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HomeMy WebLinkAbout30-Police Department OTY OF SAN BERNARDINO - REQUEST FOR COUNOL AcGgrLG 1 N A L From: Garrett W. Zimmon Subject: Resolution of the Mayor and Common Council of the City of San Bernardino authorizing the San Bernardino Police Department to enter into a lease agreement with "World Plaza L.L.c." to pay $1,571.50 per month to pay for the San Bernardino Police Department's Eastern District Conunand office space at 1535 E. HigWand Ave., Suite C, San Bernardino. Dept:: Police Department Date: August 15, 2005 Synopsis of Previous Council Action None Recommended Motion: Adopt resolution. ~ MICHAEL BIt T, ASSI TANT CHIEF OF POLICE Contact person: Lt. Walt Goggin Phone: 384-5784 Supporting data attached: Yes Ward: Seventh Source: $1,571.50 per month 001-213-5171 General Fund FUNDING REQUIREMENTS: Amount: Council Notes: Finance Agenda Item No.3fr-- "Ill/OS" CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION STAFF REPORT SUBJECT Resolution of the Mayor and Common Council of the City of San Bernardino authorizing the San Bernardino Police Department to enter into a lease agreement with "World Plaza L.L.C." to pay $1,571.50 per month for the San Bernardino Police Department Eastern District Command office space at 1535 E. Highland Ave., Suite C, San Bernardino. BACKGROUND Effective September 1, 1999, the City of San Bernardino, specifically the San Bernardino Police Department Eastern District Command, leased 2245 square feet at 1535 E. Highland Ave., Suite C, San Bernardino for a community police facility. The landlord, Jian Torkan from "World Plaza L.L.C." leased the office space for $1.00 per year for five years, paid in advance. On April 27, 2005, Mr. Jian Torkan notified the San Bernardino Police Department, Eastern District that the lease had expired. Due to new refinancing arrangements, the existing lease terms could not be extended without approval of the mortgage lender. Mr. Torkan was unable to secure approval for the lease rates of $1.00 per year for five years. A review of market lease rates revealed current lease rates to be approximately $1.18 to $1.38 a square foot "triple net". Upon request of the Police Department, Mr. Torkan secured mortgage lender approval for a discount lease rate of$.70 per square foot "triple net". The current Eastern District office space lease would amount to $1,571.50 per month or $18, 858.00 beginning in 2005. Mr. Torkan proposed a 3 % annual increase resulting in the following monthly and yearly rates: Year 2006 2007 2008 2009 Monthly rate $1,618.65 $1,667.20 $1,717.20 $1,768.70 Annual total $19,423.80 $20, 006.40 $20, 606.40 $21, 224.40 The Police Department surveyed available commercial properties to determine if those owners would entertain the former lease rate of $1.00 per year. Properties along Highland Ave., Baseline, Pacific, Del Rosa, Golden, Arden, and Sterling were reviewed because of their central location within the Eastern District. Commercial property occupancy rates were found to be high with few and suitable properties. When suitable properties were located none of the owners would offer the $1.00 per year rate. Only two offered a discount rate and one of those was Mr. Torkan. The costs to move a district command office are high. Moving computer, phone and data connection lines, office equipment, etc. costs several thousand dollars. According to Mr. Sharer, tenant improvements to move into another property, depending on need is between $50-100 per square foot. Using our current floor space of 2245 sq. ft for comparison reveals any move would be cost prohibitive. All Police Department district offices exist with leases of $1.00 per year. Many are reaching renewal dates and the possibility exists that they too will be required to move or begin paying market rates. The San Bernardino Police Department operates under a philosophy of community oriented policing and problems solving. Because of this operational philosophy, it is imperative that the San Bernardino Police Department maintain an office in each district served. FINANCIAL IMP ACT The lease agreement will result in a monthly, recurring general fund budget expense beginning at $1,571.50 per month or approximately $18, 900.00 per year. At maturity in 2009 the lease will cost $1, 768.70 per month or $21,224.40 per year. The Police Department's 05/06 budget includes $18,900 for this lease. RECOMMENDA nON Adopt resolution. 1 RESOLUTION NO. 2 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AUTHORIZING THE SAN BERNARDINO POLICE DEPARTMENT 3 TO ENTER INTO A LEASE AGREEMENT WITH "WORLD PLAZA L.L.c." TO PAY 4 $1,571.50 PER MONTH FOR THE SAN BERNARDINO POLICE DEPARTMENT EASTERN DISTRICT COMMAND OFFICE SPACE AT 1535 E. HIGHLAND AVE., 5 SUITE C, SAN BERNARDINO. 8 SECTION 1. The Mayor and Common Council of the City of San Bernardino 9 do hereby authorize San Bernardino Police Department to enter into a lease agreement with "World Plaza L.L.c." starting at the amount of $1,571.50 per month with 3% annual increases 10 until 2010 to pay for the San Bernardino Police Department's Eastern District Command office 11 space at 1535 E. Highland Ave., Suite C, San Bernardino. 8 _dayof 9 COuncil Members: 10 ESTRADA 11 12 13 14 15 16 "' 1 2 3 4 5 6 7 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AUTHORIZING THE SAN BERNARDINO POLICE DEPARTMENT TO ENTER INTO A LEASE AGREEMENT WITH "WORLD PLAZA L.L.c." TO PAY $1,571.50 PER MONTH FOR THE SAN BERNARDINO POLICE DEPARTMENT EASTERN DISTRICT COMMAND OFFICE SPACE AT 1535 E. HIGHLAND AVE., SUITE C, SAN BERNARDINO. I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor and Common Council of the City of San Bernardino at a meeting thereof, held on the , 2005, by the following vote, to wit: AYES NAYS ABST AIN ABSENT LONGVILLE MCGINNIS DERRY KELLEY JOHNSON 17 MCCAMMACK 18 19 20 21 Rachel G. Clark, City Clerk ,2005. day of The foregoing resolution is hereby approved this 22 23 24 25 26 27 28 Judith Valles, Mayor City of San Bernardino Approved as to Form and legal content: JAMES F. PENMAN, City Attorney By: PROGRAM CHANGE REQUEST DEPARTMENT: Police Patrol Division DIVISION: 213 DESCRIPTION: Eastern District C.O.P. lease (1535 E. Highland Ave). - ACCOUNT NUMBER EXPENDITURE JUSTIFICATION AMOUNT + (-) 001-213-5803 + 18,858 TOTAL NET CHANGE +18,858 Jill AIR COMMERCIAL REAL ESTATE ASSOCIATION STANDARD INDUSTRIAUCOMMERCIAL MULTI-TENANT LEASE - GROSS r'lI~ 1. Basic Provisions (UBasiC Provlslons"). 1.1 Partie.: This Lease ("Leaae"). dated for reference purposes only is made by and between lJnrl n ?1 ~7:::l. T J r. Tllnp ?1 ?00'i = ("Lessor") and r.ity nf ~:::ln R~rn~rn;nn "Party"). 1.2(a) Premises: That certain portion of the Project (as defined below), including all improvements therein or to be provided by Lessor under the terms of this Lease, commonly known by the street address 01 1535 Hi eh 1 ,mn Avenne ' located in the City of c;~n "R"rn~rr1i nn ' County of San Jl~l7'~r-:liY;;lg , State 01 r~ 1 i fnrni ~ ,with zip code ,as ou\lined on Exhibit_ attached hereto ("Premises") and generally described as (describe brielly the nature of the Premises): 8j)j)roximatply 7, 745 "qn~rp fppt "nmpri oi ng ~. . ("Lessee"), (collectively the "Parties", or individually a In addition to Lessee's rights to use and occupy the Premises as hereinafter specified, Lessee shall have non.exclusive rights to any utility raceways of the building containing the Premises ("Building") and to the Common Areas (as defined in Paragraph 2.7 below), but shall not have any rights to the roof, or exterior walls 01 the Building or to any other buildings In the Project. The Premises, the Building, the Common Areas, the land upon which they are located, along with all other buildings and improvements thereon, are herein collectively relerred to as the "Projecl" (See also Paragraph 2) 1.2(b) Parking: ~~ ~ unreserved vehicle parking spaces. (See also Paragraph 2.6) 1.3 Term: =::: (-'H ~~ L-~ years and -D.- months ("Orl~lnal Term") commencing Ang,,"t 1 ?nn5 w \Tt-\:T'...Jo Cd ,. O,..::::,e '(eM- 1'":>V'T'li'J~S cp,'Llc::..$. ("Commencement Date") and ending ~1 '?n' n E$P .ec.~'" L_,7 -~ ==i:(./~). ~l ("l:xplration Date"). (See also Paragraph 3) . ""2.O{I 'if 1.4 Early possession: T po"PP nm7 in rn"opooinn ("Early possession Date"). (See also Paragraphs 3.2 and 3.3) 1.5 Base Rent: $ 1 ~ 7~ 'i0 day 01 each month commencing. " ;~t 1 ?005 4) il! If this box is checked, there are provisions in this Lease for the Base Rent to be adjusted. 1.6 Lessee's Share of Common Area Operating Expenses: 1\T I A percent ( _ '/.) ("LeSSee's Share"). Lessee's Share has been calculated by dividing the approximate square footage of the Premises by the approximate square footage of the Project. In the event that that size of the Premises and/or the Project are modified during the term of this Lease, Lessor shall recaiculate Lessee's Share to rellect such modification. 1.7 Base Rent and Other Monies Paid Upon Execution: (a) Base Rent: $ for the period (b) Common Area Operating Expenses: $ (c) Security Deposit: $ (d) Other: $ for (e) Total Due Upon Execution of this Lease: $ Agreed Use: c;~n P.Prn"rrlinn Pnl i "" n"p"rtm"nt nfTi "" "nrl "rlmin; otr~H",' """ per month ("Base Rent"), payable on the fi r"t il "r) . (See also Paragraph for the period ("Security Deposit"). (See also Paragraph 5) 1.6 . (See also Paragraph 6) 1.9 Insuring Party. Lessor is the "Insuring Party." (See also Paragraph 8) t;lo-.'_R88I-t:smtrBrokerr.-(Sn-alscrpaTa"\lTaPtr1.S)- __ ~c-_.- (a) Representation: The following real estate brokers (the "Brokers") and brokerage rel~g9oshlp.-exrSt in this transaction (check applicable boxes): . . .---.:-- o represents"'Lessor exclusively ("Lessor's Broker"); ----. - o ----- represents Lessee exclusively ("Lessee's Broker"); or ----.... o _---. represents both Lessor and Lessee ("Dual Agency"). (b) ~\lmenttoBrokers: Upon execution and delivery of this Lease by both Parties, Lessor shall pay to the Brokers the broke!.!lge-fee-.-gfeed to in a separate written agreement (or if there is no such agreement, the sum of or - % of thiACtaH3ase-RenHor1he-l>rokerage-selVices-rendered-by-th...erokers~. 1.11 Guarantor. The obligations 01 the Lessee under this Lease are to be guaranteed by N/ A ("Guarantor"). (See also Paragraph 37) i. \ 2 Attachments, Attached hereto are the fOIlOwin?9 all of which constitute a part of this Lease: \SJ an Addendum consisting 01 Paragraphs 2Q..-- through ; o a site plan depicting the Premises; IZJ a site plan depicting the Project; o a current set of the Rules and Regulations lor the Project; o a current set of the Rules and Regulations adopted by the owners' association; o a Work Letter, o other (specify): 2. Premises. 2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises. for the term, at the '-'niiiaiS- C1998-AIR CommercII' Real estate Association PAGE 1 --iniliaiS- FORM MTG-4.5/04 rental, and upon all 01 the terms, covenants and conditions setlorth in this Lease. Unless otherwise provided herein, any, statement of size setlorth in this Lease, or that may have been used in calculating Rent, is an approximation which the Parties agree's reasonable and any payments based thereon are not subject to revision whether or not the actual size is more or iess. NOTE: Lessee Is advised to verity the actual size prior to execullng this Lease. 2;2-- _Condltlon;-l;essor'shal~deliverthat'por1ion'oHhe-p"'mises"Contained'Within'the'Building-("Unit")'to-I:esseerbroom>lean' and Iree of debris on the Commencement Date or the Early Possession Date, whichever first occurs ("Start Date"), and (lI'\g as the required selVice contracts described in Paragraph 7.1 (b) below are obtained by Lessee and in effect within thirt a ollowing the Start Date, warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and ~ I loning systems ("HVAC"), loading doors. sump pumps, if any, and all other such elements in the Unit, other than tho ~ructed by Lessee, shall be in good operating condition on said date, that the structural elements of the roof, bearing w foundation of the Unit shall be froe of material defects, and that the Unit does not contain hazardous levels of any molg.o gi defined as toxic under applicable state dr federal law. If a non-compliance witH such warranty exis,ts as of the Start D~r1rone of such systems or elements should malfunction or fail wilhin the appropriate warranty period, Lessor shall, as L~~e obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written iee1'fOm Lessee setting forth with specificity the nature and extent of such non-compliance, malfunction or failure, rectify same sor's expense. The warranty periods shall be as follows: (i) 6 months as to the HVAC systems, and (iI) 30 days as to t~ ning systems and other elements of the Unit. If Lessee does not give Lessor the required notice within the approprial arTllrity p~riod, corr~ction of any such non-compliance, malfunction or failure shall be the obligation of Lessee at Less' e cost and expense (except for the repairs to the fire sprinkler systems. roof, foundations, and/or bearing walls - see aragraptr7): ~mPlia""er-l-<>998f-Waff"flIs-IhaH<r\he-llest-oHts-knOwledge-1he-imprOvements-orrthe-Premises-and-th..-eomm5'" Areas comply with the building codes that were in effect at the time that each such improvement, or portion thereof, was constrycfed, and also with all applicable laws, covenants or restrictions of record, regulations, and ordinances in effect on the Start Data (" Appncable Requirements"). Said warranty does not apply to the use to which Lessee will put the Premises, modifications which maj&tle required by the Americans with Disabilities Act or any similar laws as a result of Lessee's use (see Paragraph 49), or to any Alt'lfalions or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee Is responsible for determining whether or not the Applicable Requirements, and especially the zoning are appropriate for Lessee's Intended uSJl{and acknowledges that past uses of the Premises may no longer be allowed_ if the Premises do not comply wilh said warr "ty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity t nature and extent of such non-compliance, rectily the same at Lessor's expense. if Lessee does not give Lessor written noti of a non-compliance with this warranty wilhin 6 months following the Start Date, correction of that non-compliance shall be the 0 I gation of Lessee at Lessee's sole cost and expense. If the Applicable Requirements are hereafter changed sO as to require durin e term of this Lease the construction of an addition to or an aile ration of the Unit, Premises andlor Building, the remediation of any);l zardous Substance, or the reinforcement or other physical modification of the Unit, Premises andlor Building ("Capital Expen21tu 8"), Lessor and Lessee shall allocate the cost of such work as follows: (a) Subject to Paragraph 2.3(c) below, if such Capital Expenditur~ are required as a resuil of the specific and unique use of the Premises by Lessee as compared with uses by tenants in generl\l<'(essee shall be fully responsible for the cost thereof, provided, however that if such Capital Expenditure is required during the IlSt 2 years of this Lease and the cost thereof exceeds 6 months' Base Rent, Lessee may instead terminate this Lease unless L sor notifies Lessee, in writing, within 10 days after receipt 01 Lessee's termination notice that Lessor has elected to pay the diffe nee between the actual cost thereof and the amount equal to 6 months' Base Rent. If Lessee elects termination, Lessee shall ifJ) ediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice specifying a)efmination date at least 90 days thereafter. Such termination date shall, however,. in no ~vent be earlier than the last day t;2at aSSes could legally utilize the Premises without commencing such Capital Expenditure. (b) if such Capital Expenditure is I).P the result of the specific and unique use of the Premises by Lessee (such as, governmentally mandated seismic modification;;Y.then Lessor and Lessee shall allocate the obligation to pay for the portion of such costs reasonably attributable