Document:

Exhibit 10(b)-1

 

TCF FINANCIAL INCENTIVE STOCK
PROGRAM 

 

RESTRICTED STOCK AGREEMENT

 

RS
NO.   [Stock Agreement #]
(Performance-Based)

 

	
  Shares of Restricted Stock are hereby awarded
  effective on [ Date ]by TCF Financial Corporation (“TCF Financial”) to [Name]
  (the “Grantee”), in accordance with the following terms and conditions:

  

 

	
  1.

  	
   

  	
  Share Award/Dividend Reduction.  TCF Financial hereby awards the Grantee [ #
  of Shares] shares (the “Shares”) of Common Stock, par value $.01 per share
  (“Common Stock”) of TCF Financial pursuant to the TCF Financial 1995
  Incentive Stock Program (the “Program”), upon the terms and conditions
  therein and hereinafter set forth.  A
  copy of the Program as currently in effect is incorporated herein by
  reference and is attached hereto. 
  Until the January 1 on which fifty percent of the Shares vest under
  Section 2.b(i) of this Agreement, any dividend paid on the shares shall be
  50% of the dividends generally paid on Common Stock. Upon and after such
  January 1, any dividends paid on the Shares shall be at the same rate as
  dividends paid on Common Stock generally.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Restrictions
  on Transfer and Restricted Periods.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.

  	
   

  	
  During the respective periods (the “Restricted Periods”) hereinafter
  described, Shares may not be sold, assigned, transferred, pledged, or
  otherwise encumbered by the Grantee.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.

  	
   

  	
  The Shares will be subject to the restrictions in subparagraph a
  during Restricted Periods commencing on the date of this Agreement (the
  “Commencement Date”) and, (subject to the forfeiture provisions herein)
  terminating with respect to a percentage of the Shares as follows:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (i) [# of Shares] Shares (50% of the Share Award) will no longer be
  subject to a Restricted Period (will “vest”) on January 1 of the first year
  after TCF Financial’s “Cash EPS” (as defined in the Program) reaches [ goal ]
  or more;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (ii) [# of Shares] Shares (the remainder of the Share Award) will
  vest on January 1 of the first year after TCF Financial’s Cash EPS reaches [
  goal ] or more;

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Notwithstanding the foregoing, any Shares still subject to a
  Restricted Period on [ date ] shall be forfeited and returned and returned to
  TCF Financial and this Agreement shall be terminated.  The total vesting percentage under this
  Agreement shall never in any event exceed 100%.

  

 

 

1

 

	
   

  	
   

  	
  c.

  	
   

  	
  Shares will vest, and no longer be subject to the restrictions
  imposed by subparagraph (a), at the expiration of the Restricted Period with
  respect thereto.  The Committee
  referred to in section 2 of the Program or its successor (the “Committee”)
  shall not have any authority to accelerate the time at which any or all of
  the restrictions in subparagraph (a) shall lapse with respect to any Shares,
  or to remove any or all such restrictions.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Termination of Service.  In the event of Grantee’s termination of
  employment for any reason other than disability, retirement or death prior to
  removal of all Restricted Periods on the Shares, all Shares which at the time
  of such event are subject to the restrictions imposed by paragraph 2.a. above
  shall be forfeited and returned to TCF Financial. In the event of Grantee’s
  retirement (as determined by the Committee), disability (the Grantee is
  receiving benefits under TCF’s long-term disability plan) or death prior to
  removal of all Restricted Periods on the Shares:  (a) a pro-rata percentage of the Shares
  shall vest on the same date as they would have vested under section 2.b if
  Grantee had remained employed, and (b) all Shares in excess of that
  percentage shall be forfeited and canceled upon such retirement, disability
  or death.  The pro-rata percentage
  shall be determined as follows:  For
  the Shares subject to a goal of [ goal ] Cash EPS, the percentage is the Cash
  EPS of TCF Financial for the fiscal year ending closest to the Grantee’s
  retirement, disability or death, reduced by [ ], divided by [ ] and
  multiplied by 100.  For the Shares
  subject to a goal of [ goal ] Cash EPS, the percentage is the Cash ESP of TCF
  Financial for the fiscal year ending closest to the Grantee’s retirement,
  disability or death, reduced by [ ], divided by [ ] and multiplied by
  100.  If the Cash EPS for the fiscal
  year ending closest to the Grantee’s retirement, disability or death is less
  than [ ], the pro-rata percentage shall be 0%. In the event that the EPS
  goals in section 2(a) are not achieved on or before [ date ], all remaining
  Shares not forfeited upon Grantee’s retirement, disability or death shall be
  forfeited and canceled on [ date ].

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Certificates for Shares.  TCF Financial shall issue one or more
  certificates in respect of the Shares in the name of the Grantee, and shall
  hold such certificate(s) on deposit for the account of the Grantee until the
  expiration of the Restricted Period with respect to the Shares represented
  thereby.  Certificate(s) for Shares
  subject to a Restricted Period shall bear the following legend:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “The transferability of this certificate and the Shares of stock
  represented hereby are subject to the terms and conditions (including
  forfeiture) contained in the TCF Financial 1995 Incentive Stock Program and
  an Agreement entered into between the registered owner and TCF Financial
  Corporation.  Copies of such Plan and
  Agreement are on file in the offices of the Secretary of TCF Financial
  Corporation, 200 Lake Street East, Wayzata, MN 55391 .”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Grantee further agrees that simultaneously with the execution of
  this Agreement a stock power shall be executed, endorsed in blank and
  promptly delivered to TCF Financial.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Grantee’s Rights.  Except as otherwise provided herein,
  Grantee, as owner of the Shares, shall have all rights of a stockholder,
  including, but not limited to, the right to receive all dividends paid on
  Shares and the right to vote the Shares. Dividends payable on Shares that 

  

 

 

2

 

	
   

  	
   

  	
  are subject to restrictions imposed by subparagraph 2.a. shall be
  paid to the Grantee at the same time as such dividends are paid to other
  shareholders; provided, that shares of Common Stock dividends in the nature
  of a stock split shall be subject to all of the restrictions that apply to
  the Shares with respect to which such dividends are paid until all of the
  restrictions applicable to such Shares have terminated or otherwise have been
  removed.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Expiration of Restricted Period.  Upon the expiration of the Restricted
  Period with respect to any Shares, TCF Financial shall redeliver to the
  Grantee (or, if the Grantee is deceased, to his legal representative,
  beneficiary or heir) the certificate(s) in respect of such Shares, without
  the restrictive legend provided for in paragraph 4 above. The Shares as to
  which the Restricted Period shall have lapsed or expired shall be free of the
  restrictions referred to in subparagraph 2.a. above and such certificates
  shall not bear the legend provided for in paragraph 4 above.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Adjustments for Changes in Capitalization of TCF Financial.  In the event of any change in the
  outstanding Common Stock of TCF Financial by reason of any reorganization,
  recapitalization, stock split, combination or exchange of shares, merger,
  consolidation or any change in the corporate structure of TCF Financial or in
  the shares of Common Stock, or in the event of any issuance of preferred
  stock or other change in the capital structure of TCF Financial which the
  Committee deems significant for purposes of this Agreement, the number and
  class of Shares covered by this Agreement as well as the Cash EPS goals and
  pro-rata vesting provisions in sections 2 and 3, or the alternate goals under
  section 13, shall be appropriately adjusted by the Committee, whose
  determination of the appropriate adjustment, or whose determination that
  there shall be no adjustment, shall be conclusive. Any Shares of Common Stock
  or other securities received, as a result of the foregoing, by the Grantee
  subject to the restrictions contained in subparagraph 2.a. above also shall
  be subject to such restrictions and the certificate or other instruments
  representing or evidencing such Shares or securities shall be legended and
  deposited with TCF Financial in the manner provided in paragraph 4 above.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Effect of Change in Control.  Each of the events specified in the
  following clauses (a) through (d) of this paragraph 8 shall be deemed a
  “change of control”; (a) any “person”, as defined in sections 13(d) and 14(d)
  of the Securities Exchange Act of 1934 (the “Exchange Act”) is or becomes the
  “beneficial owner” as defined in Rule 13d-3 under the Exchange Act, directly
  or indirectly, of securities of the Company representing thirty percent (30%)
  or more of the combined voting power of the Company’s then outstanding
  securities.  For purposes of this
  clause (a), the term “beneficial owner” does not include any employee benefit
  plan maintained by the Company that invests in the Company’s voting
  securities; or (b) during any period of two (2) consecutive years (not
  including any period prior to the date on which the Program was approved by
  the Company’s Board of Directors) there shall cease to be a majority of the
  Board comprised as follows: individuals who at the beginning of such period
  constitute the Board of new directors whose nomination for election by the
  Company’s shareholders was approved by a vote of at least two-thirds (2/3) of
  the directors then still in office who either were directors at the beginning
  of the period or whose election or nomination for election was previously so
  approved; or (c) the shareholders of the 

  

 

 

3

 

	
   

  	
   

  	
  Company approve a merger or consolidation of the Company with any
  other corporation, other than a merger or consolidation which would result in
  the voting securities of the Company outstanding immediately prior thereto
  continuing to represent (either by remaining outstanding or by being
  converted into voting securities of the surviving entity) at least 70% of the
  combined voting power of the voting securities of the Company or such
  surviving entity outstanding immediately after such merger or consolidation,
  or the shareholders of the Company approve a plan of complete liquidation of
  the Company or an agreement for the sale or disposition by the Company of all
  or substantially all the Company’s assets; provided, however, that no change
  in control will be deemed to have occurred if such merger, consolidation,
  sale or disposition or assets, or liquidation is not subsequently
  consummated.  Subject
  to the six month holding requirement, if any, of Rule 16b-3 of the Securities
  and Exchange Commission but notwithstanding any other provision in this
  Program (including, but not limited to, sections 2.b and 3 of this Agreement)
  or the previous Stock Option and Incentive Plan of TCF Financial, in the
  event of a Change in Control all terms and conditions of this Restricted
  Stock Award shall be deemed satisfied, all the Shares shall vest as of the
  date of the Change in Control and shall thereafter be handled as provided in
  section 6 of this Agreement.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Delivery and Registration of Shares of Common Stock.  TCF Financial’s obligation to deliver
  Shares of Common Stock hereunder shall, if the Committee so requests, be
  conditioned upon the receipt of a representation as to the investment
  intention of the Grantee or any other person to whom such Shares are to be
  delivered, in such form as the Committee shall determine to be necessary or
  advisable to comply with the provisions of the Securities Act of 1933, as
  amended, or any other federal, state, or local securities law or regulation.  It may be provided that any representation
  requirement shall become inoperative upon a registration of such Shares or
  other action eliminating the necessity of such representation under such
  Securities Act or other securities law or regulation.  TCF Financial shall not be required to
  deliver any Shares under the Plan prior to (i) the admission of such Shares
  to listing on any stock exchange on which the Common Stock may be listed, and
  (ii) the completion of such registration or other qualification of such Shares
  under state or federal law, rule, or regulation, as the Committee shall
  determine to be necessary or advisable.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Plan and Plan Interpretations as Controlling.  The Shares hereby awarded and the terms and
  conditions herein set forth are subject in all respects to the terms and
  conditions of the Program, which are controlling.  All determinations and interpretations of
  the Committee shall be binding and conclusive upon the Grantee or his legal
  representatives with regard to any question arising hereunder or under the
  Plan.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Grantee Service. 
  Nothing in this Agreement shall limit the right of TCF Financial or
  any of its affiliates to terminate the Grantee’s service as a director,
  officer, or employee, or otherwise impose upon TCF Financial or any of its
  affiliates any obligation to employ or accept the services of the Grantee.

  

 

 

4

 

	
  12.

  	
   

  	
  Grantee Acceptance.  The Grantee shall signify acceptance of the
  terms and conditions of this Agreement by signing in the space provided below
  and signing the attached stock powers and returning a signed copy hereof and
  of the attached stock powers to TCF Financial.

  

 

	
  IN WITNESS WHEREOF, the parties hereto have caused
  this RESTRICTED STOCK AGREEMENT to be executed as of the date first above
  written.

  

 

	
   

  	
  TCF
  FINANCIAL CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Sr. Vice President/General Counsel for Corporate Affairs

  
	
   

  	
   

  
	
   

  	
  ACCEPTED:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Street
  Address)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (City,
  State and Zip Code)

  

 

 

5Exhibit 10.10

NET

LEASE

 

THIS
LEASE dated                                 ,
198        for reference purposes only Is
made between Lessor and Lessee named below, effective on the later of the dates
set forth under their respective signatures.

 

Basic
Lease Provisions

 

	
  1.

