make any improvements on the
property without Lessor’s consent. In making any alterations that Lessee has a
right to make, Lessee shall comply with the following:

 

a.                                      Lessee shall submit reasonably detailed
plans and specifications of the proposed alterations before the commencement of
such Lessor approved alterations.

 

b.                                      The
alterations shall not commence until five (5) days after Lessor has
received notice from Lessee stating the date the construction is to commence so
that Lessor can post and record an appropriate notice of non-responsibility.

 

c.                                      The
proposed improvements shall be approved by all the appropriate government agencies,
and all applicable permits and authorizations shall be obtained before
commencement of the alterations. All approved improvements shall be completed
in the standard workmanship quality.

 

d.                                      All
the appropriate government agencies and all applicable laws shall approve the
proposed improvements.

 

e.                                      Before
commencing the alterations and at all times during construction, Lessee shall
maintain insurance as provided for in paragraphs 18 and 19. In addition,
contractor shall be licensed and insured and a Certificate of Insurance with
liability insurance in the amount of $1,000,000.00 and Worker’s Compensation
Insurance shall be provided by Lessee’s contractor to Lessor within 10 days
prior to commencement of any work and said certificate shall name Lessor as additionally
insured.

 

f.                                        Lessee
shall pay all costs for construction done by it or caused to be done by it on
the premises as permitted by this Lease. Lessee shall keep the improvements and
land free and clear of all mechanics’ liens resulting from construction done by
or for Lessee.

 

20

 

64.  AMERICANS WITH DISABILITIES ACT: On July 26, 1990 the Americans
With Disabilities Act of 1990 (ADA) was signed into law. This federal Civil
rights legislation prohibits discrimination against individuals with
disabilities. The ADA affects almost all commercial facilities and public
accommodations. Residential properties are not typically covered by the ADA but
may be governed by its provisions if used for certain purposes. The ADA can
require, among other things, buildings to be made readily accessible to the
disabled. Different requirements apply to new construction, alterations to
existing buildings, and removal of barriers in existing buildings. Compliance
with the ADA may require significant costs. Monetary and injunctive remedies
may be incurred if the property is not in compliance. Neither Lessor nor a real
estate broker does have the technical expertise to either determine whether a
building is in compliance with ADA requirements or to advise a Lessee on the
requirements of the ADA. Any Lessee who is a party to the above referenced
agreement is advised to contact an attorney, contractor, architect, engineer or
other qualified professional of his/her own choosing to determine to what
degree, if at all, the ADA impacts upon that principal or this transaction. It
will be the Lessee’s responsibilities to comply with this act, at no cost to
Lessor.

 

65.  NOTICE OF SURRENDER: Lessee shall, at least thirty (30) days before the
date of expiration of this lease, give Lessor a written notice of intention to
surrender the leased premises on that date. If such notice is not given, the
Lessee shall be liable for rent of one additional month.

 

66.  REAL ESTATE BROKERAGE FEE: Lessee warrants to Lessor that there are no
Real Estate brokerage fees offered or required in conjunction with this lease
which may arise as a result of the execution of this lease and agrees to pay
said fees, and hold harmless and indemnify Lessor from any claims for brokerage
fees for failure to pay said fee.

 

67.  LESSOR LOAN OR SALE: Lessee agrees within ten (10) business days
of receipt of written request by Lessor, to execute and deliver to Lessor any
reasonably necessary documents, including estoppel certificates, in a form
reasonably acceptable to Lessee, presented to Lessee by Lessor. Lessee’s
failure to deliver an estoppel certificate within five (5) days following
such request shall constitute a default under this Lease and shall be
conclusive upon Lessee that this Lease is in full force and effect and has not
been modified except as may be represented by Lessor and that there are no
uncured defaults in Lessor’s performance. In addition, if requested by Lessor,
Lessee shall deliver to Lessor, on a reasonable basis but nor more frequent
than annually, or to any prospective lender or purchaser of the Property,
financial statements of Lessee covering the two (2) fiscal years
immediately preceding the request,

 

