Document:

Exhibit
10.13

 

CHANGE OF CONTROL
AGREEMENT

________________________________________________________________________________________________________

                This Change of Control Agreement
(the “Agreement”) is made and entered into effective as of ____________________,
by and between ___________________ (“Employee”) and Integrated Device
Technology, Inc., a Delaware corporation (the “Company”).

 

RECITALS

 

                The parties hereto
understand from time to time it is possible that another entity may consider
acquiring the Company or a change in control may otherwise occur, with or
without the approval of the Company’s Board of Directors (the “Board”); and

 

                The Board
recognizes that such considerations can be a distraction to Employee and can
cause Employee to consider alternative employment opportunities; and

 

                The Board has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication and objectivity
of Employee, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined below) of the Company; and

 

                The Board believes
that it is in the best interests of the Company and its shareholders to provide
Employee with an incentive to continue his or her employment with the Company;
and

 

                The Board believes
that it is imperative to provide Employee with certain benefits upon a Change
of Control and, under certain circumstances, upon termination of Employee’s
employment in connection with a Change of Control, which benefits are intended
to provide Employee with financial security and provide sufficient income and
encouragement to Employee to remain with the Company notwithstanding the
possibility of a Change of Control.

 

                To accomplish the
foregoing objectives, the Board of Directors has directed the Company, upon execution
of this Agreement by Employee, to agree to the terms provided in this
Agreement.

 

                In
consideration of the mutual covenants herein contained, and in consideration of
the continuing employment of Employee by the Company, the parties agree as
follows:

 

1.               At-Will Employment.  The Company
and Employee acknowledge that, the Employee’s employment is and shall continue
to be at-will, as defined under applicable law.  If Employee’s employment terminates for any reason, including
(without limitation) any termination prior to a Change of Control, the Employee
shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, the terms of certain
Board resolutions and agreements issued to Employee with respect to the grant
of stock options for the Company’s securities (as described below) and the
Company’s established employee plans and written policies at the time of
termination.  The terms of this 

 

1

 

Agreement shall terminate upon the date that all
obligations of the parties hereunder have been satisfied.  A termination of the terms of this Agreement
pursuant to the preceding sentence shall be effective for all purposes, except
that such termination shall not affect the payment or provision of compensation
or benefits on account of a termination of employment occurring prior to the
termination of the terms of this Agreement.

 

2.               Restricted Stock and Stock Options. 
Subject to Section 6 below, in the event of a Change of Control and
regardless of whether an Employee’s employment with the Company is terminated
in connection with the Change of Control, the vesting schedule for each
unvested share of Common Stock or option to purchase Common Stock held by such
Employee (collectively referred to as the “Shares”) shall be accelerated by two
(2) years.  Thereafter, so long as
Employee remains employed by the Company (or a successor entity), the remaining
Shares that have not otherwise vested as of the Change of Control shall vest
over the remaining vesting term (after taking into account the 2 year
acceleration) applicable to the Shares. 
Each stock option shall be exercisable to the extent so vested in
accordance with the provisions of the option agreement and Plan pursuant to
which such option was granted and each share of restricted stock shall be
freely transferable to the extent so vested in accordance with the provisions
of the agreement pursuant to which such stock was purchased by Employee.

 

3.               Change of Control.

 

3.1.           Termination Following a Change of Control. 
If Employee’s employment with the Company is terminated at any time
within two (2) years after a Change of Control, then Employee shall be entitled
to receive severance benefits as follows:

 

3.1.1.       Voluntary Resignation.  If Employee
voluntarily resigns from the Company (other than as an Involuntary Termination
(as defined below)), then Employee shall not be entitled to receive severance
benefits under this Agreement. 
Employee’s benefits will be terminated under the Company’s then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination.

 

3.1.2.       Involuntary Termination. 
If Employee’s employment is terminated as a result of an Involuntary Termination
other than for Cause, Employee shall be entitled to receive the following
severance benefits: (i) a lump sum severance payment consisting of (a) twelve
(12) months (the “Severance Period”) of the monthly salary which Employee was
receiving immediately prior to the Change of Control and (b) Employee’s “target
bonus” prorated over the Severance Period, with such payment being made on the
termination date; (ii) a prorated amount of Employee’s “target bonus” for the
fiscal year in which the termination occurs (or for the prior fiscal year if a
target bonus has not yet been determined for the fiscal year in which the
termination occurs), calculated based on the number of months during such
fiscal year in which Employee was employed by the Company (or a successor
corporation), with such payment being made on the termination date; (iii)
continuation of all medical, dental, vision and life insurance benefits through
the end of the Severance Period 

 

2

 

substantially identical to those to which Employee was
entitled immediately prior to the Change of Control; and (iv) outplacement
services actually incurred and payable to a third party service provider with a
total value not to exceed $15,000.  For
purposes of this Agreement, the term “target bonus” shall mean that percentage
of Employee’s base salary that is prescribed by the Company under its Annual
Executive Performance Bonus Plan (or successor plan) as the percentage of such
base salary payable to Employee as a bonus if the Company pays bonuses at
one-hundred percent (100%) of its operating plan.

 

3.1.3.       Involuntary Termination for Cause. 
If Employee’s employment is terminated for Cause (as defined below),
then Employee shall not be entitled to receive severance benefits under this
Agreement.  Employee’s benefits will be terminated
under the Company’s then existing benefit plans and policies in accordance with
such plans and policies in effect on the date of termination.

 

3.2.            Termination Apart from Change of Control.  In the event Employee’s employment
terminates for any reason, either prior to the occurrence of a Change of
Control or after the two year period following the effective date of a Change
of Control, then Employee shall not be entitled to receive severance benefits
under this Agreement.  Employee’s
benefits will be terminated in accordance with such plans and policies in
effect on the date of termination.

 

4.               Definition of Terms.  The following
terms referred to in this Agreement shall have the following meanings:

 

4.1.           Change of Control.  “Change of
Control” shall mean the occurrence of any of the following events:

 

4.1.1.       Ownership.  Any “Person”
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) is or becomes the “Beneficial Owner” (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power
represented by the Company’s then outstanding voting securities (or convertible
under any circumstances into such securities);

 

4.1.2.       Merger/Sale of Assets.  A merger or
consolidation of the Company whether or not approved by the Board of Directors
of the Company, other than a merger or consolidation in which the voting
securities of the Company outstanding immediately prior to the transaction
continue to represent at least fifty percent (50%) of the total voting power of
the Company or such surviving entity immediately after such merger or
consolidation;

 

4.1.3.       Sale of Assets, Liquidation. 
Entering into an agreement for the sale or disposition by the Company of
all or substantially all of the Company’s assets or the shareholders of the
Company approve a plan of complete liquidation of the 

 

3

 

Company in connection with an agreement for the sale
or disposition by the Company of all or substantially all of the Company’s
assets; or

 

4.1.4.        Change in Board Composition.  A change in the composition of the Board of
Directors of the Company, as a result of which fewer than a majority of the
directors are Incumbent Directors. 
“Incumbent Directors” shall mean directors who either (A) are directors
of the Company as of the date of this Agreement or (B) are elected, or
nominated for election, to the Board of Directors of the Company with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company).

 

4.1.5.       In no event shall a spin-off of less than
substantially all of the assets of the Company constitute a Change of Control
for purposes of this Agreement.

 

4.2.           Cause.  “Cause” shall
mean (i) gross negligence or willful misconduct in the performance of an
Employee’s duties to the Company where such gross negligence or willful
misconduct has resulted or is likely to result in substantial and material
damage to the Company or its subsidiaries, (ii) repeated unexplained or
unjustified absence from the Company, (iii) a material and willful violation of
any federal or state law; (iv) commission of any act of fraud with respect to
the Company; or (v) conviction of a felony or a crime involving moral turpitude
causing material harm to the standing and reputation of the Company, in each
case as determined in good faith by the Board of Directors of the Company.

 

4.3.           Involuntary Termination. 
“Involuntary Termination” shall include any termination by the Company
other than for Cause and Employee’s voluntary termination, following (i) a
material reduction or change in job duties, responsibilities and requirements
inconsistent with Employee’s position with the Company and Employee’s duties,
responsibilities and requirements as in effect immediately prior to the Change
of Control; (ii) any reduction of Employee’s base compensation or target bonus;
or (iii) Employee’s refusal to relocate to a facility or location more than 50
miles from the Company’s current location.

 

5.               Tax Liability on Payments. 
Notwithstanding anything contained in this Agreement to the contrary, in
the event that the vesting of the options upon a Change of Control together
with all other payments and the value of any benefit received or to be received
by Employee would result in all or a portion of such payment to be subject to
excise tax under Section 4999 of the Internal Revenue Code, then Employee’s
payment shall be either (A) the full payment or (B) such lesser amount which
would result in no portion of the payment being subject to excise tax under
Section 4999 of the Internal Revenue Code, whichever of the foregoing amounts,
taking into account the applicable Federal, state, and local employment taxes,
income taxes, and the excise tax imposed by Section 4999 of the Internal
Revenue Code, results in the receipt by the Employee, on an after-tax basis, of
the greatest amount of the payment notwithstanding that all or some portion of
the payment may be taxable under Section 4999 

 

4

 

of the Internal Revenue Code; provided, however, that
Employee will be entitled to receive the full payment only if the excess of (C)
the “parachute payments” as defined in Section 280G(b)(2) of the Code, over (D)
2.99 times Employee’s “base amount” as defined in Section 280G(b)(3) of the
Code exceeds the sum of (X) the greater of (i) $100,000 or (ii) ten (10)
percent of the payments under this agreement plus (Y) the excise tax imposed
under Section 4999 of the Code, plus (Z) the applicable Federal, state, and
local employment taxes and income taxes imposed on the excess of (i) the
“parachute payments” as defined in Section 280G(b)(2) of the Code, over (ii)
2.99 times Employee’s “base amount” as defined in Section 280G(b)(3) of the
Code.  All determinations required to be
made under this Paragraph 5 shall be made by Company’s independent certified
public accountants serving immediately prior to the Change of Control (the
“Accounting Firm”).  Company shall cause
the Accounting Firm to provide detailed supporting calculations of its
determinations to Company and Employee. 
Notice must be given to the Accounting Firm within fifteen (15) business
days after an event entitling Employee to a payment under this Agreement.  All fees and expenses of the Accounting Firm
shall be borne solely by Company.

 

6.               Certain Business Combinations.

 

6.1             Preclusion of Pooling.  In the event
of receipt of written notification from the Securities and Exchange Commission
that the enforcement of any agreement between Employee and the Company which
allows for the acceleration of vesting of stock and/or stock options upon the
effective date of a Change in Control would preclude accounting for any
proposed business combination as a pooling of interests, and the Board
otherwise desires to approve such a proposed business transaction which
requires that it be accounted for as a pooling of interests, then any such
section of this Agreement shall be null and void.  For purposes of this Section, the Board’s determination shall
require the unanimous approval of the non-employee Board members.

 

6.2             Re-measurement of Stock Option. 
In the event the Securities and Exchange Commission determines that this
Agreement requires the Company to re-measure the price of Employee’s Shares for
any reason other than upon a Change of Control, this Agreement shall be null
and void.

 

6.3             Reserved.

 

 

 

 

7.               Confidentiality.  Employee agrees
that Employee will not, without compulsion of legal process, reveal directly or
indirectly any of the terms of this Agreement to any person or entity except in
confidence to those individuals or entities to whom the disclosure is necessary
to effect the purposes of this Agreement.

 

8.               Successors.  Any successor
to the Company (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially all of

 

5

 

the Company’s business and/or assets shall assume the
obligations under this Agreement and agree expressly to perform the obligations
under this Agreement in the same manner and to the same extent as the Company
would be required to perform such obligations in the absence of a
succession.  The terms of this Agreement
and all of Employee’s rights hereunder shall inure to the benefit of, and be
enforceable by, each Employee’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.

 

9.               Notice.  Notices and
all other communications contemplated by this Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered or when
mailed by U.S. certified mail, return receipt requested and postage
prepaid.  Mailed notices to Employee
shall be addressed to Employee at the home address Employee most recently
communicated to the Company in writing. 
In the case of the Company, mailed notices shall be addressed to its
corporate headquarters, and all notices shall be directed to the attention of
its General Counsel.

 

10.         Miscellaneous Provisions.

 

10.1.     No Duty to Mitigate.  Employee
shall not be required to mitigate the amount of any payment contemplated by
this Agreement (whether by seeking new employment or in any other manner), nor,
except as otherwise provided in this Agreement, shall any such payment be
reduced by any earnings that Employee may receive from any other source.

 

10.2.     Waiver.  No provision
of this Agreement shall be modified, waived or discharged as to Employee unless
the modification, waiver or discharge is agreed to in writing and signed by
Employee and by an authorized officer of the Company (other than
Employee).  No waiver by either party of
any breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.

 

10.3.     Whole Agreement.  No
agreements, representations or understandings which are not expressly set forth
in this Agreement have been made or entered into by either party with respect
to the subject matter hereof.  This
Agreement supersedes any agreement of the same title and concerning similar
subject matter dated prior to the date of this Agreement, and by execution of
this Agreement both parties agree that any such predecessor agreement shall be
deemed null and void.