to the Premlse!l-pursuant to the formula set out in Paragraph 7.1 (d); provided, however, that if such Capital Expenditure is required during the last 2 years of this Lease or if Lessor reasonabiy determines that it is not economically feasible to pay its share thereof, Lessor shall h the option to terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notilies Lessor, in writing, within 1 ays after receipt of Lessor's termination notice that Lessee will pay for such Capital Expenditure. if Lessor does not elect to termil)ll e, and fails to tender its share of any such Capital Expenditure, Less~e may advance such funds and deduct same, with Interest.)rom Rent until Lesso~s share of such costs have been fully paid. If Lessee is unable to finance Lessor's share, or if the balance.)lnhe Rent due and payable for the remainder of this Lease is not sufticient to fully reimburse Lessee on an offset basis, Lessee tfall have the right to terminate this Lease upon 30 days written notice to Lessor. (c otwithstanding the above, the provisions concerning Capital Expenditures are intended to appiy only to non- voluntary, un ected, and new Applicable Requirements. if the Capital Expenditures are Instead triggered by Lessee as a resuil 01 an actual or posed change in use, change in intensity of use, or modification to the Premises then, and in that event, Lessee shall either: (I) imrp aiateiy cease such changed use or intensity of use andlor take such other steps as may be necessary to eiiminate the re5JUifement for such Capital Expenditure, or (ii) complete such Capital Expenditure at its own expense. Lessee shall not have any right t<HermiRate 1~ge. 2.4 Acknowledgements. Lessee acknowledges that: (a) it has been advised by Lessor and/or Brokers to satisfy itseif with respect to the condition of the Premises (including but not limited to the eiectrical, HVAC and fire sprinkler systems. security, environmental aspects. and compliance with Applicable Requirements and the Americans with Disabilities Act), and their suitability for Lessee's intended use, (b) Lessee has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises, and (c) neither Lessor, Lessor's agents, nor Brokers have made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease. In addition, Lessor acknowledges that: (I) Brokers have made no representations, promises or warranties concerning Lessee's ability to honor the Lease or suitability to occupy the Premises, and (ii) it is Lessor's sole responsibility to investigate the financial capability and/or suitability of all proposed tenants. 2.5 Lessee as Prior Owner/Occupant- The warranties made by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises. In such event, Lessee shall be responsible for any necessary corrective work. 2.6 Vehicle Parking. Lessee shail be entitled to use the number 01 parking spaces specilied in Paragraph 1.2(b) on those portions of the Common Areas designated from time to time by Lessor for parking. Lessee shall not use more parking spaces than said number. Said parking spaces shall be used for parking by vehicles no larger than full-size passenger automobiles or pick-up trucks, herein called "Permitted Size Vehicles." Lessor may regulate the loading and unloading of vehicles by adopting Rules and Regulations as provided in Paragraph 2.9. No vehicles other than Permitted Size Vehicles may be parked in the Common Area without the prior written permission of Lessor. In addition: (a) Lessee shail not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee's employees, suppliers, shippers, customers, contractors or invitees to be loaded, unioaded, or parked in areas other than those designated by Lessor for such activities. (b) Lessee shall not selVice or store any vehicles in the Common Areas. . (c) If Lessee permits or allows any of the prohibited activities described in this Paragraph 2.6, then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor. 2.7 Common Areas _ Definition. The term "Common Areas" is defined as ail areas and facilities outside the Premises and within the exterior boundary line of the Project and interior utility raceways and instailations within the Unit that are provided and designated by the Lessor from time to time for the general non-exclusive use of Lessor, Lessee and other tenants of the Project and their respective empioyees, suppliers, shippers, customers, contractors and invitees, including parking areas, loading and unloading Inilials <C1998~AIR Commercial Real Estate Association PAGE 2 Initials FORM MTG-4-5/04 "'ff'l ~r._'Dt 1 r"I'H'i~" areas. trash areas. roadways. walkWays, driveways and landscaped areas. 2.8 Common Araas . Lesaee's Rights. Lessor gra~ts to Lessee, for the benefit of Lessee and Its employees, suppliers. shippers, contractors, customers and invitees, during the term of this Lease, the non-exclusive right to use, in common with others enliUed to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions goveming the use of the Project. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, temporarily or permanently, in the Common Areas. Any such storage shall be permitted only by the prior written consent of Lessor or Lessor's designated agent, which consent may be revoked at any time. In the event that any unauthorized storage shall occur then Lessor shall have the right. wilhout notice. In addition to such other rights and remedies that it may have, to remove the property and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor. 2.9 Common Areas' Rules and Regulations, Lessor or such other person(s) as Lessor may appoinl shall have Ihe exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify. amend and enforca reasonable rules and regulations ("RuleS and Regulations") for the management, safety, care, and cleanliness of the grounds, the parking and unloading 01 vehicles and the preservation of good order, as well as for the convenience of other occupants or tenants of Ihe Building and the Project and their invitees. Lessee agrees to abide by and conform to all such Rules and Regulations, and shall use its best efforts to cause its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform. Lessor shall not be responsible to Lessee for the non-compliance with said Rules and Regulations by other tenants of the Project. 2.10 Common Areas' Changes. Lessor shall have the right, In Lessor's sole discretion, from time to time: (a) To make changes to Ihe Common Areas, inciuding, without limitation, changes In the location, size, shape and number of driveways. entrances. parking spaces, parking areas, loading and unloading areas, ingress. egress, direction of treffic, landscaped areas, walkways and utility raceways; (b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available; (c) To designate other land outside the boundaries of the Project to be a part of the Common Areas; (d) To add additional buildings and improvements to the Common Areas; (e) To use the Common Areas while engaged in making addilional improvements. repairs or allerations to the projecI. or any portion thereof; and (f) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Project as Lessor may, in the exercise of sound business judgment. deem to be appropriate. 3. Term. 3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3. 3.2 Early possession. If Lessee totally or partially ocoupies the Premises prior to the Commencement Date, the obligation 10 pay Base Rent shall be abated for the period of such earty possession. All other terms of this Lease (including bul not limited to Ihe obligations to pay Lessee's Share of Common Area Operating Expenses, Real Property Taxes and insurance premiums and 10 maintain Ihe Premises) shall be in effect during such period. Any such early possession shall not affect the Expiration Date. ~ Dalal IR p.98ee&leAo-beSil8H>!lFB<>&-te-u.e-ils-Geet-eem_reielly-ree.eeRal>l~ffefle-le-<le~es.ie · Premises to Lessee by the Commencement Date. If, despite said efforts, Lessor is unable to deliver possession as agr ssor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or change the Ex' Ii ate. Lessee shall nol. however. be obligated to pay Rent or perform its other obligations until Lessor delivers posses . e Premises and any period of rent abatement that Lessee would otherwise have enjoyed shall run from the date o~ Ivery of possession and conlinue for a period equal to what Lessee would otherwise have enjoyed, but minus any da~llliiY caused by the acls or omissions of Lessee. If possession is not delivered within 60 days after the CommencementjlatS;-ce.see may, at its option, by notice in writing within 10 days after Ihe end of such 60 day period, cancel this Lease, in ~A",,"ii8nt the Parties shall be discharged from all obligations hereunder. If such written nolice is not received by Lessor wi '~...arcI10 day period, Lessee's right to cancel shall terminate. Except as otherwise provided. if possession is not tendered ee by the Start Date and Lesaee doea not terminate this Lease, as aforesaid, any period 01 rent abatement that Les~ea1 otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what L~......rould otherwise have enjoyed under the terms hereof, but minus any days 01 delay caused by the acts or omissi~H:'8s"see. U possession of the Premises is not delivered within 4 months after the Commencement Date, this Lease shall \Q~~A.....,g'..Ill.~t. a_ohad b.~"..~ ......r .~d ......., iR '''riti~, 3.4 Lessee CompUance, Lessor shall not be required to tender possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such eVideltce, Lessee shall be required to pertorm all 01 its obligations under this Lease from and after the Start Date, including the payment of Rent, notwithstanding Lessor's election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied. 4. Rent. 4.1. Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent ("Rent"). 4.2 CammeR' Faa Op...lIRg IixpaR'" ..eosee-sAall-p~o-I.e&SGr-dWriRg-lAe-te~.....dditjen-lG-tAe-Bas...RJll't. Lessee's Share (as specified in Paragraph 1.6) of all Common Area Operating Expenses, as hereinafter defined, during each endar year of the term of this Lease, in accordance with the following provisions: (a) "Common Area Operating Expenses" are defined. for purposes of this Lease, as all costs incurred to Ihe ownership and operation of the Project, including, but not limited to, the following: (i) The operation. repair and maintenance, in neat, clean, good order and condition, but subparagraph (e)). 01 the following: (aa) The Common Areas and Common Area improvements, including parkin as, loading and unloading areas, trash areas, roadways, parkways, walkways, driveways, landscaped areas, bumpers, irrigation ems, Common Area lighting facilities, fences and gates, elevators, roofs, and roof drainage systems. (bb) Exterior signs and any tenant directories. (cc) Any fire sprinkler systems. (Ii) The cost of water. gas, electricity and telephone to s metered. (iii) Trash disposal. pest control services, propert nagement, security services, owner's association dues and fees. the cost to repaint the exterior of any structures and the cost ny environmental inspections. (iv) Reserves set aside for maintenance repair of Common Areas and Common Area equipment. (v) Property TaxeS (as defined in Paragraph 10). (vi) Any "Insurance Cost Incre (as defined in Paragraph 6). (vii) Any deductible portio an insured loss concerning the Building or the Common Areas. (viii) s' and attorneys' lees and costs related to the operation, maintenance, repair and replacement 01 the Project. (Ix) The co any Capital Expenditure to the Building or the Project not covered under the provisions of Paragraph 2.3 provided; however, Lessor shall allocate the cost of any such Capital Expenditure over a 12 year period and Lessee shall not be required to pay e than Lessee's Share of 1/144th of the cost of such Capital Expenditure in any given month. Any other services to be provided by Lessor that are stated elsewhere in this Lease to be a Common Area pense. . R~' Call1maR . r.. operali~.ee-aAd-l'leal-PFGJleRy-'r&l<B&lAal-ere-speeilieallY"'llribtttable-tS"the-Bnir,1he-BUifding Operatin (bl PAGE 3 Initials FORM MTG-4-5/04 Initials 0I998..AIR Commercl.1 Real Estate A..oclatlon . ._~-.----"'--- ,,_.,,~.---".' ef-l<Hl~llef-l>tlilei~e-I'fejeet-eHe-lI1e-eperatie"""paiHlnd-mainteAanee-l~efeof,s~all-be-eIIOCated-enlifely-1<HluciT-jJAit, Building, Of olher building. However, any Common Area Operating Expenses and Real Property Taxes that are no.\...SpeclJically attributable to the Building or to any other building or to the operation, repair and maintenance thereof, .hall be. ltabry allocated by Lessor to all buildings in the Pro!ect. . (c) The inclusion of the improvements, facililies and services set forth in Subparagraph ~'" all not be deemed to Impose an obligation upon Lessor to either have said improvements or facilities or to provide those spees unless the Project already has the same, Lessor already provides the services. or Lessor has agreed elsewhere In this L sEffo provide the same or some of them. (d) Lessee's Share of Common Area Operating Expenses is paya onthly on the same day as the Base Rent is due hereunder. The amount of such payments shall be based on Lessor's as . e of the annual Common Area Operating Expenses. Within 60 days after written request (but not more than once each year r shall deliver to Lessee a reasonably detailed statement showing Lessee's Share of the actual Common Area Operating E es incurred during the preceding year. If Lessee's payments during such year exceed Lessee's Share, Lessor shall credi amount of such over-payment against Lessee's future payments. If Lessee's payments during such year were less tha ee's Share, Lessee shall pay to Lessor the amount of the deficiency within 10 days a<<er delivery by Lessor to Lessee 01 th ement. (eJ Except as . ed in paragraph 4.2(a)(viii), Common Area Operating Expenses shall not include the cost of replacing equipment or capit ponents such as the roof, foundations, exterior walls or Common Area capital improvements, such as the parking iot ., Etlevalors, ienctls that havE;! a useful life for accounting purposes of 5 years or more. Common Area Operating Expenses shall not include any expenses paid by any tenant directiy to third parties, or as to iO~ Leeser i. el~ep iee rei",13uFeee 13\ aAY tAi~afly;-etlleHe""nt,.eHA6Uf8Ae&-pf0G8eds. 4.3 Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it js due. All monetary amounts shall be rounded to the nearest whole dollar. In the event that any invoice prepared by Lessor is inaccurate such inaccuracy shall not constilule a waiver and Lessee shall be obligated to pay the amount set forth in this Lease. Rent for any period during the term hereol which is for less than one full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amounl then due shall not be a waiver of Lessor's rights to the balance of such Rent, regardless of Lessor's endorsement of any check so stating. In the event that any check, draft, or other instrument 01 payment given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to Lessor the sum 01 $25 in addition to any Late Charge and Lessor, at its option, may require all future Rent be paid by cashier's check. Payments will be applied first to accrued late charges and attorney's fees, second to accrued interest, then to Base Rent and Common Area Operating Expenses, and any remaining amount 10 any olher outstanding charges or costs. 