  	
   

  	
  Premises:

  	
   

  	
  As
  depicted on Exhibit A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Building
  Name:

  	
   

  	
  SANTA
  BARBARA TECH CENTER

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Premises
  Address:

  	
   

  	
  5540
  Ekwill Street, S.B. CA 93111 Floor:      2nd

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Leased
  Area:

  	
   

  	
  14,044
  Square Feet

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Lessee’s
  Percentages: Building:

  	
   

  	
  33.17%          

  	
  Common
  Area 16.59%*

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  *(See
  Addendum 3.4(a) and 3.4(c))

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Initial
  Annual Rent:

  	
   

  	
  $156,731.04

  	
   

  	
  ($11.16
  Per Square Foot)*

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (*See
  Addendum 3.1)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Monthly
  Rental Installments:

  	
   

  	
  $13,060.92      ($.93 Pet
  Square Foot)*

  
	
   

  	
   

  	
   

  	
   

  	
  (See
  Addendum 3.1)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Term:   Seven
  (7) Years and Zero (0)       Months for
  the former Forum System Space

  
	
   

  	
   

  	
  (See
  Addendum 2 1(a)).

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.5

  	
   

  	
  Option

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  See Addendum
  2.3)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Target
  Commencement Date:

  	
   

  	
  August
  1, 1989 for the former Forum Systems Space; and  February 13, 1991 or February 13, 1992 for
  the former APCD Space (See Addendum 2.1(a)).

  
	
   

  	
   

  	
  Termination
  Date:

  	
   

  	
  July
  31, 1996

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Security
  Deposit:

  	
   

  	
  $24,397.41         (See
  Addendum 4)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Broker(s):

  	
   

  	
  Ed
  DeLacy, COLDWELL BANKER REAL ESTATE SERVICES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Parking
  Spaces Provided:

  	
   

  	
  43      (Not
  To Be Separately Identified)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Address
  for Payments and Notices:  (if different from below)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  Submission
  of this Instrument for examination or signature by Lessee does not constitute
  a reservation of or option for space and it is not effective as a lease or
  otherwise until execution by both Lessee and Lessor.

  
										

 

IN
WITNESS WHEREOF, the parties hereto have executed this Lease, consisting of the
foregoing Basic Lease Provisions, Articles 1 through 20 which follow, as of the
date first above written.

 

	
  LESSOR

  	
   

  	
  LESSEE

  
	
  EKWILL
  PARTNERS, LTD.

  	
   

  	
  McGHAN
  MEDICAL CORPORATION

  
	
  a
  California Limited Partnership

  	
   

  	
   

  
	
  300
  Esplanade Drive, Suite 1860

  	
   

  	
  Address:

  	
   

  
	
  Oxnard,
  CA 93030

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B
  y:

  	
   

  
	
   

  	
   

  	
   

  	
  Signature

  
	
  /s/
  Jeffrey C. Dermant

  	
   

  	
  /s/
  Donald K. McGhan

  
	
  By

  	
  Jeffrey
  C. Bermant

  	
   

  	
  Name and Title (Type or Print)

  
	
   

  	
  General
  Partner

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature Name and Title

  
	
   

  	
   

  	
  Date:

  	
   

  
							

 

MEMORANDUM

 

	
  Actual
  Commencement Date:

  	
   

  	
   

  	
   

  

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Basic Lease Provisions

  	
   

  
	
   

  	
  Table
  of Contents

  	
   

  
	
  1.

  	
  Lease
  of Premises

  	
   

  
	
  2.

  	
  Term

  	
   

  
	
  3.

  	
  Rent

  	
   

  
	
  4.

  	
  Security
  Deposit

  	
   

  
	
  5.

  	
  Use

  	
   

  
	
  6.

  	
  Maintenance,
  Repairs and Alterations

  	
   

  
	
  7.

  	
  Insurance;
  Indemnity

  	
   

  
	
  8.

  	
  Damage or Destruction

  	
   

  
	
  9.

  	
  Personal Property Taxes

  	
   

  
	
  10.

  	
  Utilities

  	
   

  
	
  11.

  	
  Assignment and Subletting

  	
   

  
	
  12.

  	
  Defaults; Remedies

  	
   

  
	
  13.

  	
  Condemnation or
  Restriction on Use

  	
   

  
	
  14.

  	
  Brokers

  	
   

  
	
  15.

  	
  Lessor’s Liability

  	
   

  
	
  16.

  	
  (Deleted)

  	
   

  
	
  17.

  	
  (Deleted)

  	
   

  
	
  18.

  	
  Parking

  	
   

  
	
  19.

  	
  General Provisions

  	
   

  
	
   

  	
  19.1

  	
  Estoppel Certificate

  	
   

  
	
   

  	
  19.2

  	
  Severability

  	
   

  
	
   

  	
  19.3

  	
  Time of Essence

  	
   

  
	
   

  	
  19.4

  	
  Captions

  	
   

  
	
   

  	
  19.5

  	
  Notices

  	
   

  
	
   

  	
  19.6

  	
  Waivers

  	
   

  
	
   

  	
  19.7

  	
  Holding Over

  	
   

  
	
   

  	
  19.8

  	
  Cumulative Remedies

  	
   

  
	
   

  	
  19.9

  	
  Inurement

  	
   

  
	
   

  	
  19.10

  	
  Choice of Law

  	
   

  
	
   

  	
  19.11

  	
  Subordination

  	
   

  
	
   

  	
  19.12

  	
  Attorneys’ Fees

  	
   

  
	
   

  	
  19.13

  	
  Lessor’s Access

  	
   

  
	
   

  	
  19.14

  	
  Corporate Authority

  	
   

  
	
   

  	
  19.15

  	
  Surrender or
  Cancellation

  	
   

  
	
   

  	
  19.16

  	
  Entire Agreement

  	
   

  
	
   

  	
  19.17

  	
  Signs

  	
   

  
	
   

  	
  19.18

  	
  Interest on Past Due Obligations

  	
   

  
	
   

  	
  19.19

  	
  Gender; Number

  	
   

  
	
   

  	
  19.20

  	
  Recording of Lease

  	
   

  
	
   

  	
  19.21

  	
  Interstate Land Sales Act

  	
   

  
	
   

  	
  19.22

  	
  Confidentiality of Lease

  	
   

  
	
   

  	
  19.23

  	
  Outlet Enjoyment

  	
   

  
	
   

  	
  19.24

  	
  Meaning

  	
   

  
	
  20.

  	
  Construction

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Exhibit
  A:

  	
  Floor
  Plans

  	
   

  
	
   

  	
  Exhibit
  B:

  	
  Site
  Plan

  	
   

  
	
   

  	
  Exhibit
  C:

  	
  Rules
  and Regulations

  	
   

  
	
   

  	
  Exhibit
  D:

  	
  -
  deleted -

  	
   

  
	
   

  	
  Exhibit
  E:

  	
  Estoppel
  Certificate

  	
   

  
	
   

  	
  Exhibit
  F:

  	
  Water
  Service

  	
   

  
	
   

  	
  Exhibit
  G:

  	
  Diagram
  of Premises

  	
   

  
					

 

iii

 

1.                                       LEASE OF PREMISES

 

Lessor
hereby leases to Lessee and Lessee leases from Lessor for the term, at the
rental, and, upon all of the conditions set forth in this Lease, the Premises, identified
in Item 1 of the Basic Lease Provisions, together with the nonexclusive use, in
common with Lessor and other tenants of the Building(s) and their respective invitees,
of common areas in or about the Building and the parking garage (if any) or
parking areas adjoining the Building.  The
approximate anticipated configuration of Santa Barbara Tech Center and the location
of the Building(s).  Premises and
associated common and parking areas is indicated on Exhibit “B”. The size,
location and function of the building and related structures depicted here are
approximate.  The configuration of the
development, the design. size, function and location of all other improvements,
and the identity and location of other tenants to the extent depicted are
subject to change without notice for any reason deemed sufficient by the owner.
Lessor reserves the right to alter the configuration of Santa Barbara Tech Center
to construct additional Improvements thereon, to withdraw areas therefrom from
time to lime and alter the configuration of the associated common and parking
areas, provided that the number of parking spaces intended for Lessee’s use
shall not thereby be materially diminished and provided that Lessee’s access to
Premises will not thereby be affected.*  (*See
Addendum 1)

 

2.                                       TERM

 

2.1                                 Commencement of Term

 

(a)                                  The term of the Lease shall be as shown
in Item 6 of the Basic Lease Provisions, commencing on the Commencement Date,
which Lessor and Lessee expect to be the Target Commencement Date as shown in
Item 7 of the Basic Lease Provisions but which may be such other date as herein
provided, and ending on the Termination Date unless sooner terminated pursuant
to any provision hereof.

 

(b)                                 Notwithstanding the foregoing, the term
of this Lease and the payment of rent shall commence upon delivery of
possession of the Premises or sooner as provided in Article 20 herein. Delivery
of possession of the Premises shall occur upon written tender of
same by Lessor.

 

(c)                                  If delivery of possession occurs prior to
the Target Commencement Date, the term of this Lease shall commence on such
date of delivery of possession, but the Termination Date shall not be advanced.

 

2.2                                 Delay in Commencement.  Notwithstanding
the Target Commencement Date, if for any reason Lessor cannot deliver
possession of the Premises to Lessee on or before said date, Lessor shall not
be subject to any liability therefor, nor shall such failure affect the
validity of this Lease or the obligations of Lessee hereunder or extend
the term thereof provided, however, that if Lessor shall not have delivered
possession of the Premises within three (3) months after the Target
Commencement Date, as such Date may be extended pursuant to the provisions of
Article 20 hereof, Lessee may, at Lessee’s option by notice in writing to
Lessor within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder. Subject to the
provisions of Article 20 hereof, if applicable, Lessee shall not be obligated
to pay rent until delivery of possession of the Premises has occurred.

 

2.3                                 Option and Right of Notification - (See Addendum 2.3)

 

 

3.                                       RENT

 

3.1                                 Initial Annual Rent.  Lessee shall pay to Lessor as rent for the
Premises an Initial Annual Rent in the amount specified in Item 4 of the Basic
Lease Provisions in equal monthly installments in the amount specified in Item
5 of the Basic Lease Provisions in advance on the first day of each month.  (See Addendum 3.1)

 

3.2                                 Additional Rent.  Lessee
shall reimburse Lessor, as additional rent, in the manner and at the times
provided, for Lessee’s proportionate share of all Building Operating Expenses
and Common Area Operating Expenses (as hereinafter defined) incurred by
Lessor.  Lessee’s proportionate share of
such Building Operating Expenses and Common Area Operating Expenses shall be
based upon Lessee’s Building Percentage in the case of Building Operating
Expenses and upon Lessee’s Common Area Percentage in the case of Common Area Operating
Expenses, all as defined herein.

 

3.3                                 Water Service Charges - See Exhibit F

 

3.3a                           All Rent due under this Lease shall be
payable without deduction, abatement or offset except as may be otherwise
expressly provided in this Lease.

 

3.4                                 Definitions: For purpose of this Article 3:

 

(a)                                  Lessee’s Building Percentage is a
percentage calculated by dividing the Leased Area of the Premises, as shown in
Item 2 of the Basic Lease Provisions, during the comparison year by the leasable
area of the Building, and is stipulated to be as shown in Item 3 of the Basic
Lease Provisions.  (See Addendum 3.4 (a))

 

(b)                                 Building Operating Expense shall mean the
sum of all expenses incurred by Lessor in connection with the operation, repair
and maintenance of the Building, including but not limited to heating and air
conditioning, all real property taxes (as hereinafter defined) imposed upon or
with respect to the Building and related improvements exclusive
of the land underlying all such improvements); all fire and extended coverage,
earthquake, loss of rents, vandalism, malicious mischief and other insurance
covering the Building (exclusive of public liability insurance) and losses
suffered which fall below the insurance deductible: utilities; materials and
supplies; salaries, wages and other expenses incurred with respect to the
operation, repair and maintenance of the Building; the cost of repainting, the
Building; security and fire protection; amortization of capital investments for
improvements which are designed to reduce operating costs, improve operations
or comply with governmental conservation or safety programs over such
reasonable period as Lessor shall determine (together with Interest at five (5)
percentage points above the discount rate of the Federal Reserve Bank of San
Francisco on the unamortized amount); and an amount equal to fifteen percent
(15%) of all such expenses to cover Lessees administrative and overhead
expense.  Building Operating Expenses for
any year being used as a base year or comparison year shall be adjusted, if
necessary, to reflect al least 95% occupancy of the leasable area of the
Building and a full year of operation. Building Operating Expenses attributable
to the utilities and services furnished pursuant to Article 10 shall be
apportioned among the tenants of the Building receiving such services
(excluding those tenants furnishing or paying for their own utilities and
janitorial services) based on the respective leased areas occupied by such
tenants.  *on any such improvements to
improve operations or reduce costs, Lessor will, upon request, reasonably
justify such improvements to Lessee.