68.  ATTORNMENT: If Lessor conveys in a Sale all of its rights and duties
in and to the Lease and/or Premises and the realty underlying the Premises, or
if an interest in Lessor or Lessor’s equity of redemption or other interest in
the Lease and the Premises under a mortgage, deed of trust, pledge or security
agreement is foreclosed judicially or non-judicially, upon the request of
Lessor’s lawful successor, Lessee shall aftorn to said successor, provided said
successor accepts the Premises subject to this Lease. The foregoing
notwithstanding, in accepting the Premises subject to this Lease, said
successor shall not be bound by (i) any prepayment of more than one month’s
rental (except for payments under Article 7, “Security Deposit”) or (ii) any
material amendment of this Lease made after the later of the Effective Date or
such date as the successor’s lien or interest first arose, unless said
successor shall have consented to such amendment.

 

69.  MUTUAL WAIVER OF RIGHT OF SUBROGATION: Except as may be provided
herein, Lessor and Lessee each hereby waives any and all rights of recovery
against the other and their respective authorized representatives for damage to
any person or to the Premises, and the Building and other improvements in which
the Premises are located, and to fixtures, personal property, Lessee’s
improvements, and alternation of either Lessor or Lessee in or On the Premises
and the Building and other improvements in which the Premises are located,
arising from any cause insured against under any insurance policies carried by
the parties and in force at the time of any such damage. Each party shall cause
insurance policy obtained by it to provide that the insurance company waives
all right to recover by way of subrogation against either party in connection
with damage covered by any policy.

 

70.  MISCELLANEOUS PROVISIONS:

 

70.1)                    Time
of Essence. Time is of the essence of each provision of this Lease.

 

21

 

70.2)                    Landlord’s
Consent Except as may otherwise be expressly stated in their Lease, any
consent required by Landlord under this Lease must be granted in writing and
must be withheld or conditioned by Lessor in its reasonable discretion.

 

70.3)                    Severability.
It is agreed that, if any provision of this Lease shall be determined to be
void by any court of competent jurisdiction, then such determination shall not
affect any other provision of the Lease and all such other provisions shall
remain in full force and effect. It is the intention of the parties hereto
that, if any provisions of this Lease is capable of two (2) constructions,
one of which would render the provision void and the other of which would
render the provision valid, then the provision shall have the meaning which
renders it valid.

 

70.4)                    Warranty
of Authority. If Lessee is a corporation, the person or persons executing
this Lease on behalf of Lessee hereby covenant and warrant as of the Effective
Date that: (a) Lessee is a duly constituted corporation, qualified to do
business in the state where the Center is located; (b) Lessee has paid all
applicable franchise and corporate taxes, and (c) Lessee will file when
due all future forms, reports, fees and other documents necessary to comply
with applicable laws.

 

70.5)                    Right
to Lease. Lessor reserves the absolute right to effect such other tenancies
in the Center as Landlord, in the exercise of its sole business judgment, shall
determine to best promote the interest of the Center. Lessee does not rely on
the fact, nor does Lessor represent, that there shall be any specific occupants
or number of occupants of space in the Center after the Effective Date.

 

70.6)                    Waiver
of Rights of Redemption. Lessee hereby expressly waives any and all rights
of redemption granted by or under any present or future laws in the event
Lessee is evicted or dispossessed for any cause or in the event Lessor obtains
possession of the Premises by reason of the violation by Lessee of any of the
terms, covenants and conditions of this Lease or otherwise. The rights given to
Lessor herein are in addition to any rights that may be given to Lessor by any
statute or otherwise.

 

70.7)                    Flood/Flood
Disaster Disclosure. Lessee is hereby advised that the subject property may
be located with a Flood Area and that the Lessor or possible previous Lessor
may have received Federal Flood Assistance in the past. Lessee hereby agrees to
investigate the matter, including the availability of Flood Insurance and
agrees to accept the premises with this understanding. Additionally, Lessee
agrees to hold harmless and free from any liability, and to indemnify the
Lessor, Lessor agent and Lessor property manager from any loss or liability
resulting therefrom.