5. Security Deposit Lessee shall deposit with Lessor upon execution hereof the Security Deposit as security for Lessee's faithful pertormance of its obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defauits under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensale Lessor for any liability, expense, loss or damage which Lessor may sulfer or incur by reason thereof. If Lessor uses or applies all or any portion 01 the Security Deposit, Lessee shall within 10 days after wrillen request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to increase the Security Deposit to the extent necessary, in Lessor's reasonable judgment, to account for any increased wear and tear that the Premises may sulfer as a result thereof. If a change in control of Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessor's reasonable judgment, significantiy reduced, Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on such change in financial condition. Lessor shall not be required to keep the Security Deposit separate from its general accounts, Within 14 days after the expiration or tenmination of this Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent, and otherwise within 30 days after the Premises have been vacated pursuant to Paragraph 7.4(c} below, Lessor shall retum that portion of the Security Deposit not used or applied by Lessor. No part of the Security Deposit shall be considered to be held in trust, to bear interest or 10 be prepaymenlfor any monies to be paid by Lessee under this Lease. I 6. Use. 6.1 Use. Lessee shall use and occupy the Premises only for the Agreed Use, or any other legal use which is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of or causes damage to neighboring premises or properties. Other than guide, signal and seeing eye dogs, Lessee shall not keep or allow in the Premises any pets, animals, birds, fish, or reptiles. Lessor shall not unreasonably withhold or delay its consent to any written request for a modification of the Agreed Use, so long as the same will not impair the structural integrity of the Building or the mechanical or electrical systems therein, and/or is not significantly more burdensome to the Project. If Lessor elects to withhold consent, Lessor shall within 7 days after such request give written notification of same, which notice shall include an explanation of Lessor's objections to the change in the Agreed Use. 6.2 Hazardous Substances. (a) Reportable Uses Require Consent. The term "Hazardous Substance" as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, Is either. (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (Ii) regulated or manila red by any governmental authority, or (Iii) a basis for potential liability of Lessor to any governmental agoncy or third party under any applicable statute or common law theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, ga801lne, and/or crude 011 or any product8, by..products or traotlon. thereof. L..... ,hall not engage in any activity In or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee's expense) with all Applicable Requirements, "Reportable Use" shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation. possession, storage, use, transportation, or disposal 01 a Hazardous Substance that requires a permll from, or with respect to which a report, notice, registration or business plan is required to be flied with, any governmental authority, and/or (Iii) Ihe presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, ordinary office supplies (copier toner, liquid paper, glue, etc.) and common household cleaning materials, so long as such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving such addilional assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or Iiebility, including, but not limited to, the Installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasemenls) and/or increasing the Security Deposit. (b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come 10 be located in, on, under or about the Premises, olher than as previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance. (c) Lessee Remedlalfon. Lessee shall not cause or penmit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptiy, at Lessee's expense, comply with all Applicable Requirements and take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, lor the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or PAGE 4 lnilials FORM MTG-4-S/04 Initials <t1l99S.A1R Commercial Real Estate Association ~::,::r: "repetlie~~ '::t~~::~~.ee 6r fflB~lly-eBftItibttteti-t~.ee;-e'1'~"i"g-lo-e"';"VClvj"g-any-Haz8reo~s-S~bst8"Ce e It:1a Pre I he ten:t\ al \RIB lease, ~y af fer les8e8, Sf aAY tRIFEl-part.y. (d) Le.sell Indemnlllcetlon. Lessee shall indemnify, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents andlor damages, fiabilities, judgments, claims, expenses, penalties, and attomeys' and cons~llants' fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from areas outside of the Project not caused or contributed to by Lessee). Lessee's obligations shall include, but not be limited to, the eNects of any contamination or injury to person, property or the environment created or suNered by Lessee. and the cost of investigation, removal, remediation, restoration andlor abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement. (e) Lessor Indemnillcatlon. Lessor and its successors and assigns shall indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all environmental damages, Including the C08t of remediation, which are suNered as a direct result of Hazardous Substances on the Premises prior to Lessee taking possession or which are caused by the gross negligence or willful misconduct of Lessor, its agents or employees. Lessor's obligation'S, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal, remediation, restoration andlor abatement, and shall survive the expiration or termination of this Lease. (f) Investigations and Remedlatlons. Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to Lessee taking possession, unless such remediation measure is required as a result of Lessee's use (Including "Alterations", as defined in paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor's agents to have reasonable access to the Premises at reasonable times in order to carry out Lessor's investigative and remedial responsibilities. (g) Lessor Termination Option. If a Hazardous Substance Condition (see Paragraph 9.1 (e)) occurs during the term of this Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by the Applicable Requirements and this Lease shall continue in full force and eNect, but subject to Lessor's rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's option, either (I) investigate and remedlate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue In full force and eNect, or (ii) if the estimated cost to remediate such condition exceeds 12 times the then monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee, within 30 days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition, 01 Lessor's desire to terminate this Lease as of the date 60 days following the date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee's commitment to pay the amount by which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal to 12 times the then monthly Base Rent or $100,000. whichever is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days following such commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds are available. II Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessor's notice of termination. 6.3 Lessee's Compllance with Applicable Requirements. Except as otherwise provided in t~lis Lease, Lessee shall, at Lessee's soie expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of eny applicable fire insurance underwriter or rating bureau, and the recommendations of Lessor's engineers andlor consultants which relate In any manner to such Requirements, without regard to whether said Requirements are now In effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of Lessor's written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee's compliance with any Applicabie Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents invoived) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements. Likewise, Lessee shall immediately give written notice to Lessor of: (i) any water damage to the Premises and any suspected seepage, pooling, dampness or other condition conducive to the production of mold; or (ii) af\\' mustiness or other odors that might indicate the presence of mold in the Premises. 6.4 Inspection; Compliance. Lessor and Lessor's "Lender" (as defined In Paragraph 30) and consultants shall have the right (0 enler into Premises at any time, in the case of an emergency, and otherwise at reasonable times after reasonable notice, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or a Hazardous Substance condition (see Paragraph 9.1) is lound to exist or be imminent, or the inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such Inspection is reasonably related to the violation or contamination. In addition, Lessee shall provide copies of all relevant material safety data sheets (MSDS) to Lessor within 10 days of the receipt of written request therefor. 7. Maintenance: Repairs, Utility Installations: Trade Fixtures and Alterations. 7.1 Lessee's Obligations. (a) in General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable Requirements), 7,2 (Lessor's Obligations), 9 (Damage or Dastruction), and 14 (Condemnation), Lessee shall, at Lessee's sole expense, keep the Premises, Utility Installations (Intended for Lessee's exclusive use, no matter where located), and Alterations in good order, condition and repair (whether or not the portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the Premises), including, but not limited to, all equipment or facilities, such as plumbing, HVAC equipment, electricaf, lighting facilities, boilers, pressure vessels, fixtures, Interior walls, Interior surfaces of exterior walls, ceilings, floors, windows. doors. plate glass, and skylights but excluding any items which are the responsibility of Lessor pursuant to Paragraph 7.2. Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Paragraph 7.1 (b) below. Lessee's obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair. (b) Service Contracts. Lessee shall, at Lessee's sole expense, procure and maintain contracts, with copies to Lessor, in customary form and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements, If any, If and when Installed on the Premises: (I) HVAC equipment, (Ii) boiler and pressure vessels, (Iii) clarifiers, and (iv) any other equipment, jf reasonably required by Lessor. However, Lessor reserves the right, upon notice to Lessee, to procure and maintain any or all of such service contracts, and Lessee shall reimburse Lessor, upon demand, for the cost thereof. (c) Failure to Perform. II Lessee fails to perform Lessee's obligations under this Paragraph 7.1, Lessor may enter upon the Premises after 10 days' prior written notice to Lessee (except in the case of an emergency, In which case no notice shall be required), perform such obligations on Lessee's behalf, and put the Premises in good order, condition and repair, and Lessee shall promptly pay to Lessor a sum equal to 115% 01 the cost thereof. (d) Replacement. Subject to Lessee's indemnification of Lessor as set forth in Paragraph 8.7 below, and without . relieving Lessee of liability resulting from Lessee's failure to exercise and perform good maintenance practices, if an item described In Paragraph 7.1 (b) cannot be repaired other than at a cost which is In excess of 50% of the cost of replacing such item, then such Item shall be replaced by Lessor, and the cost thereof shall be prorated between the Parties and Lessee shall only be obligated to pay, each month during the remainder of the term 01 this Lease, on the date on which Base Rent Is due, an amount equal to the product of mulliplying the cost of such repiacement by a fraction, the numerator of which is one, and the denominator of which is 144 (ie, 1/144th Initials 0199B-AIR Commercial Rcal Estate Association PAGE 5 Initials FORM MTG-4-5/04 01 the cost per month). Lessee shall pay Interest on the unamortized balance but may prepay its obligation at any time. 7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2 (Condition). 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler system, Common Area fire alarm andlor smoke detection systems, fire hydrants, parking lots, walkways, parkways, driveways, landscaping, fences, signs and utility systems serving the Common Areas and all parts thereof, es well as providing the services for which there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior surtaces of exterior walls nor shall Lessor be obligated to maintain, repair or repiace windows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter in eflect to the extent it is inconsistent with the terms of this Lease. 7.3 Utility Installations; Trade Fixtures; Alterations. (a) Deflnttlons. The term "Utility Instsllattons" refers to all floor and window coverings, air andlor vacuum lines, power panels, eiectrical distribution, security and fire protection systems, communication cabling, lighting fixtures, HVAC equipment, plumbing, and lencing In or on the Premises. The term "Trada Fixtures" shall maan Lessee's machinery and equipment that can be removed without doing material damage to the Premises. The term "Alterations" shall mean any modification of the Improvements, other than Utility tnstallations or Trade Fixtures, whether by addition or deletion. "Lessee Owned A!terattons and/or Utility Instsllattons" are defined as Alterations andlor Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a). (b) Consent. Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor's prior written consent. Lessee may, however, make non-structural Utility installations to the interior of the Premises (excluding the rool) without such consent but upon notice to Lessor, as long as they are not visible from the outside, do not involve puncturing, relocating or removing the rool or any existing walls, will not affect the electrical, plumbing, HVAC, andlor life safety systems, and the cumuiative cost thereof during Ihis Lease as extended does not exceed a sum equal to 3 month's Base Rent in the aggregate or a sum equal to one month's Base Rent in anyone year. Notwithstsnding the foregoing, Lessee shall not make or permit any roof penetrations andlor install anything on the roof without the prior written approval of Lessor. Lessor may, as a precondition to granting such approval, require Lessee to utilize a contractor chosen andlor approved by Lessor. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee's: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations shall be pertormed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount in excess of one month's Base Rent, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount equal to 150% of the estimated cost of such Alteration or Utility Installation and/or upon Lessee's posting an additional Security Deposit with Lessor. (c) Liens; Bonds. Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been lurnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises or any interest therein. Lessee shall give Lessor not less than 10 days notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to 150% of the amount of such contested lien, claim or demand, indemnifying Lessor against liability lor the same. If Lessor elects to participate in any such action, Lessee shall pay Lessor's altorneys' fees and costs. 7.4 Ownership; Removal; Surrender; and Restoration. (a) Ownership. Subject to Lessor's right to require removal or elect ownership as hereinafter provided, all Aiterations and Utility Installations made by Lessee shall be the property of Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise instructed per paragraph 7.4(b} hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or tenmination of this Lease, become the property of Lessor and be surrendered by Lessee with the Premises. (b) Removal. By delivery to Lessee of written notice from Lessor not earlier than 90 and not later than 30 days prior to the end of the term of this Lease, Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this Lease. Lessor may require the removal at any time of all or any part bf any Lessee Owned Alterations or Utility Installations made without the required consent. (c) Surrender; Restoration. Lessee shall surrender the Premises by the Expiration Date or any earlier termination date, with all of the improvements, parts and surtaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. "Ordinary wear and tear" shall not include any damage or deterioration that would have been prevented by good maintenance practice. Notwithstanding the foregoing, if this Lease is for 12 months or less, then Lessee shail surrender the Premises in the same condition as delivered to Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any damage occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations andlor Utiiity Installations, furnishings, and equipment as well as the removal of any storage tank installed by or lor Lessee. Lessee shall also completely remove from the Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or any third party (except Hazardous Substances which were deposited via underground migration from areas outside of the Premises) even if such removal would require Lessee to perform or pay for work that exceeds statutory requirements. Trade Fixtures shall remain the properly of Lessee and shall be removed by Lessee. Any personal property of Lessee not removed on or before the Expiration Date or any earlier termination date shalt be deemed to have baen abandoned by Lessee and may be disposed of or retained by Lessor as Lessor may desire. The failure by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 26 below. 