 

(c)                                  Lessee’s Common Area Percentage is a
percentage figure calculated by the project architect by dividing the Leased
Area of the Premises during the comparison year by the average leasable area in
all improvements, including the Building and other buildings, shown on Exhibit “B”

 

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during such year and is initially
stipulated to be as shown in Item 3 of the Basic Lease Provisions.  Should the Building and/or landscape area
become a separate legal lot, or should additional improvements or common area
be added to or deleted from Exhibit “B”, Lessor may, at its option, calculate
Lessee’s Common Area Percentage by comparing the common area attributable to
the Premises with the common area on such legal lot or otherwise within Exhibit
“B” as so revised.  (See Addendum 3.4(c))

 

(d)                                 Common Area Operating Expenses shall mean
the sum of all expenses incurred by Lessor In connection with the operation and
maintenance of driveways, landscaping, walkways, plazas, parking facilities,*
and perimeter property, including, but not limited to: all real property taxes
(as hereinafter defined) imposed upon or with respect to the
land included within Exhibit “B”; all public liability Insurance covering
Exhibit “B”, and losses suffered which fall below the insurance deductible;
security and fire protection salaries, wages and other expenses incurred with
respect to maintenance of the common areas, gardening, landscaping, repaving,
repainting and trash removal; depreciation of equipment used in such
maintenance, amortization of capital investments for improvements which comply
with governmental conservation or safety programs over such reasonable period
as Lessor shall determine (together with Interest at five (5) percentage points
above the discount rate of the Federal Reserve Bank of San Francisco on the
unamortized amount); and an amount equal to fifteen percent (15%) of all such expenses
to cover Lessor’s administrative and overhead expense.  General overhead and depreciation of improvements
shall not be included in the expenses except as specifically set forth in the
foregoing.  Any governmental surcharge,
fee or assessment imposed with respect to the parking facilities within Exhibit
“B” shall, to the extent paid by Lessor and not passed on to the users of said
parking facilities, be included in Common Area Operating .Expenses *water
system per Section F.3 of Exhibit “F”.

 

(e)                                  Real Property Taxes shall mean all real
and personal property taxes and assessments Incurred during any calendar year,
including, but not limited to; special and extraordinary assessments, water and
sewer rates and charges, occupancy taxes or similar taxes imposed on or with
respect to the real or personal property whether or not imposed on or
measured by the rent payable by Lessee, and other governmental levies and
charges, general and special, ordinary and extraordinary, unforeseen as well as
foreseen, of any kind and nature whatsoever relating to the real or personal
property, and any gross rental, license or business tax measured by or levied
on rent payable or space occupied.  If,
by law, any property taxes are payable, or may at the option of the taxpayer be
paid, in Installments (whether or not Interest shall accrue on the unpaid
balance of such property taxes).  Lessor
may, at Lessor’s option, pay the same and, in such event, any accrued interest
on the unpaid balance of such property taxes shall be deemed to be Real
Property Taxes as defined herein.  Real
Property Taxes shall also include all expenses reasonably incurred by Lessor in
seeking a reduction by the taxing authorities of Real Property Taxes applicable
to Santa Barbara Tech Center.  Real
Property Taxes shall not include any capital levy, franchise, estate, inheritance,
succession, gift or transfer tax of Lessor, or any income, profits or excess
profits tax, assessment, charge or levy upon the income of Lessor; provided,
however, that if at any time during the term of this Lease under the laws of
the United States or the State of California or any political subdivision of
either, a tax or excise on rents, space or other aspects of real property, is
levied or assessed against Lessor, the same shall be deemed to be Real Property
Taxes. If any such property taxes upon the income of Lessor shall be imposed on
a graduated scale, based upon Lessor’s aggregate rental income, Real Property
Taxes shall include only such portion of such property taxes as would be
payable if the rent payable with respect to the Building and Common Areas were
the only rental Income of Lessor subject thereto.  Real Property Taxes for any year being used as
a base year or comparison year shall be adjusted, if necessary, to reflect the
substantial completion of partitioning and other normal Lessee Improvements in
all leasable areas of the Building, and to reflect at least 95% occupancy of
the leasable area of the Building.

 

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3.5                                 Rent Adjustment for Consumer
Price Index. The
annual rent shall be adjusted as of the expiration of each full or partial
calendar year of the lease term (the “adjustment date”) to reflect any change in
the United States Department of Labor, Bureau of Labor Statistics, Consumer
Price Index, Subgroup “All Items”, entitled, “Consumer Price Index, Urban Wage
Earners and Clerical Workers (Revised Series), L.A. Anaheim-Riverside: (1982-84 =
100).  “The Index for said subgroup
applicable for the month of December (or the month preceding the Commencement
Date for the first full or partial calendar year of the lease term) preceding
each adjustment date shall be considered the “base”, and the annual rent
following each adjustment date shall be computed by adjusting the annual rent
payable for the preceding calendar year thereof by the percentage change in the
Index as of the adjustment date over the “base”; provided, however, in no event
shall the rent payable for any year be less than the rent payable for the
preceding period on account of the adjustment pursuant to this Section 3.5,
notwithstanding the fact that the Index may, as of some adjustment date, be less
than the ‘‘base” if as of any adjustment date there shall not exist the
Consumer Price Index in the same format as set forth above, the parties                               
substitute any official index published by                  
Bureau of Labor Statistics or any successor or similar Governmental agency as
may then be in existence and shall be most nearly equivalent thereto. If the
parties shall be unable to agree upon a successor index, the parties shall refer
the choice to arbitration in accordance with the rules of the American
Arbitration Association. (See Addendum 3.5)

 

3.6                                 Calculation and Payment

 

(a)                                  Annual rent shall be payable to Lessor
without deduction or offset, in lawful money of the United Stales at Lessor’s
address herein or to such other persons or at such other places as Lessor
designates in writing, Rent payable for any period for less than one month
shall be prorated based upon a thirty (30) day month.

 

Prior
to the commencement of the lease term and of each December thereafter, Lessor
shall give Lessee a written estimate of Lessee’s share of Building and Common
Area Operating Expenses for the ensuing year or portion thereof. Lessee shall
pay such estimated amount to Lessor in equal monthly installments, in advance. Within
ninety (90) days after the and of each calendar year, Lessor shall furnish to
Lessee a statement showing in reasonable detail the actual Building and Common
Area Operating Expenses incurred by Lessor during such period, and the parties
shall within thirty (30) days make any payment or allowance necessary to adjust
Lessee’s estimated payment to Lessee’s actual proportionate share as shown by
such annual statement.  Any amount due Lessee
shall be credited against installments next coming due under this paragraph. Lessee
or its representatives shall be entitled to examine Lessor’s books and records
pertaining to such costs upon reasonable advance written notice to Lessor.

 

(b)                                                                           

 

(c)                                                                            

 

(d)                                 Within ninety (90) days after each
adjustment date, Lessor shall furnish Lessee a written statement showing the
percentage change in the Index for the period ending on the adjustment date and
specifying the increase, if any, in the annual rent subsequent to the
adjustment date, taking into account all prior adjustments to annual rent for
the period preceding the adjustment date pursuant to this paragraph above and applying
any percentage increase in the index to the annual rent as previously adjusted.
At the rental payment date next following Lessee’s receipt of such statement,
Lessee shall pay Lessor an amount equal to one twelfth (1/12) of the adjustment
pursuant to this Paragraph (d) multiplied by the number of rent payment dates including
the current one) since the relevant adjustment date. Subsequent rental payments
shall be increased by one twelfth (1/12) of the adjustment pursuant to this
Paragraph (d).

 

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3.7                                 End of Term. Upon the expiration or earlier
termination of this Lease, Lessee shall pay Lessor, as additional rent, the
aggregate rental increase which would have been payable by Lessee pursuant to
this Article 3, except for such expiration or termination, for the portion of
the year in which termination or expiration occurs through the termination
date. The amount of such payment shall be calculated by Lessor based upon
Sections 3.2, 3.3 and 3.5 (using the expiration or termination date as the
adjustment data for Section 3.5) and the best information then available to
Lessor, and shall give effect to all prior adjustments and payments on account
by Lessee pursuant to this Article 3.

 

4.                                       SECURITY DEPOSIT

 

Concurrently
with Lessee’s execution of this Lease, Lessee shall deposit with Lessor the sum
specified in Item 8 of the Basic Lease Provisions as security for the faithful
performance by Lessee of all covenants and conditions of this Lease*  If Lessee shall breach or default in the
performance of any covenants or conditions of this Lease, including the payment
of rent, Lessor may use, apply or retain the whole or any part of such security
deposit for the payment of any rent in default or for any other sum which
Lessor may spend or be required to spend by reason of Lessee’s default. If
Lessor so uses or applies all or any portion of said deposit. Lessee shall,
within ten (10) days after written demand therefor, deposit cash with Lessor in
an amount sufficient to restore said deposit to the full amount hereinabove
stated and Lessee’s failure to do so shall be a material breach of this Lease.
Should Lessee comply with all covenants and conditions of this Lease, the
security deposit or any balance thereof shall be returned to Lessee (or at the
option of Lessor, to the last assignee of Lessee’s interest in this Lease) at
the expiration of the term. Lessee shall not be entitled to interest on the
security deposit and Lessor shall have the right to commingle said security
deposit with other funds of Lessor. Should Lessor sell its interest in the
Premises; Lessor may transfer to the purchaser thereof the then unexpended or unappropriated
deposit and thereupon Lessor shall be discharged from any further liability for
such funds. *pursuant to the conditions set forth in Addendum 4 hereof (See
Addendum 4).

 

5.                                       USE

 

5.1                                 Use.  The Premises shall be used and occupied for
lawful general office or industrial purposes permitted under applicable
ordinances and other Governmental requirements, the covenants, conditions and
restrictions affecting Santa Barbara Tech Center and the Rules and Regulations
as Lessor may from time 10 lime reasonably adopt for the safety, care
and cleanliness of the Building and Santa Barbara Tech Center or the
preservatior of good order. The Rules and Regulations presently in effect are
attached hereto as Exhibit “C”. Lessor shall not be responsible to Lessee for
the nonperformance of any of said Rules and Regulations by any other tenant of
the Building. (See Addendum 5.1)

 

5.1.1                        Hazardous Substances - (See Addendum 5.1.1)

 

5.2                                 Compliance With Law. Lessee shall, at Lessee’s expense,
comply promptly with all applicable statutes, ordinances, rules, regulations, orders
and requirements in effect regulating the use by Lessee of the Premises. Lessee
shall not use or permit the use of the Premises in any manner that will tend to
create waste or a nuisance of which disturbs other tenants of the Building,

 

5.3                                 Insurance Cancellation. Notwithstanding the provisions of
Paragraph 5.1 above, Lessee shall not do or permit anything to be done in or
about the Premises nor bring or keep anything therein which will in any way increase
the existing rate of or affect any fire or other Insurance upon the Building or
any other part thereof or any of its consents, and if Lessee’s use of the
Premises causes an increase in said insurance rates. Lessee shall pay as
additional rent the amount of such increase.

 

6.                                                                               

 

5

 

6.1                                 Lessor’s Obligations. Lessor shall cause to be maintained, in
good order, condition and repair, the ** and exterior walls and windows of the
Building (excluding the interior surface thereof),* and any public and Common
areas in the Building, as well as all parking areas, driveways, sidewalks,
private roads or streets, landscaping and all other areas located within Santa
Barbara Tech Center other than areas occupied by other buildings (such nonbuilding
areas being herein referred to as “Common Areas”). *heating, venting and air
conditioning systems **foundation, structural walls

 

6.2                                 Lessee’s Obligations. Lessee shall during the term of this
Lease keep in good order, condition and repair the interior of the Premises and
every part thereof, including, but not limited to, all interior windows and
doors in and to the Premises. Lessor shall incur no expense nor have any
obligation of any kind whatsoever in connection with the
maintenance of the interior of the Premises and Lessee expressly waives the
benefits of any statute now or hereafter in effect which would otherwise afford
Lessee the right to make repairs at Lessor’s expense or to terminate this Lease
because of any failure to keep the interior of the Premises in good order,
condition and repair. Notwithstanding the foregoing, Lessor shall be liable for
maintenance or repairs which are caused by Lessor’s gross negligence. *the roof
and roof membrane,

 

6.3                                 Alterations and Additions.

 

(a)                                  Lessee shall not, without Lessor’s prior
written consent, make any alterations, improvements, additions or utility
installations in, on or about the Premises. 
As used in this Paragraph 6.3, the term “utility installations” shall include
bus ducting, power panels, fluorescent fixtures, space heaters, conduits and
wiring. As a condition to giving such consent, Lessor may require that Lessee (i)
agree to remove any such alterations, improvements, additions or utility installations
at the expiration or sooner termination of the term, and to restore the
Premises to their prior condition and/or (ii) provide Lessor, at Lessee’s sole
cost and expense, a lien and completion bond in an amount equal to one and
one-half (1 1/2) times the estimated cost of such improvements, to insure
Lessor against any liability for mechanics’ and materialmen’s liens and to
insure completion of work *unless such work is nonstructural and does not
exceed $20,000.00. For all work Lessee will provide Lessor with
as-built drawings reflecting any changes to Premises.