 

10.4.     Choice of Law.  The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of California, excluding conflict-of-law
principles that would cause the application of the laws of any other
jurisdiction.

 

10.5.     Severability. If any term or provision of this Agreement be
invalid or unenforceable, such term or provision shall be ineffective to the
extent of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining terms and provisions of this Agreement, and a
suitable and equitable term or provision shall be 

 

6

 

	
   

  	
   

  	
  substituted therefor to carry out, insofar as may be
  valid and enforceable, the intent and purpose of the invalid or unenforceable
  term or provision.

  
	
   

  	
   

  	
   

  
	
  10.6.

  	
   

  	
  Arbitration.  Any
  dispute or controversy arising under or in connection with this Agreement may
  be settled at the option of either party by binding arbitration before a
  single arbitrator in the County of Santa Clara, California, in accordance
  with the rules of the American Arbitration Association then in effect.  Judgment may be entered on the
  arbitrator’s award in any court having jurisdiction.  In no event shall incidental,
  consequential or punitive damages be awarded to either party.

  
	
   

  	
   

  	
   

  
	
  10.7.

  	
   

  	
  Legal Fees and Expenses. 
  The parties shall each bear their own expenses, legal fees and other
  fees incurred in connection with this Agreement.

  
	
   

  	
   

  	
   

  
	
  10.8.

  	
   

  	
  No Assignment of Benefits. 
  The rights of any person to payments or benefits under this Agreement
  shall not be made subject to option or assignment, either by voluntary or
  involuntary assignment or by operation of law, including (without limitation)
  bankruptcy, garnishment, attachment or other creditor’s process, and any
  action in violation of this subsection shall be void.

  
	
   

  	
   

  	
   

  
	
  10.9.

  	
   

  	
  Employment Taxes.  All
  payments made pursuant to this Agreement will be subject to withholding of applicable
  income and employment taxes.

  
	
   

  	
   

  	
   

  
	
  10.10.

  	
   

  	
  Assignment by Company. The Company may assign its rights under this
  Agreement to an affiliate, and an affiliate may assign its rights under this
  Agreement to another affiliate of the Company or to the Company; provided,
  however, that no assignment shall be made if the tangible assets of the
  assignee are less than $100 million at the time of assignment.  In the case of any such assignment, the
  term “Company” when used in a section of this Agreement shall mean the
  corporation that actually employs Employee.

  
	
   

  	
   

  	
   

  
	
  10.11.

  	
   

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

  

 

                IN WITNESS WHEREOF, each of the
parties has executed this Agreement, in the case of the Company by its duly
authorized officer, as of the day and year first above written.

 

	
  Integrated Device Technology, Inc.

  	
   

  	
  Employee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Greg S. Lang

  	
   

  	
   

  
	
  President and Chief Executive Officer

  	
   

  	
   

  

 

 

7Exhibit 10.14

 

LEASE AGREEMENT

(triple net)

Basic Lease Information

 

 

	
  Lease Date:

  	
  December 10, 2002

  
	
   

  	
   

  
	
  Landlord:

  	
  LaGuardia Associates, a
  general partnership

  
	
   

  	
   

  
	
  Landlord’s Address:

  	
  c/o Quadrangle
  Investments

  
	
   

  	
  Attn: Sam Kobrinsky

  
	
   

  	
  295 South Main St. Fifth
  Floor

  
	
   

  	
  Salinas, CA 93901

  
	
   

  	
   

  
	
  Tenant:

  	
  Integrated Device
  Technology, Inc., a corporation

  
	
   

  	
   

  
	
  Tenant’s Address:

  	
  Integrated Device
  Technology, Inc.

  
	
   

  	
  Attn: Jim Laufman

  
	
   

  	
  2975 Stender Way, M/S
  C7-001

  
	
   

  	
  Santa Clara, CA 95054

  
	
   

  	
   

  
	
  Premises, Building

  	
   

  
	
  and Lot:

  	
  The Premises are
  approximately 33,600 rentable square feet of space inside The Building, of
  equal square footage, located on the Lot, which is commonly known as 710
  LaGuardia Street, Salinas, California, all of which are shown on Exhibit A
  and incorporated herein by reference.

  
	
   

  	
   

  
	
  Term:

  	
  Ten years.  The term of this Lease Agreement shall
  commence upon the Commencement Date, and expire on the tenth anniversary of
  said Commencement Date (“Expiration Date”). 
  The estimated Commencement Date is December 1, 2003.  The “Commencement Date” shall be the date
  that is ten (10) days after all of the following have occurred:  (i) Landlord shall have completed
  construction of the Building, the Leasehold Improvements and all exterior
  improvements on the Lot, including, without limitation, the parking areas,
  driveways, sidewalks, and entranceways into the Building (collectively,
  “Exterior Improvements”), except for punch list items that will not interfere
  with Tenant’s use or occupancy of the Premises or the conduct of Tenant’s
  business; (ii) Landlord’s architect has given Tenant written certification
  that the Building, Leasehold Improvements and Exterior Improvements have been
  completed in accordance with the Final Plans and Specifications therefore
  approved by Tenant pursuant to Exhibit B attached hereto; and (iii) the City
  of Salinas has conducted a final inspection of the Building, Leasehold
  Improvements and Exterior Improvements and approved such work.  Landlord shall give Tenant not less than
  ten (10) days prior written notice of the anticipated Commencement Date.

  
	
   

  	
   

  
	
  Base Rent (Sec 3):

  	
  The initial Base Rent for
  the first year of this Lease Agreement shall be Thirty-Six Thousand Nine
  Hundred Sixty Dollars ($36,960.00) per month.  The first month of Base Rent shall be paid to Landlord upon the
  execution of this Lease Agreement. 
  The second month of Base Rent shall be paid to Landlord thirty days
  after the Commencement Date, but shall be prorated to the end of the
  then-existing month so that the Base Rent shall then become due on the first
  day of each month thereafter. The Base Rent shall then be payable every
  thirty days thereafter during the term of this Lease Agreement, due on the
  first of each month.

  
	
   

  	
   

  
	
  Adjustments to

  	
   

  
	
  Base Rent:

  	
  The Base Rent for each
  year during the term of this Lease Agreement shall be increased, on each
  anniversary date of the Commencement Date (each such date an “Adjustment
  Date”), in an amount which is
  equal to the percentage increase in
  the All Urban Consumers - Consumer Price Index, (for San Francisco-Oakland-San
  Jose) (“CPI”).  The adjustment shall
  be made by multiplying the monthly Base Rent in effect as of the applicable
  Adjustment Date by a fraction, the numerator of which is the CPI for the
  month that is two months prior to the Adjustment Date and the denominator of
  which is the CPI for the month that is two months prior to the previous
  Adjustment Date or Commencement Date, as applicable, and the resulting
  product shall be the monthly Base Rent for the next twelve-month period.  However, in no event shall the increase in
  any given year be any less than two percent, nor any more than four percent.

  
	
   

  	
   

  
	
  Security Deposit (Sec 4.1):

  	
  Upon execution of this
  Lease Agreement Tenant shall pay to Landlord an amount equal to Thirty-Five
  Thousand Dollars ($35,000.00) as a security deposit for the performance of
  the terms of this Lease Agreement.

  
	
   

  	
   

  
	
  Permitted Uses (Sec 9):

  	
  The Premises, Building
  and Lot may be used for any lawful purpose, to the extent permitted by the
  City of Salinas, County of Monterey, and all agencies and governmental
  authorities having jurisdiction thereof.

  
	
   

  	
   

  
	
  Parking Spaces:

  	
  One Hundred Forty-Five
  (145) exclusive spaces.

  

 

1

 

	
  Broker (Sec 38):

  	
  Colliers International on
  behalf of the Tenant, and Leland B. Evans on behalf of the Landlord.

  
	
   

  	
   

  
	
  Exhibits:

  	
  Exhibit
  A - Premises, Building, and Lot

  
	
   

  	
  Exhibit
  B - Tenant Improvements

  
	
   

  	
  Exhibit
  C - Rules and Regulations

  
	
   

  	
  Exhibit
  D - Covenants, Conditions and Restrictions Intent

  
	
   

  	
  Exhibit
  E - Hazardous Materials Disclosure Certificate - Example

  
	
   

  	
  Exhibit
  F - Change of Commencement Date - Example

  

 

2

 

TABLE OF CONTENTS

 

	
  SECTION

  	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  PREMISES

  	
  4

  
	
  2.

  	
   

  	
  ADJUSTMENT
  OF COMMENCEMENT DATE; CONDITION OF THE PREMISES

  	
  4

  
	
  3.

  	
   

  	
  RENT

  	
  4

  
	
  4.

  	
   

  	
  SECURITY DEPOSIT

  	
  4

  
	
  5.

  	
   

  	
  LEASEHOLD
  IMPROVEMENTS

  	
  4

  
	
  6.

  	
   

  	
  ADDITIONAL RENT

  	
  4

  
	
  7.

  	
   

  	
  UTILITIES

  	
  6

  
	
  8.

  	
   

  	
  LATE CHARGES

  	
  6

  
	
  9.

  	
   

  	
  USE OF PREMISES

  	
  6

  
	
  10.

  	
   

  	
  ALTERATIONS
  AND ADDITIONS; AND SURRENDER OF PREMISES

  	
  7

  
	
  11. 

  	
   

  	
  REPAIRS AND MAINTENANCE

  	
  7

  
	
  12.

  	
   

  	
  INSURANCE

  	
  7

  
	
  13.

  	
   

  	
  WAIVER
  OF SUBROGATION

  	
  8

  
	
  14.

  	
   

  	
  INTENTIONALLY
  OMITTED

  	
  8

  
	
  15.

  	
   

  	
  ASSIGNMENT AND SUBLEASING

  	
  8

  
	
  16.

  	
   

  	
  AD VALOREM TAXES

  	
  9

  
	
  17

  	
   

  	
  SUBORDINATION

  	
  9

  
	
  18.

  	
   

  	
  RIGHT OF ENTRY

  	
  9

  
	
  19.

  	
   

  	
  ESTOPPEL
  CERTIFICATE

  	
  9

  
	
  20.

  	
   

  	
  TENANT’S DEFAULT

  	
  9

  
	
  21.

  	
   

  	
  REMEDIES FOR TENANT’S
  DEFAULT

  	
  10

  
	
  22.

  	
   

  	
  HOLDING OVER

  	
  10

  
	
  23.

  	
   

  	
  LANDLORD’S
  DEFAULT

  	
  11

  
	
  24.

  	
   

  	
  PARKING

  	
  11

  
	
  25.

  	
   

  	
  INTENTIONALLY
  OMITTED

  	
  11

  
	
  26.

  	
   

  	
  WAIVER 

  	
  11

  
	
  27.

  	
   

  	
  CASUALTY DAMAGE

  	
  11

  
	
  28.

  	
   

  	
  CONDEMNATION

  	
  11

  
	
  29.

  	
   

  	
  ENVIRONMENTAL
  MATTERS/HAZARDOUS MATERIALS

  	
  12

  
	
  30.

  	
   

  	
  INTENTIONALLY
  OMITTED

  	
  13

  
	
  31.

  	
   

  	
  GENERAL
  PROVISIONS

  	
  13

  
	
  32.

  	
   

  	
  SIGNS

  	
  14

  
	
  33.

  	
   

  	
  INTENTIONALLY
  OMITTED

  	
  14

  
	
  34.

  	
   

  	
  QUITCLAIM

  	
  14

  
	
  35.

  	
   

  	
  INTENTIONALLY
  OMITTED

  	
  14

  
	
  36.

  	
   

  	
  WARRANTIES
  OF TENANT

  	
  14

  
	
  37.

  	
   

  	
  COMPLIANCE
  WITH AMERICANS WITH DISABILITIES ACT

  	
  14

  
	
  38.

  	
   

  	
  BROKERAGE
  COMMISSION

  	
  14

  
	
  39. 

  	
   

  	
  QUIET ENJOYMENT

  	
  15

  
	
  40.

  	
   

  	
  LANDLORD’S
  ABILITY TO PERFORM TENANT’S UNPERFORMED OBLIGATIONS

  	
  15

  
	
  41.

  	
   

  	
  OPTION

  	
  15

  

 

3

 

LEASE AGREEMENT

 

	
  DATE:

  	
  This Lease is made and
  entered into as of the Lease Date set forth on Page 1. The Basic Lease
  Information set forth on Page I and this Lease are and shall be construed as
  a single instrument.

  

 

 

1.             Premises:  Landlord hereby leases the Premises,
Building and Lot to Tenant upon the terms and conditions contained herein.
Landlord and Tenant hereby agree that for purposes of this Lease, as of the
Lease Date, the rentable square footage area of the Premises shall be deemed to
be the number of rentable square feet as set forth in the Basic Lease
Information on Page 1.