8. Insurance; Indemnity. 8.1 Payment of Premium Increases. (a) As used herein, the term "Insurance Cost Increase" is defined as any increase in the actual cost of the insurance applicable to the Building andlor the Project and required to be carried by Lessor, pursuant to ParagraphS 8.2(b), 8.3(a) and 8.3(b), ("Required Insurance"), over and above the Base Premium, as herelnalter defined, calculated on an annual basis. Insurance Cost incroase shall include, but not be limited to, requirements of the holder of a mortgage or deed of trust covering the Premises, Building and/or Project, increased valuation of the Premises, Building and/or Project, andlor a general premium rate increase. The term Insurance Cost Increase shall not, howev~r, include any premium increases resulting from the nature of the occupancy 01 any other tenant of the Building. If the parties insert a dollar amount in Paragraph 1.9, such amount shall be considered the "Base Premium." The Base Premium shall be the annual premium applicable to the 12 month period immediately preceding the Start Date. If, however, the Project was not insured for the entirety of such 12 month period, then the Base Premium shall be the lowest annual premium reasonably obtainable for the Required Insurance as of the Start Date, assuming the most nominal use possible of the Building. In no event, however, shall Lessee be responsibie for any portion of the premium cost attributable to liability Insurance coverage In excess of $2,000,000 procured under Paragraph 8.2(b). (b) Lessee shall pay any Insurance Cost Increase to Lessor pursuant to Paragraph 4.2. Premiums lor poiicy periods commencing prior to, or extending beyond, the term of this Lease shall be prorated to coincide with the corresponding Start Date or Expiration Date. 8.2 Liability Insurance. (a) Carried by Lessee. Lessee shall obtain and keep in force a Commercial General Liability policy of insurance protecting Lessee and Lessor as an additional insured against claims for bodily injury, personal injury and property damage based upon lrulials C1998~AtR Commercial Real Estate Association PAGE 6 Initials FORM MTG-4-S/04 .-.. ._-_.-......-..........~_..... .,~~ r. ..,..PllIII\lI,........'.. or arising out 01 the ownership, use, occupancy or maintenance of the Premises and all areas appurtenaht thereto. Such insurance shall be on an occurrence bula providing single limit coverage in an amount not less than $11000,000 per occurrence with an annual aggregale of not less than $2,000,000. Lessee shall add Lessor as an additional insured by means of an endorsement at least as broad as the Insurance Service Organization's "Additional Insured~Managers or Lessors of Premises" Endorsement and coverage shall also be extended to include damage caused by heat, smoke or fumes from a hostile fire. The policy shall not contain any intra-insured exclusions as between insured persons or organizations. but shall include coverage for liability assumed under this Lease as an "Insured contract" for the performance of Lessee's indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. Lessee shall provide an endorsement On its liability pOI;cy(ies) which provides that its insurance shall be primary to and not contributory with any similar insurance carried by Lassor, whose insurance shall be considered excess insurance only. (b) Carried by Lessor. Lessor shall maintain liability insurance as described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional Insured therein. 8.3 Property tnsurance - Building, Improvements and Rental Value. (a) Building end Improvements. Lessor shall obtain and keep in force a policy or policies 01 insurance in the name of Lessor, with loss payable to Lessor. any ground-lessor. and to any Lender insuring loss or damage to the Premises. The amount of such insurance shall be equal to the full Insurable replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lender, but in no event more than the commercially reasonable and available Insurable value thereof. Lessee Owned Alterations and Utility Installations. Trade Fixtures, and Lessee's personal property shall be insured by Lessee under Paragraph 8.4. II the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender), including coverage for debris removal and the enlorcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed $1,000 per occurrence. (b) Rental Value. Lessor shall also obtain and keep in force a policy or policies in the name of Lessor with loss payabie to Lessor and any Lender, insuring the loss of the full Rent for one year with an extended period of indemnity for an additional 180 days ("Renlal Value insllrancs-). Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to rellect the projected Rent otherwise payable by Lessee, for the next 12 month period. (c) Adjacent Premises. Lessee shall pay for any increase in the premiums for the property insurance of the Building and for the Common Areas or other buildings in the Project if said increase is caused by Lessee's acts. omissions. use or occupancy of the Premises. (d) Lessee's Improvements. Since Lessor is the Insuring Party, Lessor shall not be required to insure Lessee Owned Alterations and Utility Installations unless the item in question has become the property of Lessor under the terms of this Lease. 8.4 Lessee's Property; Business Interruption Insurance. (a) Property Damage. Lessee shall obtain and maintain insurance coverage on all of Lessee's personal property, Trade Fixtures. and Lessee Owned Alterations and Utility Installations. Such Insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with written ovidence that such insurance is in force. (b) Business Interruption. Lessee shall obtain and maintain loss of income and extra expense insurance in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent lessees in the business of Lessee or attributable to. prevention of access to the Premises as a result of such perils. (c) No Representation of Adequate Coverage. Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee's property, business operations or obligations under this Lease. 8.5 Insurance Policies. Insurance required herein shall be by companies duly licensed or admitted to transact business in the state where the Premises are located, and maintaining during the policy term a "General Policyhold"lS Rating" of at ieast A.. VI, as set forth in the most current issue of "Best's Insurance Guide", or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date. deliver to Lessor certified copies of policies of such insurance or certificates evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or subject to modification except after 30 days prior written notice to Lessor. Lessee shall, at least 10 days prior to the expiration of such policies, furnish Lessor with evidence of renewals or "insurance binders- evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fail to procure and maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same. 8.6 Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other. and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils required to be insured against herein. The effect of such releases and waivers is not limited by the amount of insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby. 8.7 Indemnity. Except for Lessor's gross negligence or willful misconduct, Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor and Its agents, Lessor's master or ground lessor, partners and Lenders, from and against any and all claims. loss of rents andlor damages, liens, judgments. penalties, attorneys' and consultants' fees, expenses andlor liabilities arising out of, involving, or in connection with, the use andlor occupancy of the Premises by Lessee. If any action or proceeding is brought against Lessor by reason 01 any of the foregoing matters, Lessee shall upon notice defend the same at Lessee's expense by counsel reasonabiy satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified. 8.8 Exemption of Lessor from Liability. Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee. Lessee's employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, indoor air quality, Ihe prosoroco of mcle or from the breakage, leakage, obstruction or other delects of pipes, fire sprinklers, wires, appliances, plumbing, H'JAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions 01 the Building, or from other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor nor from. the failure of Lessor to enforce the provisions of any other lease In the Project. Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee's business or for any loss of income or profit therefrom. 8.9 Failure to Provide Insurance. Lessee acknowiedges that any failure on its part to obtain or maintain the insurance required herein will expose Lessor to risks and potentially cause Lessor to incur costs not contemplated by this Lease, the extent of which will be extremely difficult to ascertain, Accordingly, for any month or portion thereot that Lessee does not maintain the required .insurance andlor does not provide Lessor with the required binders or certificates evidencing the existence of the required insurance, the Base Rent shall be automatically increased, without any requirement for notice to Lessee, by an amount equal to 10% 01 the then existing Base Rent or $100, whichever is greater. The parties agree that such increase in Base Rent represents fair and reasonable compensstion for the additional risk/costs that Lessor will incur by reason of Lessee's failure to maintain the required insurance. Such increase in Base Rent shall in no event constitute a waiver of Lessee's Default or Breach with respect to the failure to maintain such Initials C1199a.AIR Commercial Real Estate Association PAGE 7 Initials FORM MTG-4-5/04 insurance, prevent the exercise of any of the other rights and remedies granted hereunder, nor relieve Lessee of its obligation to maintain the insurance specified in this Lease. 9. Damage or Destruction. 9.1 Definitions. (a) "Premises Partial Damage" shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alleratlons and Utility Installations, which can reasonably be repaired in 3 months or less from the date of the damage or destruction, and the cost thereof does not exceed a sum equal to 6 month's Base Rent. Lessor shall notify Lessee In writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total. Notwithstanding the foregoing, Premises Partial Damage shall not include damage to windows, doors, andlor other similar items which Lessee has the responsibility to ropair or replace pursuant to the provisions of Paragraph 7.1. (b) "Premises Total Destruction" shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be repaired in 3 months or less from the date of the damage or destruction andlor the cost thereof exceeds a sum equal to 6 month's Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total. (c) "Insured Loss" shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3{a). irrespective of any deductible amounts or coverage limits involved. (d) "Replacement Cost" shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prtor thereto, including demolition, debrts removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation. (e) "Hazardous Substance Condition" shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the Premises which requires repair, remediation, or restoration. 9.2 Partial Damage _ Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shali, at Lessor's election. make the repair of any damage or destruction the total cost to repair of which is $10,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insurtng Party shall promptly contribute the shortage in proceeds as and when required to complete said repairs. In the event, however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage In insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof wllhin said 10 day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by wrttten notice to Lessee within 10 days thereafter to: (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in fulllorce and effect, or (Ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party. 9.3 Partial Damage _ Uninsured Loss. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willlul act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), Lessor may either: (i) repair such damage as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (Ii) terminate this Lease by giving written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective 60 days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within 10 days after receipt of the termination notice to give wrttten notice to Lessor of Lessee's commitment \0 pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required furtds are available. If Lessee does not make the required commitment, this Lease shall terminate as of the date specified In the termination notice. '9.4 Total Destruction. Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, this Lease shall terminate 60 days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lesso~S damages from Lessee, except as provided in Paragraph 8.6. 9.5 Damage Near End 01 Term. If at any time during the last 6 months of this Lease there is damage for which the cost to repair exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective 60 days following the date of occurrence of such damage by giving a written termination notice to Lessee within 30 days aller the date of occurrence 01 such damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier 01 (I) the date which is 10 days aller Lessee's receipt of Lessor's written notice purporting to terminate this Lease, or (ii) the day prtor to the date upon which such option expires. If Lessee duly exercises such option durtng such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee's option shall be extinguished. 9.6 Abatement of Rent; lessee's Remedies. (a) Abatement. In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required lor the repair, remediation or restoration of such damage shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired, but not to exceed the proceeds received from the Rental Value insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein. (b) Remedies. If Lessor shall be obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within gO days aller such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders .01 which Lessee has aclual nOlice, of Lessee's election to terminate lhls Lease on a date not less than 60 days following the giving of such notice. If Lessee gives such nolice and such repair or restoration is not commenced within 30 days thereafter, this Lease shall terminate as of the date specilied in said notice. If the repair or restoration is commenced within such 30 days, this LeaSe shall continue in full force and effect. .Commence" shall mean either the unconditional authortzatlon of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs. .9.7 Termination; Advance Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph g, an equitable adjustment shall be made conceming advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much 01 Lessee's Securtty Deposit as has not been, or is not then required to be, used by Lessor. 