Exhibit 10.1

Triple Net Industrial Lease

by and between

PDG CARLSBAD 47 & 48, LP

a California limited partnership

as Landlord

and

IRIS INTERNATIONAL, INC,

a Delaware corporation

as Tenant

Property located at

1891 Rutherford Road, Suite 200, Carlsbad, CA 92008

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TABLE OF CONTENTS

 

        Page  

ARTICLE 1 DESCRIPTION OF PREMISES

    1     

1.1 Premises

    1     

1.2 Tenant Improvements

    1   

ARTICLE 2 TERM

    1     

2.1 Lease Term

    1     

2.2 Anticipated Commencement Date

    1     

2.3 Delay in Possession

    2     

2.4 Supplemental Agreement

    2   

ARTICLE 3 RENT

    2     

3.1 Base Monthly Rental

    2     

3.2 Proration of Rent

    3     

3.3 Annual Adjustments

    3     

3.4 Additional Rent, Expenses and Costs

    3     

3.5 Late Fees

    3     

3.6 Security Deposit

    3   

ARTICLE 4 TENANT IMPROVEMENTS

    4     

4.1 Tenant Improvements

    4     

4.2 Acceptance of Premises

    4   

ARTICLE 5 USE

    5     

5.1 Permitted Use of Premises

    5     

5.2 Compliance with Laws

    5     

5.3 Prohibited Uses

    5     

5.4 Rules and Regulations

    6   

ARTICLE 6 ALTERATIONS AND ADDITIONS

    6     

6.1 Prohibited Alterations

    6     

6.2 Notice of Commencement

    6     

6.3 Trade Fixtures

    7   

ARTICLE 7 SURRENDER OF PREMISES

    7     

7.1 Conditions upon Surrender

    7   

ARTICLE 8 UTILITIES AND SERVICES

    7     

8.1 Utilities

    7     

8.2 Landlord Service

    8   

ARTICLE 9 INDEMNIFICATION BY TENANT

    9     

9.1 Indemnity of Landlord

    9     

9.2 Waiver of Claims

    9     

9.3 Indemnity of Tenant

    9   

 

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ARTICLE 10 INSURANCE

     9     

10.1 Landlord’s Insurance

     9     

10.2 Payment

     10     

10.3 Tenant’s Insurance

     10     

10.4 Release of Subrogation Rights

     12   

ARTICLE 11 CARE OF THE PREMISES

     12     

11.1 Care of Premises

     12     

11.2 Maintenance of Equipment

     12     

11.3 Roof and Structural

     13     

11.4 Compliance with Governmental Regulations

     13     

11.5 Action by Landlord if Tenant Fails to Maintain

     13     

11.6 Action by Tenant if Landlord Fails to Perform

     13   

ARTICLE 12 TAXES

     14     

12.1 Personal Property Taxes

     14     

12.2 Real Property Taxes

     14     

12.3 Definition of Taxes

     14   

ARTICLE 13 COMMON AREAS

     15     

13.1 Common Area

     15     

13.2 Maintenance

     15     

13.3 Tenant’s Costs

     16     

13.4 Tenant’s Rights

     16   

ARTICLE 14 SIGNS AND ADVERTISING

     17     

14.1 Signs

     17   

ARTICLE 15 ENTRY BY LANDLORD

     17     

15.1 Entry by Landlord

     17     

15.2 Entry to Relet Premises

     17     

15.3 No Liability

     17   

ARTICLE 16 ASSIGNMENT AND SUBLETTING

     18     

16.1 Assignment and Subletting

     18     

16.2 Notice to Landlord

     18     

16.3 Excess Rent

     18     

16.4 No Release of Liability

     19   

ARTICLE 17 ABANDONMENT

     19     

17.1 No Abandonment

     19   

ARTICLE 18 BREACH BY TENANT

     19     

18.1 Events of Default

     19     

18.2 Five-Day Notice

     20     

18.3 No Waiver

     20   

 

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ARTICLE 19 REMEDIES UPON BREACH

     20     

19.1 Landlord’s Remedies

     20     

19.2 Forfeiture

     21   

ARTICLE 20 DAMAGE OR DESTRUCTION

     21     

20.1 Landlord’s Obligation to Rebuild

     21     

20.2 Landlord’s Right to Terminate

     21     

20.3 Limited Obligation to Repair

     22     

20.4 Abatement of Rent

     22   

ARTICLE 21 CONDEMNATION

     23     

21.1 Total Taking—Termination

     23     

21.2 Partial Taking

     23     

21.3 No Apportionment of Award

     23     

21.4 Temporary Taking

     23     

21.5 Sale Under Threat of Condemnation

     23   

ARTICLE 22 SURRENDER OF LEASE

     24     

22.1 Surrender of Lease

     24   

ARTICLE 23 ATTORNEYS’ FEES

     24     

23.1 Attorneys’ Fees

     24   

ARTICLE 24 SALE OF THE PREMISES BY LANDLORD

     24     

24.1 Sale of Premises

     24   

ARTICLE 25 QUIET ENJOYMENT

     24     

25.1 Quite Enjoyment

     24   

ARTICLE 26 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

     25     

26.1 Tenant Estoppel Certificate

     25     

26.2 Tenant Financial Statements

     25   

ARTICLE 27 SUBORDINATION AND ATTORNMENT

     25     

27.1 Subordination of Lease

     25     

27.2 Attornment to Lender

     26   

ARTICLE 28 HOLDING OVER

     26     

28.1 Holding Over

     26   

ARTICLE 29 MORTGAGEE PROTECTION

     26     

29.1 Mortgagee Protection

     26   

ARTICLE 30 LIABILITY OF SUCCESSORS

     27     

30.1 Successors Liability

     27   

ARTICLE 31 EASEMENTS

     27     

31.1 Easements

     27   

 

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ARTICLE 32 COVENANTS, CONDITIONS AND RESTRICTIONS

     27     

32.1 Compliance with Covenants, Conditions and Restrictions

     27     

32.2 Associations

     27     

32.3 Association Fees

     28   

ARTICLE 33 QUITCLAIM DEED

     28     

33.1 Quitclaim Deed

     28   

ARTICLE 34 HAZARDOUS MATERIALS

     28     

34.1 Definitions

     28     

34.2 Tenant’s Obligations

     28   

ARTICLE 35 MISCELLANEOUS

     31     

35.1 Gender

     31     

35.2 Headings

     31     

35.3 Integration

     31     

35.4 Choice of Laws

     31     

35.5 Severability

     31     

35.6 Amendment for Financing

     31     

35.7 Payments

     31     

35.8 Time of Essence

     31     

35.9 Force Majeure

     31     

35.10 Notices

     32     

35.11 Brokers

     32     

35.12 Special Provisions

     32   

ARTICLE 36 OPTION TO EXTEND

     34   

EXHIBIT A PREMISES

EXHIBIT B BUILDING

EXHIBIT C TENANT IMPROVEMENTS

 

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LEASE AGREEMENT

THIS LEASE is entered into as of December 5, 2011, by and between PDG CARLSBAD
47 & 48, LP, a California limited partnership, (the “Landlord”) and IRIS
INTERNATIONAL, INC., a Delaware corporation, (the “Tenant”).

ARTICLE 1

DESCRIPTION OF PREMISES

1.1 Premises. Landlord hereby leases to Tenant and Tenant hires from Landlord,
pursuant to the terms, conditions and uses herein set forth, that certain real
property commonly known as 1891 Rutherford Road, Suite 200, Carlsbad, California
and more particularly described in Exhibit “A” attached hereto (the “Premises”),
including a building located on the Premises containing approximately 25,776
rentable square feet, as shown on the drawing attached hereto as Exhibit “B”
(the “Premises” or “Building”).

1.2 Tenant Improvements. In addition to the existing improvements, the Premises
shall be improved with certain tenant improvements (the “Improvements”) as more
fully described in Section 4.1 and Exhibit “C” attached hereto.

ARTICLE 2

TERM

2.1 Lease Term. The term of this Lease shall be for Eighty Four (84) months
commencing on the earlier of (i) date which is ten (10) days after Landlord
notifies Tenant that the Improvements are completed and the Premises are ready
for occupancy (and such notice is factually accurate), or (ii) the date on which
Tenant shall take occupancy of the Premises and commences to conduct business
operations therefrom (the “Commencement Date”). If the Commencement Date occurs
on other than the first day of a month, the term of this Lease shall be extended
by the number of days remaining in the first calendar month of occupancy.

2.2 Anticipated Commencement Date. The anticipated date on which the term shall
commence is May 1, 2012, (the “Anticipated Commencement Date”). If Landlord, for
any reason, cannot deliver possession of the Premises to Tenant on said date
with the Improvements completed, Landlord shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease or the
obligations of Tenant hereunder; provided that, Tenant shall not be obligated to
pay rent until possession of the Premises is tendered to Tenant with the
Improvements completed, except to the extent any such delay is the result of a
Tenant Delay (defined below) in which case, the Tenant shall be obligated to
commence payment of the Rent on the date the Improvements would have been
completed but for the Tenant Delay. The term “Tenant Delay” shall mean an actual
delay resulting from the failure of Tenant to comply with its obligations under
this Lease or Tenant unreasonably interfering with the completion of the
Improvements; provided that no Tenant Delay shall be deemed to have occurred
unless Tenant has failed to cure the Tenant Delay within one (1) business days
following written notice thereof from Landlord.

 

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2.3 Delay in Possession. In the event Landlord shall not have delivered
possession of the Premises with the Improvements completed within two (2) months
from the Anticipated Commencement Date set forth in Section 2.2, plus periods
occurring as a result of any Tenant Delay or any delays which are beyond
Landlord’s reasonable control, including, but not limited, inclement weather,
strikes, acts of God, inability to obtain labor or materials, ability to secure
governmental approvals or permits, governmental restrictions, civil commotion,
fire or similar causes (not to exceed sixty (60) days), Tenant may, by written
notice to Landlord within ten (10) days after the expiration of said two-month
period, either (i) elect to receive two (2) days of rental abatement for each
day beyond the end of such two-month period until the Improvements are so
completed and the Premises is delivered to Tenant, or (ii) terminate this Lease
and, upon Landlord’s return of any monies previously deposited by Tenant, the
parties shall have no further rights or liabilities towards each other. Provided
further, however, that if such written notice of Tenant is not given to Landlord
within said ten (10) day period, Tenant’s right to cancel this Lease under this
Section 2.3 shall terminate and be of no further force or effect.

2.4 Supplemental Agreement. Tenant agrees to execute a supplemental agreement
within ten (10) days after receipt in form requested by Landlord which shall
confirm the Commencement Date of this Lease.