 

70.8)                    Earthquake
and Seismic Hazard Area. Lessee is hereby advised that the subject property
is located within an Earthquake and Seismic Hazard Area and that Lessor does
not maintain Earthquake Insurance on the building. Lessee accepts the premises
with this knowledge and understands that it is the Lessee responsibility to
investigate this matter, and to obtain insurance coverage on Lessee’s personal
property. Lessee holds harmless and free of any liability, and will indemnify,
the Lessor, Lessor agents and property manager, for any loss or liability
resulting therefrom.

 

70.9)                    Agency
Disclosure. Lessor advises Lessee that Lessor has retained professional
advice in connection with this Lease. 
Lessor recommends that Lessee obtain professional advise and to engage
legal counsel for Lessee’s own representation.

 

22

 

EXHIBITS,
SUPPLEMENTS AND ADDENDUMS

 

The
attached Exhibits and Addendum’s are incorporated herein:

 

	
  LEASE EXHIBIT’A’

  	
   

  	
  LEASE EXHIBIT”B”

  	
   

  	
  LEASE EXHIBIT “C”

  	
   

  	
  LEASE EXHIBIT “D”

  

 

 

PERSONAL
GUARANTEE                 None                    

 

ADDENDUM
          1                               PERCENTAGE
RENTAL AGREEMENT           None

 

IN
WITNESS WHEREOF, the above-named parties hereto have: A) set their hands the
date first hereinabove written, B) acknowledge receipt of a copy hereof, and C)
have read, understand and agree to all of the above.

 

 

	
  LESSOR:

  	
  LESSEE:

  
	
   

  	
   

  
	
  John A.
  Crivello Family Partnership, L. P.

  	
  Monterey
  County Bank

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
    /s/John A. Crivello

  	
   

  	
  By: 

  	
    /s/Charles T. Chrietzberg, Jr.

  	
   

  
	
   John A. Crivello, General Partner 

  	
  Charles Chrietzberg, C. E. O.

  
	
   

  	
   

  
	
  Dated:   July 12,
  2004

  	
  Dated:   July 12,
  2004

  
						

 

23

 

Lease Exhibit “A”

 

	
  Lessor:

  	
  John A. Crivello
  Family Partners, L.P.

  	
   

  
	
   

  	
   

  	
   

  
	
  Lessee:

  	
  Monterey County
  Bank

  	
   

  
	
   

  	
   

  	
   

  
	
  Demised
  Premises:

  	
  Suite 301
  Webster Street, Monterey, California

  	
   

  
	
   

  	
   

  	
   

  
	
  Floor Area:

  	
  Approximately
  1500 rentable square feet

  	
   

  
	
   

  	
   

  	
   

  
	
  Share of CAM and
  other

  	
   

  	
   

  
	
  Expenses:

  	
  32% (included in
  fixed CAM through 8/31/2006)

  	
   

  
	
   

  	
   

  	
   

  
	
  Term of Lease:

  	
  Two years, two
  months

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of
  Commencement:

  	
  July 1,
  2004

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of
  Expiration:

  	
  August 31, 2006

  	
   

  
	
   

  	
   

  
	
  Rental:

  	
  Fixed Rent as of
  July 1, 2004:

  	
  $3,000.00

  
	
   

  	
  CAM fixed
  charge:

  	
  $ 450.00

  
	
   

  	
  Estimated:
  MRWPCA

  	
  $ included

  
	
   

  	
  Estimated
  Utility

  	
   

  
	
   

  	
  Reimbursement:

  	
  $ included

  
	
   

  	
  Total Due per
  month as of

  	
   

  
	
   

  	
  July1, 2004 (subject to

  	
   

  
	
   

  	
  adjustment as per Lease:

  	
  $3,450.00

  
	
   

  	
   

  	
   

  
	
  Security
  Deposit:

  	
  Total of
  $3,000.00

  
	
   

  	
   

  	
   

  
	
  Property Taxes:

  	
  32% (Included in
  Fixed CAM through 8/31/2006)

  	
   

  
	
   

  	
   

  	
   

  
	
  Insurance:

  	
  32% (Included in
  Fixed CAM through 8/31/2006)

  	
   

  
	
   

  	
   

  	
   

  
	
  CAM/Mgt

  	
  32% (Included in
  Fixed CAM through 8/31/2006)

  	
   

  
	
   

  	
   

  	
   

  
	
  Purpose:

  	
  Office Space

  	
   

  
	
   

  	
   

  	
   

  
	
  Additional
  Insured:

  	
  John A. Crivello
  Family Partners, L.P.