 

(b)                                 All alterations, improvements and
additions to the Premises shall be performed by Lessor’s contractor for Santa
Barbara Tech Center or other licensed contractor approved by Lessor. Lessee
shall pay, when due, all claims for labor or materials furnished to or for
Lessee at or for use in the Premises, which claims are or may be secured by any
mechanics or materialmen’s lien against the Premises or any interest therein,
and Lessor shall have the right to post notices of nonresponsibility in or on
the Premises as provided by law.

 

6.4                                 Surrender. On the last day of the term hereof, or
on any sooner termination, Lessee shall surrender to Lessor the Premises and,
subject to the provisions of Paragraph 6.3 (a) hereof, all alterations, additions,
and improvements thereto, in the same condition as when received or made,
ordinary wear and tear excepted; provided, however, that Lessee’s
machinery, equipment and trade fixtures (including utility installations) which
may be removed without irreparable or material damage to the Premises, shall
remain the property of Lessee and be removed by Lessee. Lessee shall repair any
damage to the Premises occasioned by the removal of Lessee’s furnishings,
machinery, equipment and trade fixtures, which repair shall include the
patching and filling of holes and repair of structural damage.

 

6.5                                 Lessor’s Rights. If Lessee falls to perform Lessee’s
obligations under this Article 6, Lessor may, at its option (but shall not be
required to), and without notice to Lessee, perform such obligations on behalf
of Lessee, and the cost thereof, together with interest thereon at the rate
specified in Paragraph 12.2(a) hereof, shall immediately become due and payable
as additional rent to Lessor.

 

6

 

7.                                       INSURANCE

 

Lessee, at its sole cost and expense, shall, commencing on the date
Lessee is given access to the Premises for any purpose, and during the entire
term hereof, procure, pay for and keep in full force and effect:

 

7.1                                 Lessee’s
Liability Insurance. Comprehensive general liability insurance with
respect to the Premises and the operations of or on behalf of Lessee in, on or
about the Premises, including but not limited to: personal injury, product
liability (if applicable), blanket contractual, owner’s protective, broad form
property damage liability coverage, host liquor liability and owned and
non-owned automobile liability in an amount not less than $1,000,000 Combined
Single Limit. Such policy shall contain (i) severability of interest, (ii)
cross liability, and (iii) an endorsement stating* “Such insurance as is
afforded by this policy for the benefit of Lessor shall be primary as respects
any liability or claims arising out of the occupancy of the Premises by Lessee,
or out of Lessee’s operations, and any insurance carried by Lessor shall be
excess and non-contributory”. *in substance that

 

7.2                                 Lessee’s Worker’s Compensation
Insurance. Worker’s
Compensation coverage as required by law, together with Employer
Liability coverage.

 

7.3                                 Lessee’s Fire and Extended
Coverage Insurance.
Insurance against fire, vandalism, malicious mischief and such other additional
perils as now are or hereafter may be included in a standard “All Risks”
coverage, insuring all improvements and betterments made to the Promises,
Lessee’s trade fixtures, furnishings, equipment, stock, loss of income
or extra expense, and other items of personal property in an amount not less
than 100% of replacement value. Such insurance shall contain (i) no coinsurance
or contribution clauses, (ii) a Replacement Cost Endorsement, and (iii)
deductible amounts acceptable to Lessor.

 

7.4                                 Policy Requirements. All policies of insurance required to
be carried by Lessee pursuant to these requirements shall be written by responsible
insurance companies authorized to do business in the State of California.  Any such insurance required by Lessee
hereunder may be furnished by Lessee under any blanket policy carried
by it or under a separate policy therefor.  A true and exact copy of each paid up policy
evidencing such insurance or a certificate of the insurer, certifying that such
policy has been issued, providing the coverage required and containing the
provisions specified herein, shall be delivered to Lessor prior to the date Lessee
is given the right to possession of the Premises and upon renewals, not less
than thirty (30) days prior to the expiration of such coverage.  Lessor may, at any time, and from time to
time, inspect and/or copy any and all insurance policies required hereunder.  In no event shall the then limits of any
policy be considered as limiting the liability of Lessee under this Lease.

 

Each
policy evidencing insurance inquired to be carried by Lessee pursuant to these
requirements shall contain, in form and substance satisfactory to Lessor: (i) a
provision including Lessor, Lender and any other parties in interest designated
by Lessor as an additional insured; (ii) a waiver by Lessee’s insurers of any
right to subrogation against Lessor, its agents, employees and representatives
which arises or might arise by reason of any payment under such policy or by
reason of any act or omission of Lessor, its agents, employees or
representatives; and (iii) a provision that the insurer will not cancel or materially
change the coverage provided by such policy without first giving Lessor thirty (30)
days prior written notice.

 

7.5                                 Lessor’s Rights. If Lessee fails to procure, maintain and/or
pay for at the times and for the durations specified in this Lease, the insurance
required hereunder, or fails to carry insurance required by any governmental
requirement, Lessor may (but without obligation to do so), and without notice
to Lessee, perform such obligations on behalf of Lessee, and the cost thereof,
together with interest thereon

 

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at the rate specified in
Paragraph 12.2 (a) hereof, shall immediately become due and payable as
additional rent to Lessor.

 

7.6                                 Lessor’s Insurance. Lessor shall maintain during the term
of this Lease such insurance against physical damage to the Building,
comprehensive liability insurance and other insurance as Lessor may from time
to time determine. Lessor will determine the limits of coverage, deductibles
and specific perils insured against. Lessor may, but shall not be obliged to,
take out and carry any other form or forms of insurance as it or the mortgagees of
Lessor may reasonably determine advisable. Notwithstanding any contributions by
Lessee to the cost at insurance premiums, with respect to the Building or any
alterations of the Premises, as may be provided herein, Lessee acknowledges that
it has no right to receive any proceeds from any such insurance policies carried
by Lessor. (See Addendum 7.6)

 

7.7                                 (See Addendum 7.7)

 

7.8                                 Exemption of Lessor from Liability.  Lessor
shall not be liable for injury to Lessee’s business or any loss of income therefrom
or for damage to the property of Lessee, Lessee’s employees, invitees,
customers, or any other person in or about the Premises, nor shall Lessor be
liable for injury to the person of Lessee, Lessee’s employees, agents a
contractors, whether such damage or injury is caused by or results from fire, explosion,
falling plaster, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether such damage or injury results from conditions arising upon the Premises
or upon other portions of the Building, or from other sources or places, and
regardless of whether the cause of such damage a injury or the means of
repairing the same is inaccessible. Lessor shall not be liable for incorporeal
hereditaments including interference or obstruction of light, air a view.
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of the Building or the other portions of Santa Barbara Tech
Center.  Such exemption shall not extend
to any acts of gross negligence or willful misconduct.

 

8.                                       DAMAGE OR DESTRUCTION

 

8.1                                 Partial Damage. If the Premises, or so much of the
Building as to cause the Premises to be uninhabitable, are damaged by any casualty,
and the damage (exclusive of any property or improvements installed by Lessee in
the Premises) can be repaired within ninety (90) days without the payment of
overtime. Lessor shall at Lessor’s expense repair such damage
(exclusive of any property of Lessee or improvements installed by Lessee in the
Premises) as soon as practicable and this Lease shall continue in full force
and effect. If the Premises, or so much of time Building as to cause the
Premises to be uninhabitable, are damaged by any casualty, and the damage
(exclusive of any property of Lessee or improvements installed by Lessee in the
Premises) cannot be repaired within ninety (90) days without the payment of
overtime or other premiums. Lessor may, at Lessor’s option, either (i) repair such
damage as soon as practicable at Lessor’s expense, in which event this Lease
shall continue in full force and effect, or (ii) give written notice to Lessee
within thirty (30) days after the date of the occurrence of such damage of Lessor’s
intention to terminate this Lease, in which event this Lease shall terminate as
of the date of the occurrence of such damage.

 

8.2                                 Damage Near End of Term. If the Premises, or so much of the Building
as to cause the Premises to be uninhabitable, are damaged during the last six (6)
months of the term of this Lease or any renewal thereof, Lessor may, at Lessor’s
option, terminate this Lease as of the date of occurrence of such damage by
giving written notice to Lessee of Lessor’s election to do so within thirty (30)
days after the date of occurrence of such damage; provided, however, that if
the term of this Lease has been extended for any reason whatsoever, Lessor’s
right to terminate this Lease shall only apply during the last six (6) months
of the then current term of this Lease.

 

8

 

(a)                                  If Lessor is obligated or elects to
repair the Premises as provided above, the rent payable for the period *                             
shall be abated, in proportion to the degree to which Lessee’s use of the
Premises is impaired; provided, however, that the aggregate period of abatement
hereunder shall not exceed six (6) months. Except for such
abatement, if any, Lessee shall have no claim against Lessor for any damage
suffered by reason of any such damage, destruction, repair or, restoration. *from
commencement until completion of repair

 

(b)                                 If Lessor is obligated or elects to
repair the Premises as provided above, but does not commence such repair within
ninety (90) days after such obligation shall accrue, subject to an extension of
up to another ninety (90) days for delays beyond the reasonable control of
Lessor, Lessee may, at Lessee’s option, terminate this Lease by giving Lessor
written notice of Lessee’s election to do so at any time prior to the
commencement of such repair or restoration, in which event this Lease shall
terminate as of the date of such destruction.

 

8.3                                 Insurance Proceeds Upon
Termination. If
this Lease Is terminated pursuant to any right given Lessee or Lessor to do so
under this Article 8, all insurance proceeds payable under Section 7.5 with
respect to the damage giving rise to such right of termination shall be paid to
Lessor and any encumbrancer of the Premises, as their interests may appear.

 

8.4                                 Restoration. Lessor’s obligation to restore shall
not include the restoration or replacement of Lessee’s furnishings, machinery,
equipment, trade fixtures or other personal property or any improvements or
alterations made by Lessee to the Premises.

 

9.                                       PERSONAL PROPERTY TAXES

 

Lessee
shall pay prior to delinquency all Real Property Taxes and other taxes assessed
against, levied upon or attributable to its furnishings, machinery, equipment,
trade fixtures or other personal property contained in the Premises or
elsewhere, and, if required, all improvements to the Premises in excess of
Lessor’s “building standard” improvements, provided, however, that nothing
contained herein shall require Lessor to insure the accuracy of any segregation
of the same for purposes of Section 3.4(b) hereof. When practicable, Lessee
shall cause said furnishings, machinery, equipment, trade fixtures and all
other personal property to be assessed and billed separately from the real
property of Lessor.

 

10.                                 UTILITIES

 

Lessee
shall pay for all water, gas, heat, light, power, janitorial services and other
utilities and services supplied to the Premises, together with any taxes
thereon. If any such services are not separately metered or charged to Lessee, Lessee
shall pay a pro rata proportion, as part of operating expenses, based on
rentable area, of all charges jointly metered or charged with other premises.
Lessor shall not be liable in damages or otherwise unless due to Lessor’s gross
negligence for any failure or interruption of any utility services being
furnished to the building and no such failure or interruption shall entitle
Lessee to terminate this lease. The operation and control of utilities, air
conditioning and any other energy system is subject to compliance with any
government authority governing the regulation and use of energy systems within
the commercial office building structure. See Exhibit F

 

11.                                 ASSIGNMENT AND SUBLETTING

 

11.1                           Lessee shall not voluntarily or by
operation of law sublet, assign, transfer, mortgage or otherwise encumber, or
grant concessions, licenses or franchises with respect to all or any part of
Lessee’s interest in this Lease or the Premises without the prior written
consent of Lessor. If Lessee desires at any

 

9

 

time to assign this Lease or
to sublet the Premises or any portion thereof, it shall first notify Lessor of
its desire to do so and shall submit in writing to Lessor (i) the name of the
proposed sublessee or assignee, (ii) the nature of the proposed sublessee’s or
assignee’s business to be carried on in the Premises; (iii) the terms and
provisions of the proposed sublease or assignment; (iv) such reasonable
financial information as Lessor may request concerning the proposed sublessee
or assignee, including, but not limited to a balance sheet as of a date within
ninety (90) days of the request for Lessor’s consent, statements of income or
profit and loss for the two year period preceding the request for Lessor’s
consent and a written statement in reasonable detail as to the business experience
of the proposed sublessee or assignee during the five (5) years preceding the
request for Lessor’s consent; and (v) the name and address of sublessee’s or
assignee’s present or previous landlord. Lessor may, as a condition to granting
such consent, require that the obligations of any assignee which is a
subsidiary or affiliate of another corporation be guaranteed by the parent or
controlling corporation. Any sublease, license, concession, franchise or other
permission to use the Premises shall be expressly subject and subordinate to
all applicable terms and conditions of this Lease. Any purported or attempted
assignment, transfer, mortgage, encumbrance, subletting, license, concession,
franchise or other permission to use the Premises contrary to the provisions of
this paragraph shall be void and, at the option of Lessor, shall terminate this
Lease.