ARTICLE 3

RENT

3.1 Base Monthly Rental. Tenant shall pay to Landlord at the address set forth
in Section 35.10, or such other address as Landlord may advise Tenant in
writing, without deduction, offset or prior notice or demand (except as
otherwise provided herein), and Landlord shall accept, as rent for the Premises
the sum outlined below, per month, in lawful money of the United States payable
in advance on the first day of each month of the term of this Lease. Said
monthly installments shall hereinafter be referred to as the “Base Monthly
Rental.” Tenant has delivered to Landlord the Base Monthly Rental for the first
month of the term hereof upon execution and delivery of this Lease.

 

Month 1

Month 2

Months 3-12

Months 13-24

Months 25-36

Months 37-48

Months 49-60

Months 61-72

Months 73-84

  

$26,250

Abated (Tenant to pay CAM charges pursuant to Article 13)

$26,250

$32,445

$38,988

$42,454

$43,940

$45,478

$47,070

 

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3.2 Proration of Rent. In the event that the Commencement Date is not on the
first day of the month, Tenant shall pay to Landlord prior to the first day of
the second full calendar month following the Commencement Date, in lieu of the
Base Monthly Rental for such second month, an amount equal to the Base Monthly
Rental multiplied by a factor having as its numerator the number of days
remaining from and after the Commencement Date in the month in which the
Commencement Date occurs and as its denominator the number thirty. Thereafter,
rent shall be payable in accordance with the terms of Section 3.1.

3.3 Annual Adjustments. [Intentionally Blank]

3.4 Additional Rent, Expenses and Costs. Tenant shall pay as additional rent
(“Additional Rent”) insurance pursuant to Section 10, taxes pursuant to
Section 12, maintenance, roof and structural repairs pursuant to Sections 11.2
and 11.3, or other charges, expenses and cost provided for herein, as described
and in the manner provided in Article 13. Landlord shall have the right to
reasonably estimate and collect from Tenant in advance on a monthly basis any
such Additional Rent.

3.5 Late Fees. Tenant acknowledges that late payment by Tenant to Landlord of
the Base Monthly Rental or other charges incurred under this Lease will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of such
costs being extremely difficult and impracticable to fix. Such costs include,
without limitation, processing, administrative and accounting charges, and late
charges that may be imposed on Landlord by the terms of any note secured by any
mortgage encumbering the Premises. If any payment of Base Monthly Rental, Excess
Operating Expenses, or other charges due from Tenant is not received by Landlord
within three (3) business days following the delivery of written notice to
Tenant that same is due, Tenant shall pay to Landlord an additional sum of the
greater of (i) five percent (5%) of the overdue rent or (ii) Fifteen Dollars
($15.00) as a late charge. Late charges shall constitute Additional Rent. The
parties agree that the late charge represents a fair and reasonable estimate of
the costs that Landlord will incur by reason of late payment by Tenant.
Acceptance of any late charge shall not constitute a waiver of Tenant’s default
with respect to the overdue amount, or prevent Landlord from exercising any of
the other rights and remedies available to Landlord hereunder. Notwithstanding
the foregoing, no late fee shall be due and owing with respect to the first late
payment during every calendar year of this Lease unless Tenant continues to fail
to pay the required amount due and owing to Landlord within ten (10) business
days after Tenant’s receipt of written notice from Landlord.

3.6 Security Deposit. Tenant has deposited with Landlord the sum of Forty Seven
Thousand Seventy Dollars ($47,070.00), receipt of which is hereby acknowledged,
as security for the full performance of the obligations of Tenant under this
Lease.

3.6.1 If Tenant shall be in default with respect to the payment of the Base
Monthly Rental or any other covenant contained herein, after the expiration of
all applicable notice and cure periods, Landlord may use or retain all or any
part of the security deposit for the payment of any sum in default, or for the
payment of any amount which Landlord may spend or become obligated to spend by
reason of Tenant’s default. If any portion of said security deposit be so
applied or used, Tenant shall, within five (5) business days after written
notice thereof, deposit an additional amount with Landlord sufficient to restore
said security deposit to the amount set forth above and Tenant’s failure to do
so shall constitute a breach of this Lease.

 

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3.6.2 If Tenant is not in default at the expiration or earlier termination of
this Lease, Landlord shall return said security deposit to Tenant within two
(2) weeks after said expiration or termination of this Lease, less any amounts
required, as a result of Tenant’s failure to comply with its restoration
obligations hereunder, to restore the Premises to good condition and repair,
reasonable wear and tear excepted, including damage resulting from the removal
by Tenant of its trade fixtures or equipment.

3.6.3 Landlord’s obligation with respect to any security deposit is that of a
debtor and not as a trustee, consequently, such sums may be commingled with
rental receipts or dissipated and no interest shall accrue thereon.

3.6.4 In the event of the sale of the real property of which the Premises
constitute a part, Landlord or its agents shall pay over to Landlord’s successor
in interest the sums held as security or advance rent and notify Tenant in
writing setting forth the particularity of such transfer, including the
successor’s name and address. Upon such written notification, (and provided
Landlord’s successor-in-interest in fact received said security deposit), Tenant
shall have no further claim against Landlord with respect to any such security
deposit and hereby waives all rights against Landlord in such regard.

3.6.5 In the event of foreclosure by the holder of any mortgage or deed of trust
encumbering the Premises, Landlord shall continue to be liable for any security
deposit and any such mortgagee shall have no liability or responsibility
therefor.

3.7 Tenant shall have the right to, prior to the Commencement Date, remeasure
the Premises in accordance with the standards set forth in ANSI Z65.1-1996, as
promulgated by the Building Owners and Managers Association (“BOMA Standard”),
including allocation of common areas, and in the event that subsequent
remeasurement of the Premises by Tenant produces a square footage number in
excess of or lower than the square footage number which would have resulted had
the BOMA Standard been utilized, any payments due to Landlord from Tenant based
upon the amount of square feet contained in the Premises shall be
proportionally, retroactively and prospectively reduced or increased, as
appropriate, to reflect the actual number of square feet as remeasured under the
BOMA Standard.

ARTICLE 4

TENANT IMPROVEMENTS

4.1 Tenant Improvements. Subject to the provisions of Exhibit “C” of this Lease,
Landlord shall cause to be constructed, for the mutual benefit of Tenant and
Landlord, certain modifications and improvements to the Premises as more fully
described in Exhibit “C” attached hereto.

4.2 Acceptance of Premises. Subject to Landlord’s other obligations under this
Lease (including the completion of the Improvements), Tenant shall accept the
Premises in a boom clean, “As Is” condition, with all personal property of
Landlord and any prior tenant removed.

 

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However, prior to the Commencement Date, Landlord, at Landlord’s sole cost,
shall provide that the roof, existing HVAC systems, mechanical,
fire/life/safety, electrical and plumbing systems serving the Premises and
Building are in good working condition and shall ensure that the Premises,
Building and parking areas, in their current condition and build-out, meet and,
other than as a result of modifications or improvements made by Tenant, continue
to meet during the term of this Lease all current laws, codes and conditions
including Building, fire and life safety and applicable Americans With
Disabilities Act requirements. Prior to the Commencement Date, Landlord shall
provide Tenant with a current Phase I Environmental Assessment of the Premises
and shall remediate any environmental violations described therein at its sole
cost. Such Phase I Environmental Assessment shall be the baseline for the
pre-lease environmental condition of the Premises under the lease. The parties
agree that a Phase I Environmental Assessment prepared for Isis Pharmaceuticals
within six (6) months prior to the Commencement Date, with a peer review by
Kasai Consulting, shall qualify as an acceptable Phase I Environmental
Assessment for purposes of this paragraph (hereinafter, the “Existing Phase I”).
Landlord prior to Tenant’s occupancy shall perform testing to ensure that the
gas lines are in sound condition and free of leaks and promptly provide said
results to Tenant. In addition, Landlord shall provide Tenant with confirmation
that the underground sewer system is in sound condition and free of leaks.

ARTICLE 5

USE

5.1 Permitted Use of Premises. The Premises shall be used and occupied by Tenant
solely for pharmaceutical, medical and biotechnology laboratory, research and
development uses and any other uses permitted under applicable law and zoning,
including but not limited to general office space.

The Premises are to be used for no other purposes without first obtaining the
consent of Landlord. Tenant shall not commit or permit any nuisance, act or
other thing which may disturb the quiet enjoyment of the other tenants of the
Building.

5.2 Compliance with Laws. Tenant, at Tenant’s sole expense, shall promptly
comply, or cause compliance, with all laws, ordinances, zoning restrictions,
rules, regulations, orders and requirements of any duly constituted public
authorities now or hereafter affecting the use, safety, cleanliness and
occupation of the Premises; provided that Tenant shall have no obligation to
perform any structural repairs or other capital improvements (unless resulting
from alterations performed by Tenant or from Tenant’s particular use).

5.3 Prohibited Uses. Tenant shall not do, bring or keep anything in or about the
Premises that will cause a cancellation of any insurance covering the Premises
or the Building. Tenant shall not use the Premises in any manner that will
constitute waste, nuisance or unreasonable annoyance to owners or occupants of
nearby properties, provided that Tenant’s proper and lawful use of the Premises
for the contemplated use shall not constitute any such nuisance or annoyance.
Subject to the foregoing, Tenant shall not use the Premises for sleeping,
cooking, washing clothes, or the preparation, manufacture, or mixing of anything
that might emit any odor or objectionable noises or lights onto nearby
properties, nor shall any animals or birds

 

5

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be brought in or kept in or about the Premises. Tenant shall not do anything on
the Premises that will cause damage to the Building. Tenant shall place no loads
upon the floors, walls or ceiling of the Building in excess of the maximum
designed load specified by Landlord or which may damage the Building. No
machinery, apparatus, or other appliance shall be used or operated in or on the
Premises that will in any manner injure, the Premises.

5.4 Rules and Regulations. Provided Tenant receives reasonable advance notice of
the same and Tenant’s use of the Premises is not impaired as a result, Tenant
shall comply with all nondiscriminatory rules and regulations (the “Rules and
Regulations”) from time to time reasonably adopted by Landlord with respect to
the Premises.

ARTICLE 6

ALTERATIONS AND ADDITIONS

6.1 Prohibited Alterations. Tenant shall not make any alterations, improvements
or additions to the Premises, except for non-structural alterations not
exceeding Fifty Thousand Dollars ($50,000) in aggregate cost per annum over the
Term of the Lease, without obtaining Landlord’s prior written consent, which
consent shall not be unreasonably withheld or delayed. Any such improvements,
excepting movable furniture and trade fixtures, shall become part of the realty
and belong to Landlord. All alterations and improvements shall be installed at
Tenant’s sole cost, by a licensed contractor, in a good and workmanlike manner,
and in conformity with the laws of all applicable duly constituted public
authorities.