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for
  Notices:

  	
  Lessor at: Post
  Office Box 3311, Monterey, CA. 93942

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Lessee at: 301
  Webster Street, Monterey, California 93940

  	
   

  
	
   

  	
  With copy to: 601 Munras Avenue,

  	
   

  
	
   

  	
  Monterey, CA. 93940

  	
   

  
					

 

	
  Lessor:
  John A. Crivello Family Partners, L.P.

  	
   

  
	
   

  
	
   

  	
  By: 

  	
   /s/John A. Crivello

  	
   

  
	
   

  	
  John A. Crivello, General Partner

  
	
   

  
	
  Lessee: Monterey County Bank

  	
   

  
	
   

  	
   

  
	
   

  
	
   

  	
  By:

  	
   /s/Charles T. Chrietzberg, Jr.

  	
   

  
	
   

  	
  Charles Chrietzberg, Jr., C. E. O.

  
	
   

  	
   

  
	
  July , 2004

  	
   

  
								

 

24

 

LEASE
EXHlBIT “B”

 

The
Demised Premises consist of that portion of the center marked on he attached Exhibit ”C”
as Suite 301.  The Demised Premises
are a portion of the following described property in the city of Monterey,
County of Monterey, State of California:

 

Beginning
at the Southwesterly corner of Lot 2 in Block D, said corner being the intersection of
the easterly line of Houston Street with the Northerly line of Webster Street,
as said Lot and Block and said streets are shown on page 28 of the Map
Book entitled :”Block Book of the City of Monterey, Monterey County, California
compiled by H. D. Severance, 1913”:, a copy of which Block Book was filed in
the Office of the County Recorder of the County of Monterey on October 22,
1915, thence Easterly along said Northerly line of Webster Street

 

1.               N.
74 degrees, 18’1”; 110 feet (at 70 feet the Southwesterly corner of said Lot 1)
to a 1⁄2” iron pipe at the Southerly edge of a concrete wall; thence Northerly
leaving said line of Webster Street

 

2.               N.
13 degrees 50” W, 117.65 feet (at 6.01 feet a 2”x2” stake, at 44.39 , a cross
in brick walk, at 80.39 feeet a cross in brick wall) to a 2”x2” stake), thence
Westerly running parallel with the Northerly line of Lots 5 and 6 in said Block
D

 

3.               S.
76 degrees 09” W, 104.19 feet ( at 74.42 feet a 1”x2” stake, at 102.99 feet a 2”
x 2” stake) to a lead plug in concrete wall footing, marking a point on said
Easterly line of Houston Street, said line here being the Westerly line of Lot
3 in said Block D; hence Southerly along said line of Houston Street.

 

4.               S.
11 degrees 07” E, 121.35 feet ( at 51.35 feet the mutual corner of said lots 3
and 1) to the point of beginning, and comprising portions of Lots 1, 2, 3, and
4 in said Block D.

 

25

Exhibit C

 

26

 

 

27

Exhibit D

 

28

 

ADDENDUM 1

 

CONDITIONAL

OPTION TO EXTEND TERM

 

First Option

 

If
Lessee is not in default in the performance of any of Lessee’s obligations
hereunder, Lessor hereby grants to Lessee an option to extend the term of this
Lease, subject to (a), the terms and conditions hereof, specifically including
but not limited to, the provisions of Article 6 hereof “Adjustments to
Fixed Rent”, and (b), provided that Lessor shall have no obligation to make any
improvements to the premises, for an additional period of five (5) years
commencing on September 1, 2006 and expiring on August 31, 2011.