 

2.             Adjustment
of Commencement Date; Condition of the Premises:

 

2.1          If Landlord cannot deliver possession of the Premises on
the estimated Commencement Date stated on Page 1, Landlord shall not be subject
to any liability nor shall the validity of the Lease be affected; provided, the
Commencement Date shall occur when all of the conditions to the Commencement
Date set forth on Page 1 have been satisfied, and the Expiration Date shall be
extended commensurately. Notwithstanding the foregoing, if the Commencement
Date has not occurred by December 1, 2003, then as compensation for Landlord’s
delay in delivery of the Premises, Tenant shall receive an abatement of Base
Rent for each day from and after December 1, 2003, until the Commencement Date,
which abatement shall apply to the Base Rent first becoming due under the
Lease.  In the event Landlord is unable
to deliver possession of the Premises, Building and Lot by a date no later than
the Final Completion Date as described in more detail in Exhibit B, Tenant
shall have the right to terminate this Lease and Landlord shall pay to Tenant
the amount of the security deposit and the first month’s rent, which Tenant has
paid to Landlord.  In the event the
Commencement Date and/or the Expiration Date of this Lease is other than the
estimated Commencement Date on Page 1, Landlord and Tenant shall execute a
written amendment to this Lease, substantially in the form of Exhibit F hereto,
wherein the parties shall specify the actual Commencement Date and Expiration
Date.  Tenant hereby acknowledges and
agrees that neither Landlord nor Landlord’s agents or representatives has made
any representations or warranties as to the suitability or fitness of the
Premises for the specific conduct of Tenant’s business, Tenant’s intended use
of the Premises or for any other purpose.

 

3.             Rent:  On
the date that Tenant executes this Lease, Tenant shall deliver to Landlord the
original executed Lease, the Base Rent (which shall be applied against the Base
Rent payable for the first month Tenant is required to pay Base Rent), and the
Security Deposit.  Prior to taking
possession of the Premises, Building and or Lot, Tenant shall provide to
Landlord all insurance certificates evidencing the insurance required to be
obtained by Tenant under Section 12 of this Lease. Tenant agrees to pay
Landlord, without prior notice or demand, or abatement, offset, deduction or
claim, except as specifically provided herein, the Base Rent described on Page
1, payable in advance at Landlord’s address shown on Page 1 on the first day of
each month throughout the Term of the Lease. In addition to the Base Rent set
forth on Page 1, Tenant shall pay Landlord in advance and on the first (1st) day
of each month throughout the Term of this Lease, as Additional Rent, all
Operating Expenses, Tax Expenses, and Utility Expenses.  The term “Rent” whenever used herein refers
to the aggregate of all these amounts. The Rent for any fractional part of a
calendar month at the commencement or termination of the Lease term shall be a
prorated amount of the Rent for a full calendar month based upon a thirty (30)
day month. The prorated Rent shall be paid on the Commencement Date and the
first day of the calendar month in which the date of termination occurs, as the
case may be.

 

4.             Security Deposit:  Upon Tenant’s execution of
this Lease, Tenant shall deliver to Landlord, as a Security Deposit for the
performance by Tenant of its obligations under this Lease, the amount described
on Page 1. If Tenant is in default beyond any applicable cure period under this
Lease, Landlord may, but without obligation to do so, use the Security Deposit,
or any portion thereof, to cure the default or to compensate Landlord for all
damages sustained by Landlord resulting from Tenant’s default. Tenant shall,
after ten (10) days written notice from Landlord, pay to Landlord a sum equal
to the portion of the Security Deposit so applied or used so as to replenish
the amount of the Security Deposit held to increase such deposit to the amount
initially deposited with Landlord. 
Within thirty (30) days after the termination of this Lease, Landlord
shall return the Security Deposit to Tenant, subject to the limitations of
California Civil Code Section 1950.7, and the terms of the Lease herein.   Landlord shall not be required to keep the
Security Deposit separate from other funds, and Tenant shall not be entitled to
interest on the Security Deposit. Tenant may not use the Security Deposit as a
credit, or as collateral for any debt other than the performance of this Lease
Agreement, or to otherwise offset any payments required hereunder, including,
but not limited to, Rent or any portion thereof.

 

5.             Leasehold Improvements: 
Landlord shall construct the improvements (“Leasehold Improvements”) on
the Lot in accordance with the terms, conditions, criteria and provisions set
forth in Exhibit B hereto. Tenant acknowledges that neither Landlord nor any of
Landlord’s agents, representatives or employees has made any representations as
to the suitability or fitness of the Premises for the conduct of Tenant’s
business, including without limitation, any storage incidental thereto, or for
any other purpose.  Neither Landlord nor
any of Landlord’s agents, representatives or employees has agreed to undertake
any construction, alterations or leasehold improvements, except as expressly
provided in Exhibit B to this Lease. 
Landlord warrants that Leasehold Improvements, Building and Lot will
comply with all applicable building codes and Americans with Disabilities Act
requirements as of the Commencement Date, and Landlord shall bear the costs of
said compliance up until that date.

 

6.             Additional Rent:  It
is intended by Landlord and Tenant that this Lease be a “triple net lease”. It
is the intention of Landlord and Tenant that the Base Rent and Additional Rent
payable by Tenant to Landlord during the entire term of this Lease Agreement
shall be net of all costs and expenses incurred in connection with or relating to
the Premises, Building and Lot, including, without limitation, in connection
with or relating to the operation, maintenance, management and repair of the
Premises, Building and or Lot, except as otherwise stated in this Lease
Agreement.  Except as otherwise stated
herein, Tenant shall be liable for any obligations or liabilities in connection
with or relating to the operation, maintenance, management and repair of the
Premises, Building and Lot during the term of this Lease Agreement, and except
as otherwise provided herein,   Tenant
shall pay all such costs or expenses before such costs or expenses become
delinquent. The costs and expenses specifically described herein and all other
sums, charges, costs and expenses, are to be paid by Tenant directly to the
third party service provider (collectively, “Additional Rent”).

 

6.1          Operating
Expenses: In addition to the Base Rent set forth in Section
3, Tenant shall pay all Operating 

 

4

 

Expenses as Additional Rent. The term
“Operating Expenses” as used herein shall mean the total amounts paid or
payable in connection with the maintenance, repair and operation of the
Premises, the Building and the Exterior Improvements.  These Operating Expenses may include, but are not limited to:

 

6.1.1                     Cost of repairs to, and
maintenance of, the roof on the Building;

 

6.1.2       Cost
of maintaining the outside paved area, interior lobbies, mezzanines, parking
areas, sidewalks, landscaping and similar areas and facilities;

 

6.1.3       Annual
cost of insurance insuring against fire and extended coverage (including, if
Landlord elects, “all risk” coverage) and all other insurance, including, but
not limited to, flood and/or surface water endorsements for the Premises,
Building, and Lot, rental value insurance against loss of Rent in an amount
equal to the amount of Rent for a period of at least one (1) year commencing on
the date of loss, and subject to the provisions of Section 27 below, any
deductible;

 

6.1.4       Cost of
modifications to the Premises, Building, and or Exterior Improvements
occasioned by any rules, laws or regulations effective subsequent to the date
on which the Tenant takes occupancy of the Premises, Building and  Lot; provided, however, any such
modifications or alterations shall be made by Landlord and the cost of such
modifications or alterations shall be amortized over the useful life of such
alteration or modification, and Tenant shall pay the monthly amortized portion
of such cost to Landlord as Additional Rent;

 

6.1.5       Cost
of preventative maintenance, and repair contracts including, but not limited
to, contracts for heating, ventilation and air conditioning systems;

 

6.1.6                     Cost of trash
or refuse collection;

 

6.1.7                     Cost of security and fire
protection services for the Premises, Building and or Lot; and

 

6.1.8       Cost of
supplies, equipment, rental equipment and other similar items used in the
operation and/or maintenance of the Premises, Building and or Lot.

 

6.2          Tax
Expenses:  In
addition to the Base Rent, Tenant shall pay all real property taxes applicable
to the land and improvements included within the Lot on which the Premises and
Building are situated and one hundred percent (100%) of all personal property
taxes now or hereafter assessed or levied against the Premises, Building, Lot
or Tenant’s personal property. Tenant shall also pay one hundred percent (100%)
of any increase in real property taxes attributable to any and all alterations,
Leasehold Improvements or other improvements of any kind, whatsoever placed in,
on or about the Premises, Building or Lot for the benefit of, at the request
of, or by Tenant. The term “Tax Expenses” shall mean and include, without
limitation, any form of tax and assessment (general, special, supplemental,
ordinary or extraordinary), commercial rental tax, payments under any
improvement bond or bonds, license fees, license tax, business license fee,
rental tax, transaction tax, levy, or penalty imposed by authority having the
direct or indirect power of tax (including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other
improvement district thereof) as against any legal or equitable interest of
Landlord in the Premises, the Building, or the Lot, as against Landlord’s right
to rent, or any other tax, fee, or excise, however described, including, but
not limited to, any value added tax, or any tax imposed in substitution
(partially or totally) of any tax previously included within the definition of
real property taxes, or any additional tax the nature of which was previously
included within the definition of real property taxes. The term “Tax Expenses”
shall not include any franchise, estate, inheritance, net income, or excess
profits tax imposed upon Landlord.  The
obligations of Tenant to pay Tax Expenses described hereinabove shall be
prorated to apply to Tax Expenses applicable to the time period commencing on
the Commencement Date and terminating on the Expiration Date.

 

6.2.1       Proposition
13 Protection.  Despite
any other provision of this Lease Agreement, if during the term of this Lease
Agreement any sale, or change in ownership of the Lot, Building or Premises is
consummated and, as a result, all or part of the Lot, Building or Premises is
reassessed (“Reassessment”) for real estate tax purposes by the appropriate
government authority under the terms of Proposition 13 (as adopted by the
voters of the State of California in the June 1978 election and as subsequently
amended), the terms of this subsection 6.2.1 shall apply.  For purposes of subsection 6.2.1, the term
Tax Increase (“Tax Increase”) shall mean that portion of the Tax Expenses, as
calculated immediately following the Reassessment, that is attributable solely
to the Reassessment.  Except as stated
hereinbelow, Tenant shall not be obligated to pay any Tax Increase as part of
the Tax Expenses.  Notwithstanding the
above, the Tax Increase exclusion shall not apply to any amounts calculated
immediately following Reassessment, that are: 
(i) attributable to the anticipated initial Reassessment of the value of
the Lot, Building Premises and Leasehold Improvements located on, or to be
built upon the Lot pursuant to the terms of this Lease Agreement; (ii)
attributable to the annual inflationary increase in real estate taxes; or (iii)
part of Tax Expenses incurred or considered to be incurred during the first
year term of this Lease Agreement.

 

6.3            Payment
of Additional Rent:  Tenant
shall pay all Operating Expenses directly to the party providing services to
the Premises.  Tenant shall pay Tax
Expenses directly to the taxing authority prior to the delinquency date.  If Tenant will not pay all of any
installment of real property taxes due to the protection afforded by Section
6.2.1, Tenant shall pay its portion of Tax Expenses directly to Landlord not
later than ten (10) days prior to the delinquency date subject to Tenant’s
receipt of a tax bill from Landlord. 
Tenant shall pay insurance premiums directly to the insurer within
thirty (30) days after receipt of the insurance invoices from Landlord.

 

6.4          Annual
Reconciliation:  By June 30th
of each calendar year, or as soon thereafter as reasonably possible Landlord
shall furnish Tenant with an accounting of the actual costs incurred by
Landlord as Additional Rent. Within thirty (30) days of Landlord’s delivery of
such accounting, Tenant shall pay to Landlord the amount of any underpayment.
Notwithstanding the foregoing, failure by Landlord to give such accounting by
such date shall not constitute a waiver by Landlord of its right to collect any
of Tenant’s underpayment at any time; provided, however, after such accounting
has been delivered, Landlord may not charge Tenant for any additional expenses
for the calendar year represented by such accounting.  Landlord shall refund the amount of any overpayment to Tenant. If
the Term of the Lease expires prior to the annual reconciliation of expenses
Landlord shall have the right to reasonably estimate Tenant’s Share of such
expenses, and if Landlord determines that an underpayment

 

5

 

is due, Tenant hereby agrees that Landlord
shall be entitled to deduct such underpayment from Tenant’s Security Deposit.
If Landlord reasonably determines that an overpayment has been made by Tenant,
Landlord shall refund said overpayment to Tenant as soon as practicable
thereafter.

 

6.5          Audit:  After delivery to Landlord
of at least fifteen (15) business days prior written notice, Tenant, at its
sole cost and expense through any accountant designated by it, shall have the
right to examine and/or audit the books and records evidencing such costs and
expenses for the previous one (1) calendar year, during Landlord’s reasonable
business hours but not more frequently than twice during any calendar year. Any
such accounting firm designated by Tenant may not be compensated on a
contingency fee basis. The results of any such audit (and any negotiations
between the parties related thereto) shall be maintained strictly confidential
by Tenant and its accounting firm and shall not be disclosed, published or
otherwise disseminated to any other party other than to Landlord and its
authorized agents or to third parties whose relationship to Tenant is such that
disclosure is necessary for good faith and reasonable business purposes.
Landlord and Tenant shall use its best efforts to cooperate in such
negotiations and to promptly resolve any discrepancies between Landlord and
Tenant in the accounting of such costs and expenses.