6.2 Notice of Commencement. At least twenty (20) days prior to commencing any
work relating to any alterations, improvements or additions approved by
Landlord, Tenant shall notify Landlord in writing of the expected date of
commencement. Landlord shall have the right at any time thereafter to post and
maintain on the Premises such notices as Landlord reasonably deems necessary to
protect Landlord and the Premises from mechanics’ liens, materialmen’s liens or
any other liens. Tenant shall pay, when due, all claims for labor or materials
furnished to or for Tenant for use in improving the Premises. Tenant shall not
permit any mechanics’ or materialmen’s liens to be levied against the Premises
arising out of work performed, materials furnished, or obligations to have been
performed on the Premises by or at the request of Tenant. Tenant hereby
indemnifies and holds Landlord harmless against loss, damage, attorneys’ fees
and all other expenses on account of claims of lien of laborers or materialmen
or others for work performed or materials or supplies furnished for Tenant or
its contractors, agents or employees. If Tenant fails to remove or bond any
lien(s) filed against the Premises in connection with any work performed or any
work claimed to have been performed by or at the direction of Tenant within ten
(10) business days from the date of the lien(s) filing, Landlord may remove such
lien(s) at Tenant’s expense and Tenant shall reimburse Landlord for all costs
incurred by Landlord in connection with the removal of the lien(s), which amount
shall be deemed Additional Rent, and shall include, without limitation, all sums
disbursed, incurred or deposited by Landlord, including Landlord’s costs,
expenses and actual attorneys’ fees, with interest thereon, at ten percent
(10%) per annum from the date of expenditure.

 

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6.3 Trade Fixtures. Tenant may install trade fixtures, machinery or other trade
equipment in conformance with the ordinances of all applicable duly constituted
public authorities. Tenant may remove any of such trade fixtures or machinery
upon the termination of this Lease. In the event that Tenant installs
improvements, machinery or trade fixtures following the Commencement Date,
Tenant shall, at Landlord’s election (which must have been communicated to
Tenant concurrently with Landlord’s approval of any such improvements, to the
extent such approval is required), return the Premises on termination of this
Lease to the same condition as existed at the Commencement Date, reasonable wear
and tear excepted, including the removal of improvements approved by Landlord in
Section 6.1, if Landlord’s approval was conditioned upon Tenant’s removal of
said improvements. Tenant shall, in any event, repair any damage resulting from
the removal of machinery or trade fixtures of Tenant.

ARTICLE 7

SURRENDER OF PREMISES

7.1 Conditions upon Surrender. Upon the expiration, or earlier termination, of
this Lease, Tenant shall surrender the Premises to Landlord in its condition
existing as of the Commencement Date, normal wear and tear and acts of God
excepted, with all interior walls in good repair and repainted if marked, all
carpets shampooed and cleaned, the HVAC equipment, plumbing, electrical and
other mechanical installations in good operating order, and all floors stripped,
cleaned and waxed, all to the reasonable satisfaction of Landlord. Tenant shall
remove from Premises all of Tenant’s alterations which Landlord requires Tenant
to remove pursuant to Section 6.3 and all Tenant’s personal property and shall
repair any damage and perform any restoration work caused by such removal. If
Tenant fails to remove such alterations and Tenant’s personal property pursuant
to the above, and such failure continues for more than ten (10) business days
after the termination of the Lease, Landlord may retain such property and all
rights of Tenant with respect to it shall cease, or Landlord may place all or
any portion of such property in public storage for Tenant’s account. Tenant
shall pay to Landlord upon demand costs of removal of such alterations and
Tenant’s personal property and storage and transportation costs of same, and the
cost of repairing and restoring the Premises, together with attorneys’ fees and
interest on said amounts, from the date of expenditure by Landlord. If the
Premises are not so surrendered at the termination of this Lease, Tenant hereby
agree to indemnify Landlord and its agents against all loss or liability
resulting from such delay Tenant in so surrendering the Premises, including,
without limitation, any claims made by any succeeding Tenant, losses to Landlord
due to lost opportunity to lease to succeeding tenants, actual attorneys’ fees
and costs.

ARTICLE 8

UTILITIES AND SERVICES

8.1 Utilities. Tenant shall make all arrangements for and pay for all water,
sewer, gas, heat, light, power, telephone service and any other service or
utility Tenant requires at the Premises. Except as provided in Section 8.3
below, Landlord shall not be liable for any failure or interruption of any
utility service being furnished to the Premises, and no such failure or
interruption shall entitle Tenant to terminate this Lease.

 

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8.2 Landlord Service. In the event that any utilities are furnished by Landlord,
Tenant shall pay to Landlord the cost thereof in the manner set forth in
Section 13.3. Tenant’s cost shall be the total cost shown on utility meters
servicing the Premises and Landlord’s actual, out-of-pocket costs incurred in
connection with any extraordinary use which may be made by Tenant.

8.3 Abatement for Untenantability. In the event that Tenant is reasonably
prevented from using the Premises or any material portion thereof and does not
use the same, as a result of (a) any entry by Landlord into the Premises, or
alteration or construction in the common areas or affecting the Building
structure or Building systems, or any other repair, maintenance or alteration
which is performed by Landlord, or which is required hereunder to be performed
by Landlord and which Landlord failed to perform after the Commencement Date,
which materially interferes with Tenant’s use or occupancy of the Premises (or
the applicable portion thereof), (b) any failure, for any reason within the
Building to provide access to the Premises or any failure caused by Landlord to
provide services or utilities to the Premises, in either case to the extent such
failure materially impairs Tenant’s use or occupancy of the Premises, or (c) the
presence of Hazardous Materials which have been conclusively determined to have
not been brought on the Premises by Tenant which materially impairs Tenant’s use
or occupancy of the Premises (any such set of circumstances as set forth in
items (a), (b) or (c), above, to be known as an “Abatement Event”), then Tenant
shall give Landlord notice of such Abatement Event, and if such Abatement Event
continues for three (3) consecutive business days or seven (7) non-consecutive
business days in any twelve (12) month period (the “Eligibility Period”), then
the Base Monthly Rent and all other Rent payable by Tenant hereunder on a
periodic basis (collectively, “Periodic Rent”), shall be abated or reduced, as
the case may be, from the commencement of the Eligibility Period for such time
that Tenant continues to be so prevented from using and does not use the
Premises or a portion thereof, in the proportion that the rentable area of the
portion of the Premises that Tenant is prevented from using and does not use
bears to the total rentable area of the Premises (provided, that if Tenant is
prevented from using a portion of the Premises for a period of time in excess of
the Eligibility Period and the remaining portion of the Premises is not
sufficient to allow Tenant to effectively conduct its business therein and
Tenant in fact does not conduct business therein, then after expiration of the
Eligibility Period, and for such time that Tenant continues to be so prevented
from effectively conducting its business in any portion of the Premises,
Tenant’s obligations to pay Periodic Rent for the entire Premises shall be
abated for such time as Tenant continues to be so prevented from using the
Premises). If Landlord has not cured an Abatement Event within two hundred
seventy (270) days after Landlord’s receipt of written notice of the Abatement
Event from Tenant and such Abatement Event materially interferes with Tenant’s
use of the Premises, Tenant shall have the right to terminate this Lease during
the first fifteen (15) business days of the first full calendar month following
the end of such two hundred seventy (270) day period, which right may be
exercised only by delivery of notice to Landlord (the “Abatement Event
Termination Notice”) during such five (5) business-day period, and shall be
effective as of the date set forth in the Abatement Event Termination Notice
(the “Abatement Event Termination Date”), which Abatement Event Termination Date
shall not be less than thirty (30) days, and not more than six (6) months,
following the date on which Tenant delivers to Landlord an Abatement Event
Termination Notice.

 

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ARTICLE 9

INDEMNIFICATION BY TENANT

9.1 Indemnity of Landlord. Tenant hereby agrees to indemnify, defend (with
attorneys’ approved by Landlord), protect, and hold Landlord and Landlord’s
agents harmless from any and all liabilities, costs, expenses and losses by
reason of injury to person or property, from whatever cause, to the extent
resulting from Tenant’s use of the Premises, including without limitation, any
liability for injury to the person or property of Tenant, its agents, officers,
employees, or invitees, but excepting any loss or injury resulting from the acts
or negligence of Landlord or its agents, representatives or employees. Tenant
shall, at Tenant’s sole expense, resist and defend any such action, suit, or
proceeding or cause the same to be resisted or defended by counsel designated by
Tenant and approved by Landlord. Tenant’s obligation hereunder shall survive the
termination of this Lease if the incident requiring such defense occurred during
the lease term.

9.2 Waiver of Claims. Tenant, as a material part of the consideration rendered
to Landlord in entering into this Lease, hereby waives all claims against
Landlord for damages to goods, wares, machinery and trade fixtures in, upon and
about the Premises and for injury to Tenant, its agents, employees, invitees, or
any third person in or about the Premises from any cause at any time, except to
the extent resulting from any gross negligence or willful misconduct of Landlord
or Landlord’s breach of this Lease.

9.3 Indemnity of Tenant. Landlord hereby agrees to indemnify, defend (with
attorneys’ approved by Tenant), protect, and hold Tenant and Tenant’s agents
harmless from any and all liabilities, costs, expenses and losses by reason of
injury to person or property, from whatever cause, to the extent resulting from
Landlord’s breach of this Lease, negligence or willful misconduct, but excepting
any loss or injury resulting from the acts or gross negligence of Tenant or its
agents, representatives or employees. Landlord shall, at Landlord’s sole
expense, resist and defend any such action, suit, or proceeding or cause the
same to be resisted or defended by counsel designated by Landlord and approved
by Tenant. Landlord’s obligation hereunder shall survive the termination of this
Lease if the incident requiring such defense occurred during the lease term.

ARTICLE 10

INSURANCE

10.1 Landlord’s Insurance. Landlord shall maintain, at Tenant’s sole expense,
which Tenant shall pay to Landlord as Additional Rent in the manner set forth in
Section 13.3 a policy or policies of insurance protecting Landlord against the
following:

 

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10.1.1 Property Insurance—Building, Improvements. Landlord shall obtain and keep
in force a policy or policies of insurance in the name of Landlord with loss
payable to Landlord and to any Lender insuring loss or damage to the Building
and/or Project. The amount of such insurance shall be equal to the full
replacement cost of the Building and/or Project, as the same shall exist from
time to time, or the amount required by any Lender, but in no event more than
the available insurable value thereof. If the coverage is available and
commercially appropriate, such policy or policies by Landlord shall insure
against all risks of direct physical loss or damage to include earthquake;
(flood may be included if required by a Lender), including coverage for debris
removal and the enforcement 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 by Landlord
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 and other
endorsements which Landlord may elect to maintain and which may be reasonably
required by the first mortgagee or beneficiary of a deed of trust encumbering
real property of which the Premises constitute a part (“Mortgagee”). If such
insurance coverage has a deductible clause, the deductible amount shall not
exceed $5,000 per occurrence.