9.8 Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or PAGE 8 InitialS FORM MTG-4.5/04 Inilials Ct 998.AIR Commercial Real Estate Association .'. ._. ,--...---..,.--.'-." ...~. ..." .-... ...-...-...-,-" destruction of the Premises with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent inconsistent herewith. 10. Real Property Taxes. 10.1 Delinltlons. (a) "Real Property Taxes." As used herein, the term "Real Property Taxes" shall include any form of assessment; real estate, general, special, ordinal)! or extraordlnal)!, or rantal lavy or tax (othar than Inharitanca, paraonal inoome or estate taxes); improvement bond; and/or license fee imposed upon or levied against any legal or equitable interest of Lessor in the Project, Lessor's right to other income therefrom, and/or Lessor's business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Project address and where the proceeds so generated are to be applied by the city, county or other local taxing authority of a jurisdiction within which the Project is located. The term "Real Property Taxes" shall also include any tax, fee, levy, assessment or charge, or any increase therein: (i) imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Project, (ii) a change in the improvements thereon, and/or (iii) levied or assessed on machinel)! or equipment provided by Lessor to Lessee pursuant to this Lease. (b) "Base Real Property Talles." As used herein, the term "Base Real Property Taxes" shall be the amount of Real Property Taxes, which are assessed against the Premises, Building, Project or Common Areas In the calendar year during which the Lease is executed. In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any real estate tax year shail be included in the calculation of Real Property Taxes for such calendar year based upon the number of days which such calendar year and tax year have in common. 10.2 Payment of Taxes. Except as otherwise provided in Paragraph 10.3, Lessor shall pay the Real Property Taxes applicable to the Project, and said payments shall be included in the calculation of Common Area Operating Expenses in accordance with the provisions of Paragraph 4.2. 10.3 Additional Improvements. Common Area Operating Expenses shall not include Real Property Taxes specified in the tax assessor's records and work sheets as being caused by addltlonallmprovements placed upon the Project by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at the time Common Area Operating Expenses are payable under Paragraph 4.2, the entirety 01 any increase in Real Property Taxes if assessed solely by reason of Alterations. Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee's request or by reason of any alterations or improvements to the Premises made by Lessor subsequent to the execution of this Lease by the Parties. 10.4 Joint Assessment If the Building is not separately assessed, Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Property Taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. Lessor's reasonable determination thereof, In good faith, shall be conclusive. 10.5 Personal Property Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee Owned Alterations and Utility Instaliations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained in the Premises. When possible, Lessee shali cause its Lessee Owned Alterations and Utility Instaliations, Trade Fixtures, furnishings, equipment and ali other personal property to be assessed and billed separately from the real property 01 Lessor. II any of Lessee's said property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's property within 10 days after receipt of a written statement setting forth the taxes applicable to Lessee's property. 11. Utilities and Services. Lessee shall pay for ali water, gas, heat, light, power, telephone, trash disposal and other utilities and selVices supplied to the Premises, together with any taxes thereon. Notwithstanding the provisions of Paragraph 4.2, if at any time in Lessor's sole judgment, Lessor determines that Lessee is using a disproportionate amount of water, electricity or other commonly metered utilities, or that Lessee is generating such a large volume of trash as to require an Increase In the size of the trash receptacle and/or an increase in the number of times per month that it is emptied, then Lessor may increase Lessee's Base Rent by an amount equal to such increased oosts. Thera shall be no abatement of Rent and Lessor shali not be liable in any respect whatsoever for the inadequacy, stoppage, interruption or discontinuance of any utility or service due to riot, strike, labor dispute, breakdown, accident, repair or other cause beyond Lessor's reasonable control or in cooperation with governmental request or directions. 12. Assignment and Subletting. 12.1 Lessor's Consent Required. (a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encuMber (collectively, "assign or assignment") or sublet all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent. (b) Unless Lessee is a corporation and its stock is publicly traded on a national stock exchange, a change in the control of Lessee shall constitute an assignment requiring consent. The transfer, on a cumulative basis, of 25% or more of the voting control of Lessee shall constitute a change in control for this purpose. (c) The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of the Net Worth of Lessee by an amount greater than 251% of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediateiy prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent. "Net Worth of Lessee" shall mean the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles, (d) An assignment or subletting without consent shall, at Lessor's option, be a Default curable aller notice per Paragraph 13.1(c), or a noncurable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable Breach, Lessor may either. (i) terminate this Lease, or (il) upon 30 days written notice, increase the monthly Base Rent to 110% of the Sase Rent then In eHect. Further, In the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to 110% of the price previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term shall be increased to 110% of the scheduled adjusted rent. (e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief. (I) Lessor may reasonably withhold consent to a proposed assignment or subletting if Lessee is in Default at the time consent is requested. (g) Notwithstanding the foregoing, allowing a diminimus portion of the Premises, ia. 20 square feet or less, to be used by a third party vendor in connection with the installation of a vending machine or payphone shall not constitute a subietting. 12.2 Terms and Conditions Applicable to Asstgnment and Subtettlng. (aj Regardless of Lessor's consent, no assignment or subletting shall: (i) be effective without the express written assumption by such assignee or sublessee 01 the obligations 01 Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primal)! liability of Lessee for the payment of Rent or for the periormance of any other obligations to be perlormed by Lessee. (b) Lessor may accept Rent or periormance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval 01 such assignment nor the acceptance of Rent or perlormance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for Lessee's Default or Breach, (c) Lessor's consent to any assignment or subletting shall not constitute consent to any subsequent assignment or .subletting. (d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the periormance of Lessee's obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therelora to Lessor, or any security held by Lessor. (a) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to 100tials C1998-AIR Commercial Real Estate AssocIation PAGE 9 Initials FORM MTG-4-5104 Lessor's determination as to the financial and operational responsibility and appropriateness 01 the proposed assignee or sublessee, including bul not limited to the Intended uee andlor required modilicatlon of the Premises, if any, together with a lee of $500 as consideration lor Lessor's considering and processing said request. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested. (See also Paragraph 36) (f) Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment, entering into such sublease, or entering into possession of the Premises or any portion thereof, be deemed to have assumed and agreed to conform and comply With each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term 01 said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing. (g) Lessor's consent to any assignment or subletting shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease unless such transfer is specifically consented to by Lessor in writing, (See Paragraph 39,2) 12.3 Additional Terms and Conditions Applicable to Subletting. Tha following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included In all subleases under this Lease whether or not expressly incorporated therein: (a) Lessee hereby assigns and transfers to Lessor all 01 Lessee's interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee's obligations under this Lease; provided, however, that until a Breach shall occur in the performance 01 Lessee's obligations, Lessee may collect said Rent. In the event that the amount coliected by Lessor exoeeds Lessee's then outstanding obligations any such excess shall be refunded to Lessee, Lessor shall not, by reason of the foregoing or any assignment of such sublease, nor by reason 01 the collection of Rent, be deemed liable to the sublessee for any lailure of Lessee to pertorm and comply with any 01 Lessee's obligations to such sublessee. Lessee hereby Irrevocably authorizes and directs any such sublessee, upon receipt 01 a written notice Irom Lessor stating that a Breach exists in the performance of Lessee's obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice Irom Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary. (b) in the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease Irom the time 01 the exercise of said option to the expiration 01 such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or lor any prior Delaults or Breaches 01 such sublessor, (c) Any matter requiring the consent of the sublessor under a sublease shall also require the consent 01 Lessor. (d) No sublessee shall further assign or sublet all or any part of the Premises without Lessor's prior written consent. (e) Lessor shall deliver a copy of any notice 01 Default or Breach by Lessee to the sublessee, who shall have the right to cure the Delault 01 Lessee within the grace period, il any, specified in such notice. The sublessee shall have a right of reimbursement and olfset from and against Lessee lor any such Defaults cured by the sublessee. 13. Default; Breach; Remedies, 13,1 Delault; Breach. A "Delault" is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or Rules and Regulations under this Lease, A "Breach" is defined as the occurrence 01 one or more of the lollowing Defaults, and the lailure 01 Lessee to cure such Default within any applicable grace period: (a) The abandonment of the Premises; or the vacating of the Premises without providing a commercially reasonable level of security, or where the coverage of the property insurance described in Paragraph 8.3 is Jeopardized as a result thereof, or without providing reasonable assurances to minimize potential vandalism. (b) The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to provide reasonable evidence 01 insurance or surety bond, or to fulfill any obligation under this Lease which endangers or threatens lile or property, where such failure continues for a period of 3 business days following written notice to Lessee. (c) The commission 01 waste, act or acts constituting public or private nuisance, and/or an illegal activity on the Premises by Lessee, where such actions continue for a period of 3 business days following written notice to Lessee. (d) The failure by Lessee to provide (i) reasonable written evidence 01 compliance with Applicable Requirements, (ii) the service contracls, (iii) the rescission of an unauthorized assignment or subletting, (iv) an Estoppel Certificate, (v) a requested subordination, (vi) evidence concerning any guaranty andlor Guarantor, (vii) any document requested under Paragraph 41, (viii) material data safety sheets (MSDS), or (ix) any other documentation or information which Lessor may reaso^ably require of Lessee under the term~ of this Lease, where any such lailure continues for a period of 10 days following written notice to Lessee. (e) A Delault by Lessee as to the terms, covenants, conditions or provisions 01 this Lease, or of the rules adopted under Paragraph 2.9 hereof, other than those described in subparagraphs 13.1(a), (b), (c) or (d), above, where such Default continues for a period of 30 days alter written notice; provided, however, that if the nature 01 Lessee's Default is such thai more than 30 days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said 30 day period and therealter diligently prosecutes such cure to completion. (f) The occurrence of any of the lollowing events: (i) the making of any general arrangement or assignment for the benefit 01 credilors; (ii) becoming a "debtor" as defined in 11 U.S.C. 9 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days); (Iii) the appointment 01 a trustee or receiver to take possession 01 substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within 30 days; provided, however, in the event that any provision of this subparagraph is contrary to any applicable law, such provision shall be 01 no force or effect, and not affect the validity of the remaining provisions. . (g) The discovery that any financial statement of Lessee or 01 any Guarantor given to Lessor was materially false. (h) If the pertormance 01 Lessee's obligations under this Leese is guaranteed: (i) the death of a Guarantor, (i1) the termination 01 a Guarantor's liability with respect to this Lease other than in accordance with the terms 01 such guaranty, (Iii) a Guarantor's becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a Guarantor's breach 01 its guaranty obligation on an anticipatory basis, and Lessee's failure, within 60 days following written notice 01 any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources 01 Lessee and the Guarantors that existed at the time of execution 01 this Lease. 13.2 Remedies. II Lessee fails to perform any of its affirmative duties or obligations, within 10 days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duty or obligation on Lessee's behalf, including but not limited to the obtaining 01 reasonably requited bonds, insurance policies, or governmental licenses, permits or approvals, Lessee shall pay to Lessor an amount equal to 115% 01 the costs and expenses incurred by Lessor in such performance upon receipt of an invoice therefor. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any righl or remedy which Lessor may have by reason of such Breach: (a) Terminate Lessee's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall Immediately surrender possession to Lessor, In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the time 01 termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been eamed after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (Iii) the worth at the time 01 award of the amount by which the unpaid rent for the balance 01 the term alter the time 01 award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensale Lessor for all the detriment proximately caused by the Lessee's failure to perform its obiigations under this Lease or which in the ordinary course of things would be likely to result therefrom, including bul nollimited to Ihe cost 01 recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys' fees, and that portion 01 any leasing commission paid by Lessor in connection wilh this Lease applicable 10 the unexpired term ---- lnilials Cl998~AIR Commercial Real Estate Association PAGE 10 ~a's'- FORM MTG-4-5/04 .