 

11.2                           If Lessee is a corporation, any transfer
of its stock, or any dissolution, merger or consolidation, which results in a
change in the control of Lessee from the person or persons owning a majority of
its voting stock immediately prior thereto, or the sale or other transfer of
all or substantially all of the assets of Lessee, * shall constitute an
assignment of Lessee’s interest in this Lease within the meaning of this
Article 11 and the provisions requiring consent contained herein. Lessor may
require as a condition to giving such consent that the new controlling person(s)
execute a guaranty of this Lease. If Lessee is a corporation which, under then
current guidelines published by the California Commissioner of Corporations, is
not deemed to be a public corporation, the transfer, assignment or
hypothecation of any Interest in such corporation in the aggregate in excess of
25% (other than a transfer occurring by operation of law upon the death of the
holder of such interest)* shall be deemed an assignment within the provisions
of this Article. *and which results in a reduction in the net worth of the
entity following such action.

 

11.3                                                                                                                       
concession, franchise or other permission to use the Premises shall relieve
Lessee of its obligations to pay the rent or to perform all                                   
other obligations to be performed by Lessee hereunder.                      
acceptance of rent by Lessor from any other person shall not be deemed to be a
waiver by Lessor of any provisions of this Lease.

 

11.4                           At any time within ten (10) days after
Lessor’s receipt of the information specified in Section 11.1 above, Lessor may
by written consent to Lessee elect (a) to sublease the Premises or the portion
thereof so proposed to be subleased by Lessee, or to take an assignment of Lessee’s
leasehold estate hereunder, upon the same terms as those offered to the
proposed sublessee or assignee, as the case may be; or (b) deleted; or (c)
disapprove such assignment or subletting. 
If Lessor does not act within the twenty (20) days, such failure to act
is deemed a disapproval of such request for assignment or subletting.

 

11.5                           Each assignee or transferee, other than
Lessor, shall assume, all obligations of Lessee under this Lease and shall be
and remain liable jointly and severally with Lessee for the payment of the
rent, and for the due performance of all the terms, covenants, conditions and
agreements to be performed by Lessee hereunder; provided, however, that a
transferred other than an assignee shall be liable to Lessor for rent only in
the amount set forth in the assignment or transfer.  No assignment shall be binding on Lessor
unless such assignee or Lessee shall deliver to Lessor a counterpart of such
assignment and an instrument in recordable form which contains a covenant of
assumption by such assignee satisfactory in substance and form to
Lessor, consistent with the requirements of this Section 11.5, but the failure
or

 

10

 

refusal
of such assignee to execute such instrument of assumption shall not release or
discharge such assignee from its liability as set forth above.

 

11.6                           Consent by Lessor to any subletting or assignment
shall be conditioned upon payment by Lessee to Lessor of all “Transfer
Consideration” (as hereafter defined) received or to be received, directly or
indirectly, by Lessee on account of such assignment of subletting.  Transfer Consideration shall be paid to
Lessor at the same time or times as the same is due by Lessee.  Failure to pay Lessor the Transfer
Consideration, or any portion or installment thereof, shall be deemed a default
under this Lease, entitling Lessor to exercise all remedies available to it
under law including, but not limited to, those specified in Article 12 of this
Lease.  “Transfer Consideration” shall
mean (a) in the case of a subletting, any consideration paid or given, directly
or indirectly, by the sublessee to Lessee pursuant to the sublease for the use
of the Premises, or any portion thereof, over and above the rent and any
additional rent, however denominated, in this Lease, payable by Lessee to
Lessor for the use of the Premises (or portion thereof), prorating as
appropriate the amount payable by Lessee to Lessor under this Lease if less
than all of the Premises is sublet, and (b) in the case of an assignment or a
sublease, any consideration paid or given, directly or indirectly, by the
sublessee or assignee to Lessee in exchange for entering in the sublease or
assignment, but shall not include reimbursement for any security deposit,
reimbursement of any improvements, fixtures or furnishings installed in the
Premises by Lessee or any payment for personal property of Lessee not in excess
of Lessee’s book value thereof.  As used
herein, consideration shall include consideration in any form, including but
not limited to, money, property, assumption of liabilities other than those
arising under this Lease, discounts, services, credits or any other item or
thing of value, irrespective of the form of such consideration, Lessor shall be
entitled to be paid in cash in an amount equivalent to the aggregate of the
cash portion of the Transfer Consideration and the value of any non-cash
portion of the Transfer Consideration. 
If any Transfer Consideration is to be paid or given in installments,
Lessee shall pay each such installment at the time the same is to be paid or
given.

 

11.7                           deleted

 

12.                                 DEFAULTS; REMEDIES

 

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

 

(a)                                  The vacating or
abandonment of the Premises by Lessee combined with the failure to pay rent;

 

(b)                                 The failure of Lessee to make any payment
of rent or any other payment required to be made by Lessee hereunder, as and
when due, where such failure shall continue to for a period of ten (10) days
after written notice thereof from Lessor to Lessee; provided, however, that any
such notice shall be in lieu of, and not in addition to, any notice required
under California Code of Civil Procedure Section 1161;

 

(c)                                  The failure by
Lessee to observe or perform any of the covenants, conditions or provisions of
this Lease (or the covenants, conditions and restrictions governing Santa
Barbara Tech Center to be observed or performed by Lessee, other than described
in Paragraph 12.1 (b) hereof, where such failure shall continue for a period of
thirty (30) days after written notice thereof from Lessor to Lessee; provided,
however, that any such notice shall be in lieu of, and not in addition to, any
notice required under California Code of Civil Procedure Section 1161; provided
further, that if the nature of Lessee’s default is such that more than thirty
(30) days are reasonably required for its cure, then Lessee shall not be deemed
to be in default if Lessee commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion; or

 

11

 

(d)                                 The making by Lessee of any general
assignment or general arrangement for the benefit of creditors; the filing by
or against Lessee of a petition to have Lessee adjudged a bankrupt or a
petition for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Lessee, the same is dismissed
within sixty (60) days); the appointment of a trustee or receiver to take
possession of substantially all of Lessee’s assets located at the Premises, or
of Lessee’s interest in this Lease, where possession is not restored to Lessee
within thirty (30) days; or the attachment, execution or other judicial seizure
of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest
in this Lease, where such seizure is not discharged within thirty (30) days.

 

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

 

(a)                                  Terminate Lessee’s right to possession of
the Premises by any lawful means, in which case this Lease shall terminate and
Lessee shall immediately surrender possession of the Promises to Lessor, in
such event Lessor shall be entitled to recover from Lessee:

 

(1)                                  The worth at the time of award of the
unpaid rent which has been earned at the time of termination;

 

(2)                                  The worth at the time of award of the
amount by which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that Lessee
proves could have been reasonably avoided:

 

(3)                                  The worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that Lessee proves could be
reasonably avoided; and

 

(4)                                  Any other amount necessary to compensate
Lessor for all the detriment proximately caused by Lessee’s failure to perform
its obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, including, but not limited to; the cost of
recovering possession of the Premises, expenses of releasing including
necessary renovation and alteration of the Premises, reasonable attorneys’ fees
and any other reasonable cost. The “worth of the time of award” of the amounts
referred to in subparagraphs (1) and (2) above shall be computed by allowing
interest at five (5) percentage points above the discount rate of the Federal
Reserve Bank of San Francisco at the time of the award. The worth at the time
of award of the amount referred to in subparagraph (3) above shall be computed
by discounting such amount at one (1) percentage point above such discount
rate.

 

(b)                                 deleted

 

(c)                                  Require Lessee to make payment of all
rental obligations in cash or by certified cashiers check.

 

(d)                                 Pursue any other remedy now or hereafter
available to Lessor under the laws or judicial decisions of the State of
California, including, but not limited to, the remedy provided In California
Civil Code Section 1951.4 to continue this Lease in affect.

 

12.3                           Default by Lessor. Lessor shall not be In default of any
of the obligations of Lessor under this Lease unless Lessor fails to perform
such obligations within a reasonable time, but in no event

 

12

 

less than thirty (30)
days after written notice by Lessee to Lessor specifying wherein Lessor has
failed to perform such obligations; provided, however, that
if the nature of Lessor’s default is such that more than thirty (30) days are
required for its cure, Lessor shall not be in default if Lessor commences such
cure within such thirty (30) day period and thereafter diligently prosecutes
the same to completion. In the event of any such default by Lessor, Lessee may
pursue any remedy now or hereafter available to Lessee under the laws of
judicial decisions of the State of California, except that Lessee shall not
have the right to terminate this Lease except as expressly provided herein.
(See Addendum 12.3)

 

12.4                           Late Charges. Lessee acknowledges that the late
payment by Lessee to Lessor of rent and other sums due hereunder will cause
Lessor to incur costs not contemplated by this Lease, the exact amount of which
will be extremely difficult to ascertain. Such costs include, but are not
limited to, processing and accounting charges and late charges
which may be imposed on Lessor by the terms of any mortgage or trust deed
covering the Premises. Accordingly, if any installment of rent or any other sum
due from Lessee shall not be received by Lessor or Lessor’s designee within ten
(10) days after the same is due, Lessee shall pay to Lessor a late charge equal
to fifteen percent (15%) of such overdue amount monthly until such overdue
amount is paid. Lessee acknowledges that such late charge represents a fair and
reasonable estimate of the cost Lessor will incur by reason of a late payment
by Lessee. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee’s default with respect to such overdue amounts,
nor prevent Lessor from exercising any of the other rights and remedies granted
hereunder.

 

13.                                 CONDEMNATION OR RESTRICTION ON
USE

 

13.1                           Eminent Domain.  If
the whole of the Premises or so much thereof as to render the balance unusable
by Lessee shall be taken under power of eminent domain, this Lease shall
automatically terminate as of the date of such condemnation, or as of the date
possession is taken by the condemning authority, whichever is earlier. No
award for any partial or entire taking shall be apportioned, and Lessee hereby
assigns to Lessor any award which may be made in such taking or condemnation,
together with any and all rights of Lessee now at hereafter arising in or to
the same or any part thereof; provided, however, that nothing contained herein
shall be deemed to give Lessor any interest in or to require Lessee to assign
to Lessor any award made to Lessee for its relocation expenses, the taking of
personal property and fixtures belonging to Lessee, the interruption of or
damage to Lessee’s business and/or for Lessee’s unamortized cost of leasehold improvements.
The unamortized portion of the Lessee’s expenditures for improving the Premises
shall be determined by multiplying such expenditures by a fraction, the
numerator of which shall be the number of years of the term of this Lease                         ,
and the denomination of which shall be the number of years of           
term of this Lease which shall not have expired at the time of improving the
Premises. In no event shall options to renew or extend be taken into
consideration in determining the payment to be made to the Lessee. Lessee’s
right to receive compensation or damages for its fixtures and personal property
shall not be affected in any manner thereby.

 

13.2                           Abatement of Rent. In the event of a partial or temporary taking
which does not result in a termination of this Lease, rent shall be abated in
proportion to that part of the Premises so made unusable by Lessee.

 

13.3                           Temporary Taking. No temporary taking of the Premises and/or
of Lessee’s rights therein or under this Lease shall terminate this Lease, and
any award made by reason of any such temporary taking shall belong entirely to Lessor.

 

13.4                           Voluntary
Sale as Taking. A voluntary sale by Lessor to any public body or
agency having the power of eminent domain, either under threat of condemnation or
while condemnation

 

13

 

proceedings
are pending, shall be deemed to be a taking under the power of eminent domain
for the purpose of this Article 13.

 

14.                                 BROKERS

 

Lessor
acknowledges its obligation to pay a single commission to the broker(s)
specified in Item 9 of the Basic Lease Provisions, if any. Lessee represents
and warrants that it has neither incurred nor is aware of any other broker’s,
finder’s, or similar fee in connection with the origin, negotiation, execution
or performance of this Lease and agrees to indemnify and hold harmless Lessor
from any loss, liability, damage, cost or expense incurred by reason of a
breach of this representation.