10.1.2 Property Insurance—Loss of Rents. Landlord shall also obtain and keep in
force a policy or policies in the name of Landlord with loss payable to Landlord
insuring the loss of the full Rent for one year with an extended period of
indemnity for an additional 365 days (“Loss of Rents”). Said insurance shall
contain an agreed valuation provision in lieu of any coinsurance clause, and the
amount of coverage shall be adjusted annually to reflect the projected Rent
otherwise payable by Tenant, for the next 12 month period.

10.1.3 Liability Insurance—Commercial General Liability. Commercial General
Liability policy of insurance protecting Landlord against claims for bodily
injury, personal injury and property damage based upon or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an annual aggregate of not less than $2,000,000.

10.2 Payment. Tenant shall pay to Landlord in the manner set forth in
Section 13.3, the cost of insurance required in Section 10.1.

10.3 Tenant’s Insurance. Tenant shall maintain at its sole cost and expense, in
force a policy or policies of insurance protecting Landlord and Tenant against
each of the following:

10.3.1 Liability Insurance—Commercial General Liability. Tenant shall obtain and
keep in force a Commercial General Liability policy of insurance protecting
Tenant and Landlord as an additional insured against claims for bodily injury,
personal injury and property damage based upon or arising out of the ownership,
use, occupancy or maintenance of the Premises and all areas appurtenant thereto.
Such insurance shall be on an occurrence basis providing single limit coverage
in an amount not less than $1,000,000 per occurrence with an annual aggregate of
not less than $2,000,000. Tenant shall add Landlord as an additional insured by
means of an endorsement at least as broad as the Insurance Service
Organization’s “Additional Insured-Managers or Landlords of Premises”
Endorsement and coverage shall also

 

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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
Tenant’s indemnity obligations under this Lease. The limits of said insurance
shall not, however, limit the liability of Tenant nor relieve Tenant of any
obligation hereunder. Tenant shall provide an endorsement on its liability
policy(ies) which provides that its insurance shall be primary to and not
contributory with any similar insurance carried by Landlord, whose insurance
shall be considered excess insurance only.

The amount of such Commercial General Liability insurance shall be increased
from time to time as Landlord may reasonably determine. All such bodily injury
and property damage insurance shall specifically insure the performance by
Tenant of the indemnity agreement as to personal injury or property damage
contained in Section 9.

10.3.2 Property; Business Interruption Insurance; Property Damage. Tenant shall
obtain and maintain insurance coverage on Tenant’s alterations permitted under
Section 7, all of Tenant’s personal property and trade fixtures. Such insurance
shall be full replacement cost coverage with a deductible of not to exceed
$10,000 per occurrence and contain an agreed amount clause. The proceeds from
any such insurance shall be used by Tenant for the replacement of personal
property, trade fixtures and Tenant’s alterations. Tenant shall provide Landlord
with written evidence that such insurance is in force.

10.3.3 Business Interruption. Tenant shall obtain and maintain loss of income
and extra expense insurance in amounts as will reimburse Tenant for direct or
indirect loss of earnings attributable to all perils commonly insured against by
prudent Tenants in the business of Tenant or attributable to prevention of
access to the Premises as a result of such perils.

10.3.4 Workers Compensation Insurance. Tenant shall obtain and maintain Worker’s
Compensation Insurance in such amount as may be required by Applicable
Requirements. Coverage shall contain a waiver of subrogation clause in favor of
Landlord.

10.3.5 No Representation of Adequate Coverage. Landlord makes no representation
that the limits or forms of coverage of insurance specified herein are adequate
to cover Tenant’s property, business operations or obligations under this Lease.

10.3.6 Insurance Policies. All policies of insurance to be provided by Tenant
shall be issued by insurance companies, with general policy holder’s rating of
not less than A- and a financial rating of not less than Class A as rated in the
most current available “Best’s” Insurance Reports, and qualified to do business
in the State of California or such other rating as may be required by a Lender.
Such policies shall be issued in the names of Landlord and Tenant and, if
requested by Landlord, any mortgagee. The policies provided by Tenant shall be
for the mutual and joint benefit and protection of Landlord, Tenant and any
mortgagee. Tenant shall not do or permit to be done anything which invalidates
the required insurance policies. Tenant shall, prior to the Commencement Date,
deliver to Landlord certified copies of policies of such insurance or
certificates with copies of the required endorsements evidencing the existence
and amounts of the required insurance. No such policy shall be cancelable or
subject to modification except after ten (10) days prior written notice to
Landlord. Tenant shall, prior to the expiration

 

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of such policies, furnish Landlord with evidence of renewals or “insurance
binders” evidencing renewal thereof, or Landlord may order such insurance and
charge the cost thereof to Tenant, which amount shall be payable by Tenant to
Landlord 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.

10.3.7 Notwithstanding anything to the contrary, Tenant’s obligation to carry
the insurance described in this Section may be brought within the coverage of a
so-called blanket policy or policies of insurance carried and maintained by the
Tenant, provided that (i) Landlord and any mortgagee shall be named as an
additional insured thereunder as their interests may appear, (ii) the coverage
afforded Landlord will not be reduced or diminished by reason of the use of such
blanket policy of insurance, and (iii) the requirements set forth herein are
otherwise satisfied. Tenant agrees to permit Landlord at all reasonable time to
inspect the policies of insurance of Tenant covering the Premises for policies
which are not required to be delivered to Landlord.

10.4 Release of Subrogation Rights. Landlord and Tenant hereby mutually release
each other from liability and waive all right to recover against each other for
any loss from perils insured against under their respective property insurance
policies, including any extended coverage and special form endorsements to said
policies; provided, however, this Section shall be inapplicable if it would have
the effect, but only to the extent that it would have the effect, of
invalidating any insurance coverage of Landlord or Tenant. The parties shall
obtain, if available, from their respective insurance companies, a waiver of any
right of subrogation which said insurance company may have against the Landlord
or the Tenant, as the case may be.

ARTICLE 11

CARE OF THE PREMISES

11.1 Care of Premises. Tenant shall, at its sole cost and expense keep the
Premises and exterior and interior portions of windows, doors, and all other
glass or plate glass fixtures in a working neat, clean, sanitary and safe
condition, and shall keep the Premises free from trash, rubbish and dirt. Tenant
shall make all repairs or replacements thereon or thereto, whether ordinary or
extraordinary.

11.2 Maintenance of Equipment. Tenant shall, at its sole cost and expense, keep
and maintain all fixtures and mechanical equipment used by Tenant in good
working order, condition and repair. Said items shall include, but are not
limited to, all plumbing or sewage facilities in the Premises, doors, locks and
closing devices, windows, including glass, lights, electric systems and
equipment, heating and air conditioning systems and equipment and, all other
appliances and equipment of every kind. Landlord shall enter into a maintenance
agreement for the maintenance of any heating and/or air conditioning units
servicing the Premises with a reputable maintenance service company and Tenant
shall pay to Landlord as Additional Rent in the manner set forth in
Section 13.3, the cost of any such maintenance agreement.

 

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11.3 Roof and Structural and Other Maintenance Obligations of Landlord. Landlord
shall keep in good condition and repair the foundations, exterior walls,
fire/life/safety systems, roof and structural components of the Building, but
the cost thereof (other than any capital expenditures which shall be amortized
over the life of the improvement with the amount charged to Tenant limited to
the period of the remaining term of the Lease) shall be paid by Tenant as
Additional Rent in accordance with the manner set forth in Section 13.3.
Landlord shall have no obligation to make any such repairs until Landlord has
received written notice from Tenant with respect to the need for such repairs.
Landlord shall not be deemed to be in default with respect with its obligation
to repair unless and until Landlord has (i) received said written notice and
(ii) failed to make such repairs within a reasonable period following the
receipt of said notice. Landlord shall, after receiving written notice, exercise
due diligence in making such repairs. Tenant hereby waives any provisions of law
permitting Tenant to make repairs at Landlord’s expense. Landlord shall enforce
any construction warranties for the benefit of Tenant to the extent that they
are available.

11.4 Compliance with Governmental Regulations. Tenant shall, at its sole cost
and expense, promptly and properly observe and comply with, including the making
by Tenant of any alterations to the Premises, all present and future orders,
regulations, directions, rules, laws ordinances, and requirements of all
governmental authorities (including, without limitation, state, municipal,
county and federal governments and their departments, bureaus, boards and
officials) arising from the use of the Premises (provided Tenant shall have no
responsibility for any structural improvements or capital expenditures, except
to the extent resulting from alterations by Tenant or Tenant’s particular use).

11.5 Action by Landlord if Tenant Fails to Maintain. If Tenant refuses or
neglects to repair or maintain the Premises as required by Sections 11.1, 11.2,
11.3 and 11.4 to the reasonable satisfaction of Landlord, Landlord, at any time
following fifteen (15) days from the date on which Landlord shall make written
demand on Tenant to affect such repair or maintenance, may, but shall not have
the obligation to, make such repair and/or maintenance (without liability to
Tenant for any loss or damage which may occur to Tenant’s merchandise, fixtures
or other personal property, or to Tenant’s business by reason thereof) and upon
completion thereof, Tenant shall pay to Landlord as Additional Rent Landlord’s
costs for making such repairs, plus interest at ten percent (10%) per annum upon
demand therefor. Moreover, Tenant’s failure to pay any of the charges in
connection with the performance of its maintenance and repair obligations under
this Lease will constitute a material default under the Lease.

11.6 Action by Tenant if Landlord Fails to Perform. Notwithstanding anything to
the contrary contained in this Lease, if Tenant provides written notice to
Landlord of an event or circumstance which requires the action of Landlord with
respect to repair and/or maintenance of the Premises which Landlord is required
to provide pursuant to this Lease, and Landlord fails to commence such action
within five (5) business days following the delivery of two (2) successive
written notices from Tenant and thereafter diligently prosecute the same to
completion (except in the event of an emergency with an imminent threat to the
health or safety of Tenant’s employees, or an imminent threat of substantial
damage to Tenant’s property, then within two (2) business days), then, Tenant
shall have the right to perform the required action of Landlord, and Landlord
shall reimburse Tenant for the costs thereof within thirty (30) days after
presentation of a reasonably detailed invoice demonstrating the expenses
incurred by Tenant. If Landlord fails to

 

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reimburse Tenant within such thirty (30) day period, then Tenant shall be
entitled to deduct from rent the costs incurred by Tenant in connection with the
repair work performed by Tenant pursuant to this Section 11.6. Notwithstanding
anything to the contrary contained herein, in the event Tenant takes any repair
action pursuant to this Section 11.6, and such work will affect the structural
integrity or exterior appearance of the Building, or materially affects the
Building systems, Tenant shall use only those contractors designated by Landlord
for such work (provided Landlord has notified Tenant of such contractors and
such contractors are available).