---.,.--'--'-"--- of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be com puled by discounting such amount at the discount rate of the Federal Reserve Bank of tihe District within which the Premises are localed at the time of award plus one percent. Efforts by Lessor to mitigate damages caused by Lessee's Breach of this Lease shall not waive Lessor's right to recover damages under Paragraph 12. If termination of this Lease Is obtained througtlthe provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part tihereof in a separate suit. If a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under tihe unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease andlor by said statute. (b) Continue the Lease and Lessee's right to possession and recover the Rent as it becomes due, in which event Lessee may sublet or assign, subject only to reasonable limitations. Acts of maintenance, efforts to relet, andlor the appointment of a receiver to protect the Lessor's interests. shall not constitute a termination of the Lessee's right to possession. (c) Pursue any other remedy now or herealter available under tihe laws or judicial decisions of the state wherein the Premises are located. The expiration or termination of this Lease andlor tihe termination of tessee's right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee's occupancy of the Premises. 13.3 Inducement Recapture. Any agreement for free or abated rent or other charges, or for tihe giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee's entering into this Lease, all of which concessions are hereinafter referred to a8 "Inducement Provisions", shall be deemed conditioned upon Lessee's full and faithful performance of all 01 the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated tihe operation of this paragraph shall not be daemed a waiver by Lessor of the provisions of this paragraph unless speCifically so stated in writing by Lessor at the time of such accaptance. 13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contempiated by this Lease, the exact amount of which will be axtremely difficult to ascertain. Such costs include, but ara not limitad to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender, Accordingly, if any Rent shall not be received by Lessor within 5 days alter such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall immediately pay to Lessor a one-time late charge equal to 10% of each such overdue amount or $100, whichever is greater. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment. Acceplance of such lata charge by Lessor shall in no event constitute a waiver 01 Lassee's Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a iale charge is payable hereunder, whether or not collected, for 3 consecutive installments of Base Rent, then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor's option, become due and payable quarterly in advance. 13.5 Interest. Any monetary payment due Lassor hereunder, other than late charges, not received by Lessor, when due as to scheduied payments (such as Base Rent) or witihin 30 days following the date on which it was due for non-scheduled payment, shall bear interest from the date when due, as to scheduled payments, or the 31st day alter it was due as to non-scheduled payments. The interest ("Interest") charged shall be computed at the rate of 10% per annum but shall not exceed the maximum rata allowed by law. Interest is payabie in addition to the potential late charge provided for in Paragraph 13.4. 13.6 Breach by Lessor. (a) Notice of Breach. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of tihis Paragraph, a reasonable time shall in no event be less than 30 days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessea in writing for such purpose, of written notice specifying wherain such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor's obligation is such tihat more than 30 days are reasonably required for its performance, tihen !,essor shall not be in breach if performance is commenced within such 30 day period and tiherealter diligently pursued to completion. (b) Performance by Lessee on Behalf of Lessor. In the event that neither Lessor nor Lender cures said breach within 30 days after receipt of said notice, or if having commenced said cure tihey do not diligently pursue it to completion, then Lessee may elect 10 cure said breach at Lessee's expense and offset from Rent tihe actual and reasonable cost to perform such cure. provided howevar, that such offset shall not exceed an amount equal to the greatar of one month's Base Rent or the Security Deposit, reserving Lessee's right to reimbursement from Lessor for any such expense in excess of such offset Lessee shall document the cost of said cure and supply said documentation to Lessor. 14. Condemnalion. IItha Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively "Condemnation"), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the floor area of the Unit, or more than 25% of Lessee's Reservad Parking Spaces, is taken by Condemnation, Lessee may, at Lessee's option, to be exercised In writing within 10 days after Lessor shall have given Lessae written notice of such taking (or in the absence of such notice, within 10 days after the condemning authority shall have taken possession) terminate tihls Lease as of the date lhe condemning aulhority takes such possession, it Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards andlor paymants shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation for Lessee's relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any and all compensation which is payabla therefor. In lhe event that this Lease Is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnalion. ~~e F.e. 15.1 Additional Commission. In addition to the payments owad pursuant to Paragraph 1.10 abova, and unlas'!J-essOr and the Brokers otherwise agree in writing. Lessor agrees tihat (a) if Lessee exercises any Option, (b) if Lessee acqyjt:e&-from Lessor any rights to the Premises or other premises owned by Lessor and located within the Project, (c) if Lessee r sins in possession of the Premises, with the consent of Lessor, after lhe expiration of this Lease, or (d) if Basa Rent is . sed, whetiher by agraement or operation of an escalation ciause herein, tihen, Lessor shall pay Brokers a fee in accorda I tihe schedule of the Brokers in effect at Ihe time of the execution of this Lease. 15.2 Assumption of Obligations. Any buyer or transferee ssor's interest in tihis Lease shall be deemed to have assumed Lessor's obligation hereunder. Brokers shall be third ene!iciaries of tihe provisions of Paragraphs 1.10, 15, 22 and 31. it Lessor fails to pay to Brokers any amounts due as anEJo okerage fees partaining to this Lease whan due, then such amounts shall accrue Interest. In addition, if Lessor fails to p~n;t8.mounts to Lessee's Broker when due, Lessee's Broker may send writtan notice to Lessor and Lessee 01 such failure a '!"Lessor fails to pay such amounts within 10 days after said notice, Lessee shall pay said monies 10 ils Broker and offset ounts against Rent. In addition, Lessee's Broker shall be deemed to be a third party beneficiary 01 any commission a r nt entered into by and/or between Lessor and Lessor's Broker for the limited purpose of COllecting any br:Z;kerage fee e. Representations and Indemnities of Broker Relationships. Lessee and Lessor each represent and warrant to the at r that it Ra&-l>aHHealiAge-witR aAY ~aFOeA;-lifm;-b~F-liffil~eHRIlfHR..Bl'ek9f9;"iHtrlyTin-;:onneetion-wiltHhi~ase, PAGE " Initials FORM MTG-4.5/04 Initials C199S.AIR Commercial Real Estate Association a~~A9f-ll1aA-6ai<I-A_ed-Srek<!l&-i&-9AtitleG-le-<lAy-eoAlfflieeiefH)HiAEleFs-fee-ifHlet1Aeetie""Aerewil . ~r do each hereby agree to indemnity. protect, defend and hold the oth II y or compensation or charges which may be claimed b an ,0 er similar party by reason of any dealings or actions of tho indemnifying ~ \&;-<l*P9flB69;illleffieys'-lees-teaSellably-inetirred-with-fellpeeHhereto. 16. Estoppel Certificates. (a) Each Party (as "Respondtng Party") shall wilhin 10 days after written notice from the other Party (the "Requesling Party") execute, acknowledge and deliver to the Requesting Party a statement in writing in form similar to the then most current. "Estoppel Certificate" form published by the AIR Commercial Real Estate Association, plus such additional information, confirmation and/or statemonts as may be reasonably requested by the Requesting Party. (b) If the Responding Party shall fail to execute or deliver the Estoppel Certificate wilhin such 10 day period, the Requesting Party may execute an Estoppel Certificate stating that: (i) the Lease is in full force and eHect without modification except as may be represented by the Requesting Party, (II) there are no uncured defaults in the Requesting Party's pertormance, and (i1i) if Lessor is the Requesting Party, not more than one month's rent has been paid in advance. Prospective purchasers and encumbrancers may rely upon the Requesting Party's Estoppel Certificate, and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate. (c) If Lessor desires to finance, refinance, or sell the Premises, or any p~rt thereof, Lessee and all Guarantors shail deliver to any potential lender or purchaser designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee's financial statements for the past 3 years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth. 17. Definition of Lessor. The term "Lessor" as used herein shall mean the owner or owners at the time in question of the fee title to the Premises, or, if this is a sublease, of the Lessee's interest in the prior lease. In the event of a transfer of Lessor's title or interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such transfer or assignment and deiivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of ail liability with respect to the obligations andlor covenants under this Lease thereafter to be pertormed by the Lessor. Subject to the foregoing, the obligations andlor covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. 18. Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way aHect the vaiidity of any other provision hereof. 19. Days. Unless othelWise specifically indicated to the contrary, the word I-days" as used in this Lease shall mean and refer to calendar days. 20. Limitation on Liability. The obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, or its partners, members, directors, officers or shareholders, and Lessee shali iook to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against Lessor's partners, members, directors, officers or shareholders. or any of their personal assets for such satisfaction. 21. Time of Essence. TIme is of the essence with respect to the performance of all obligations to be pertormed or observed by the Parties under this Lease. 22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, Its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the use, nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. The liability (including court costs and attorneys' fees), of any Broker with respect to negotiation, execution, delivery or performance by either Lessor or Lessee under this Lease or any amendment or modification hereto shall be limited to an amount up to the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker's liability shall not be applicabie to any gross negligence or wiiiful misconduct of such Broker. 23. Nollces. 23.1 Nolice Requirements. All notices required or permitted by this Lease or applicable law shall be in writing and may be delivared in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed suHiciently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party's signature on this Lea~e shail be that Party'~ address for delivery or mailing of notices. Either Party may by written notice to the other specify a dillerent address for notice, except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for notice. A copy of all notices to Lessor shall be concurrantly transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate in writing. 23.2 Date of Nollce. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date Is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given l,3 hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantee next day delivery shail be deemed given 24 hours after delivery of the same to the Postal Service or courier. Notices transmitted by facsimile transmission or similar means shail be deemed delivered upon telephone confirmation of receipt (confirmation report from fax machine Is suHicient), provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day. 24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shail be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or of any other term, covenant or condition hereof. Lessor's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to entorce the provision or provisions of this Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any Defauit or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of monies or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith. which such statements and/or conditions shall be of no force or eHect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment. 2&--(lisele3"reS neg8rdln!t'fhe-Nlltttre-<>Ht-Reel [318t8 Ageney-Relelionship. ~ . (a) When entering into a discussion wilh a real estate agent regarding a real estate transaction, a Lessor or ~ should from the outset understand what type of agency relationship or representation it has with the agent or agents in th FaT1SB.ction. Lessor and Lessee acknowledge being advised by the Brokers in this transaction, as follows: (i) Lessor's Agent. A Leilsar's agent under a listing agreement with the Lessor s the agent for the Lessor only. A Lessor's agent or subagent has the following affirmative obligations: To the Lessor: A fi.sWcl duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessor. To the Lessee and fhe Lessor. a. Diligent e . rc~ of reasonable skills and care in pertormance of the agent's duties. b. A duty of honest and fair dealing and good faith. uty to disclose all facts known to the agent materially aHecting the value or desirability of the property that are not known within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confid information obtained from the other Party which does not involve the aHirmative duties set forth above. (Ii) Lessee's Agent. An a an agree to act as agent for the Lessee only. In these situations, the agent is not the Lessor's agent, even if by agreeme agent may receive compensation for services rendered, either in full or in part from the Lessor. An agent acting only for a e has the following affirmative obligations. To the Lessee: A fiduciary duty of utmost care, integrity, honesty, and loyal' alings with the Lessee. To the Lessee and the Lessor. a. Diligent exercise of reasonabie skills and care in pertormance e agent's duties. b. A duty of honest and fair dealing and good faith. c. A duty to disclose all facts known to the agent m~ aHecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the ~-.ra,h<,. t,,, dgor,t i. ""t obligated 10 ,c.odllo Oilher-PartY_My-confidentiaHnfommtion-obtainecHronHhe-other-Perly'Whieh-does-not lnilials 01998-AIR Commercial Rail e.tate A..oelatlon PAGE 12 Initials FORM MTG-4-Sl04 iRvol.G the aUifffialiwG dl.::ltic..1 ~ct-forth-abo"6. (iii) Agent Representing Both Lessor and Lessee. A real astate agent, either acting directly or through 0 associate licenses, can legally be the agent of both the Lessor and the Lessee in a transaction, but only with the kno d and consent of both the Lessor and the Lessee. In a dual agency situation, the agent has the following affirmative obligati both the Lessor and the Lessee: a. A fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with eith ssor or the Lessee. b. Other duties to the Lessor and the Lessee as stated above in subparagraphs (i) or (ii). In representi Lessor and Lessee, the agent may not without the express permission of the respective Party, disclose to the other Pa~ e Lessor will accept rent In an amount less than that indicated in the listing or that the Lessee is willing to pay a higher ..nfIan that offered. The above duties of the agen) in a real eslate transaction do not relieve a Lessor or Lessee from the res I ity to protect their own interests. Lessor and Lessee should carefully read all agreements to assure that they adequatel }t ass their understanding of the transaction. A real estate agent is a person qualified to advise about real estate. If legal advise is desired, consult a competent professional. (b) Brokers have no responsibiiit . respect to any default or breach hereof by either Party. The Parties agree that no lawsuit or other legal proceeding invo' any breach of duty, error or omission relating to this Lease may be brought against Broker more than one year after the ate and that the liability (including court costs and attorneys' fees), of any Broker with respect to any such lawsuit andlor Ie roceeding shall not exceed the fee received by such Broker pursuant to this Lease; provided, however, that the foregoin Ion on each Broker's liability shall not be applicable to any gross neglig'ence or willful misconduct of such Broker. Buyer and Seller agree to identify to Brokers as "Confidential" any communication or information given Brokers that is eM>e1l~ Is be esnlidenlial. 