 

15.                                 LESSOR’S LIABILITY

 

15.1                           The term “Lessor” as used herein shall
mean only the owner or owners at the time in question of the fee title or a lessee’s
interest in a ground lease of the Building. In the event of any transfer of
such title or interest, Lessor herein named (and in case of any subsequent
transfers, the then grantor) shall be relieved from, and after the date of
such transfers of all liability for Lessor’s obligations thereafter to be
performed; provided, however, that any funds in the hands of Lessor or the then
grantor at the time of such transfer in which Lessee has an interest shall be
delivered to the grantee. The obligations contained in this Lease to be
performed by Lessor shall, subject as aforesaid, be binding on Lessor’s
successors and assigns only during their respective periods of ownership and no
such successor or assignee shall be liable for the obligations of its
predecessor Lessor hereunder.

 

15.2                           The initial Lessor hereunder is a joint
venture operating as an unincorporated association. In consideration of the
benefits accruing hereunder, Lessee, its successors and assigns, agree that, in
the event of any actual or alleged failure, breach or default hereunder by the initial
Lessor;

 

(a)                                  The sole and exclusive remedy shall be
against the assets of the joint venture;

 

(b)                                 No joint venturer shall be sued or named in
a party in any suit or action (except as may be necessary to secure
jurisdiction of the joint venture);

 

(c)                                  No service of process shall be made
against any joint venturer (except as may be necessary to secure jurisdiction
of the joint venture);

 

(d)                                 No joint venturer shall be required to
answer or otherwise plead to any service of process;

 

(e)                                  No judgment will be taken against any
joint venturer;

 

(f)                                    Any judgment taken against any joint
venturer may be vacated and set aside at any time nunc pro tunc;

 

(g)                                 No writ of execution will ever be levied
against the assets of any joint venturer; and

 

(h)                                 These covenants and agreements are
enforceable by Lessor and also by any joint venturer thereof.

 

16.                                 (DELETED)

 

14

 

17.                                 (DELETED)

 

18.                                 

 

During the term of this Lease, Lessee shall have the right in common
with other tenants of the Building (if any) and any adjacent buildings, to use
the parking area available to tenants of the Building. Lessee’s use of such
parking facilities or that of its invitees shall be limited to a maximum of the
number of parking spaces shown in Item 10 of the Basic Lease Provisions (but
such space will not be separately identified and Lessor shall have no
obligation to monitor the use of such parking facility), and shall be subject
to such rules and regulations as may be established from time to time by Lessor
for the effective use of such parking facilities. Such rules and regulations
may include, but shall not be limited to; designation of specific areas for use
by invitees of Lessee and Lessor, hours during which parking shall be available
for use; parking attendants; a parking validation or other assessment system*;
and such other matters affecting the parking operation to the end that said facilities
shall be utilized to maximum efficiency and in the best interest of Lessor,
Lessee and their respective invitees. Lessor may temporarily close any part of
the Common Area for such periods of time as may be necessary to prevent the
public from obtaining prescriptive rights or to make repair or alterations.
Lessee’s right to use any area for parking purposes shall be subject to
restrictions or other limitations resulting from any laws, statutes, ordinances
and governmental rules, regulations or requirements now in force or which may
hereafter be in force, and no such event shall in any way affect this Lease,
abate rent, relieve Lessee of any liabilities or obligations under this Lease
or give rise to any claim whatsoever against Lessor. If Lessor reasonably
determines that Lessee is regularly using in excess of the number of parking
spaces specified in Item 10 of the Basic Lease Provisions, Lessor may, in
addition to any other remedy, impose a reasonable charge for such excess usage,
payable by Lessee upon demand.*to prevent parking abuse

 

19.                                 GENERAL PROVISIONS

 

19.1                           Estoppel Certificate

 

(a)                                  Lessee shall at any time and from time to
time upon not less than ten (10) days prior written notice from Lessor execute,
acknowledge and deliver to Lessor a statement in writing (i) certifying that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification and certifying that this Lease,
as so modified, is in full force and effect) and the date to which the rent and
other charges are paid in advance, if any, and (ii) acknowledging that then are
no, to Lessee’s knowledge, uncured defaults on the part of Lessor hereunder, or
specifying such defaults if any are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises. (See Addendum 19.1(a))

 

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

 

(c)                                  deleted. 
(See Addendum 19.1(c))

 

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

 

15

 

19.3                           Time of Essence. Time is of the essence in the
performance of all terms and conditions of this Lease in which time is an
element.

 

19.4                           Captions. Article and paragraph captions have
been inserted solely as a matter of convenience and such captions in no way
define or limit the scope or intent of any provision of this Lease.

 

19.5                           Notices. Any notice required or permitted to be
given hereunder shall be in writing and may be served personally or by regular
mail, addressed to Lessor and Lessee respectively at the addresses set forth
before their signatures in Item 11 of the Basic Lease Provisions, or to such
other or additional persons or at such other addresses as may
from time to time be designated in writing by Lessor or Lessee by notice
pursuant hereto.

 

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

 

19.7                           Holding Over. If Lessee holds over after the
expiration or earlier termination of the term hereof without the express
written consent of Lessor, Lessee shall become a tenant at sufferance only at
the then prevailing market rate as determined by Lessor in its sole and
absolute discretion for the space in effect upon the date of such expiration
or earlier termination (subject to adjustment as provided in Article 3 hereof
and prorated on a dally basis), and otherwise upon the terms, covenants and conditions
herein specified, so far as applicable. Acceptance by Lessor of rent after such
expiration or earlier termination shall not constitute a consent to a holdover
hereunder or result in a renewal. The foregoing provisions of this Paragraph
are in addition to and do not affect Lessor’s right of re-entry or any other
rights of Lessor hereunder or as otherwise provided by law.

 

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

 

19.9                           Inurement. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of Article 15
hereof, the terms and conditions contained in this Lease shall bind the
parties, their personal representatives, successors and assigns.

 

19.10                     Choice of Law. This Lease shall be governed by the
laws of the State of California.

 

19.11                     Subordinate. 
This Lease shall, at Lessor’s option, be either superior or subordinate
to mortgages or deeds of trust on the Premises, whether now existing or
hereinafter created. Lessee shall, upon written demand by Lessor, execute such
instruments as may be required from time to time to subordinate the rights and
interest of Lessee under this Lease to the lien of any mortgage or deed of trust
on the Building. Notwithstanding any such subordination, so long as Lessee is
not in default hereunder, this Lease shall not be terminated or Lessee’s quiet
enjoyment of the Premises disturbed in the event such mortgage or deed of trust
is foreclosed. In the event of such foreclosure, Lessee shall thereupon become
a lessee of, and attorn to, the successor-in-interest to Lessor on the same
terms and conditions as are contained in this Lease.  (See Addendum 19.11)

 

19.12                     Attorneys’ Fees. If either party hereto brings an action
to enforce the terms hereof or declare the rights of the parties hereunder, the
prevailing party in any such action, on trial or appeal, shall be entitled to
recover from the other party the reasonable costs and attorneys fees incurred
in connection

 

16

 

with such action. For
purposes of this provision, in any action or proceeding instituted by Lessor
based upon any default or alleged default by Lessee hereunder, Lessor shall be
deemed the prevailing party if (i) judgment is entered in favor of Lessor or
(ii) prior to trial or judgment Lessee shall pay all or any portion of the rent
and charges claimed by Lessor, eliminate the condition(s), cease the act(s)
or otherwise cure the omission(s) claimed by Lessor to constitute a default by
Lessee hereunder. Any expenses incurred in collecting sums due, whether action
is brought or not, and any attorneys’ fees incurred in collecting payment will
be charged to Lessee.

 

19.13                     Lessor’s Access. Lessor and Lessor’s agents shall have
the right to enter the Premises * at reasonable times for the purpose of
inspecting the same, showing the same to prospective purchasers, lessees, or
lenders, and making such alterations, repairs, improvements or additions to the
Premises or to the Building as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Building any ordinary “For Sale”
signs and Lessor may at any time during the last one hundred eighty (180) days
of the term hereof place on or about the Building any ordinary “For Sale”, “For
Lease” or similar signs, all without rebate of rent or liability to Lessee.
*with reasonable notice

 

19.14                     Corporate Authority. If Lessee is a corporation, Lessee shall, at Lessor’s request,
require that each individual executing this Lease on behalf of said corporation
represent and warrant that he is duly authorized to execute and deliver this
Lease on behalf of said corporation in accordance with a duly adopted
resolution of the Board of Directors of said corporation or in accordance with the
By-Laws of said corporation, and that this Lease is binding upon said
corporation in accordance with its terms. Lessee shall also, at Lessor’s
request, within thirty (30) days after execution of this Lease, deliver to
Lessor a certified copy of a resolution of the Board of Directors of said
corporation authorizing or ratifying the execution of this Lease.

 

19.15                     Surrender or Cancellation. The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not work a merger, and shall
terminate all or any existing subleases, unless Lessor elects to treat such
surrender or cancellation as an assignment to Lessor of any or all of such subleases.

 

19.16                     Entire Agreement. This Lease, the Exhibits hereto which by
this reference are incorporated herein as though set forth in full herein,
covers in full each and every agreement of every kind or nature whatsoever
between the parties hereto concerning the Premises and the Building, and all
preliminary negotiations and agreements of whatsoever kind or nature are
merged herein. Lessor has made no representations or promises whatsoever with
respect to the Premises or the Building, or the design configuration of the
development of Santa Barbara Tech Center, except those contained herein, and no
other person, form or corporation has at any time had any authority from Lessor
to make any representations or promises on behalf of Lessor. If any such representations
or promises have been made by others, Lessee hereby waives all right to rely
thereon. No verbal agreement or implied covenant shall be held to vary the
provisions hereof, any statute, law or custom to the contrary notwithstanding.

 

Except
as otherwise provided herein, nothing expressed or implied herein is intended
or shall be construed to confer upon or grant any person any rights or remedies
under or by reason of any term or condition contained in this Lease.

 

19.17                     Signs. 
No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed, printed or affixed to or near any part of the outside or
inside of the Building without the written consent of Lessor first had and
obtained. Lessor shall have the right to remove any such sign, placard,
picture, advertisement, name or notice without notice to and at the
expense of Lessee. All approved signs shall be installed at Lessee’s sole cost
and expense. (See Addendum 19.17)

 

17

 

19.18                     deleted.

 

19.19                     Gender; Number. Whenever the context of
this Lease requires the masculine gender includes the feminine or neuter, and
the singular number includes the plural.’

 

19.20                     Recording Of Lease.
Lessee shall not record this lease without the express written consent of
Lessor. If such permission granted, at the expiration or sooner termination of
this Lease, Lessee shall execute, acknowledge and deliver to Lessor, within
ten (10) days after written demand from Lessor, any quitclaim deed or other
document reasonably required by any reputable title company to remove the cloud
of this Lease from the title of the real property subject to the Lease.  (See Addendum 19.20)

 

19.21                     deleted

 

19.22                     Confidentiality of Lease. Lessee acknowledges and agrees that the terms of
this Lease are confidential and constitute proprietary information of Lessor.
Disclosure of the terms hereof could adversely affect the ability of Lessor to
negotiate other leases with respect to the Building and impair Lessor’s
relationship with other tenants of the Building. Lessee agrees that it, its
partners, officers, directors, employees and attorneys, shall not disclose the
terms and conditions of this Lease to any other person without the prior
written consent of Lessor. It is understood and agreed that damages would be an
inadequate remedy for the breach of this provision by Lessee, and Lessor shall
have the right to specific performance of this provision and to injunctive
relief to prevent its breach or continued breach.  (See Addendum 19.22)

 

19.23                     Quiet Enjoyment. Provided Lessee has performed all of
the terms, covenants, agreements and conditions of this Lease, including the
payment of rent and all other sums due hereunder, Lessee shall peaceably and
quietly hold and enjoy the Premises for the term hereof, but subject to the
provisions and conditions of this Lease against Lessor and all persons
claiming by, through or under Lessor, Lessee’s right to use the Premises and
the Common Area as herein provided shall be subject to restrictions or other
limitations or prohibitions resulting from any laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force and no such event shall in any way affect this Lease,
abate rent, relieve Lessee of any liabilities or obligations under this Lease
or give rise to any claim whatsoever against Lessor.

 

19.24                     Meaning - (See Addendum 19.24)

 

20.                                 CONSTRUCTION

 

20.1                           Lessor shall cause the construction of
Lessee’s improvements in the Premises in accordance with mutually approved
Lessee’s improvement plans and outline specifications which will be initialed
by Lessor and Lessee on or before May 20, 1989. No changes shall
be made in the initially approved plans and specifications without the prior
written approval of Lessor and Lessee. Any such changes or additions caused by
Lessee or any Governmental authority shall be made at the sole cost of Lessee
and all additional expenses incurred by Lessor with respect to these changes
(except changes requested by Lessor) shall be reimbursed to Lessor by Lessee
upon demand. Any such changes which cause a delay or any other delays caused by
Lessee or Lessee’s agents may postpone occupancy of the Premises beyond the
Target Commencement date (in which case the same shall be adjusted to the
aggregate delays) but there shall be no abatement of Lessee’s rent as a result
of any such delay. Failure by Lessee to accomplish, complete and approve plans
and specifications for Lessee’s improvements in a timely fashion shall be a
material breach of this Lease and, at Lessor’s option, this Lease may be
cancelled or the monthly rent shall begin on the date indicated in Item #7 of
the Basic Lease Provisions. Under no

 

18

 

circumstances
shall Lessor be charged with any delay whatsoever as a result of nonstandard
improvement work.