 

7.             Utilities:  Utility Expenses, and all other sums or
charges set forth in this Section 7 are also considered part of Additional
Rent. Once the gas, electric, sewer and water utilities are connected at
Landlord’s cost, Tenant shall then pay the cost of all water, sewer use, sewer
discharge fees and sewer use fees, gas, heat, electricity, refuse pick-up,
janitorial service, telephone and other utilities billed or metered to the
Premises, Building and or Lot. Tenant shall also pay any assessments or charges
for utility or similar purposes included within any tax bill for the Lot on
which the Premises and Building are situated, including, without limitation,
entitlement fees, allocation unit fees, and/or any similar fees or charges, and
any penalties related. Tenant acknowledges that the Premises may become subject
to the rationing of utility services or restrictions on utility use as required
by a public utility company, governmental agency or other similar entity having
jurisdiction thereof. Notwithstanding any such rationing or restrictions on use
of any such utility services, Tenant acknowledges and agrees that its tenancy
and occupancy hereunder shall be subject to such rationing restrictions as may
be imposed upon Landlord, Tenant, the Premises, the Building or the Lot, and
Tenant shall in no event be excused or relieved from any covenant or obligation
to be kept or performed by Tenant by reason of any such rationing or
restrictions. Tenant further agrees to timely and faithfully pay, prior to
delinquency, any amount, tax, charge, surcharge, assessment or imposition
levied, assessed or imposed upon the Premises, or Tenant’s use and occupancy
thereof.

 

8.             Late Charges:  Any
and all sums or charges set forth in this Section 8 are considered part of
Additional Rent. Tenant acknowledges that late payment (the tenth day after
written notice of default which remains uncured by Tenant) by Tenant to
Landlord of Base Rent, Additional Rent or any other sums due hereunder, will
cause Landlord to incur costs not contemplated by this Lease, the exact amount
of such costs being extremely difficult and impracticable to fix. Such costs
include, without limitation, processing and accounting charges, and late
charges that may be imposed on Landlord by the terms of any note secured by any
encumbrance against the Premises, and late charges and penalties due to the
late payment of real  property taxes on
the Premises. Therefore, if any installment of Rent or any other sum due from
Tenant is not received by Landlord when due, Tenant shall promptly pay to Landlord
an additional sum equal to ten percent (10%) of such delinquent amount. The
parties agree that this late charge and the other charges referenced above
represent a fair and reasonable estimate of the costs that Landlord will incur
by reason of late payment by Tenant. Acceptance of any late charge or other
charges shall not constitute a waiver by Landlord of Tenant’s default with
respect to the delinquent amount, nor prevent Landlord from exercising any of
the other rights and remedies available to Landlord for any other breach of
Tenant under this Lease.

 

9.             Use of Premises:

 

9.1          Compliance
with Laws, Recorded Matters, and Rules and Regulations: The Premises
are to be used solely for the uses stated on Page 1 and for no other uses or
purposes.  The use of the Premises by
Tenant and its employees, representatives, agents, invitees, licensees,
subtenants, customers or contractors (collectively, “Tenant’s Representatives”)
shall be subject to, and at all times in compliance with, (a) any and all
applicable laws, ordinances, statutes, orders and regulations as same exist
from time to time (collectively, the “Laws”), (b) any and all documents,
matters or instruments, including without limitation, any declarations of
covenants, conditions and restrictions, and any supplements thereto, each of
which has been recorded in any official or public records with respect to the
Premises, the Building, the Lot, or any portion thereof prior to the date of
the Lease (collectively, the “Recorded Matters”), and (c) any and all rules and
regulations set forth in Exhibit C, attached to and made a part of this
Lease.  Tenant agrees to, and does
hereby, assume full and complete responsibility to ensure that the Premises are
adequate to fully meet the needs and requirements of Tenant’s intended
operations of its business within the Premises, Building and on the Lot, and
Tenant’s use of the Premises and that same are in compliance with all
applicable Laws throughout the Term of this Lease.

 

9.2          Prohibition
on Use:  Tenant shall not use the
Premises, Building or Lot, or permit anything to be done in or about the
Premises, Building or Lot, nor keep or bring anything therein which will in any
way conflict with any of the requirements of the Board of Fire Underwriters or
similar body now or hereafter constituted or in any way increase the rate of or
affect any policy of fire or other insurance upon the Building or any of its
contents, or cause a cancellation of any insurance policy. No auctions may be
held or otherwise conducted in, on or about the Premises, the Building, or the Lot
without Landlord’s written consent thereto, which consent may be given or
withheld in Landlord’s sole discretion. Tenant shall not do or permit anything
to be done in or about the Premises, Building or Lot  which will in any way obstruct or interfere with the rights of
Landlord, or other persons or businesses in the area, or injure or annoy other
persons or businesses in the area, nor do or permit anything to be done in or
about the Premises, Building or Lot to be used for any unlawful purpose; nor
shall Tenant cause, maintain or permit any private or public nuisance in, on or
about the Premises, Building, or Lot, including, but not limited to, any
offensive odors, noises, fumes or vibrations. Tenant shall not damage or deface
or otherwise commit or suffer to be committed any waste in, upon or about the
Premises, Building or Lot. Tenant shall not place or store, nor permit any
other person or entity to place or store, any property, equipment, materials,
supplies, personal property or any other items or goods outside of the Premises
for any period of time. Tenant shall not permit any animals, including, but not
limited to, any household pets, to be brought or kept in or about the Premises,
Building or Lot. Tenant shall place no loads upon the floors, walls, or
ceilings in excess of the maximum designed load permitted by the applicable
Uniform Building Code or which may damage the Building or outside areas; nor
place any harmful liquids in the drainage systems; nor dump or store waste
materials, refuse or other such materials, or allow such to remain outside the
Building area, except in refuse dumpsters or in any enclosed trash areas
provided.  Tenant shall honor the terms
of all Recorded Matters relating to the Premises, the Building and the Lot.

 

6

 

10.          Alterations
and Additions; and Surrender of Premises:

 

10.1        Alterations and Additions:  After Landlord
has completed the construction of the Leasehold Improvements described in
Exhibit B, Tenant shall not install any signs, fixtures, improvements, nor make
or permit any other alterations or additions to the Premises, Building or Lot
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld.  Notwithstanding
the above, Tenant shall be allowed to make nonstructural alterations, the cost
of which do not exceed fifty thousand dollars ($50,000) per year, without
Landlord’s consent.  If any such
alteration or addition is expressly permitted by Landlord, including any
alterations that do not require Landlord’s consent, Tenant shall deliver at
least ten (10) days prior notice to Landlord, from the date Tenant intends to
commence construction, sufficient to enable Landlord to post a Notice of
Non-Responsibility. In all events, Tenant shall obtain all permits or other
governmental approvals prior to commencing any of such work and deliver a copy
of same to Landlord. All alterations and additions shall be installed by a
licensed contractor reasonably approved by Landlord, at Tenant’s sole expense
in compliance with all applicable Laws (including, but not limited to, the ADA
as defined herein), Recorded Matters, and Rules and Regulations. Tenant shall
keep the Premises, Building and Lot free from any liens arising out of any work
performed, materials furnished or obligations incurred by or on behalf of
Tenant.

 

10.2        Surrender of Premises:   Upon the termination of this Lease, whether by forfeiture, lapse
of time or otherwise, or upon the termination of Tenant’s right to possession
of the Premises, Tenant will at once surrender and deliver up the Premises,
Building and Lot to Landlord in good condition and repair including, but not
limited to, all light bulbs and ballasts, HVAC equipment, plumbing and
electrical in good working condition, excepting for reasonable wear and tear.
Upon such termination of this Lease, Tenant shall remove all tenant signage,
trade fixtures, furniture, furnishings, and personal property.  Tenant shall repair any damage caused by the
installation or removal of such signs, trade fixtures, furniture, furnishings
fixtures which are to be removed from the Premises, Building or Lot by Tenant
hereunder.

 

11.          Repairs and Maintenance:

 

11.1        Tenant’s
Repairs and Maintenance Obligations:  Except as otherwise provided in this Lease, Tenant shall, at
Tenant’s sole cost and expense, keep and maintain the Premises, Building and
Lot in good, clean, operable and safe condition and repair. Without limiting
the generality of the foregoing, Tenant shall be responsible for maintaining
and repairing:  (a) all mechanical
systems, heating, ventilation and air conditioning systems, (b) all plumbing,
electrical wiring and equipment serving the Premises, Building and Lot (c) all
interior lighting (including, without limitation, light bulbs and/or ballasts)
and exterior lighting serving the Premises, Building and Lot (d) all glass,
windows, window frames, window casements, skylights, interior and exterior
doors, door frames and door closers, (e) all roll-up doors, dock equipment,
including without limitation, dock bumpers, dock plates, dock seals, dock
levelers and dock lights, if any (f) all signage, (g) lifts for disabled
persons, if any (h) sprinkler systems, fire protection systems and security
systems, (i) all partitions, fixtures, equipment, interior painting, and
interior walls, floors and floor coverings of the Premises and Building and
every part thereof, (j) the roof,  (k)
exterior electrical wiring and equipment, exterior lighting, exterior glass, and
(l) exterior doors/entrances and door closers, exterior window casements,
exterior painting of the Building, paving, curbs, striping, trash receptacle
areas, and underground utility and sewer pipes.

 

                                In
the event any of the HVAC units, mechanical, plumbing and electrical systems,
or the roof needs replacement, or any capital repairs or replacements are
required to the Premises, Leasehold Improvements and Exterior Improvements
during the term of this Lease Agreement, then Landlord shall perform and pay
for the cost of said replacement or repair, and thereafter Landlord shall
amortize the cost of said capital expenditure, repair or replacement over the
useful life of the item replaced, and Tenant shall reimburse Landlord an amount
equal to the monthly amortized cost for the period of time remaining on the
term of the Lease Agreement.

 

                                Tenant
shall procure and maintain (a) a heating, ventilation and air conditioning
systems preventative maintenance and repair contract(s); such contract(s) to be
on no more than a quarterly basis, and (b) a fire and sprinkler protection
services and preventative maintenance and repair contract(s) (including,
without limitation, monitoring services); such contract(s) to be on no more
than a monthly basis. In the event Tenant fails to obtain the service contracts
described hereinabove, Landlord reserves the right, but without the obligation
to do so, to procure and maintain (i) the heating, ventilation and air
conditioning systems preventative maintenance and repair contract(s), and/or
(ii) the fire and sprinkler protection services and preventative maintenance
and repair contract(s) (including, without limitation, monitoring services),
and Tenant shall be obligated to reimburse Landlord for the cost thereof.  If Tenant procures and maintains any of such
contract(s), Tenant will promptly deliver to Landlord a true and complete copy
of each such contract and any and all renewals or extensions thereof, and each
service report or other summary received by Tenant pursuant to or in connection
with such contract(s).

 

11.2        Tenant’s
Failure to Perform Repairs and Maintenance Obligations:  Except for normal
maintenance and repair of the items described above, and Tenant’s reasonable
ability to place a satellite and/or antennae on the roof, Tenant shall have no
right of access to or right to install any device on the roof of the Building
nor make any penetrations of the roof of the Building without the express prior
written consent of Landlord, which consent shall not be unreasonably
withheld.  If, after twenty (20) days
written notice from Landlord, Tenant refuses or neglects to repair and maintain
the Premises, Building or Lot properly as required herein, Landlord may, but
without obligation to do so, at any time make such repairs and/or maintenance.

 

11.3        Landlord’s
Repairs and Maintenance Obligations: Landlord warrants that the
roof and HVAC, mechanical , electrical and plumbing systems shall be free from
defects and repairs for the first two years of the Lease Term.  Except for repairs rendered necessary by the
intentional or negligent acts or omissions of Tenant, or Tenant’s agents,
contractors or invitees, Landlord agrees, at Landlord’s sole cost and expense
(a) to keep in good repair the structural portions of the foundations, exterior
walls (exclusive of glass windows or doors), concrete slab flooring, (b) to
replace the structural portions of the roof of the Building when reasonably
necessary, and (c) during the first two years of the Lease Term, to make any
repairs required for the roof and/or the HVAC, mechanical, plumbing and
electric systems of the Building.