ARTICLE 12

TAXES

12.1 Personal Property Taxes. Tenant shall pay, as Additional Rent, prior to
delinquency all taxes, assessments, license fees, and other public charges
levied, assessed or imposed or which become payable during the term of this
Lease upon any trade fixtures, furnishings, equipment and all other personal
property of Tenant installed or located in the Premises. Whenever possible,
Tenant shall cause said trade fixtures, furnishings, equipment and personal
property to be separately assessed. If, however, any or all of said items shall
be assessed and taxed with the real property, Tenant shall pay to Landlord such
taxes as are attributable to Tenant’s trade fixtures, furnishings, equipment and
personal property within fifteen (15) days after receipt of an invoice from
Landlord advising Tenant of the taxes applicable to Tenant’s property.

12.2 Real Property Taxes. Tenant shall also pay in the manner set forth in
Section 13.3 any and all real estate taxes, as defined in Section 12.3, assessed
or imposed, or which become a lien upon or become chargeable against or payable
in connection with the Premises, including Tenant’s equitable proportion of such
charges which are attributable to common areas. In the event that the Premises
and common areas are not separately assessed, Tenant shall pay an equitable
proportion of the real estate taxes and assessments for all the land and
improvements included within the tax parcel(s) assessed, such proportion shall
be determined by Landlord from the respective valuations assigned in the
Assessor’s worksheets and such other information as is reasonably available to
Landlord, including Tenant’s proportionate share of square feet in the Building
and any special improvements constructed for the benefit of Tenant. Real estate
taxes for the last year of the term of this Lease shall be prorated between
Landlord and Tenant as of the expiration date of the term. With respect to any
assessments which may be levied against or upon the Premises, or which under the
laws then in force may be evidenced by improvement or other bonds and may be
paid in annual installments, only the amount of such annual installment, with
appropriate proration for any partial year, and interest thereon, shall be
included within a computation of taxes and assessments levied against the
Premises.

12.3 Definition of Taxes. For purposes of this Lease, “taxes” shall also include
each of the following:

12.3.1 Any form of assessment, license fee, license tax, bond or improvement
bond, business license tax, commercial rental tax, levy, charge, penalty, or
tax, imposed by any authority having the direct power to tax, including any
city, county, state or federal government,

 

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or any school, agricultural, lighting, drainage or other improvement or special
district thereof, as against any legal or equitable interest of Landlord in the
Premises or the real property of which the Premises constitute a part;

12.3.2 Any tax on Landlord’s right to rent or other income from the Premises or
as against Landlord’s business of leasing the Premises;

12.3.3 Any assessment, tax, fee, levy or charge in substitution, partially or
totally, of any assessment, tax, fee, levy or charge previously included with
the definition of real property tax, it being acknowledged by Tenant and
Landlord that Proposition 13 was adopted by the voters of the State of
California in the June 1978 election and that assessments, taxes, fees, levies
and charges may be imposed by governmental agencies for such services as fire
protection, street, sidewalk and road maintenance, refuse removal and for other
governmental services formerly provided without charge to property owners or
occupants. It is the intention of Tenant and Landlord that all such new and
increased assessments, taxes, fees, levies and charges and all similar
assessments, taxes, fees, levies and charges be included within the definition
of real property tax for purposes of this Lease;

12.3.4 Any tax allocable to or measured by the area of the Premises or the
rental payable hereunder, including without limitation, any gross income tax or
excise tax levied by the State, any political subdivision thereof, city, or
federal government, with respect to the receipt of such rental, or upon or with
respect to the possession, leasing, operating, management, maintenance,
alteration, repair, use of occupancy by Tenant of the Premises, or any portion
thereof;

12.3.5 Any tax upon this transaction or any document to which Tenant is a party,
creating or transferring an interest or an estate in the Premises; and

12.3.6 “Real estate taxes” shall not include Landlord’s federal or state income,
franchise, inheritance or estate taxes.

ARTICLE 13

COMMON AREAS

13.1 Common Area. Common areas shall include all areas within the Premises
outside the exterior boundaries of the buildings situated thereon, including,
but not limited to, streets, driveways, parking areas, truckways, delivery
passages, loading doors, sidewalks, ramps, open and closed courts and malls,
landscaped and planted areas, exterior stairways, bus stops, retaining and
decorative walls and planters, and other areas provided by Landlord for the
common use of Landlord and Tenants, their employees and invitees.
Notwithstanding the foregoing, Tenant shall be entitled to 77 onsite,
non-reserved parking spaces available to Tenant at no additional rental charge.

13.2 Maintenance. Landlord shall maintain said common areas in a neat, clean and
orderly condition, properly lighted and landscaped as Landlord, in its
reasonable discretion, shall reasonably determine. Tenant shall pay to Landlord
in the manner set forth in Section 13.3

 

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Tenant’s pro rata share of expenses in connection with the maintenance of common
areas. Tenant’s pro rata share of expenses in connection with the maintenance of
common areas shall be that proportion which the gross floor area of the Premises
bears to the gross floor area in the Building plus any additional costs arising
from special requirements uniquely created by Tenant’s use of the Premises (and
with respect to which Landlord has provided Tenant with prior written notice).
It is understood and agreed that the phrase “expenses in connection with the
maintenance of common areas” shall include, but shall not be limited to, all
sums expended in connection with said common areas for all general maintenance,
repairs, pest control, resurfacing, painting, restriping, cleaning, sweeping and
trash removal; maintenance and repair of sidewalks, curbs and Building signs;
sprinkler systems, planting and landscaping; lighting, water, music and other
utilities; directional signs and other markers and bumpers; maintenance and
repair of any fire protection systems, automatic sprinkler systems, lighting
systems, storm drainage systems and any other utility systems; personnel to
implement such service and to police the common areas; police and fire
protection services; depreciation and maintenance on operating machinery and
equipment (if owned) and rental paid for such machinery and equipment (if
rented); rental for electric and service rooms based upon the average rate in
the Building; any surcharges or any other costs levied or assessed by local,
state or federal government agencies in connection with the use of the parking
facilities (specifically excluding any parking charges levied by Landlord) and,
property management costs. Such costs and expenses shall not include any
allowance for depreciation of common area improvements. Landlord may cause any
or all of said service to be provided by an independent contractor or
contractors. The property management costs, as set forth in this Section, shall
not exceed amounts which are usual and customary for such services in the County
of San Diego.

13.3 Tenant’s Costs. Within sixty (60) days of the Commencement Date, Landlord
shall give Tenant a written estimate of Tenant’s share of the cost of utilities,
if not separately metered, insurance provided by Landlord, roof and structural
repairs, taxes, and expenses in connection with maintenance of common areas.
Tenant shall pay such estimated amount to Landlord in equal monthly
installments, in advance. Within ninety (90) days after the end of each calendar
year, Landlord shall furnish to Tenant a statement showing in reasonable detail
the costs incurred by Landlord for the operation and maintenance of the Premises
during such year (a “Reconciliation Statement”), and Tenant shall pay to
Landlord Tenant’s proportionate share of the cost incurred in excess of the
payments made by Tenant within ten (10) days of receipt of such Reconciliation
Statement. In the event that the payments made by Tenant for the operation and
maintenance of the Premises exceed Tenant’s share of the cost of same, such
amount shall be credited by Landlord to the rent or other charges next due and
owing, provided that, if the Lease term has expired, Landlord shall accompany
said Reconciliation Statement with the amount due Tenant. Tenant shall have the
right to audit any Reconciliation Statement.

13.4 Tenant’s Rights. Tenant shall have for its use and benefit the
non-exclusive right in common with Landlord and future owners, other Tenants,
and their agents, employees, customers, licensees and subtenants to use said
common areas from time to time existing during the entire term of this Lease, or
any extension thereof, for ingress and egress, roadway, automobile parking and
sidewalks. Tenant’s use of common areas shall be subject to and in accordance
with such Rules and Regulations as may be reasonably adopted by Landlord in
accordance with Section 5.4.

 

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ARTICLE 14

SIGNS AND ADVERTISING

14.1 Signs. Landlord and Tenant shall mutually agree upon the location on the
Premises for one (1) or more exterior Tenant identification sign(s). Tenant
shall have no right to maintain Tenant identification sign(s) in any of the
locations in, on or about the Premises and shall not display or erect any other
signs, displays, or other advertising materials that are visible from the
exterior of the building. The size, design, and other physical aspects of the
permitted sign(s) shall be subject to the Landlord’s written approval prior to
installation, which approval will not unreasonably be withheld, any covenants,
conditions, or restrictions encumbering the Premises (including but not limited
to the Carlsbad Research Center Design Guidelines), any applicable municipal or
other governmental permits and approvals. The cost of the sign(s), including the
installation, maintenance and removal thereof shall be at Tenant’s sole cost and
expense. If Tenant fails to maintain its sign(s), or if Tenant fails to remove
such sign(s) upon termination of the Lease, and repair any damage caused by such
removal (including without limitation, painting the building, if reasonably
required by Landlord) Landlord may do so at Tenant’s expense. Tenant shall
reimburse Landlord for all reasonable, out-of-pocket costs incurred by Landlord
to effect such removal, which amounts shall be deemed Additional Rent and shall
include without limitation, all sums disbursed, incurred or deposited by
Landlord, including Landlord’s costs, expenses and actual attorneys’ fees with
interest thereon.

ARTICLE 15

ENTRY BY LANDLORD

15.1 Entry by Landlord. Tenant shall permit Landlord and Landlord’s agents and
contractors to enter the Premises at all reasonable times, upon giving Tenant at
least one (1) business day prior notice, except in the event of an emergency in
which case the one (1) business day notice is not required; (i) for the purpose
of inspecting the same, (ii) for the purpose of maintenance, repairs,
alterations, or additions to any portion of the Building, including the erection
and maintenance of such scaffolding, canopies, fences, and props as may be
required, or (iii) for the purpose of posting notices of non-responsibility for
alterations, additions, or repairs.

15.2 Entry to Relet Premises. Landlord may, during reasonable business hours and
upon reasonable prior notice within sixty (60) days prior to the expiration of
this Lease, enter the Premises for the purpose of allowing prospective tenants
to view the Premises.