26. No Right To Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over, then the Base Rent shell be Increaled to 150% of the Baae Rent applicable immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee. 27. Cumulative Remedies, No remedy or election hereunder shail be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity. 28. Covenants and Conditions; Construction 01 Agreement. All provisions of this Lease to be observed or pertonmed by Lessee afe both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the Parties only and shall not be considered a part of this Lease. Whenever required by the context, the singular shall Include the plural and vice versa. This Lease shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it. 29. Binding Effect: Choice of Law. This Lease shall be binding upon the parties. their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located. 30. Subordination; Attornment; Non.Dlsturbance. 30.1 Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, "Security Device"), now or hereafter placed upon the Premises. to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders 01 any such Security Devices (in this Lease together referred to as "Lender") shall have no liability or obligation to pertorm any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease andlor any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, whereupon this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof. 30.2 Attornment. In the event that Lessor transfers title to the Premises, or the Premises are acquired by another upon the foreclosure or termination of a Security Device to which this Lease Is subordinated (i) Lessee shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and upon request, enter into a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder of the term hereof, or, at the election of the new owner, this Lease will automatically become a new lease between Lessee and such new owner, and (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor's obligations, except that such new owner shall not: (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of owhership; (b) be subject to any offsets or defenses which Lessee might have against any prior lessor, (c) be bound by prepayment of more than one month's rent. or (d) be liable for the return of any security deposit paid to any prior lessor. 30.3 Non-Disturbance. With respect to Security Devices entered into by Lessor after the execution of this. Lease, Lessee's subordination of this Lease shall be subJect to receiving a oommerclally reasoneble non-disturbance agreement (a "Non-Disturbance Agreement") from the Lender whioh Non-Disturbance Agreement provides that Lessee's possession of the Premises, and this Lease, including any options to extend the term hereof, will not be disturbed so long as Lessee is not in Breach hereof end attorns to the record owner of the Premises. Further, within 60 days after the execution of this Lease, Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security Device which is secured by the Premises. In the event that Lessor is unable to provide the Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee's option, directly contact Lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement. 30.4 Self-Exeoutlng. The egreements oontained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attornment andlor Non-Disturbance Agreement provided for herein. 31. Attorneys' Fees. If any Party or Broker brings an action or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, aotlon, or appeal thereon. shall be entitled to reasonable attomeys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or prooeedlng Is puraued to doolllon or Judgment. Thetenm, "Prevelllng Party" .hall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, Judgment, or the abandonment by the other Party or Broker of its claim or defense. The attomeys' fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred. In addition. Lessor shall be entitled to attorneys' fees, costs and expenses incurred In the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence for such services and consultation). 32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall have the right to enter the Premises at any time, in the case 01 an emergency, and otherwise at reasonable times after reasonable prior notice for the purpose of showing the same to prospective purchasers, lenders, or tene-nts, and making such alterations, repairs, Improvements or additions to the Premises as Lessor may deem necessary or desirable and the erecting, using and maIntaining of utilities, services, pipes and conduits through the Premises and/or other premises as long as there Is no material adverse effect on Lessee's use of the Premises. All such activities shall be without abatement of rent or liability to Lessee. 33. Auctions. Lessee shall not conduct, nor penmit to be conducted, any auction upon the Premises without Lessor's prior written consent. Lessor shall not be obligated to exercise any standard of reasonabieness in detenmining whether to penmit an auction. 34. Signs. Lessor may place on the Premises ordinary "For Sale" signs at any time and ordinary "For Lease" signs during the last 8 months of the term hereof. Except for ordinary "For Sublease" signs which may be piaced only on the Premises, Lessee shall not place any sign upon the Project without Lessor's prior written consent. All signs must comply with all Applicable Requirements. '35. Termination; Merger. Unless speCifically stated otherwise In writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a tenminatlon hereol by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises: provided, however, that Lessor may elect to continue anyone or all exisling subtenancies. Lessor's failure within 10 days following any such event to elect to the contrary by written notice to the holder of any such Initials PAGE 13 IniUals J:,.....~. lesser interest, shall constitute Lessor's election to have such event constitute the termination of such Interest. 36, Consents. Except es otherwise provided herein, wherever In this Lease the consent of a Party is required to an act by or lor the other Party. such consent shall not be unreasonably withheld or. delayed. Lessor's actual reasonable costs and expenses (including but not limited to architects', auomeys', engineers' and other consultants' fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a subleUing or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor. Lessor's consent to any act. assignment or subleUing shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach. except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The lailure to specify herein any particuler condition to Lessor's consent shall not preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular maUer for which consent is being given. In the event that either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such detenmination, the determining party shall furnish its reasons in writing and in reasonable detail within 10 business days following such request. 37. Guarantor. 37.1 Execution. The Guarantors, if any, shall each execute a guaranty in the form most recently published by the AIR Commercial Real Estate Association. . 37.2 Default. It shall constitute a Delault of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidanee of tho exoeution 01 the guaranty. including the authority of the party signing on Guarantor's behalf to obligate Guarantor. and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d) wriUen confirmation that the guaranty is still in elfect. 38. Quiet possession. Subject to payment by Lessee of the Rent and pertormance of all of the covenants, conditions and provisions on Lessee's part to be observed and pertormed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof. 39. Options. If Lessee is granted an option. as defined below. then the following provisions shall apply. 39.1 Definition. "Option" shall mean: (a) the right to extend the term of or renew this Lease or to extend or renew any lease that Lessee has on other property of Lessor; (b) the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase or the right of first refusal to purchase the Premises or other property of Lessor. 39.2 Options Personal To Original Lessee. Any Option granted to Lessee in this Lease is personai to the original Lessee, and cannol be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the Premises and. if requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subleUing. 39.3 MUltiple Options. In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Options have been validly exercised. 39.4 Effect of Default on Options. (a) Lessee shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is cured, (iI) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee). (ii1) during the time Lessee is in Breach of this Lease, or (Iv) In the event that Lessee has been given 3 or more notices of separate Default. whether or not the Defaults are cured, during the 12 month period immediately preceding the exercise of the Option. (b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of Paragraph 39.4(a). (c) An Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and prior to the commencement of the extended term or completion of the purchase. (i) Lessee fails to pay Rent for a period of 30 days after such Rent becomes due (without any necessity of Lessor to give notice thereof), or (ii) if Lessee commits a Breach of this Lease. 40. Security Measures. Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not include the cosl 01 guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties. 41. Reservations. Lessor reserves the right: (i) to grant, without the consent or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, (ii) to cause the recordation of parcel maps and restrictions, and (Iii) to create and/or install new utility raceways, so long as such easements, rights, dedications. maps, restrictions, and utility raceways do not unreasonably intertere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate suc~ rights. 42. Perlormance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof. the Party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay. A Party who does not initiate suit for the recovery of sums paid "under protest" within 6 months shall be deemed to have waived its right to protest such payment. 43. Authority; Multiple Parties; Execution. (a) If either Party hereto is a corporation, trust. limited liability company. partnership, or similar entity, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each Party shall, within 30 days after request, deliver to the other Party satisfactory evidence of such authority. (b) If this Lease is executed by more than one person or entity as "Lessee", each such person or entity shall be jointly and severally liable hereunder. It is agreed that anyone of the named Lessees shall be empowered to execute any amendment to this Lease, or other document ancillary thereto and bind all of the named Lessees, and Lessor may rely on the same as if all of the named Lessees had executed such document. (c) This Lease may be executed by the Parties in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. 44. Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions. 45. Offer. Preparation of this Lease by either party or their agent and submission of same to the other Party shall not be deemed an oller to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto. 46. Amendments. This L.ease may be, modified only in writing, algned by the Parties in interest at the time of the modilication. As long ss they do not materially change Lessee's obligations hereunder, Lessee agrees to make such reasonable non-monetary PAGE 14 Initials FORM MT" . In;lials /t)1~gR.AIR CommercIal Real Estate Association ...-r.... ~,....-....-..-... modifications to Ihis Lease as may be reasonabiy required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises. 47. Waiver of Jury Trial. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR ARISING OUT OF THIS AGREEMENT. 46. Mediation end Arbitration of Disputes. An Addendum requiring the Mediation and/or the Arbitration of disputes between the Parties and/or Brokers arising out of this Lease 0 Is ~ is not attached to this Lease. 49. Americans with Disabilities Act. Since compliance with the Americans with Disabilities Act (ADA) Is dependent upon Lessee's specific use of the Premises, Lessor makes no warranty or representation as to whether or not the Premises comply with ADA or eny similar legislation. In the event that Lessee's use of the Premises requires modifications or additions to the Premises in order to be in ADA compliance, Lessee agrees to make any such necessary modifications and/or additions at Lessee's expense. LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES. ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO: 1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. 2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE. WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED. The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures. Altn: Altn: TItle: TItle: Address', Address: Telephone: ( ) Telephone: ( ) Facsimile: ( ) Facsimile: ( ) Email: Email: FederallD No. FederallD No. Executed at: on: By LESSOR: World Plaza T,Le. a California limited liRhility rnmpRny By: Name Printed: ,Ii;::jn Torln:m Tille: Hanager By: Name Prinled: Tille: I Address: Telephone: ( Facsimile: ( Federal 10 No. BROKER: Execuled at: on: By LESSEE: r.i t'y AT ~~n 'RArn~r(H nA By: Name Printed: TiUe: By: Name Printed: Title: Address: Telephone: ( Facslmlle: ( Federal 10 No. BROKER: These torms are olten modified to meet changing requirements of law and needs of the Industry. Always write or call to make sure you are uUlizlng the most current form: AIR COMMERCIAL REAL ESTATE ASSOCIATION, 700 South Flower Street, Suite 600, Los Angeles, CA 90017. (213) 687-8777. C::. ':t"~~k\.? r:.~.e:r-.... ~ 'Es"'.II\I: s..livr...iW'ftI ?J.:':E ..~ frHAA .ur....~..."." -- .~ RENT ADJUSTMENT(S) STANDARD LEASE ADDENDUM Dated Tllnp 7], 700'5 By and Betwedil(Le5s1S1r1 Horld Plaza, LLC (Lessee) City of San Bernardino Address of Premises: 1535 Highland Avenue, Suite C San Bernardino, California Pacagraph ....2ll..