 

20.2                           Lessee hereby acknowledges and agrees
that all of Lessee’s improvement work, including suite design and decorating,
within the Premises shall be accomplished by parties acceptable to Lessor and
then only upon such conditions as Lessor may impose.

 

20.3                           Lessor shall at its expense promptly
correct all items not conforming with the plans and specifications of which
Lessor is notified by Lessee in writing within sixty (60) days after Lessee
takes possession of the Premises.

 

20.4                           Lessor warrants the Building and Lessee’s
improvements installed un the Premises by Lessor against any defects in
materials and workmanship of which Lessor is notified by Lessee in writing
within one (1) year after date of completion of the work in question. Lessor
further warrants that the construction of the Building and such tenant
improvements will upon completion comply with all applicable statutes,
ordinances, rules, regulations, orders and requirements of Governmental
authorities in effect as of the commencement of the lease term.

 

20.5                           Construction Allowance. Lessee shall have a maximum
construction allowance of $-0- for the completion of Lessee’s improvements.
Lessor shall be deemed the owner of these tenant improvements. Prior to the
commencement of construction, Lessee shall approve the Lessee improvement cost
breakdown. Within ten (10) days following said approval, Lessee shall deposit
with Lessor cash equal to the coat of any Lessee improvements over the
allowance. Failure to make such deposit shall be deemed a material breach of
this Lease and, at Lessor’s option, this Lease may be cancelled. Lessee shall
be deemed the owner of any improvements in excess of the allowance during the
term of this Lease, but the ownership of such improvements shall revert to
Lessor upon the expiration of this Lease. Any change orders to the originally
approved contract which are requested by Lessee shall be forwarded to Lessor or
Lessor’s designated contractor for costing and approval. Lessee shall be given
a written cost estimate for the completion of said change order which must be
approved and paid for by Lessee prior to the commencement of work.

 

20.5.1                  Improvements to be Constructed at Lessor’s
Sole Expense (See Addendum 20.5.1)

 

20.6                           Construction. Tender of possession of the Premises by
Lessor to Lessee may not take place prior to the time the Building and the
Premises have been completed The Premises shall be deemed completed when construction
has been substantially completed in accordance with the plans and
specifications as set forth in this Article 20. The Building shall be deemed
completed when a Certificate of Occupancy has been received. Taking of
possession by Lessee of the Premises shall constitute an acknowledgement that
the Building and the Premises have been satisfactorily completed and Lessor
shall have no further responsibility with respect to construction, except as
expressly set forth in Section 20.3 and 20,4 hereof. (See Addendum 20.6)

 

20.7                           Punchlist. 
(See Addendum 20.7)

 

19

 

ADDENDA

 

1.                                       The Premises consists of approximately 14,044
square feet depicted on Exhibit “G” as the “Former Forum Systems Space” and
approximately 11,451 square feet depicted on Exhibit “G” as the “Former APCD
Space.”

 

2.1(a)                   As of the date of execution of this Lease,
that portion of the Premises identified as “Former APCD Space” is occupied by
Santa Barbara County Air Pollution Control District.  APCD’s current lease with Lessor terminates
on February 12, 1991, subject to an option to extend the term of the lease for
one (1) year through and including February 12, 1992. Lessee’s term for
possession of the Former APCD Space in the Premises shall commence upon the
termination of APCD’s lease. Such termination will occur no later than February
12, 1992, or on such earlier date as APCD or Lessor may terminate APCD’s lease.
Lessee agrees that it will commence this term for the Former APCD Space
immediately upon APCD’s termination, whether that be at the current APCD lease
termination date or prior to such date. Lessee’s term for the Former APCD Space
shall terminate concurrently with the termination of Lessee’s term for the
Former Forum Systems Space. Any default by Lessee with respect to its
possession of the Former APCD Space shall expressly constitute a default of the
entire lease (including the Former Forum Systems Space) pursuant to Section
12.1 hereof.

 

2.3                                 Option and Right of Notification. Lessor hereby grants the Lessee the right
to renew this Lease for one successive period of seven (7) years, upon the same
terms, covenants and conditions as are provided in this Lease.

 

Lessee
shall give notice to Lessor in writing of Lessee’s election to exercise such
option no less than six (6) months prior to the expiration of the term. Lessee
shall not be entitled to exercise the option if, at the time of such exercise,
Lessee is in default of any provision of this Lease.

 

The
annual rent for the first year of the option period, including the commencement
thereof, shall be adjusted as of the commencement of said period, and as of the
expiration of each full or partial calendar year of the option term (the “Adjustment
date”) to reflect any change in the United States Department of Labor, Bureau
of Labor Statistics, Consumer Price Index, Subgroup “All Items”, entitled “Consumer
Price Index, Urban Wage Earners and Clerical Workers (Revised Series), L.A. -
Anaheim - Riverside Average (1982-84 = 100).” The index for said subgroup
applicable for the month of December (or the month preceding the Commencement
Date for the first full or partial calendar year of the lease term) preceding
each adjustment date shall be considered the “base” and the annual rent
following each adjustment date shall be computed by adjusting the annual rent
payable for the preceding calendar year thereof by the percentage change in the
index as of the adjustment date over the “base”; provided, however, in no event
shall the rent payable for any year be less than the rent payable for the
preceding period on account of the adjustment pursuant to this Section 2.3,
notwithstanding the fact that the index may, as of some adjustment date, be
less than the “base.” If as of any adjustment date there shall not exist the
Consumer Price Index in the same format as set forth above, the parties shall
substitute any official index published by the Bureau of Labor Statistics or
any successor or similar governmental agency as may then be in existence and
shall be most nearly equivalent thereto. If the parties shall be unable to
agree upon a successor index, the parties shall refer the choice to arbitration
in accordance with the rules of the

 

 

	
   /s/ JCD

  	
   

  	
   /s/ DKM

  
	
  Lessor’s
  Initials

  	
   

  	
  Lessee’s
  Initials

  

 

 

American
Arbitration Association. The annual rent adjustment for any year of the option
period shall in no event be less than three (3%) percent or greater than seven
(7%) percent per annum.

 

Should
the leasehold interest of any other lessee in the Building known as 5540 Ekwill
terminate at the conclusion of a lease or option term for such other lessee, or
sooner (hereafter “Vacated Space”), Lessor shall provide Lessee with notice of
such leasehold termination. Lessor shall have no obligation to enter into a
lease or lease negotiations with Lessee regarding such Vacated Space. Lessor
and Lessee agree that this provision does not constitute a first right or
option for Lessee to lease any Vacated Space at 5540 Ekwill.

 

3.1                                 The Initial Annual Rent for the Former APCD
Space shall be computed upon the commencement of the term therefor by
commencing with the rent which would have been paid if Lessee were to occupy
the Former APCD Space at the same time the Former Forum Systems Space is
occupied (which is $11,336.49, or 11,451 square feet multiplied by $.99 per
square foot), and escalating that rent in the exact same proportion as the rent
for the Former Forum Systems Space will be and will have been escalated.

 

3.4(a)                   Lessee’s Building Percentage as shown in Item
3 of the Basic Lease Provisions will be adjusted at the commencement of the
term for the Former APCD Space to 60.22%.

 

3.4(c)                   Lessee’s Common Area Percentage as shown in
Item 3 of the Basic Lease Provisions will be adjusted at the commencement of
the term for the Former APCD Space to 30.11%.

 

3.5                                 The Annual Rent Adjustment for any year of
the initial term shall in no event be less than three percent (3%) or greater
than seven percent (7%) per annum.

 

4.                                       The sum of $24,397.41 reflected in Item 8 of
the Basic Lease Provisions consists of $13,060.92 applicable to the Former
Forum Systems Space and $11,336.49 applicable to the Former APCD Space. Until
the Commencement Date for the Former APCD Space, the $11,336.49 shall
constitute a rental deposit and shall be placed by Lessor into an
interest-bearing account at a commercial bank of Lessor’s choosing, with the
interest therefrom accruing to the benefit of Lessee. Upon the Commencement
Date for the Former APCD Space, said deposit shall serve as a security deposit
for the Former APCD Space, shall be removed from said interest-bearing account,
and shall no longer bear interest payable to Lessee.

 

5.1                                 Materials Storage Restrictions. The fire protection system planned for
Santa Barbara Tech Center was National Fire Protection Association Standards,
Pamphlet No. 13 and No. 231.  Such
standards allow for the stacking of Class III or less combustibles up to 18
feet high on floor pallets or in single row metal racks. All stacking is
limited to 12 feet high if Class IV combustibles are present unless such Class
IV combustibles are segregated in a separate room or rooms in accordance with
applicable codes and stacked not in excess of 12 feet high. Lessee agrees to
conduct its business so as not to violate or exceed the design standards of the
fire protection system or any insurance policies maintained by Lessor pursuant
to Article 7.

 

5.1.1                        Hazardous Substances. Any toxic or hazardous substances,
pollutants or contaminants (hereinafter sometimes referred to as “materials”)
shall be handled or disposed of as

 

2

 

directed
by applicable State, Federal, County and City regulations. Lessee shall handle,
store, or dispose of such materials in a careful and prudent manner. At the
termination of the Lease, or any option period thereof, Lessee shall fully
clean the Premises in such a manner that no residue of such materials shall
remain on the Premises. Lessee shall notify the appropriate governmental
authority of the presence and amount of any such materials, and shall comply
with all conditions imposed by such authority. Lessee shall contact the
appropriate governmental authority prior to occupancy to determine the
existence of any records for the Building and/or Premises. Specifically, thirty
(30) days prior to occupancy, Lessee shall submit a Hazardous Materials
Management Plan (“HMMP”) and a Hazardous Materials Floorplan (“HMF”) to Lessor
and the appropriate governmental authority for approval.  These plans shall be attached in full to this
Lease.

 

The
HMMP shall include the following:

 

1.                                       The company name, address, and contact
person.

2.                                       General facility description with map showing
location of all buildings and structures.

3.                                       Facility hazardous material storage map
showing the location of each proposed hazardous material storage area and
access to such facilities. The map shall be updated annually by the occupant
and submitted by January lst each year.

4.                                       A floorplan showing the location of each
hazardous material storage area, storage area access, and the location of
emergency equipment.

 

The HMF shall include the following:

 

1.                                       Hazardous Materials Handling Report
describing the safe handling of hazardous materials to prevent accidents.

2.                                       Separation of Hazardous Material Report
outlining the methods to be utilized to ensure separation and protection of
hazardous materials from such factors that could cause fire, explosion, spills,
etc.

3.                                       Inspection and Record Keeping Plan indicating
the procedures for inspecting each storage facility. An authorized record of
inspection shall be maintained by the Lessee.

4.                                       Employee Training Program to ensure that
employees know how to safely handle hazardous materials.

5.                                       Hazardous Materials Contingency that clearly
describes appropriate response procedures and measures in case of an accident.

6.                                       A floorplan identifying the location and
quantity of each hazardous material, including the chemical name and quantity
limit for each class.

 

Lessee
shall indemnify, defend and hold Lessor and its officers, employees and agents
harmless from any claims, judgments, damages, penalties, fines, costs,
liabilities and losses, including attorneys’ fees, which arise during or after
the term of this Lease from or in connection with the presence of toxic or
hazardous substances, pollutants or contaminants in the soil or groundwater on
or under the Premises, or from or in connection with the bringing onto the
Premises, handling or storing any toxic or hazardous substances, pollutants or
contaminants, but only to the extent such toxic or hazardous substances,
pollutants or contaminants are present as a result

 

3

 

of
actions of Lessee, its officers, employees or agents. Except to the extent
described in the preceding sentence, Lessor agrees to indemnify, defend, and
hold Lessee and its officers, employees, and agents harmless from any claim,
judgments, damages, penalties, fines, costs, liabilities and losses, including
attorneys’ fees, which arise before, during or after the term of this Lease
from or in connection with the presence of toxic or hazardous substances,
pollutants or contaminants in the soil or groundwater on or under the Premises.
The terms “toxic or hazardous substances” and “pollutants or contaminants” as
utilized in this clause shall have the meaning as defined in the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended.