15.3 No Liability. Landlord shall be permitted to enter the Premises for any of
the purposes stated herein without any liability to Tenant for any loss of
occupation of quiet enjoyment of the Premises resulting therefrom.

 

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ARTICLE 16

ASSIGNMENT AND SUBLETTING

16.1 Assignment and Subletting. Tenant shall not either voluntarily or by
operation of law, assign, sell, encumber, pledge or otherwise transfer all or
any part of Tenant’s leasehold estate hereunder, or permit the Premises to be
occupied by anyone other than Tenant or Tenant’s employees, or sublet the
Premises or any portion thereof, without Landlord’s prior written consent in
each instance, which consent shall not be unreasonably withheld or delayed. Any
purported assignment or subletting contrary to these provisions shall be void.
Landlord’s consent shall be based upon a determination that the same type,
class, nature and quality of business, service, management, and financial
soundness of ownership shall exist after such assignment or subletting and,
provided further, that each and every covenant, condition or obligation imposed
upon Tenant by this Lease is assumed by such assignee or subtenant and each and
every right, remedy or benefit afforded Landlord by this Lease is not thereby
impaired or diminished. Consent by Landlord to one or more assignments of this
Lease or to one or more sublettings of the Premises shall not operate to exhaust
Landlord’s rights under this Section. For purposes of this Lease the transfer,
assignment, or hypothecation of any stock or interest in Tenant in the aggregate
in excess of twenty-five (25%), or liquidation thereof, shall be deemed an
assignment.

16.2 Notice to Landlord. If Tenant desires at any time to assign this Lease or
to sublet the Premises or any portion thereof, it shall first notify Landlord of
its desire to do so and shall submit in writing to Landlord (i) the name of the
proposed Subtenant or assignee; (ii) the nature of the proposed Subtenant’s or
assignee’s business to be carried on in the Premises; (iii) the terms and
provisions of the proposed sublease or assignment; and (iv) such reasonable
financial information as Landlord may request concerning the proposed Subtenant
or assignee. Tenant agrees to reimburse Landlord for Landlord’s actual costs and
attorneys’ fees (not to exceed $2,500) incurred in conjunction with the
processing and documentation of any such requested assignment, subletting,
transfer, change or ownership or hypothecation of this Lease.

16.3 Excess Rent. If in connection with any assignment or sublease, Tenant
receives rent or other consideration either initially or over the term of the
sublease or assignment in excess of (i) the Monthly Rent called for hereunder,
plus (ii) Tenant’s direct out-of-pocket costs which Tenant certifies to Landlord
to have been incurred in connection with any sublease or assignment or otherwise
in connection with providing occupancy related services to any such subtenant or
assignee of a nature commonly provided by Landlords of similar space, then
promptly following its receipt thereof, Tenant shall pay to Landlord, as
Additional Rent hereunder, fifty percent (50%) of such excess as and when
received.

16.4 Notwithstanding anything contained in this Lease to the contrary, Tenant
may assign this Lease or sublet all or a portion of the Premises to any entity
controlling Tenant, controlled by Tenant or under common control with Tenant,
any entity with which Tenant has merged or consolidated, or any entity which
acquires or succeeds to all or substantially all of the assets or business of
Tenant (each, a “Tenant Affiliate”), without the prior written consent of
Landlord; provided, however, Tenant shall not be released from liability
hereunder on account of any such assignment or sublease and Tenant shall provide
Landlord with notice of such assignment or sublease within a reasonable period
of time following its effective date.

 

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16.5 No Release of Liability. No subletting, even with the consent of Landlord,
shall relieve Tenant of its obligation to pay the rent and perform all the other
obligations to be performed by Tenant hereunder. The acceptance of rent by
Landlord from any other person shall not be deemed to be a waiver by Landlord of
any provision of this Lease or to be a consent to any assignment or subletting.

ARTICLE 17

ABANDONMENT

17.1 No Abandonment. Tenant shall not abandon the Premises at any time during
the term of this Lease. If Tenant shall abandon or surrender the Premises, or be
disposed by process of law, or otherwise, Landlord may terminate this Lease,
retake possession of the Premises, pursue its remedies provided herein, and any
personal property or trade fixtures belonging to Tenant and left on the Premises
shall, at the option of Landlord, be deemed abandoned. In such case, Landlord
may dispose of said personal property in any manner and is hereby relieved of
all liability for doing so.

ARTICLE 18

BREACH BY TENANT

18.1 Events of Default. The occurrence of any of the following shall constitute
a breach and material default of this Lease by Tenant:

18.1.1 The failure of Tenant to pay or cause to be paid when due any Base
Monthly Rental, Additional Rent, monies, or charges required by this Lease to be
paid by Tenant when such failure continues for a period of five (5) business
days after written notice thereof from Landlord to Tenant;

18.1.2 The abandonment of the Premises by Tenant;

18.1.3 The failure of Tenant to perform any term, covenant or condition, other
than payment of rent, monies or charges, required by this Lease and Tenant shall
have failed to cure such failure within thirty (30) days after written notice
from Landlord; provided, however, that where such failure cannot reasonably be
cured within the thirty (30) day period, the Tenant shall not be in default if
it has commenced such cure within the same thirty (30) day period and diligently
thereafter prosecutes the same to completion which in all events must occur
within ninety (90) days thereafter;

 

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18.1.4 To the extent permitted by applicable law, any act of bankruptcy cause,
suffered or permitted by Tenant. For purposes of this Lease, “act of bankruptcy”
shall include any of the following:

18.1.4.1. Any general assignment or general arrangement for the benefit of
creditors;

18.1.4.2. The filing of any petition by or against Tenant to have Tenant
adjudged a bankrupt or a petition for reorganization or arrangement under any
law relating to bankruptcy, unless such petition is filed against Tenant and
same is dismissed within sixty (60) days;

18.1.4.3. The appointment of a trustee or receiver to take possession of
substantially all of Tenant’s assets located in the Premises or of Tenant’s
interest in this Lease; or,

18.1.4.4. The attachment, execution or other judicial seizure of substantially
all of Tenant’s assets located at the Premises or of Tenant’s interest in this
Lease.

18.2 Five-Day Notice. In the event that Landlord issues a five (5) business day
notice, notice of abandonment or comparable document by reason of Tenant’s
breach, and Tenant cures such default, Tenant agrees to pay to Landlord, the
reasonable cost of preparation and delivery of same.

18.3 No Waiver. The acceptance by Landlord of rent due hereunder after breach by
Tenant will not constitute a waiver of such breach, unless a writing to that
effect has been delivered to Tenant.

ARTICLE 19

REMEDIES UPON BREACH

19.1 Landlord’s Remedies. In the event of any breach by Tenant, in addition to
other rights or remedies of Landlord at law or in equity, Landlord shall have
the following remedies:

19.1.1 Landlord may recover from Tenant the Rent, including without limitation
Additional Rent, as it becomes due and any other amount necessary to compensate
Landlord for all detriment proximately caused by Tenant’s failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom. Landlord may sue monthly, annually or after such
equal or unequal periods as Landlord desires for amounts due under this
Section 19.1.1. The right to collect rent as it becomes due shall terminate upon
the termination by Landlord of Tenant’s right to possession. Tenant’s right to
possession shall not be terminated unless and until Landlord delivers to Tenant
written notice thereof; and

19.1.2 Landlord, either as an alternative or subsequent to exercising the
remedies set forth in Section 19.1.1, may terminate Tenant’s right to possession
of the Premises by and upon delivery to Tenant of written notice of termination.
Landlord may then immediately reenter the Premises and take possession thereof
pursuant to legal proceedings and remove all persons and property from the
Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant. No notice of termination
shall be necessary in the event that Tenant has abandoned the Premises. In the
event that Landlord elects to terminate Tenant’s right of possession, Landlord
may recover the following:

 

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19.1.2.1. The worth at the time of the award of the unpaid rent which had been
earned at the time of termination. “Worth at the time of award” shall be
computed by allowing interest at ten percent (10%) per annum from the first day
the breach occurs;

19.1.2.2. The worth at the time of award of the amount by which the unpaid rent
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that the Tenant proves could have been reasonably
avoided. “Worth at the time of award” shall be determined by allowing interest
at the rate of ten percent (10%) per annum from the first day a breach occurs;

19.1.2.3. The worth at the time of award of the amount by which the unpaid rent
for the balance of the term after the time of award exceeds the amount of such
rental loss that the Tenant proves could be reasonably avoided. “Worth at the
time of award” shall be computed by discounting such amount at the discount rate
at the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%); and

19.1.2.4. Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant’s failure to perform its obligations
under the Lease or which in the ordinary course of things would be likely to
result therefrom including, but not limited to, commissions and expenses of
reletting, attorneys’ fees, costs of alterations and repairs, recording fees,
filing fees and any other expenses customarily resulting from obtaining
possession of leased premises and re-leasing.

19.2 Forfeiture. It is understood that all covenants made by Tenant herein are
conditions of this Lease; therefore, in the event of any default by Tenant in
fulfilling any of the same, Landlord may at any time thereafter at its option
declare a forfeiture of this Lease, and any holding over thereafter shall be
construed to be a tenancy from month-to-month only, for the same rental and the
same conditions, except as to term, as set forth in this Lease.

ARTICLE 20

DAMAGE OR DESTRUCTION

20.1 Landlord’s Obligation to Rebuild. If the Premises are damaged or destroyed,
Landlord shall promptly and diligently repair the Premises unless it has the
right to terminate this Lease as provided in Section 20.2 below and it elects to
so terminate.

20.2 Landlord’s Right to Terminate. Landlord shall have the right to terminate
this Lease following damage to or destruction of the Premises if any of the
following occurs: (i) insurance proceeds together with additional amounts Tenant
agrees to contribute are not available to Landlord to pay one hundred percent
(100%) of the cost to fully repair the damaged Premises, excluding the
deductible for which Landlord shall be responsible; (ii) the Premises cannot,
with reasonable diligence, be substantially repaired by Landlord within two
hundred seventy (270) days after the date of the damage or destruction;
(iii) the Premises cannot be safely

 

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repaired because of the presence of hazardous factors, including, but not
limited to, earthquake faults, radiation, chemical waste and other similar
dangers; or (iv) the Premises are destroyed or damaged during the last twelve
(12) months of the Term. In addition, Tenant shall have the right to terminate
this Lease following damage to or destruction of the Premises if any of the
following occurs: (A) the Premises cannot be or are not, with reasonable
diligence, substantially repaired by Landlord within two hundred seventy
(270) days after the date of the damage or destruction or (B) the Premises are
destroyed or damaged during the last twelve (12) months of the Term. Landlord
shall provide Tenant with a good faith written estimate prepared by Landlord’s
contractor of the period of time required for restoration within 30 days
following the date of the casualty.