 

12.          Insurance:

 

12.1       Types of
Insurance:  Tenant
shall maintain in full force and effect at all times during the Term of this
Lease, at Tenant’s sole cost and expense, for the protection of Tenant and
Landlord, as their interests may appear, policies of insurance which afford the
following coverages: (i) worker’s compensation: statutory limits; (ii)
employer’s liability, as required by law, with 

 

7

 

a minimum limit of $100,000 per employee and
$500,000 per occurrence; (iii) primary commercial general liability insurance
(occurrence form) providing coverage against any and all claims for bodily
injury and property damage occurring in, on or about the Premises, Building and
Lot arising out of the use and/or occupancy of the Premises, Building and Lot .
Such insurance shall include coverage for blanket contractual liability, fire
damage, premises, personal injury, completed operations, products liability,
personal and advertising, and a plate-glass rider to provide coverage for all
glass in, on or about the Premises, Building and Lot including, without
limitation, skylights, with deletion of the exclusion for operations within
fifty (50) feet of a railroad track (railroad protective liability), if
applicable. Such insurance shall have a combined single limit of not less than
One Million Dollars ($1,000,000) per occurrence with a Two Million Dollar
($2,000,000) aggregate limit and excess umbrella insurance in the amount of Two
Million Dollars ($2,000,000). If Tenant has other locations which it owns or
leases, the policy shall include an aggregate limit per location endorsement.
If necessary, as reasonably determined by Landlord, Tenant shall provide for
restoration of the aggregate limit; (iv) comprehensive automobile liability
insurance: a combined single limit of not less than $2,000,000 per occurrence
and insuring Tenant against liability for claims arising out of the ownership,
maintenance, or use of any owned, hired or non-owned automobiles; (v) “all
risk” property insurance, including without limitation, sprinkler leakage,
boiler and machinery comprehensive form, if applicable, covering damage to or
loss of any personal property, trade fixtures, inventory, fixtures and equipment
located in, on or about the Premises, Building and Lot, together with, if the
property of Tenant’s invitees is to be kept in or about the Premises, Building
and Lot, warehouser’s legal liability or bailee customers insurance for the
full replacement cost of the property belonging to invitees and located in or
about  the Premises, Building and Lot.
Such insurance shall be written on a replacement cost basis (without deduction
for depreciation) in an amount equal to one hundred percent (100%) of the full
replacement value of the aggregate of the items referred to in this
subparagraph, such other insurance as Landlord deems necessary and prudent or
as may otherwise be reasonably required by any of Landlord’s lenders.

 

12.2       Insurance
Policies:  Insurance required
to be maintained by Tenant shall be written by companies (i) licensed to do
business in the State of California, (ii) domiciled in the United States of
America, and (iii) having a “General Policyholders Rating” of at least A:X (or
such higher rating as may be required by a lender having a lien on the
Premises) as set forth in the most current issue of “Best’s Insurance Reports.
“ Any deductible amounts under any of the insurance policies required hereunder
shall not exceed Five Thousand Dollars ($5,000). Tenant shall deliver to
Landlord certificates of insurance and true and complete copies of any and all
endorsements required herein for all insurance required to be maintained by
Tenant hereunder at the time Landlord delivers possession of the Premises,
Building and Lot to Tenant. Tenant shall, at least ten (10) days after
expiration of each policy, furnish Landlord with certificates of renewal or
“binders” thereof. Each certificate shall expressly provide that such policies
shall not be cancelable or otherwise subject to modification except after
thirty (30) days prior written notice to the parties named as additional
insureds as required in this Lease (except for cancellation for nonpayment of
premium, in which event cancellation shall not take effect until at least ten
(10) days’ notice has been given to Landlord). Tenant shall have the right to
provide insurance coverage which it is obligated to carry pursuant to the terms
of this Lease under a blanket insurance policy, provided such blanket policy
expressly affords coverage for the Premises, Building and Lot and for Landlord
as required by this Lease.

 

12.3        Additional Insureds and
Coverage:  Landlord, any
property management company and/or agent of Landlord for the Premises, the
Building, and the Lot, any lender(s) of Landlord having a lien against the
Premises, the Building, and  the Lot,
and any joint venture partners of Landlord shall be named as additional
insureds under all of the policies required in Section 12.1 above.
Additionally, such policies shall provide for severability of interest. All
insurance to be maintained by Tenant shall, except for workers’ compensation
and employer’s liability insurance, be primary, without right of contribution
from insurance maintained by Landlord. Any umbrella liability policy or excess
liability policy (which shall be in “following form”) shall provide that if the
underlying aggregate is exhausted, the excess coverage will drop down as
primary insurance. The limits of insurance maintained by Tenant shall not limit
Tenant’s liability under this Lease. It is the parties’ intention that the
insurance to be procured and maintained by Tenant as required herein shall
provide coverage for any and all damage or injury arising from or related to
Tenant’s operations of its business and/or Tenant’s or Tenant’s
Representatives’ use of the Premises, Building or Lot. It is not contemplated
or anticipated by the parties that the aforementioned risks of loss be borne by
Landlord’s insurance carriers, rather it is contemplated and anticipated by
Landlord and Tenant that such risks of loss be borne by Tenant’s insurance
carriers pursuant to the insurance policies procured and maintained by Tenant
as required herein.

 

12.4        Failure of Tenant to Purchase and
Maintain Insurance: If, after ten (10) days written notice of default
by Landlord to Tenant, Tenant does, not purchase the insurance required in this
Lease or keep the same in full force and effect throughout the Term of this
Lease (including any renewals or extensions), Landlord may, but without
obligation to do so, purchase the necessary insurance and pay the premiums
therefor. If Landlord so elects to purchase such insurance, Tenant shall
promptly pay to Landlord as Additional Rent, the amount so paid by Landlord,
upon Landlord’s demand therefor. In addition, Landlord may recover from Tenant
and Tenant agrees to pay, as Additional Rent, damages which Landlord may
sustain by reason of Tenant’s failure to obtain and maintain such insurance. If
Tenant fails to maintain any insurance required in this Lease, Tenant shall be
liable for all losses, damages and costs resulting from such failure.

 

13.          Waiver of Subrogation:  Landlord and
Tenant hereby mutually waive their respective rights of recovery against each
other for any loss of, or damage to, either parties’ property to the extent
that such loss or damage is insured by an insurance policy required to be in
effect at the time of such loss or damage. Each party shall obtain any special
endorsements, if required by its insurer whereby the insurer waives its rights
of subrogation against the other party. This provision is intended to waive
fully, and for the benefit of the parties hereto, any rights and/or claims
which might give rise to a right of subrogation in favor of any insurance
carrier. The coverage obtained by Tenant pursuant to Section 12 of this Lease
shall include, without limitation, a waiver of subrogation endorsement attached
to the certificate of insurance. The provisions of this Section 13 shall not
apply in those instances in which such waiver of subrogation would invalidate
such insurance coverage or would cause either party’s insurance coverage to be
voided or otherwise uncollectible.

 

14.                               Intentionally Omitted.

 

15.          Assignment and Subleasing:

 

15.1        Prohibition:  Tenant shall not assign,
mortgage, hypothecate, encumber, grant any license or concession, pledge or
otherwise transfer this Lease (collectively, “assignment”), in whole or in
part, whether voluntarily or involuntarily or by operation of law, nor sublet or
permit occupancy by any person other than Tenant of all or any portion of the
Premises without 

 

8

 

first obtaining the prior written consent of
Landlord, which consent shall not be unreasonably withheld. If Tenant seeks to
sublet or assign all or any portion of the Premises, Tenant shall deliver to
Landlord at least thirty (30) days prior to the proposed commencement of the
sublease or assignment (the “Proposed Effective Date”) the following: (i) the
name of the proposed assignee or sublessee; (ii) such information as to such
assignee’s or sublessee’s financial responsibility and standing as Landlord may
reasonably require; and (iii) a copy of the assignment, sublease or other
transfer document.  Tenant shall
reimburse Landlord for reasonable legal and other expenses incurred by Landlord
in connection with any actual or proposed assignment or subletting not to
exceed One Thousand Dollars ($1,000). Each permitted assignee or sublessee
shall assume and be deemed to assume this Lease and shall be and remain liable
jointly and severally with Tenant for payment of Rent and for the due
performance of, and compliance with all the terms, covenants, conditions and
agreements herein contained on Tenant’s part to be performed or complied with,
for the term of this Lease. No assignment or subletting shall affect the
continuing primary liability of Tenant (which, following assignment, shall be
joint and several with the assignee), and Tenant shall not be released from performing
any of the terms, covenants and conditions of this Lease. Tenant hereby
acknowledges and agrees that it understands that Landlord’s accounting
department may process and accept Rent payments without verifying that such
payments are being made by Tenant, a permitted sublessee or a permitted
assignee in accordance with the provisions of this Lease. Although such
payments may be processed and accepted by such accounting department personnel,
any and all actions or omissions by the personnel of Landlord’s accounting
department shall not be considered as acceptance by Landlord of any proposed
assignee or sublessee nor shall such actions or omissions be deemed to be a
substitute for the requirement that Tenant obtain Landlord’s prior written
consent to any such subletting or assignment, and any such actions or omissions
by the personnel of Landlord’s accounting department shall not be considered as
a voluntary relinquishment by Landlord of any of its rights hereunder nor shall
any voluntary relinquishment of such rights be inferred therefrom.

 

15.2        Excess
Sublease Rental or Assignment Consideration: 
In the event of any sublease or assignment of all or any portion of the
Premises where the rent or other consideration provided for in the sublease or
assignment either initially or over the term of the sublease or assignment
exceeds the Rent or pro rata portion of the Rent, as the case may be, for such
space reserved in the Lease, Tenant shall pay the Landlord monthly, as
Additional Rent, at the same time as the monthly installments of Rent are
payable hereunder, fifty percent (50%) of the excess of each such payment of
rent or other consideration in excess of the Rent called for hereunder, after
Tenant has recovered the costs of a leasing commission incurred to an
independent broker, any tenant improvement costs and reasonable attorneys’ fees
incurred by Tenant in connection with the assignment or subletting.

 

16.          Ad Valorem Taxes: 
Prior to delinquency, Tenant shall pay all taxes and assessments levied
upon trade fixtures, alterations, additions, improvements, inventories and
personal property located and/or installed on or in the Premises, Building or
Lot by, or on behalf of, Tenant; and if requested by Landlord, Tenant shall
promptly deliver to Landlord copies of receipts for payment of all such taxes
and assessments. To the extent any such taxes are not separately assessed or
billed to Tenant, Tenant shall pay the amount thereof as invoiced by Landlord,
and Landlord shall provide Tenant with verifying documentation establishing the
nature and amount of such taxes invoiced by Landlord to Tenant.

 

17.          Subordination:   Landlord shall have the right to cause this
Lease to be and become and remain subject and subordinate to any and all ground
or underlying leases, mortgages or deeds of trust which may hereafter be
executed covering the Premises, Building or Lot or any renewals, modifications,
consolidations, replacements or extensions thereof, for the full amount of all
advances made or to be made thereunder and without regard to the time or
character of such advances, together with interest thereon and subject to all
the terms and provisions thereof; provided, however, that any such ground
lessor, beneficiary or mortgagee agrees in a commercially reasonable subordination,
non-disturbance and attornment agreement (“SNDA”) in form reasonably
satisfactory to Tenant not to disturb Tenant as long as Tenant is not in
default under this Lease beyond any applicable cure period.  Notwithstanding the foregoing, Landlord,
mortgagee, or any beneficiary shall have the right to subordinate or cause to
be subordinated any underlying leases or any such liens to this Lease. If any
underlying lease terminates for any reason or any mortgage or deed of trust is
foreclosed or a conveyance in lieu of foreclosure is made for any reason,
Tenant shall, notwithstanding any subordination and upon the request of such
successor to Landlord, attorn to and become the Tenant of the successor in
interest to Landlord, provided such successor in interest will not disturb
Tenant’s use, occupancy or quiet enjoyment of the Premises, Building and or
Lot, so long as Tenant is not in default of the terms and provisions of this
Lease beyond any applicable cure period, and so long as said successor in
interest agrees to a commercially reasonable nondisturbance agreement with
Tenant.  Landlord shall be liable to
Tenant for all or any portion of the Security Deposit not forfeited by, or
refunded to Tenant, until and unless Landlord transfers such Security Deposit
to the successor in interest.

 

18.          Right of Entry:  Tenant grants Landlord or
its agents the right to enter the Premises upon at least twenty-four (24) hours
notice, except in emergency, for purposes of inspection, exhibition, posting of
notices, repair or alteration. Landlord shall comply with Tenant’s reasonable
security requirements in exercising its entry rights.  At Landlord’s option, Landlord shall at all times have and retain
a key with which to unlock all the doors in, upon and about the Premises, excluding
Tenant’s vaults and safes. It is further agreed that Landlord shall have the
right to use any and all means Landlord deems necessary to enter the Premises
in an emergency. Landlord shall also have the right to place “for rent” and/or
“for sale” signs on the outside of the Premises during the last six (6) months
of the term of this Lease, or at any time during which Tenant is in default
under this Lease.

 

19.          Estoppel Certificate:  Tenant shall execute,
acknowledge and deliver to Landlord, within not less than twenty (20) days
after Landlord provides such to Tenant, a statement in writing certifying that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification), the date to which the Rent and other charges
are paid in advance, if any, acknowledging that there are not, to Tenant’s
knowledge, any uncured defaults on the part of Landlord hereunder or specifying
such defaults as are claimed, and such other matters as Landlord may reasonably
require. Any such statement may be conclusively relied upon by Landlord and any
prospective purchaser or encumbrancer of the Premises, Building and or Lot.
Tenant’s failure to deliver such statement within such time shall be conclusive
upon the Tenant that (a) this Lease is in full force and effect, without
modification except as may be represented by Landlord; (b) there are no uncured
defaults in Landlord’s performance; and (c) not more than one month’s Rent has
been paid in advance, except in those instances when Tenant pays Rent quarterly
in advance, then not more than three month’s Rent has been paid in advance.
Failure by Tenant to so deliver such certified estoppel certificate shall be a
default of the provisions of this Lease.