 

To
exercise Lessee’s option, Lessee shall give to Lessor notice in writing by
registered or certified mail, postage prepaid with return receipt requested,
addressed to Lessor at Lessor’s address for notices provided herein, not sooner
than six (6) months prior to the expiration of the original or extended
term hereof, and not later than four (4) months prior to the expiration of
the original or extended term hereof.

 

Upon
receipt of the notice of Lessee’s exercise of said option, Lessor and Lessee
shall endeavor to reach an agreement upon the Fixed Rent for such option
period.  If such agreement cannot be
accomplished sixty (60) days prior to the date on which the term of said option
period commences, the option right is hereby terminated unless prior thereto
either party shall deliver a notice advising that the parties have reached an
impasse with respect to the determination of the Fixed Rent for such option
period.

 

In
such an event, within five (5) business days of the delivery of such
notice, the party who shall have received the notice shall deliver a list of
three independent licensed real estate agents or brokers who shall have not
less than ten (10) years recent experience in the leasing of commercial
properties and space similar to the demised premises. The other party within
five (5) business days of receipt, shall select one of the three agents or
brokers in such list, or if none of the three is acceptable, shall propose up
to three agents or brokers acceptable to that party.  If no agreement can be reached on the agent
or broker within ten (10) business days of such notice, then either party
may request that the Superior Court of the State of California, or some other
court of the State of California, determine an acceptable agent or broker.

 

.
Such agent or broker shall have the authority only to determine the Fair Market
Rental for the Demised Premises taking into account all of the other terms of
the Lease, specifically including, but not limited to, the provisions of this
Addendum 1.  Such agent or broker shall
have no authority to modify, amend or change any of the terms of the Lease.
Such agent or broker must agree to, and shall render his or her opinion as to Fair
Market Value of the Demised Premises in writing to each of the parties within
twenty (20) days of his or her appointment. 
Each party shall be entitled to make presentations, provide data or
otherwise set forth its position as to the appropriate Fixed Rent for the
option period.

 

Lessee
agrees to permit a “For Lease” sign in the window of the premises, if agreement
is not reached, as provide above.

 

29

 

Notwithstanding
the above:

 

a.               The limitation on CAM charges provided for in
the Lease shall not be applicable in the extension period, and Lessee shall be
fully responsible for its share of all CAM charges as provided in the Lease
such that the lease shall be “triple net”, and

 

b.              In no event shall the Fixed Rent to be paid
upon the commencement of the term of the extention period be less than the
amount of Fixed Rent payable by Lessee for the month prior to the effective
date of such extension.

 

Second
Option

 

Provided
that the first extension option has been properly exercised by Lessee, subject
again to all of the provisions of the Lease, and of this Conditional Option to
Extend Term, Lessee shall have a further option to extend the term of this
lease for an additional five (5) years commencing September 1, 2011
and expiring August 31, 2016. All of the terms of the Lease and of the
Conditional Option to Extend Term, including but not limited to the notice
provisions and the provisions of Article 6 “Adjustment of Fixed Rent”
shall be fully applicable in the second extension period.  The Fixed Rent to be paid during this second
extension period shall not be less than the Fixed Rent payable by Lessee during
the last month of the first extension period, and Lessee shall be fully
responsible for its share of CAM charges, such that the Lease shall be “triple
net”.

 

Lessee
shall have no further rights to extend the Lease unless and until an additional
addendum to lease so providing has been executed by Lessor and Lessee.

 

	
  Lessor:

  	
  Lessee:

  
	
   

  	
   

  
	
  John A. Crivello Family Partnership, L.P.

  	
  Monterey County Bank

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
    /s/John A. Crivello

  	
   

  	
  By: 

  	
    /s/Charles T. Chrietzberg, Jr.

  	
   

  
	
  John A. Crivello, General
  Partner

  	
  Charles Chrietzberg, Jr.,
  C.E.O.

  
	
   

  	
   

  
	
  July 12, 2004

  	
  July 12, 2004

  
						

 

30

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