If Landlord elects to terminate this Lease, Landlord may give Tenant written
notice of its election to terminate within thirty (30) days after it has
knowledge of such damage or destruction, and this Lease shall terminate fifteen
(15) days after the date Tenant receives such notice. If this Lease is
terminated, Landlord shall, subject to the rights of its lender(s), be entitled
to receive and retain all the insurance proceeds resulting from such damage,
except for those proceeds payable under policies obtained by Tenant. If Landlord
elects not to terminate the Lease, Landlord shall, promptly following the date
of such damage or destruction and receipt of any amounts provided by Tenant
pursuant to Section 20.2(i) above, commence the process of obtaining necessary
permits and approvals, and shall commence repair of the Premises as soon as
practicable and thereafter prosecute the same diligently to completion, in which
event this Lease will continue in full force and effect.

20.3 Limited Obligation to Repair. Landlord’s obligation, should it elect or be
obligated to repair or rebuild, shall be limited to the Premises and Tenant
Improvements and Tenant shall, at its expense, replace or fully repair all
Tenant’s personal property and any alterations installed by Tenant existing at
the time of such damage or destruction (except to the extent Landlord’s
insurance proceeds cover said alterations). If the Premises are to be repaired
in accordance with the foregoing, Landlord shall make available to Tenant any
portion of insurance proceeds it receives which are allocable to the alterations
constructed by Tenant pursuant to this Lease provided Tenant is not then in
default, after the expiration of all applicable notice and cure periods.

20.4 Abatement of Rent. Rent shall be temporarily abated proportionately, based
upon the extent to which Tenant’s business operations have been impaired due to
such damage or destruction, as reasonably determined by Tenant. Such abatement
shall commence upon such damage or destruction and end upon substantial
completion by Landlord of the repair or reconstruction which Landlord is
obligated or undertakes to do and the delivery of the Premises to Tenant. Tenant
shall not be entitled to any compensation or damages from Landlord for loss of
the use of the Premises, damage to Tenant’s personal property or any
inconvenience occasioned by such damage, repair or restoration. Tenant hereby
waives the provisions of Section 1932(2) and Section 1933(4) of the California
Civil Code, and the provisions of any similar law hereinafter enacted.

 

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ARTICLE 21

CONDEMNATION

21.1 Total Taking—Termination. If title to all of the Premises or so much
thereof is taken for any public or quasi-public use under any statue or by right
of eminent domain so that reconstruction of the Premises will not result in the
Premises being reasonably suitable for Tenant’s continued occupancy for the uses
and purposes permitted by this Lease, this Lease shall terminate as of the date
possession of the Premises or part thereof be taken.

21.2 Partial Taking. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold by Landlord under the threat of the exercise of
such power, this Lease shall terminate as to the part so taken as of the date
that the condemning authority takes possession of the Premises. If more than
twenty-five percent (25%) of the Premises is taken or sold under such threat,
either Landlord or Tenant may terminate this Lease as of the date that the
condemning authority takes possession by delivery of written notice of such
election within twenty (20) days after such party has been notified of the
taking or, in the absence thereof, within twenty (20) days after the condemning
authority shall have taken possession. Each party hereby waives the provisions
of Section 1265.130 of the California Code Civil Procedure allowing either party
to petition the Superior Court to termination in the event of a partial taking
of the Building or Premises.

21.3 No Apportionment of Award. No award for any partial or entire taking shall
be apportioned, it being agreed and understood that Landlord shall be entitled
to the entire award for any partial or entire taking. Tenant assigns to Landlord
its interest in any award which may be made in such taking or condemnation,
together with any and all rights of Tenant arising in or to the same or any part
thereof. Nothing contained herein shall be deemed to give Landlord any interest
in or require Tenant to assign to Landlord any separate award made to Tenant for
the taking of Tenant’s personal property, for the interruption of Tenant’s
business, for any leasehold value, or its moving costs, or for the loss of its
goodwill.

21.4 Temporary Taking. No temporary taking of the Premises shall terminate this
Lease or give Tenant any right to any abatement of Rent. Any award made to
Tenant be reason of such temporary taking shall belong entirely to Tenant and
Landlord shall not be entitled to share therein. Each party agrees to execute
and deliver to the other all instruments that may be required to effectuate the
provisions of this Section.

21.5 Sale Under Threat of Condemnation. A sale made in good faith by Landlord to
any authority having the power of eminent domain, either under threat of
condemnation or while condemnation proceedings are pending, shall be deemed a
taking under the power of eminent domain for all purposes of this Section.

 

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ARTICLE 22

SURRENDER OF LEASE

22.1 Surrender of Lease. The voluntary or other surrender of its interest in
this Lease by Tenant or a mutual cancellation of this Lease shall not work a
merger, and shall, at the election of Landlord, either terminate all or any
existing subleases or subtenancies or operate as an assignment to Landlord of
any or all of such subleases or subtenancies. Landlord shall exercise its
election within thirty (30) days of any such surrender or cancellation.

ARTICLE 23

ATTORNEYS’ FEES

23.1 Attorneys’ Fees. If either party institutes or is made a party to any
action or proceeding to enforce or interpret this Lease, the prevailing party in
such action or proceeding shall be entitled to recover all costs and attorneys’
fees incurred in connection with such action or proceeding, or any appeal or
enforcement of such action or proceeding.

ARTICLE 24

SALE OF THE PREMISES BY LANDLORD

24.1 Sale of Premises. Notwithstanding any provisions of this Lease to the
contrary, Landlord may assign, in whole or in part, Landlord’s interest in this
Lease and may sell all or part of the real estate of which the Premises are a
part. In the event of any sale or exchange of the Premises by Landlord and
assignment by Landlord of this Lease, without the need for the execution of any
additional documents, provided the transferee assumes all of Landlord’s
obligations under this Lease, Landlord shall be and is hereby entirely freed and
relieved of all liability under any and all covenants and obligations contained
in or derived from this Lease or arising out of any act, occurrence or omission
relating to the Premises which occurs after the consummation of such sale,
exchange, or assignment.

ARTICLE 25

QUIET ENJOYMENT

25.1 Quiet Enjoyment. If Tenant is not in breach under the covenants made in
this Lease, Landlord covenants that Tenant shall have peaceful and quiet
enjoyment of the Premises without hindrance on the part of Landlord. Landlord
will defend Tenant in the peaceful and quiet enjoyment of the Premises against
claims of all persons claiming through or under Landlord.

 

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ARTICLE 26

ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

26.1 Tenant Estoppel Certificate. Tenant shall at any time during the term of
this Lease, within fifteen (15) days of written notice from Landlord, execute
and deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect or, if modified, stating the nature of
such modification. Tenant’s statement shall include other reasonable details
requested by Landlord, such as the date to which rent and other charges are
paid, Tenant’s knowledge concerning any uncured defaults with respect to
Landlord’s obligations under this Lease and the nature of such defaults if they
are claimed, and such other matters as Landlord may reasonably request. Any such
statement may be relied upon conclusively by any purchaser or lender having an
interest in the Premises. Tenant’s failure to deliver such statements within
such time shall be conclusive upon the Tenant that this Lease is in full force
and effect, except as and to the extent any modification has been represented by
Landlord, and that there are no uncured defaults in Landlord’s performance, and
that not more than one (1) month’s rent has been paid in advance. In addition,
within fifteen (15) days after written request from Tenant, Landlord shall
deliver to Tenant an estoppel certificate stating that (a) this Lease is in full
force and effect and has not be modified, supplemented or amended in any way (or
specifying the date of the agreement so affecting this Lease); (b) to Landlord’s
actual knowledge, Tenant is not in breach of this Lease (or, if so, a
description of each such breach); (c) this Lease represents the entire agreement
between the parties with respect to the Premises; (d) the date to which rent has
been paid, (e) the unexpired term of this Lease, and (f) it is intended that any
Landlord’s statement may be relied upon by a prospective purchaser or lender of
or investor in Tenant.

26.2 Tenant Financial Statements. Should Tenant no longer be a publically held
company with publically filed financial statements, then within ten (10) days
after written request from Landlord, Tenant shall deliver to Landlord such
financial statements as Landlord reasonably requires (but not more often than
once per calendar year) verifying the financial condition of Tenant or any
guarantor of Tenant. In addition, Tenant shall deliver to any lender designated
by Landlord any financial statements required by such lender to facilitate the
financing or refinancing of the Premises. Tenant represents and warrants to
Landlord that each such financial statement is a true and accurate statement in
all material respects as of the date of such statements. All financial
statements shall be confidential and shall be used only for the purposes set
forth in this Lease.

ARTICLE 27

SUBORDINATION AND ATTORNMENT

27.1 Subordination of Lease. This Lease and Tenant’s rights under this Lease are
subject and subordinate to any Mortgage, ground lease, and to all renewals,
modifications, consolidations, replacements, or extensions thereof, now or
hereafter affecting the Premises, provided Tenant obtains reasonable
non-disturbance protection from any lender or ground lessor. The provisions of
this Section shall be self-operative, and no further instrument of subordination

 

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shall be required. In confirmation of such subordination, however, Tenant shall
promptly execute and deliver any instruments that Landlord, the holder of any
Mortgage, or the Landlord of any ground lease may request to evidence such
subordination. If Tenant fails to execute and deliver any such instruments,
Tenant irrevocably constitutes and appoints Landlord as Tenant’s special
attorney-in-fact to execute and deliver such instruments. Landlord shall deliver
to Tenant within sixty (60) days following the mutual execution and delivery of
this Lease, a commercially reasonable subordination, non-disturbance and
attornment agreement from any existing lender or ground lessor of Landlord.

27.2 Attornment to Lender. If the holder of any Mortgage, or the Landlord of any
ground lease affecting the Premises, shall hereafter succeed, by foreclosure or
otherwise, to the rights of Landlord under this Lease, Tenant shall attorn to
and recognize such successor as Tenant’s Landlord under this Lease, and shall
promptly execute and deliver any instruments that may be necessary to evidence
such attornment, and Tenant hereby irrevocably appoints Landlord as Tenant’s
special attorney-in-fact to execute and deliver such instruments on behalf of
Tenant should Tenant refuse or fail to do so. Upon such attornment, this Lease
shall continue in effect as a direct lease between such successor Landlord and
Tenant upon and subject to all of the provisions of this Lease.

ARTICLE 28

HOLDING OVER

28.1 Holding Over. If Tenant should remain in possession of the Premises after
the expiration of the term of this Lease without executing a new lease or after
Landlord has declared a forfeiture by reason of a default by Tenant, the such
holding over shall be construed as a tenancy from month-to-month, subject to all
the conditions, provisions and obligations of this Lease insofar as they are
applicable to a month-to-month tenancy.