- A. RENT ADJUSTMENTS: The monthly renl fo< each month 01 the adjusbnent period(s) spe<:lrIed below shaI1 be Incleased using the melhod(s) Ind~led below: (Check Method(s) to be Used and Fill In Approprialely) o I. Bv.t vI L1.i... Adj...!.._I.I('IlGBLI') a. On (Fill In COLA Oates): the Base Rent shan be adjusted by the change, If any, from the Base Month spe<:irled below, In the Consumer Price Index of the B....eau of U.S. Oepartmenl of Labor 10< (select 000):0 CPt W (Urban Wage Earners and Clerical Workers) 0< 0 cPt U (All Urban Consumers (Fin In Urban Area): ,All Items b. The monthly rent payable In accordaneei'W/1.J1ar~oh ".I.a. ol\ttis AddendUm sh;lll be ca I ed as foil"""': the Base Rent set forth In paragraph 1.5 of the attached Lease, shall be muJtlpfied by a fraction me numerator of Yct11Cn snail be the CPI of calendar month 2 months prior to the month(s) specified In paragraph A.I.a. above during which the adjustment Is to take effect. and the denomlnalor 01 shall be the CPI of the calendar monlh which Is 2 months prior 10 (select one): 0 the first month of the term of Ihis Lease as sel lorth In paragraph t.3 se Month") or 0 (Fill In Other "Base Month"): . The sum so ca shan constitute the new monthly rent hereunder. but In no event, shall any such new monlhty rent be less than the rent payable for the month Immed'tate the rent adjustment. (1982-1984 = 100), herein referred 10 as "Cpr. c. In the event the compilation and/or publicat the CPI shall be transferred to any other governmental department or bureau or agency or shall be discontinued, then the lodex most nearly the same as t P I shaM be used to make such calculalion. In the event that the Parties cannot agree on such alternative Index, then the matter shall be submitted for decl loJAe /4mePca" Arbit~ion ,.~~dance with the then rules of saki Association and the decision 01 the arbitrators shall be binding upon the s. The,p.1 ol-sai<! Ar1l,itrati~'Shall be paid equ~lIy by the Parties. o II. ent shall be adjusted to the "Market Rental Value" of the property as follows: 0' ~_I R<, ,101 Valu. !<djttstm<nt'llote-de.eribecnbove;1he-Parties-sholl-.ttempHo-agroe-upon-whaHn.."ew-MRV-wi1l InitialS: Initials: RENT ADJUSTMENT(S) Page 10f2 FORM RA...J-BJOOE C02000 . American Industrial Real Estate Association "" ,." (b) Both L~O( aOO lessee .hall each Immedlatety make a reasona~ detennlnatlon of the MRV and su arbitration in iilccorda.-.:;e with the follCMing provisions: (i) Within 15 days thereafter, lessor and lessee shall each select an 0 appraiser or er ("Consult.ant" . check one) or their choice to act as an arbitratOf'. The two arbitrators so appointed shall immediately select a third mutu.alty aceeptabJe sultant to act as a third arbitrator. b<. .:. . tl. ",~jt~ent-dete:-ihtgreement-eennot-be-reaehed-hmhirtydays:-thel'. , (a) lessor and lessee shalllmmediatety appoint a muualty acceptolble appraiser or broker to 8$tablish the new MRV within 1 Any a~soclaled costs w;n be split equally bet'ween the Partid, Of (ii) The 3 arbitratOfs shall wttnin ~ cV'.., 01 the JlRooincment of I lrd arbitrator reach a decision as to what the actual MRV for the Premises Is, and whether lessor's or Lessee's submittta MRV';~ the <1Iose1llgerelo. eclspn or a majority of the arbitrators shall be binding on the Parties. The submitted MRV which Is determined to be the closest to lne aculcu..JMt V st,aa t useq, oy the Parties. (iii) If etther of the Parties fail' tM reach a decision on his or her own, and said decision Shilll . n Ir1>itratol; f'ithin the SJ'tCified 15 days. the arbttrator timely appoinled by one or them shall iog on the Parties. uch arbitration shall be paid by the party whose submitted MRV is not selected, le. the one that is NOT the closest to the actual MRV. nding the foregoing, the new MRV shall not be less than the rer<< payable for the month Immediately preceding the rent adjustment. pan the estabUshment of each New Market Rental Value: 1) the new MRV will become the new .Base Rent" for the J'l'POSO of calculating any rurlhe< Adjustments. Ind rkct R<.ntal \''Altt6 ttffi. wll b(oom~ tl-.<. !".a.. 'Sax rJle"'l~he I't:lfl'ese tlf ealebiatlflg BfI) fuFtAef.AdjU6tmeAls. EX III. Fixed Renta' AdJustment(s) (FRA) The Base Rent shan be Increased 10 the following amou~ts on t~4 ~ oJ f~ ~ On (Fill in FRA Adjustment Oale(s)): The Nevi Baoa.Ro"t,.shallpe: All?)l~t 1 J ?001i $ 1.,618.65 AllR'U::t 1 J ?007 $ 1,667.20 Allg)1~t 1 ?OOR $ 1,717.20 All gl1Hf' , ?Om $ L 768.70 If B. NOTICE: Unle$$ specified otherwise herein. notice of any such adjustments. other than Fixed Rental Adjustments, shall be made as specified In paragraph 23 of the lease. B. &RenEWS reI:: . . . "ft.. e...... alodl b.....Id. a,oko.... r.o fc4 oocll.dilht'..I.lll 0I''''li#~ lbalaln -de;'" .Ath pl""~-lfte-I,eo&e. NOTE: These forms are onen modified to meet changing requltements or law and needs or the Industry. Always write or call to make sure you ace utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 S. Flower Slreet. Suite 600, Los Angeles. Calif. 90017 Initials: Initials: RENT ADJUSTMENT(S) Page 2 of2 FORM RA-J-'lIOOE (02000 . American Industrial Real Estate A~ociatlon _~l@ OPTION(S) TO EXTEND ADDENDUM TO STANDARD LEASE Dated .Innp 71, 700'i By and Between (Lessor) \-lor I n PI ~~~, TJ,r: (Lessee) r:ity of S~n RprnArnino Property Address: 1 'i3'i Hi gill Ann Avpnnp, Snitp r: San Bernardino, California Paragraph ---5L- A. OPTION(S) TO EXTEND: "... c,,>J~~\ Lessor hereby grants to Lessee lfle option to extend the term of this Lease for ..L additional ..no. month period(s) comm~ncinq when th~ prior term expires upon each and all of the following terms and conditions: .,.~ c~o~ ':.\.-... \\ "'e- .(;... ~ ......''''.1' o( ~V)-J'~ \, Z-O\O ..., 3"1.>\"1 ~\. "LOIS' (i) Lessee gives to Lessor. and Lessor actually receives on a date which is prior to the date that the option period would commence (if exercised) by at least ~ and not more than --1.2..- months, a written notice of the exercise of the option(s) to extend this Lease for said additionalterm(s). time being of essence. If said notification of the exercise of said option(s) is (are) not so given and received. the option(s) shall automatically expire; said option(s) may (if more than one) only be exercised con- secutively; (ii) The provisions of paragraph 39. including the provision relating to default of Lessee set forth in paragraph 39.4 of this Lease are conditions of this Option; (iil) All of the terms and conditions of this Lease except where specifically modified by this option shall apply; (iv) The monthiy rent for each month of the option period shall be calcuiated as follows, using the method(s) indicated below: (Check Method(s) to be Used and Fill in Appropriately) (a) Ca6t aI-biviAg-AdjlfStmeffi(GHCQb-) On (Fill in COL Adjustment Date(s): the monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease shall be adjusted by t ange. if any, from the Base Month specified below, in the Consumer Price Index of the Bureau of Labor Statistic he U.S. Department of Labor for (select one): 0 CPI W (Urban Wage Earners and Clerical Workers) or 0 CPI Urban Consumers). for (Fill in Urban Area): . All Items (1982-1984 = 100). herein referred to as "C.P.I." (b) The monthiy rent payable in accordance with para AI(a) of this Addendum shall be calcuiated as follows: the Base Rent set forth in paragraph 1.5 of the attached Lease. s e multiplied by a fraction the numerator of which shall be the C.P.I. of the calendar month 2 (two) months prior to the m s) specified in paragraph AI(a) above during which the adjustment is to take effect. and the denominator of which sha he C.P.I. of the calendar month which Is two (2) months prior to (select one): 0 the first month of the term of this Lea s set forth in paragraph 1.3 ("Base Month") or 0 (Fill in Other "Base Month"): . The su calculated shall constitute the new monthly rent hereunder, but in no event, shall any such new monthly rent be less t e rent payable for the month immediately preceding the date for rent adjustment. (c) vent the compilation and/or publication of the C.P.I. shall be transferred to any other governmental department or b u or agency or shall be discontinued, then the Index most nearly the same as the C.P.I. shall be used to make such calc n. In the event that Lessor and Lessee cannot 8gree on such alternative Index, then the matter shall be submitted for d ,on to the American Arbitration Association in accordance with the then rules of said association and the decision of the lors shallse SiAelif\~ ~fleA tAe fl!lrli~6-Afl;ilfatef5-5AeII-B~!lid-eQl:lally-by-l-eseere.f\(H:essee. ,./ ,. B I. [] II. Market Rental Value Adjustment(s) (MRV) (a) On (Fill in MRV Adjustm~nt Date(s):On tnI' fir~t nAY of tnp hl ~t month of tnp Tprm the monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease shall be adjusted to the "Market Rental Value" of the properly as follows: 1) Four months prior to the Market Rental Vaiue (MRV) Adjustment Date(s) described above, Lessor and Lessee shall meet to establish an agreed upon new MRV for the specified term. If agreement cannot be reached. then: initials: Initials: OPTION(S) TO EXTENO Page 1 ot 2 NOTICE: These lerms are olten modilled 10 meet changing requirements of law and industry needs. Always write or call 10 make sure you are utilizing the mosl curren I larm' American Industrial Real Estate Association, 345 South Figueroa Streel, Suite M-1, Los Angeles, CA 90071. (213) 687.8777. Fax No. (213) 687-8616, ot;'1991 Amorican Industrial Real Estate Association. i) Lessor and Lessee shall immediately appoint a mutually acceptable appraiser or broker to establish e new MRV within the next 30 days. Any associated costs will be split equally between the parties, or . ii) Both Lessor and Lessee shall each immediately select and pay the appraiser or broker of their choice to ;tablish a MRV within the next 30 days. If, for any reason, either one of the appraisals is not completed within the next 30 days, as ipulated, then the appraisal that is completed at that time shall automatically become the new MRV. If both appraisals are lmpleted and the two appraiserslbrokers cannot agree on a reasonable average MRV then they shall immediateiy select a third utually acceptable apprafserlbroker to establish a third MRV within the next30 days. The average of the two appraisals closest value shall then become the new MRV. The costs of the third appraisal will be split equally between the parties. 2) In any event, the new MRV shall not be less than the rent payable for the month immediately preceding e date for rent adjustment. (b) Upon the establishment of each New Market Rental Value as described in paragraph All: 1) the monthly rental sum so calculated for each term as specified in paragraph AII(a) will become the new 3ase Rent" for the purpose of calculating any further Cost of Living Adjustments as specified in paragraph AI(a) above and 2) the first month of each Market Rental Value term as specified In paragraph AII(a) shall become the new 3ase Month" for the purpose of calculating any further Cost of living Adjustments as specified In paragraph AI(b). ::J---Ill. rixecI-Rent8l-Adjtlstmeftl(s) (FnA) ~ On (Fill in FRA Adjustment Date(s)): he monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease shall be increased n the dates set forth below: 3. NOTICE: Unless specified otherwise herein, notice of any escalations other than Fixed Rental Adjustments shall be nade as specified in paragraph 23 of the attached Lease. J. BRe~ER'S-FEE: The neel estate Oreker3 speeifiad 11'1 paragrapl, 1.18 af 1"6 attaehed Lease shalf-be-1'aid a Olokera~e reo for-each adjtt5lmeM-speaified abev&-lI'HleCe1'danee-witll-paregteplt45-eI-lAe-ellached Lease. D. FIXED RENTAL ADJUSTJ.1ENTS DURING OPTION PERIODS: Option 1/1: Months 61-72 73-84 85-96 97-108 109-120 Ne,., Base Rent Shall Be Market Value Rent Market Value Rent x 1.03 (Year 2) Year 2 x 1.03 Year 3 x 1.03 Year 4 x 1 .03 Initials: Initials: OPTION(S) TO EXTEND pago 2 ef 2 NOTICE: These forms are olten modified to meet changing requirements 01 law and Indultry needs. Always write or call to make sure you are utilizing the mosl currentlorm: Amorican Industriat Real Eltale Alloelalion, 345 Soulh Figueroa Slreel, Suile M.1. Los Angeles, CA 90071. (213) 687-8777, Falt No. (213) 687-8816. ~1991 American Industrial R.al E,tato Anoclatlon. --.-- ...._--~ . ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE -- GROSS THIS ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE __ GROSS ("Addendum") is entered into by and between WORLD PLAZA, LLC, a California limited liability company ("Lessor"), and the CITY OF SAN BERNARDINO ("Lessee"), effective this 21 day of June 2005. R E C I TAL S A. Lessor and Lessee are concurrently entering into a Standard Industrial/Commercial Multi-Lessee Lease -- Gross dated June 21, 2005 ("Lease"), for the premises located at 1535 Highland Avenue, suite C, San Bernardino, California ("premises"). B. intended forth in Addendum Addendum The terms, covenants, and conditions set forth herein are to and shall have the same force and effect as if set the Lease. To the extent that the provisions of this are inconsistent with any provisions of the Lease, this shall supersede and control. NOW, THEREFORE, Lessor and Lessee hereby agree as follows: 52. All Base Rent, common area operating expenses, late charges, interest and other payments required to be made by Lessee under the Lease shall constitute rent ("Rent") under this Lease for purposes of section 1951 of the California civil Code and all other applicable law. 53. LESSOR IS LEASING THE PREMISES TO LESSEE IN AN "AS-IS" CONDITION. LESSEE HAS OCCUPIED THE PREMISES PRIOR TO COMMENCEMENT OF THIS LEASE AND IS TOTALLY AWARE OF THE CONDITION OF THE PREMISES. LESSOR MAKES NO REPRESENTATIONS TO LESSEE REGARDING LESSEE'S INTENDED USE OF THE PREMISES. LESSEE SHALL BE SOLELY RESPONSIBLE TO OBTAIN ALL PERMITS NECESSARY FOR HIS INTENDED USE OF THE PREMISES. ANY DELAYS IN LESSEE'S OPENING SHALL NOT AFFECT THE COMMENCEMENT DATE FOR PAYMENT OF RENT. LESSEE, AT ITS SOLE COST, SUBJECT TO REQUIRED APPROVAL BY LESSOR, SHALL BE RESPONSIBLE TO SATISFY ALL CITY, ,COUNTY, STATE AND FEDERAL REGULATIONS AND REQUIREMENTS RELATING TO LESSEE'S USE OF THE PREMISES. ANY CONFLICT BETWEEN THIS PROVISION AND THE PROVISIONS OF THE PRINTED LEASE SHALL BE RESOLVED IN FAVOR OF THIS PROVISION. 54. Lessee shall immediately give written notice to Lessor of (i) any water damage to the Premises and any suspected seepage, pooling, dampness or other condition conducive to the production of mold; or (ii) any mustiness or other odors that might indicate the presence of mold in the Premises. [IIORLD .ADD] 1 55. Notwithstanding the provision in section 9.1, Premises Partial Damage shall not include damage to windows, doors, and/or other similar items which Lessee has the responsibility to repair or replace pursuant to the provisions of Paragraph 7.1. 56. There shall be no abatement of Rent and Lessor shall not be liable in any respect whatsoever for the inadequacy, stoppage, interruption or discontinuance of any utility or service due to riot, strike, labor dispute, breakdown, accident, repair or other cause beyond Lessor's reasonable control or in cooperation with governmental request or directions. 57. In addition to the provisions of section 13.1, the commission of waste, act or acts constituting public or private nuisance, and/or an illegal activity on the Premises by Lessee, where such actions continue for a period of 3 business days following written notice to Lessee shall constitute a Breach. 58. This Lease may be executed by the Parties in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. 59. Americans with Disabilities Act. Since compliance with the Americans with Disabilities Act (ADA) is dependent upon Lessee's specific use of the Premises, Lessor makes no warranty or representation as to whether or not the Premises comply with ADA or any similar legislation. In the event that Lessee's use of the Premises requires modifications or additions to the Premises in order to be in ADA compliance, Lessee agrees to make any such necessary modifications and/or additions at Lessee's expense. IN WITNESS WHEREOF, Lessor and Lessee have executed this Addendum as of the date first set forth above. AGREED AND ACCEPTED LESSOR: LESSEE: WORLD PLAZA, LLC, a California limited liability company CITY OF SAN BERNARDINO By: By: JIAN TERKAN, Manager [\JOR LD . ADD] 2 -:JH -<>-- J !J oe(~ w(l) I-~~ -10 :>10 (1)..- I. U. ell. wu., w(l) 1-"- -0 :> 10 - (I)~ .: U). cf) t.O - c:.i : ~\ a ~I ~ \() . 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