 

20.          Tenant’s Default:  The occurrence
of any one or more of the following events shall, at Landlord’s option,
constitute a 

 

9

 

default and breach of this Lease by Tenant:

 

20.1        Any
act by Tenant which would cause any insurance policy to be invalidated or
otherwise lapse. Tenant agrees to notice and service of notice as provided for
in this Lease and waives any right to any other or further notice or service of
notice which Tenant may have under any statute or law now or hereafter in
effect.

 

20.2        The
failure by Tenant to make any payment of Rent, Additional Rent or any other
payment required hereunder on the date said payment is due, and failure to cure
said monetary delinquency within five (5) days written notice from Landlord to
Tenant.

 

20.3        The
failure by Tenant to observe, perform or comply with any of the conditions,
covenants or provisions of this Lease (except failure to make any payment of
Rent and/or Additional Rent) and such failure is not cured within the time
period required under the provisions of this Lease. If such failure is
susceptible of cure but cannot reasonably be cured within the aforementioned
time period (if any), Tenant shall promptly commence the cure of such failure
and thereafter diligently prosecute such cure to completion within a reasonable
time thereafter.  In no event or
circumstance shall Tenant have less than thirty (30) days to complete any such
cure, unless otherwise expressly agreed to in writing by Landlord (in Landlord’s
sole discretion); and

 

20.4        The
making of a general assignment by Tenant for the benefit of creditors, the
filing of a voluntary petition by Tenant or the filing of an involuntary
petition by any of Tenant’s creditors seeking the rehabilitation, liquidation,
or reorganization of Tenant under any law relating to bankruptcy, insolvency or
other relief of debtors and, in the case of an involuntary action, the failure
to remove or discharge the same within sixty (60) days of such filing, the
appointment of a receiver or other custodian to take possession of
substantially all of Tenant’s assets or this leasehold, Tenant’s insolvency or
inability to pay Tenant’s debts or failure generally to pay Tenant’s debts when
due, any court entering a decree or order directing the winding up or
liquidation of Tenant or of substantially all of Tenant’s assets, Tenant taking
any action toward the dissolution or winding up of Tenant’s affairs, the
cessation or suspension of Tenant’s use of the Premises, or the attachment,
execution or other judicial seizure of substantially all of Tenant’s assets or
this leasehold.

 

21.          Remedies
for Tenant’s Default:

 

21.1        Landlord’s
Rights:  In the event of a breach or
default under this Lease as provided in Section 20 hereof, Landlord may
exercise all of its remedies as may be permitted by law, including but not
limited to the remedy provided by Section 1951.4 of the California Civil Code,
and including terminating this Lease, reentering the Premises and removing all
persons and property therefrom, which property may be stored by Landlord at a
warehouse or elsewhere at the risk, expense and for the account of Tenant.  If Landlord elects to terminate this Lease,
Landlord shall be entitled to recover from Tenant the aggregate of all amounts
permitted by law, including but not limited to, the cost of recovering the
Premises and including (i) the worth at the time of award of the unpaid rent
which had been earned at the time of termination; (ii) 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
Tenant proves could have been reasonably avoided; (iii) the worth at the time
of the 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 Tenant
proves could be reasonably avoided; and (iv) any other amount necessary to
compensate Landlord for all the detriment proximately caused by Tenant’s
failure to perform its obligations under this Lease or which in the ordinary
course of events would be likely to result therefrom.  The “worth at the time of award” of the amounts referred to in
(i) and (ii) above is computed by allowing interest at the rate of ten percent
(10%) per annum.  The “worth at the time
of award” of the amount referred to in (iii) above shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).

 

                Notwithstanding anything to the contrary set forth
herein, Landlord’s re-entry to perform acts of maintenance or preservation of
or in connection with efforts to relet the Premises or any portion thereof, or
the appointment of a receiver upon Landlord’s initiative to protect Landlord’s
interest under this Lease shall not terminate Tenant’s right to possession of
the Premises or any portion thereof and, until Landlord does elect to terminate
this Lease, this Lease shall continue in full force and effect and Landlord
shall enforce all of Landlord’s rights and remedies hereunder including,
without limitation, the right to recover from Tenant as it becomes due
hereunder all Base Rent, Additional Rent and other charges required to be paid
by Tenant under the terms hereof.

 

21.2        Rights and
Remedies Cumulative:  The
foregoing rights and remedies of Landlord are not exclusive; they are
cumulative in addition to any rights and remedies now or hereafter existing at
law, in equity by statute or otherwise, or to any equitable remedies Landlord
may have, and to any remedies Landlord may have under bankruptcy laws or laws
affecting creditor’s rights generally.

 

21.4         Waiver of a
Default:  The waiver
by Landlord of any default or breach of any provision of this Lease shall not
be deemed or construed a waiver of any other breach or default by Tenant
hereunder or of any subsequent breach or default of this Lease, except for the
default specified in the waiver.

 

22.          Holding Over:  If Tenant
holds possession of the Premises, Building or Lot after the expiration of the
Term of this Lease with Landlord’s consent, Tenant shall become a tenant from
month-to-month upon the terms and provisions of this Lease, provided the
monthly Base Rent shall be 125% of the then existing Base Rent for the three
month period following the expiration of the Term, and then for each month
thereafter, the Base Rent shall be 150% of the Base Rent due on the last month
of the Lease Term, payable in advance on or before the first day of each month.
Acceptance by Landlord of the monthly Base Rent without the additional increase
of Base Rent shall not be deemed or construed as a waiver by Landlord of any of
its rights to collect the increased amount of the Base Rent as provided herein
at any time. Such month-to- tenancy shall not constitute a renewal or extension
for any further term. All options, if any, granted under the terms of this
Lease shall be deemed automatically terminated and be of no force or effect
during said month-to-month tenancy. Tenant shall continue in possession until
such tenancy shall be terminated by either Landlord or Tenant giving written
notice of termination to the other party at least thirty (30) days prior to the
effective date of termination. This paragraph shall not be construed as
Landlord’s permission for Tenant to hold over. Acceptance of Base Rent by
Landlord following expiration or termination of this Lease shall not constitute
a renewal of this Lease.

 

10

 

23.          Landlord’s Default:   Landlord shall not be
deemed in breach or default of this Lease unless Landlord fails within a
reasonable time to perform an obligation required to be performed by Landlord
hereunder. For purposes of this provision, a reasonable time shall not be less
than thirty (30) days after receipt by Landlord of written notice specifying
the nature of the obligation Landlord has not performed; provided, however,
that if the nature of Landlord’s obligation is such that more than thirty (30)
days, after receipt of written notice, is reasonably necessary for its
performance, then Landlord shall not be in breach or default of this Lease if
performance of such obligation is commenced within such thirty (30) day period
and thereafter diligently pursued to completion.  In the event of an emergency circumstance resulting from the
default of Landlord, Tenant shall have the right to cure said default and
invoice the Landlord for the cost associated with curing said emergency.

 

24.          Parking:   Tenant shall
have exclusive use of all parking spaces set forth on Page 1. Landlord shall
not be required to enforce Tenant’s right to use the same.

 

25.          Intentionally Omitted.

 

26.          Waiver:  No delay or omission in the exercise of any
right or remedy of Landlord on any default by Tenant shall impair such a right
or remedy or be construed as a waiver. The subsequent acceptance of Rent by
Landlord after breach by Tenant of any covenant or term of this Lease shall not
be deemed a waiver of such breach, other than a waiver of timely payment for
the particular Rent payment involved, and shall not prevent Landlord from
maintaining an unlawful detainer or other action based on such breach. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
Rent and other sums due hereunder shall be deemed to be other than on account
of the earliest Rent or other sums due, nor
shall any endorsement or statement on any check or accompanying any check or
payment be deemed an accord and satisfaction; and Landlord may accept such
check or payment without prejudice to Landlord’s right to recover the balance
of such Rent or other sum or pursue any other remedy provided in this Lease. No
failure, partial exercise or delay on the part of the Landlord in exercising
any right, power or privilege hereunder shall operate as a waiver thereof.

 

27.          Casualty Damage:  If the
Premises or any part thereof shall be damaged by fire or other casualty, Tenant
shall give prompt written notice thereof to Landlord. Landlord shall, at
Landlord’s expense, repair such damage to the condition existing prior to such
damage (but not Tenant’s trade fixtures, equipment or personal property) as
soon as reasonably possible thereafter, and this Lease shall continue in full
force and effect.  Notwithstanding the
foregoing, if the insurance proceeds are not sufficient to effect such repair,
Landlord shall promptly contribute the shortage in proceeds (except the
deductible shall be Tenant’s responsibility). 
If such shortage is due to the fact that, by reason of the unique nature
of the Leasehold Improvements, full replacement cost insurance coverage was not
commercially reasonable and available, Landlord shall have no obligation to
contribute the shortfall in insurance proceeds or to restore the unique aspects
of the Premises unless Tenant provides Landlord with the funds to cover the
shortfall or written assurance that Tenant will provide such funds within
thirty (30) days after receiving written notice of the shortfall from
Landlord.  If Landlord receives such
funds or written assurance from Tenant within said thirty (30) day period,
Landlord shall make such repairs to the Premises, including the unique aspects
of the Leasehold Improvements and this Lease shall remain in full force and
effect.

 

                If
the Premises are damaged by an uninsured casualty, and the cost to repair the
Premises exceeds five hundred thousand dollars ($500,000), Landlord may either
(i) repair such damage and restore the Premises to the condition existing prior
to such casualty as soon as reasonably possible at Landlord’s expense, in which
event the Lease shall continue in full force and effect, or (ii) terminate this
Lease by giving written notice to Tenant within thirty (30) days after receipt
by Landlord of knowledge of the occurrence of such damage.  Such termination shall be effective sixty
(60) days following the date of such notice. 
If Landlord elects to terminate this Lease, Tenant shall have the right,
within thirty (30) days after receipt of the termination notice, to give
written notice to Landlord of Tenant’s commitment to pay for the repair of such
damage without reimbursement from Landlord. 
Tenant shall provide Landlord with such funds or written assurance
thereof within thirty (30) days after making such commitment.  In such event, the Lease shall continue in
full force and effect, and Landlord shall proceed to make such repairs as soon
as reasonably possible after the required funds are available.  If Tenant does not make the required
commitment, this Lease shall terminate as of the date specified in the
termination notice.

 

                Upon
any damage or destruction of the Premises, Landlord shall cause its architect
to estimate the time period required to restore the Premises to the condition
existing prior to such damage or destruction and deliver such estimate to the
parties within thirty (30) days after such damage.  If Landlord’s architect estimates that the restoration period
applicable to the Premises will be no longer than one hundred twenty (120) days
after the date of such damage Tenant shall have the right to terminate this
Lease by giving Landlord written notice of such termination within ten (10)
days after the date Tenant receives the estimate of the restoration period from
Landlord’s architect.  Tenant’s failure
to give written notice of termination of this Lease within said ten (10) day
period shall be deemed Tenant’s waiver of its termination right and election to
permit Landlord to restore the Premises in accordance with this Section
27.  Notwithstanding the foregoing, if
all or a portion of the Premises is damaged or destroyed during the last six
(6) months of the Lease such that the remainder of the Premises cannot be
effectively and efficiently used, and Landlord’s architect reasonably
estimates, by written notice given to the parties within thirty (30) days after
the date of such damage, that the time required to repair and restore the
Premises exceeds the period of time remaining under the Lease Term, then either
party may terminate this Lease by giving written notice of such termination to
the other party within fifteen (15) days after the date of such notice from
Landlord’s architect.

 

                From
the date of such damage and destruction until the date of completion of
restoration thereof, Base Rent and Additional Rent shall be abated in
proportion to the part of the Premises which is unusable by Tenant in the
conduct of its business (but there shall be no abatement of rent by reason of
any portion of the Premises being unusable for a period equal to one (1) day or
less).

 

28.          Condemnation:   If all of the Premises, Building and Lot are
condemned by eminent domain, inversely condemned or sold in lieu of
condemnation for any public or quasi-public use or purpose (“Condemned”), then
Tenant or Landlord may terminate this Lease as of the date when physical
possession of the Premises, Building and Lot are taken and title vests in such
condemning authority, and Rent shall be adjusted to the date of termination. If
a substantial portion of the Premises, Building or the Lot is so condemned such
that Tenant cannot, in Tenant’s reasonable opinion, use the remainder for the
conduct of its business, Tenant, at its option may terminate this Lease. If
Tenant does not elect to terminate this Lease, Landlord shall, if necessary,
promptly proceed to restore the Premises, Building or Lot to substantially its
same condition prior 

 

11

 

to such partial condemnation, and shall use
the condemnation proceeds received by Landlord for such purpose.  Base Rent shall be reduced on a
proportionate basis corresponding to the time during which, and to the part of
the Premises, Building or Lot of which Tenant is deprived on account of such
partial condemnation and restoration.