 

7.6                                 Waiver of Subrogation. 
Lessee and Lessor each hereby waive any and all rights of recovery
against the other, or against the officers, employees, agents and
representatives of the other, for loss of or damage to such waiving party or
its property or the property of others under its control to the extent that
such loss or damage is insured against under any valid and collectible insurance
policy in force at the time of such loss or damages. Lessee shall, upon
obtaining the policies of insurance required hereunder, give notice to the
insurance carrier or carriers that the foregoing mutual waiver of subrogation
is contained in this Lease.

 

7.7.                              Mutual Indemnification. To the fullest extent permitted by law, the
parties hereto shall each defend, indemnify and hold harmless one another from
and against any and all claims arising from the indemnifying party’s use of the
Premises, the building or the common areas, or the conduct of its business or
from any activity, work or thing done, permitted or suffered by the
indemnifying party, its agents, contractors, employees or invitees in or about
the Premises, the building or the common areas, and shall further indemnify and
hold harmless one another from and against any and all claims arising from any
breach or default in the performance of any obligation on the indemnifying
party’s part to be performed hereunder or arising from any act, neglect, fault
or omission of such indemnifying party or of its agents, employees, or invitees
and from and against all costs, attorneys’ fees, expenses and liabilities
incurred in or about such claim or any action or proceeding brought thereon. In
case any action or proceeding be brought against one party by reasons of any
such claim, the other party, upon notice from the first, shall defend the same
at the other’s expense by counsel reasonably acceptable to the first party.

 

12.3                           Lender’s Notice and Cure. 
Copies of any notice required per Article 12.3 shall also be sent to
Lender. The Lender should have thirty (30) days to effect a cure beyond the
30-day cure period granted to the Lessor under Article 12.3. If the default is
not one which is capable of cure within the Lender’s 30-day cure period, the
Lessor shall not be in default if Lender commences such cure within the 30-day
period and thereafter diligently prosecutes the same to completion.

 

19.1(a)             Estoppel. Attached as Exhibit E is the form of tenant estoppel certificate
required by Lessor’s current Lender. Lessee agrees as part of the initial
signing of the Lease and whenever requested in accordance with Article 19.1 to
deliver to Lessor or Lender a fully executed tenant estoppel certificate in the
form of Exhibit E.

 

19.1(c)             If Lessor desires to finance, or refinance
the Premises, or any part thereof, Lessee shall deliver directly to

 

4

 

any
lender, bank or financial institution designated by Lessor Lessee’s most recent
Form l0k documents filed with the Securities & Exchange Commission.

 

19.17                     Subject to compliance with all other
provisions of this Section 19.17, Lessee shall have the right to install
signage on the building comparable in location, size and quality (as determined
by Lessor) with that of the “Forum Systems” signage currently in place on the
Building. Lessee’s signage will be in full compliance with all governmental
requirements. Lessee further agrees to maintain any approved signs in good
condition or repair at all times. Lessee shall not place any sign on a vehicle
or movable or non-movable object in or on any street adjacent to the Premises.

 

19.20                     Lessee may prepare a memorandum of lease
which shall be signed by Lessor, provided said memorandum meets with Lessor’s
approval, which will not be unreasonably withheld.  Lessee may record said memorandum of lease
with the Santa Barbara County Recorder, provided a conformed copy is furnished
to Lessor. Lessee shall be responsible for all costs in preparing and recording
the memorandum of lease.

 

19.22                     As an exception to the provisions of Section
19.22, Lessee consents to the disclosure of the terms of this Lease to any
lender, bank or financial institution designated by Lessor, and Lessor consents
to the disclosure of the terms of this Lease to the Securities and Exchange
Commission (SEC) if required as part of any reports which Lessee must provide
to the SEC.

 

19.24                     Meaning. The provisions and language of this Agreement shall be interpreted in
accordance with the plain meaning thereof and shall not be construed for or
against any of the parties hereto, as all parties have participated in, and
have approved, the drafting of this document.

 

20.5.1                  Lessor shall construct, at Lessor’s sole cost
and expense, the following improvements to the Premises:

 

(a)                                  A private, secure “front approach” entrance
to the Premises utilizing the present lobby, comparable to the design depicted
on the attached Exhibit “D”;

 

(b)                                 Semi-gloss paint on all interior walls;

 

(c)                                  Office demising walls as depicted on the
attached Exhibit “A”.

 

The
estimated cost of $66,000.00 to accomplish such improvements shall be
contributed by Forum Systems, Inc., in the sum of $56,000.00 and by Lessor in
the sum of $10,000.00.

 

In
addition, Lessor will provide to Lessee prior to tender of possession of the
Premises a report prepared by a qualified air conditioning maintenance firm
demonstrating that the air conditioning system for the Premises is in good
order and repair.

 

20.6                           Lessee shall receive the Premises in an “as
is” condition, including the existence of nails and screws inserted into the
walls by a prior lessee of the Premises. All existing electrical power and
other utilities will be in good working condition upon tender of possession of
the Premises by Lessor to Lessee.

 

5

 

20.7                           Punchlist.  Lessee shall have a “walk-through”
with Lessor and Lessor’s architect, upon substantial completion of Lessee’s
improvements in the Premises, in order to ascertain whether such improvements
comply with the improvement plans and specifications (“Plans”). In the event
Lessee determines that the improvements do not comply with the plans, then a “punch
list” will be prepared by Lessee within five (5) days of said “walk-through,”
indicating such deviations. Lessor shall correct those items reasonably noted
by Lessee to be not in substantial compliance with the plans. Lessee may not
withhold acceptance of the Premises except for deviations from the Plans which
substantially interfere with Lessee’s utilization of the Premises. Punchlist
items of a minor nature shall not delay delivery of possession of the Premises
from Lessor to Lessee. If no conditions noted on the punchlist—either in an
unrepaired form or through the likely course of repair—substantially interfere
with Lessee’s utilization of the Premises, Lessee shall sign off the punchlist
and Lessor may offer written tender of possession pursuant to Section 2.1(b)
hereof. If Lessee determines, using commercially reasonable standards, that the
conditions noted would substantially interfere with Lessee’s utilization of the
Premises, Lessee may withhold signing off on such punchlist items until after
their correction by Lessor. If the punchlist is not so provided, Lessee shall
be deemed to have accepted the Premises and Building “as is”, subject to the
provisions of Section 18.4 hereof.

 

In
the event Lessee and Lessor cannot agree upon whether or not the items on the
punchlist reflect a non-compliance with the plans, then the compliance or
non-compliance with the plans shall be determined by a neutral arbitrator (who
shall be an architect) in accordance with the commercial rules of the American
Arbitration Association.

 

6

 

SECOND AMENDMENT OF LEASE

 

THIS
SECOND AMENDMENT OF LEASE is made and entered into on May        ,
1996, between EKWILL PARTNERS, Ltd., a California limited Partnership (“Lessor”)
and McGHAN MEDICAL CORPORATION, a California corporation (“Lessee”).

 

RECITALS:

 

A.                                   Lessor and Lessee entered into a Lease dated
for reference May 23, 1989 (the “Lease”) pursuant to which Lessor leased to
Lessee and Lessee hired from Lessor 27,992 sq.ft. (the “Premises”) on the first
and second floors of the building commonly known as 5540 Ekwill Street, Santa
Barbara, California (the “Building”),

 

B.                                     The Lease was amended by a First Amendment of
Lease dated for reference August 20, 1992 (the “First Amendment”).

 

C.                                     The term of the Lease, as amended, expires
July 31, 1996.

 

D.                                    The Lease grants Lessee an option to extend
the term for an additional period of 7 years. The parties have agreed to delete
this option right in consideration of Lessee’s agreement to lease the Premises
for an additional period of 10 years commencing August 1, 1996.

 

E.                                      The parties desire to memorialize the
extension of the term of the Lease, as amended.

 

NOW,
THEREFORE, in consideration of the premises described above, and other good and
valuable consideration, the parties agree as follows:

 

1.                                       INCORPORATION OF RECITALS

 

The
recitals set forth above are incorporated herein as if fully set forth at this
point.

 

2.                                       EXTENSION OF TERM

 

Lessee
agrees to lease the Premises for a 10-year period commencing August 1, 1996,
and expiring July 31, 2006. Lessee acknowledges that it has accepted and
currently is in possession of the Premises.

 

1

 

3.                                       RENT

 

The
Initial Annual Rent for the Premises during the extended term shall be
$382,930.56, payable in equal monthly installments of $31,910.88 commencing
August 1, 1996, and commencing monthly thereafter.

 

Effective
January 1, 1997, and effective January 1 of each subsequent year during the
extended term, the Initial Annual Rent shall be adjusted as provided in Section
3.5. of the Lease. The rental adjustment effective January 1, 1997, shall be
based upon the change in the Index for the full prior 12 months.

 

4.                                       ADDITIONAL RENT

 

In
addition to the Initial Annual Rent, Lessee shall pay the Additional Rent as
provided in Section 3.2 of the Lease. For purposes of Article 3 of the Lease,
Lessee’s Building Percentage is 66.12% and Lessee’s Common Area Percentage is
33.06%. Lessee shall continue to pay 49% of the electrical charges for common
meter shared by Lessee and EG&G.

 

5.                                       SECURITY DEPOSIT

 

On
or before August 1, 1996, Lessee shall deliver to Lessor cash in an amount
sufficient to increase the total security deposit held by Lessor to $31,910.88.
The increased security deposit shall be used, applied, and retained by Lessor
on the terms and conditions described in the Lease.

 

6.                                       FURTHER AMENDMENTS TO LEASE

 

Article
20 of the Lease is deleted in its entirety.

 

Paragraphs
1, 2.1, 2.3, 3.1, 3.4(a), 3.4(c), 3.5, 4, 20.5.1, 20.6, and 20.7 of the Addenda
to the Lease are deleted in their entirety.

 

7.                                       FIRST RIGHT TO LEASE ADDITIONAL SPACE

 

In
the event that additional space within the Building (the “Additional Space”)
shall become available during the term of this Lease and Lessee is not then in
default under the terms of this Lease or the 5520 Lease (described below),
Lessor shall give Lessee written notice of Lessee’s first right to lease such
Additional Space.  The Notice from Lessor
shall describe the Additional Space, including any

 

2

 

unique
features thereof, and the date upon which the lease for the Additional Space
will commence. The lease for the Additional Space shall commence upon the date
that the Additional Space is first available for occupancy and shall continue
for a term coincidental with the term of this Lease.  The terms and conditions of the lease for the
Additional Space shall be the same as the terms of this Lease, including
without limitation the per square foot rental payable hereunder and the
obligation of the Lessee to pay Additional Rent. Rental adjustments for the
lease for the Additional Space shall be made to coincide with rental
adjustments under this Lease. The lease of the Additional Space shall be
strictly on an “AS IS” basis, and Lessor shall have no obligation to make any
changes, alterations, modifications or repairs whatsoever to the Additional
Space.

 

Lessee
shall have 10 business days from the date of receipt of Lessor’s written notice
to agree to lease the Additional Space. Lessee’s election to lease the Additional
Space shall only be effective if its written agreement to lease is received by
Lessor within said time period and is accompanied by a check in an amount equal
to the full first month’s rent plus a security deposit of one month’s rent
(collectively the “Additional Space Deposit”). In the event Lessee fails to
give timely written notice to Lessor of its agreement to lease the Additional
Space together with the required Additional Space Deposit, Lessee’s rights
hereunder shall terminate and Lessor shall be free to lease or otherwise treat
the Additional Space as it sees fit. Upon receipt of Lessee’s agreement to
lease the Additional Space and the Additional Space Deposit, Lessor shall
prepare an amendment to this Lease and deliver it to Lessee. Lessee shall
execute and return the amendment to Lessor within 10 business days of receipt.

 

8.                                       5520 LEASE

 

Concurrently
with execution of this Second Amendment to Lease, Lessee has executed a Lease
with Lessor for certain space in an adjacent building at 5520 Ekwill Street,
Santa Barbara, California (the “5520 Lease”). Any default by the Lessee under
the 5520 Lease shall constitute a default under the terms of this Lease, as
amended.

 

3

 

9.                                       NO FURTHER CHANGES

 

Except
as expressly modified and amended herein, all of the terms and provisions of
the Lease, as modified by the First Amendment, are hereby ratified and
approved.

 

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

 

 

	
  LESSOR:

  	
  EKWILL
  PARTNERS, LTD., a California limited

  
	
   

  	
  partnership

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ JEFFREY C. BERMANT

  
	
   

  	
   

  	
  Jeffrey C. Bermant,

  
	
   

  	
   

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  130 Cremona Drive, Suite D

  
	
   

  	
   

  	
  Goleta, CA 93117

  
	
   

  	
   

  
	
   

  	
   

  
	
  LESSEE:

  	
  McGHAN
  MEDICAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ DONALD K. MCGHAN

  
	
   

  	
   

  	
  Donald K. McGhan,

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5540 Ekwill Street

  
	
   

  	
   

  	
  Santa Barbara, CA 93111

  

 

4

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