 

29.          Environmental
Matters /Hazardous Materials:

 

29.1        Hazardous
Materials Disclosure Certificate:  Prior to executing this Lease, Tenant has completed, executed and
delivered to Landlord Tenant’s Hazardous Materials Disclosure Certificate (the
“HazMat Certificate”), a copy of which is attached hereto as Exhibit E and
incorporated herein by this reference. Tenant covenants, represents and
warrants to Landlord that the information on the HazMat Certificate is true and
correct and accurately describes the use(s) of Hazardous Materials which will
be made and/or used on the Premises by Tenant. Tenant shall, commencing with
the date which is one year from the Commencement Date and continuing every year
thereafter, complete, execute, and deliver to Landlord, a new or updated HazMat
Certificate in the form attached hereto as Exhibit E describing Tenant’s
present use of Hazardous Materials on the Premises, and any other reasonably
necessary documents as requested by Landlord.

 

29.2        Definition
of Hazardous Materials:  As used in this Lease, the
term Hazardous Materials shall mean and include (a) any hazardous or toxic
wastes, materials or substances, and other pollutants or contaminants, which
are or become regulated by any Environmental Laws; (b) petroleum, petroleum by
products, gasoline, diesel fuel, crude oil or any fraction thereof; (c) asbestos
and asbestos containing material, in any form, whether friable or non-friable;
(d) polychlorinated biphenyls; (e) radioactive materials; (f) lead and
lead-containing materials; (g) any other material, waste or substance
displaying toxic, reactive, ignitable or corrosive characteristics, as all such
terms are used in their broadest sense, and are defined or become defined by
any Environmental Law (defined below); or (h) any materials which cause or
threatens to cause a nuisance upon or waste to any portion of the Premises, the
Building, or the Lot, or any surrounding property; or poses or threatens to
pose a hazard to the health and safety of persons on the Premises or any
surrounding property.

 

29.3          Prohibition;
Environmental Laws:   Tenant
shall not be entitled to use nor store any Hazardous Materials on, in, or about
the Premises, the Building, or the Lot, or any portion of the foregoing,
without, in each instance, said usage being in compliance with any and all
applicable laws and regulations, and only upon giving written notice to
Landlord of said usages.  Tenant shall
be permitted to use and/or store only those Hazardous Materials that are
necessary for Tenant’s business and to the extent disclosed in the HazMat
Certificate, provided that such usage and storage is only to the extent of the
quantities of Hazardous Materials as specified in the then applicable HazMat
Certificate unless Tenant notifies Landlord in writing of a change in the
quantities used prior to the delivery of the next annual HazMat Certificate,
and provided further that such usage and storage is in full compliance with any
and all local, state and federal environmental, health and/or safety-related
laws, statutes, orders, standards, courts’ decisions, ordinances, rules and
regulations (as interpreted by judicial and administrative decisions), decrees,
directives, guidelines, permits or permit conditions, currently existing and as
amended, enacted, issued or adopted in the future which are or become
applicable to Tenant or all or any portion of the Premises, Building or Lot
(collectively, the “Environmental Laws”). 
Landlord shall have the right at all times during the Term of this Lease
to (i) inspect the Premises, Building or Lot, (ii) conduct tests and
investigations to determine whether Tenant is in compliance with the provisions
of this Section 29, and (iii) request lists of all Hazardous Materials used,
stored or otherwise located on, under or about the Premises, Building and the
Lot. The cost of all such inspections, tests and investigations shall be borne
solely by Landlord, unless there has been a release of Hazardous Materials at
which time said costs shall be paid by Tenant. The aforementioned rights
granted herein to Landlord and its representatives shall not create (a) a duty
on Landlord’s part to inspect, test, investigate, monitor or otherwise observe
the Premises, Building or Lot, or the activities of Tenant and Tenant’s
Representatives with respect to Hazardous Materials, including without
limitation, Tenant’s operation, use and any remediation related thereto, or (b)
liability on the part of Landlord and its representatives for Tenant’s use,
storage, disposal or remediation of Hazardous Materials, it being understood
that Tenant shall be solely responsible for all liability in connection
therewith.

 

29.4        Tenant’s
Environmental Obligations:  Tenant shall give to Landlord immediate verbal and follow-up
written notice of any spills, releases, discharges, disposals, emissions,
migrations, removals or transportation of Hazardous Materials on, under or
about the Premises, Building or Lot which are not in compliance with any and
all applicable laws and regulations. Tenant, at its sole cost and expense,
covenants and warrants to promptly investigate, clean up, remove, restore and otherwise
remediate (including, without limitation, preparation of any feasibility
studies or reports and the performance of any and all closures) any spill,
release, discharge, disposal, emission, migration or transportation of
Hazardous Materials by Tenant on the Premises, Building or Lot to such levels
as are required by law.  Tenant, at its
sole cost and expense, shall conduct and perform, or cause to be conducted and
performed, all closures as required by any Environmental Laws or any agencies
or other governmental authorities having jurisdiction thereof to the extent
required by Tenant’s activities on the Property. If Tenant fails to so promptly
investigate, clean up, remove, restore, provide closure or otherwise so
remediate any spill, release, discharge, disposal, emission, migration, removal
or transportation of Hazardous Materials caused by Tenant, Landlord may, but
without obligation to do so, take any and all steps necessary to rectify the
same and Tenant shall promptly reimburse Landlord, upon demand, for all costs
and expenses to Landlord of performing investigation, clean up, removal,
restoration, closure and remediation work. All such work undertaken by Tenant,
as required herein, shall be performed in such a manner so as to enable
Landlord to make full economic use of the Premises, the Building, and the Lot
after the satisfactory completion of such work.

 

29.5        Environmental
Indemnity - Tenant:  In addition to
Tenant’s obligations as set forth hereinabove, Tenant agrees to, and shall,
protect, indemnify, defend (with counsel acceptable to Landlord) and hold
Landlord and Landlord’s lenders, partners, property management company (if
other than Landlord), agents, directors, officers, representatives,
shareholders, successors and assigns and each of their respective partners,
directors, representatives, agents, shareholders, successors and assigns
harmless from and against any and all claims, judgments, damages, penalties,
fines, liabilities, losses , suits, administrative proceedings and costs (including,
but not limited to, attorneys’ and consultant fees and court costs, but
excluding any consequential damages) arising at any time during or after the
Term of this Lease in connection with or related to, directly or indirectly,
the use, presence, transportation, storage, disposal, migration, removal,
spill, release or discharge of Hazardous Materials by Tenant on, in or about
the Premises, Building or Lot. Neither the written consent of Landlord to the
presence, use or storage of Hazardous Materials by Tenant in, on, under or
about any portion of the Premises, the Building, or the Lot, nor the strict
compliance by Tenant with all Environmental Laws shall excuse Tenant from its
obligations of indemnification pursuant hereto. To the extent Landlord is strictly
liable under any Environmental Laws, Tenant’s obligations to Landlord under
this Section 29 and the indemnity contained herein shall likewise be without
regard to fault on Tenant’s part with 

 

12

 

respect to the violation of any
Environmental Law which results in liability to any of the aforementioned
indemnitees.

 

29.6        Environmental
Indemnity - Landlord:  Landlord represents and warrants to Tenant
that no Hazardous Materials have been used or incorporated into the building
materials for the Building, Premises, Leasehold Improvements and Lot, and there
are no Hazardous Materials present in the soil or groundwater on the Lot as of
execution of this Lease Agreement.  In
addition to Landlord’s obligations as set forth hereinabove, Landlord agrees
to, and shall, protect, indemnify, defend and hold Tenant and Tenant’s agents,
directors, officers, representatives, shareholders, successors and assigns and
each of their respective directors, representatives, agents, shareholders,
successors and assigns harmless from and against any and all claims, judgments,
damages, penalties, fines, liabilities, losses, suits, administrative
proceedings and costs (including, but not limited to, attorneys’ and consultant
fees and court costs, but excluding any consequential damages) arising at any
time during or after the Term of this Lease in connection with or related to,
directly or indirectly, the use, presence, transportation, storage, disposal,
migration, removal, spill, release or discharge of Hazardous Materials on, in
or about the Premises, Building or Lot which took place prior to the
Commencement Date.  Neither the written
consent of Tenant to the presence, use or storage of Hazardous Materials on, in
or about the Premises, the Building, or the Lot, nor the strict compliance by
Landlord with all Environmental Laws shall excuse Landlord from its obligations
of indemnification pursuant hereto.  To
the extent Tenant is strictly liable under any Environmental Laws, Landlord’s obligations
to Tenant under this Section 29 and the indemnity contained herein shall
likewise be without regard to fault on Landlord’s part with respect to the
violation of any environmental Law which results in liability to any of the
aforementioned indemnitees.

 

29.7        Survival: Tenant’s and
Landlord’s obligations and liabilities pursuant to the provisions of this
Section 29 shall survive the expiration or earlier termination of this Lease.

 

30.                               Intentionally Omitted.

 

31.          General Provisions:

 

31.1        Time:  Time is of the essence in
this Lease and with respect to each and all of its provisions in which
performance is a factor.

 

31.2        Successors
and Assigns:  The
covenants and conditions herein contained, subject to the provisions as to
assignment, apply to and bind the heirs, successors, executors, administrators
and assigns of the parties hereto.

 

31.3        Recordation: If Tenant so
elects, Tenant may record a commercially reasonable short form memorandum of
this Lease without the prior written consent of the Landlord.

 

31.4        Landlord’s
Personal Liability:  The
liability of Landlord to Tenant for any default by Landlord under the terms of
this Lease shall be limited to the actual interest of Landlord and its present
or future partners in the Premises, Building or Lot, and Tenant agrees to look
solely to the Premises or any applicable insurance proceeds, or sales proceeds
from a sale of the Premises, Building or Lot for satisfaction of any liability
and shall not look to other assets of Landlord nor seek any recourse against
the assets of the individual partners, directors, officers, shareholders,
agents or employees of Landlord; it being intended that Landlord and the
individual partners, directors, officers, shareholders, agents or employees of
Landlord shall not be personally liable in any manner whatsoever for any
judgment or deficiency. The liability of Landlord under this Lease is limited
to its actual period of ownership of title to the Building and Lot, and
Landlord shall be automatically released from further performance under this
Lease and from all further liabilities and expenses hereunder accruing from and
after the date of the transfer of Landlord’s interest in the Premises, Building
and or Lot.

 

31.5        Severability:
 Any provisions of this Lease
which shall prove to be invalid, void or illegal shall in no way affect, impair
or invalidate any other provisions hereof and such other provision shall remain
in full force and effect.

 

31.6        Choice of
Law:  This Lease shall be governed by
the laws of the State of California, and the venue for any legal actions
regarding or relating to this Lease Agreement shall be in the County of
Monterey, State of California.

 

31.7        Attorneys’
Fees:  In the event any dispute between
the parties results in litigation or other proceeding, the prevailing party
shall be reimbursed by the party not prevailing for all reasonable costs and
expenses, including, without limitation, reasonable attorneys’ and experts’
fees and costs incurred by the prevailing party in connection with such litigation
or other proceeding, and any appeal thereof. Such costs, expenses and fees
shall be included in and made a part of the judgment recovered by the
prevailing party, if any.

 

31.8        Entire
Agreement:  This Lease
supersedes any prior agreements, representations, negotiations or
correspondence between the parties, and contains the entire agreement of the
parties on matters covered. No other agreement, statement or promise made by
any party, that is not in writing and signed by all parties to this Lease, shall
be binding.

 

31.9        Warranty of
Authority:  Each person
executing this Lease on behalf of a party represents and warrants that (1) such
person is duly and validly authorized to do so on behalf of the entity it
purports to so bind, and (2) if such party is a partnership, corporation or
trustee, that such partnership, corporation or trustee has full right and
authority to enter into this Lease and perform all of its obligations
hereunder. In addition to any other remedies available to Landlord under this Lease,
if there is any breach of the foregoing warranty, the person(s) executing this
Lease on behalf of Tenant shall be personally liable for all of Tenant’s
obligations under this Lease, including, but not limited to, the payment by
such person(s) to Landlord of any and all losses, liabilities, costs, expenses
and damages incurred by Landlord hereunder.

 

31.10    Notices:  Any and all notices and
demands required or permitted to be given hereunder to Landlord shall be in
writing and shall be sent: (a) by United States mail, certified and postage
prepaid; or (b) by personal delivery; or (c) by overnight courier, addressed to
Landlord c/o Quadrangle Investments, 295 Main Street, Fifth Floor, Salinas,
California 93901. Any and all notices and demands required or permitted to be
given hereunder to Tenant shall be in writing and shall be sent: (i) by United
States mail, certified and postage prepaid; or (ii) by personal delivery to any
employee or agent of Tenant over the age of 

 

13

 

eighteen (18) years of age; or (iii) by
overnight courier, all of which shall be addressed to Tenant at the address
stated on Page 1 of this Lease Agreement; or (iv) by facsimile at the facsimile
number at the Premises, if any, as provided by Tenant on Page 1 of this Lease
or otherwise provided to Landlord. Notice and/or demand shall be deemed given
upon the earlier of actual receipt or the third day following deposit in the
United States mail. Notice and/or demand by facsimile shall be complete upon
transmission over the telephone line, Any notice or requirement of service
required by any statute or law now or hereafter in effect, including, but not
limited to, California Code of Civil Procedure Sections 1161, 1161 - 1, and
1162, is hereby waived by Tenant.

 

31.11   Joint and
Several:  If Tenant
consists of more than one person or entity, the obligations of all such persons
or entities shall be joint and several.

 

31.12   Covenants and
Conditions:  Each
provision to be performed by Tenant hereunder shall be deemed to be both a
covenant and a condition.

 

31.13   Waiver of Jury
Trial:  The parties hereto shall and
they hereby do waive trial by jury in any action, proceeding or counterclaim
brought by either of the parties hereto against the other on any matters
whatsoever arising out of or in any way related to this Lease, the relationship
of Landlord and Tenant, Tenant’s use or occupancy of the Premises, Building and
or Lot, and/or any claim of injury, loss or damage.

 

31.14   Intentionally
Omitted.

 

31.15   Underlining:  The use of underlining within the Lease is
for Landlord’s reference purposes only and no other meaning or emphasis is
intended by this use, nor should any be inferred.

 

32.         Signs:    All signs and graphics of
every kind visible in or from public view or corridors or the exterior of the
Premises shall be subject to any applicable governmental laws and
ordinances.  Tenant shall have the right
to place a sign either on the exterior of the Building or a monument sign on
the Lot identifying Tenant’s business without Landlord’s consent, but subject
to compliance with all applicable governmental laws and ordinances.  Tenant shall remove all such signs and
graphics prior to the termination of this Lease. Such installations and removals
shall be made in a manner as to avoid damage or defacement of the Premises; and
Tenant shall repair any damage or defacement, including without limitation,
discoloration caused by such installation or removal. Landlord shall have the
right, at its option, to deduct from the Security Deposit such sums as are
reasonably necessary to remove such signs, including, but not limited to, the
costs and expenses associated with any repairs necessitated by such removal.
Notwithstanding the foregoing, in no event shall any neon, flashing or moving
sign(s) be permitted hereunder. Tenant further agrees to maintain any such
sign, awning, canopy, advertising matter, lettering, decoration or other thing
as may be approved in good condition and repair at all times.

 

33.          Intentionally Omitted.

 

34.          Quitclaim:    Upon any termination of
this Lease, Tenant shall, at Landlord’s request, execute, have acknowledged and
deliver to Landlord a quitclaim deed of Tenant’s interest in and to the
Premises, Building and Lot. If Tenant fails to so deliver to Landlord such a
quitclaim deed, Tenant hereby agrees that Landlord shall have the full
authority and right to record such a quitclaim deed signed only by Landlord and
such quitclaim deed shall be deemed conclusive and binding upon Tenant.

 

35.          Intentionally Omitted.

 

36.          Warranties of Tenant:  Tenant hereby
warrants and represents to Landlord, for the express benefit of Landlord, that
in entering into this Lease, Tenant has not relied upon any statement, fact,
promise or representation (whether express or implied, written or oral) not
specifically set forth herein in writing and that any statement, fact, promise
or representation (whether express or implied, written or oral) made at any
time to Tenant, which is not expressly incorporated herein in writing, is
hereby waived by Tenant.

 

37.         Compliance with Americans with Disabilities Act:  Landlord and
Tenant hereby agree and acknowledge that the Premises, the Building and/or Lot
may be subject to the requirements of the Americans with Disabilities Act, a
federal law codified at 42 U.S.C. 12101 et seq., including, but not limited to
Title III thereof, all regulations and guidelines related thereto, together
with any and all laws, rules, regulations, ordinances, codes and statutes now or
hereafter enacted by local or state agencies having jurisdiction thereof,
including all requirements of Title 24 of the State of California, as the same
may be in effect on the date of this Lease and may be hereafter modified,
amended or supplemented (collectively, the “ADA”).  Landlord represents and warrants to Tenant that the Building,
Premises, Leasehold Improvements and Exterior Improvements shall comply with
ADA as of the Commencement Date.  If at
any time after the Commencement Date, any portion of the Building, Premises,
Leasehold Improvements or Exterior Improvements are determined not to comply
with ADA as in effect as of the Commencement Date, then Landlord shall, at
Landlord’s cost and expense, make such alterations as may be necessary to cause
the same to comply with ADA.  Any Tenant
Improvements constructed after the Commencement Date, whether by Landlord or
Tenant, shall be in compliance with the requirements of the ADA.  If such work is required under the ADA as a
result of Tenant’s change in use of the Premises or any work or alteration made
to the Premises by or on behalf of Tenant after the Commencement Date, then
such work shall be performed by Landlord at the sole cost and expense of
Tenant.  Within ten (10) days after
receipt, Landlord and Tenant shall advise the other party in writing, and
provide the other with copies of (as applicable), any notices alleging
violation of the ADA relating to any portion of the Premises or the Building;
any claims made or threatened in writing regarding noncompliance with the ADA
and relating to any portion of the Premises or the Building; or any
governmental or regulatory actions or investigations instituted or threatened
regarding noncompliance with the ADA and relating to any portion of the
Premises or the Building.

 

38.          Brokerage Commission:   Landlord and
Tenant each represents and warrants for the benefit of the other that it has
had no dealings with any real estate broker, agent or finder in connection with
the Premises and/or the negotiation of this Lease, except for the Brokers (as
set forth on Page 1), and that it knows of no other real estate broker, agent
or finder who is or might be entitled to a real estate brokerage commission or
finder’s fee in connection with this Lease or otherwise based upon contacts
between the Landlord and Tenant. Each party shall indemnify and hold harmless
the other from and against any and 

 

14

 

all liabilities or expenses arising out of
claims made for a fee or commission by any real estate broker, agent or finder
in connection with the Premises, Building and Lot, and this Lease other than
Brokers resulting from the actions of the indemnifying party. Any real estate
brokerage commission or finder’s fee payable to the Brokers in connection with
this Lease shall be paid by Landlord and shall only be payable pursuant to that
separate written commission agreement with Brokers, and is only applicable to
the extent of the initial Term of the Lease and to the extent of the Premises
as same exist as of the date on which Tenant executes this Lease.

 

39.          Quiet Enjoyment:  Landlord
covenants with Tenant:  (i) that Tenant
shall and may peaceably and quietly hold, occupy and enjoy the Premises,
Building and Lot during the Term of this Lease, and (ii) neither Landlord, nor
any successor or assign of Landlord, shall disturb Tenant’s occupancy or
enjoyment of the Premises, Building or Lot.

 

40.          Landlord’s
Ability to Perform Tenant’s Unperformed Obligations:   Notwithstanding anything to
the contrary contained in this Lease, if Tenant shall fail to perform any of
the terms, provisions, covenants or conditions to be performed or complied with
by Tenant pursuant to this Lease after having been given thirty (30) days
written notice to cure, and/or if the failure of Tenant relates to a matter
which in Landlord’s judgment reasonably exercised is of an emergency nature and
such failure shall remain uncured for a period of time commensurate with such
emergency, then Landlord may, at Landlord’s option without any obligation to do
so, and in its sole discretion as to the necessity therefor, perform any such
term, provision, covenant, or condition, or make any such payment and Landlord
by reason of so doing shall not be liable or responsible for any loss or damage
thereby sustained by Tenant or anyone holding under or through Tenant. If
Landlord so performs any of Tenant’s obligations hereunder, the full amount of
the cost and expense entailed or the payment so made or the amount of the loss
so sustained shall immediately be owing by Tenant to Landlord, and Tenant shall
promptly pay to Landlord upon demand, as Additional Rent, the full amount
thereof with interest thereon from the date of payment at the greater of (i)
ten percent (10%) per annum, or (ii) the highest rate permitted by applicable
law.

 

41.          Option.

 

                41.1        Grant of Option.  Landlord hereby grants to
Tenant two options(the “Options) to extend the initial term of the Lease
(“Initial Term”) for an additional five (5) years (each, an “Option Term”) upon
and subject to the terms and conditions set forth in this Lease.  The first Option Term shall commence upon
the expiration of the Initial Term and the second Option Term shall commence
upon the expiration of the first Option Term. 
Tenant may not exercise the second Option if Tenant has not exercised
the first Option.  Tenant shall have no
right to extend the Initial Term except as provided herein.  Each Option shall be exercised, if at all,
by Tenant’s delivery of written notice of exercise to Landlord no later than
six (6) months nor earlier than twelve (12) months prior to the expiration date
of the Initial Term with respect to the first Option, or the first Option Term
with respect to the second Option.  The
Basic Rental to be paid during each Option Term shall be the Prevailing Market
Rental, as hereinafter defined.  As used
herein, the term “Prevailing Market Rental” shall mean the rental and all other
monetary payments and escalations that Landlord could obtain from a third party
tenant comparable to Tenant desiring to lease the Premises for the applicable
Option Term, taking into account the age of the Premises, the size of the
Premises, the type and quality of tenant improvements, the quality of
construction of the Premises and Leasehold Improvements, the services provided
under the terms of the Lease, the Additional Rent paid by Tenant under the
Lease, the rental and brokers’ commissions then being paid for the renewal of
leases of space comparable to the Premises in the City of Salinas and all other
factors that would be relevant to a third party in determining the rental such
party would be willing to pay to lease the Premises for the applicable Option
Term.

 

                41.2        Determination of Prevailing Market
Rental.  On or before five
(5) days after Tenant provides Landlord with notice of exercise of an Option,
Landlord and Tenant shall commence negotiations to agree upon the Prevailing
Market Rental applicable thereto.  If
Landlord and Tenant are unable to reach agreement on the Prevailing Market Rental
within ten (10) days after the date negotiations commence, then the Prevailing
Market Rental shall be determined as follows:

 

                                (a)           If Landlord and Tenant are unable to
agree on the Prevailing Market Rental within said ten (10) day period, then
within five (5) days thereafter, Landlord and Tenant shall each simultaneously
submit to the other in a sealed envelope its good faith estimate of the
Prevailing Market Rental.  If the higher
of such estimates is not more than one hundred five percent (105%) of the lower
of such estimates, then the Prevailing Market Rental shall be the average of
the two estimates.

 

                                (b)           If the matter is not resolved by the
exchange of estimates as provided in subparagraph (a) above, then either
Landlord or Tenant may, by written notice to the other on or before five (5)
days after the exchange of such estimates, require that the disagreement be
resolved by arbitration.  Within seven
(7) days after such notice, the parties shall select as an arbitrator a
mutually acceptable MAI appraiser with experience in real estate activities,
including at least ten (10) years’ experience in appraising research and
development space in Monterey County, California and/or Northern
California.  If the parties cannot agree
on an appraiser, then, within a second period of seven (7) days, each party
shall select an independent MAI appraiser meeting the aforementioned criteria
and, within a third period of seven (7) days, the two appointed appraisers
shall select a third appraiser meeting the aforementioned criteria and the
third appraiser shall determine the Prevailing Market Rental pursuant to
subparagraph (c) below.  If one party
shall fail to make such appointment within said second seven (7) day period,
then the appraiser chosen by the other party shall be the sole arbitrator.

 

                                (c)           Once the arbitrator has been selected
as provided for in subparagraph (b) above, then, as soon as practicable but in
any case within fourteen (14) days thereafter, the arbitrator shall select one
of the two estimates of the Prevailing Market Rental submitted by Landlord and
Tenant, which estimate shall be the one that is closer to the Prevailing Market
Rental as determined by the arbitrator. 
The arbitrator’s selection shall be rendered in writing to both Landlord
and Tenant and shall be final and binding upon them and shall not be subject to
appeal.  If the arbitrator believes that
expert advice would materially assist such arbitrator, then the arbitrator may
retain one or more qualified persons, including, but not limited to, legal
counsel, brokers, architects or engineers, to provide such expert advice.  The party whose estimate is not chosen by
the arbitrator shall pay the costs of the arbitrator and of any experts
retained by the arbitrator; provided, however, that any fees of any counsel or
expert engaged directly by Landlord or Tenant shall be borne by the party
retaining such counsel or expert.

 

[SIGNATURES ONLY ON FOLLOWING
PAGE]

 

 

 

15

 

IN WITNESS WHEREOF, this Lease is executed by the parties as of the
Lease Date referenced on page 1 of this Lease.

 

 

	
  TENANT:

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
  Integrated Device
  Technology, Inc.,

  	
   

  	
  LaGuardia Associates,

  
	
  a corporation

  	
   

  	
  a general partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  Jerry G. Fielder

  	
   

  	
   

  	
  Samuel Kobrinsky

  
	
  Its:

  	
  Corporate Secretary

  	
   

  	
  Its:

  	
  Managing General Partner

  

 

 

 

16

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