ARTICLE 29

MORTGAGEE PROTECTION

29.1 Mortgagee Protection. In the event of any default on the part of Landlord,
Tenant agrees to give notice by registered or certified mail to any beneficiary
of a deed of trust or mortgage covering the Premises whose address shall have
been furnished to the Tenant and shall offer such beneficiary or mortgagee a
reasonable opportunity to cure such default (but not beyond the time afforded to
Landlord to cure the same).

 

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ARTICLE 30

LIABILITY OF SUCCESSORS

30.1 Successors Liability. The covenants and conditions herein contained shall,
subject to the provisions as to assignment, apply to and bind the heir,
successors, executors, administrators, and permitted assigns of all the parties
hereto and all of the parties hereto shall be jointly and severally liable for
the covenants contained herein.

ARTICLE 31

EASEMENTS

31.1 Easements. Landlord reserves the right, from time to time, to grant such
easements, rights and dedications that Landlord deems necessary or desirable,
and to cause the recordation of parcel maps and restrictions, so long as such
easements, rights, dedications, maps and restrictions do not unreasonably
interfere with the use of the Premises by Tenant. Tenant shall sign any
documents or instruments to accomplish the foregoing upon request of Landlord
(at no cost or expense or liability to Tenant), and failure to do so shall
constitute a material breach of this Lease. Tenant irrevocably appoints Landlord
as Tenant’s special attorney-in-fact to execute and deliver such documents or
instructions on behalf of Tenant should Tenant refuse or fail to do so.

ARTICLE 32

COVENANTS, CONDITIONS AND RESTRICTIONS

32.1 Compliance with Covenants, Conditions and Restrictions. In addition to
requirements imposed by law, the care of the Premises and conduct of business
thereupon, among other things, are restricted or subject to heightened
requirements pursuant to one or more recorded Covenant, Conditions and
Restrictions (“CC&R’s”). The terms of all applicable CC&R’s, in their entirety,
are incorporated herein by this reference. Tenant has received a copy of all
applicable CC&R’s prior to its execution of this Lease, and such receipt is
acknowledged hereby.

32.2 Associations. Tenant shall faithfully observe and comply with the
provisions of all applicable CC&R’s, and all modifications and additions which
may from time to time be enacted pursuant to their terms (and, with respect to
any such modifications, at no additional cost, expense or liability to Tenant).
Tenant shall similarly observe and comply with all requests, demand and orders
otherwise made by any governing associations created under the authority of the
CC&R’s (the “Associations”). Any violation of the CC&R’s or orders of the
Associations created thereby shall be a default under this Lease. However,
Landlord will not be responsible to Tenant for the nonperformance of any
provisions of such CC&R’s by its tenants occupying neighboring properties, if
any.

 

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32.3 Association Fees. All payments, charge, dues, and assessments imposed under
the authority of the CC&R’s and the Associations (“Association Fees”) shall be
paid by Landlord and included as part of the common area operating expenses paid
by Tenant pursuant to Article 13.

ARTICLE 33

QUITCLAIM DEED

33.1 Quitclaim Deed. Tenant shall execute and deliver to Landlord on the
expiration date or earlier termination of this Lease, promptly on Landlord’s
request, a quitclaim deed to the Premises, in recordable form, designating
Landlord as transferee.

ARTICLE 34

HAZARDOUS MATERIALS

34.1 Definitions:

34.1.1 Hazardous Materials Laws. “Hazardous Materials Laws” means any and all
federal, state or local laws, ordinances, rules, decrees, orders, regulations or
court decisions relating to hazardous substances, hazardous materials, hazardous
waste, toxic substances, environmental conditions on, under or about the
Premises, or soil and ground water conditions, including, but not limited to,
California Labor Code Section 6382, California Health and Safety Code
Section 25249.5, et seq., any amendments to and any regulations promulgated
pursuant to the foregoing, and any similar federal, state or local laws,
ordinances, rules, decrees, orders or regulations.

34.1.2 Hazardous Materials. “Hazardous Materials” means any chemical, compound,
substance or other material, including, without limitation, gasoline, diesel,
aviation fuels, lubricating oils, solvents and chemicals, that: (i) is defined
as a hazardous substance, hazardous material, hazardous waste or toxic substance
under any Hazardous Material Law; (ii) is controlled or governed by any
Hazardous Materials Law, or gives rise to any reporting, notice or publication
requirements thereunder, or gives rise to any liability, responsibility or duty
on the part of Tenant or County with respect to any third person thereunder; or
(iii) is a flammable or explosive material, asbestos, radioactive material,
nuclear medicine material, drug, vaccine, bacterial, virus, hazardous waste,
toxic substance, or related injurious or potentially injurious material (by
itself or in combination with other materials).

34.2 Tenant’s Obligations

34.2.1 Compliance with Laws. Tenant shall strictly comply with, and shall
maintain the Premises in compliance with, all Hazardous Materials Laws. Tenant
shall obtain and maintain in full force and affect all permits, licenses and
other governmental approvals required for Tenant’s operations on the Premises
under any Hazardous Materials Laws and shall comply with all terms and
conditions thereof. At Landlord’s request, Tenant shall deliver copies

 

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of, or allow Landlord to inspect, all such permits, licenses and approvals.
Tenant shall perform any monitoring, investigation, clean-up, removal,
detoxification, preparation of closure or other required plans and any other
remedial work (collectively, “Remedial Work”) required as a result of any
release or discharge of Hazardous Materials affecting the Premises or any
violation of Hazardous Materials Laws caused by Tenant or any Subtenant of
Tenant or their respective agents, contractors, employees, licensees or invitees
(but not by Landlord, its agents, contractors, employees, licensees or
invitees). Landlord shall have the right to intervene in any governmental action
or proceeding involving any Remedial Work, and to approve performance of the
work, in order to protect Landlord interests. Tenant shall be solely responsible
for paying all fines, damages and penalties imposed by any governmental agency
resulting from Tenant’s violation of any Hazardous Materials Laws.
Notwithstanding the foregoing, Tenant or its Subtenants shall have the right to
use Hazardous Materials in the ordinary course of business and in compliance
with all Hazardous Materials Laws, under circumstances where no liability under
any Hazardous Materials Laws could reasonably be anticipated.

34.2.2 Compliance with Insurance Requirements. Tenant shall comply with the
requirements of Tenant’s insurers regarding Hazardous Materials and with such
insurers’ recommendations based upon prudent industry practices regarding
management of Hazardous Materials.

34.2.3 Notice; Reporting. Tenant shall notify Landlord in writing immediately
after any of the following: (a) Tenant has knowledge, or has reasonable cause to
believe, that any Hazardous Material has been released or discharged under or
about the Premises, whether or not the Hazardous Material is in quantities that
would otherwise be reportable to a public agency; (b) Tenant receives any order
of a governmental agency requiring any Remedial Work pursuant to any Hazardous
Materials Laws; (c) Tenant receives any warning, notice of inspection, notice of
violation or alleged violation, or Tenant receives notice or knowledge of any
proceeding, investigation of enforcement action, pursuant to any Hazardous
Materials Laws; or (d) Tenant receives notice or knowledge of any claims made or
threatened by any third party against Tenant or the Premises relating to any
loss or injury resulting from Hazardous Materials. Tenant shall deliver to
Landlord copies of all test results, reports and business management plans
required to be filed with any government agency pursuant to any Hazardous
Materials Laws.

34.2.4 Entry and Inspection; Cure. Landlord and its agents, employees and
contractors, shall have the right to enter the Premises at all reasonable times
and upon reasonable prior notice to inspect the Premises and Tenant’s compliance
with the terms and conditions of this Section 34, or to conduct investigations
and tests. No prior notice to Tenant shall be required in the event of any
emergency, or if Landlord has reasonable cause to believe that violations by
Tenant of this Section 34 have occurred, or if Tenant consents at the time of
entry. In all other cases, Landlord shall give at least 24 hours’ prior notice
to Tenant. Landlord shall have the right, but not the obligation, to remedy any
violation by Tenant of the provisions of this Section 34, or to perform any
Remedial Work necessitated as a result of any discharge by Tenant of Hazardous
Materials on the Premises. Tenant shall pay, upon demand, all costs incurred by
Landlord in remedying such violations or performing all Remedial Work
necessitated by the acts or omissions of Tenant and/or its agents or employees,
plus interest thereon at the rate of 10 percent per annum from the date of
demand until the date paid by the Tenant.

 

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34.2.5 Termination/Expiration. Upon termination or expiration of this Lease,
Tenant shall, at Tenant’s cost, remove any equipment, improvements or storage
facilities utilized in connection with any Hazardous Materials and shall clean
up, detoxify, repair and otherwise restore the Premises to a condition free of
Hazardous Materials, to the extent such condition is caused by Tenant or any
Subtenant of Tenant or their respective agents, contractors, employees,
licensees or invitees.

34.2.6 Indemnification. Except to the extent of any liability of Landlord under
Section 34.3 below, Tenant shall indemnify, protect, defend and hold Landlord
(and its employees and agents) harmless from and against any and all claims,
costs, expenses, suits, judgments, actions, investigations, proceedings and
liabilities arising out of or in connection with any breach of any provision of
this Lease directly or indirectly arising out of the use, generation, storage,
release, disposal or transportation of Hazardous Materials by Tenant or any
Subtenant, or their respective agents, contractors, employees, licensees, or
invitees and/or trespassers upon the Premises (but not by Landlord, its agents,
contractors, employees, licensees or invitees), on, under or about the Premises
during the Term, including, but not limited to, all foreseeable and
unforeseeable consequential damages and the cost of any Remedial Work. Neither
the consent by Landlord to the use, generation, storage, release, disposal or
transportation of Hazardous Materials, nor strict compliance with all Hazardous
Materials Laws, shall excuse Tenant from Tenant’s indemnification obligations
pursuant to this Section 34.2.6. The foregoing indemnity shall be in addition to
and not a limitation of the indemnification provisions of Section 9 of this
Lease. Tenant’s obligations pursuant to this Section 34.2.6 shall survive the
termination or expiration of the Lease.

34.2.7 Default. The release or discharge of any Hazardous Material or violation
of any Hazardous Materials Law by Tenant or any Subtenant of Tenant shall be a
material default by Tenant under the Lease. In addition to or in lieu of the
remedies available under the Lease as a result of such default, Landlord shall
have the right, without terminating the Lease, to require Tenant to suspend its
operations and activities on the Premises until Landlord is satisfied that
appropriate Remedial Work has been or is being adequately performed; Landlord’s
election of this remedy shall not constitute a waiver of Landlord’s right
thereafter to declare a default and pursue other remedies set forth in the
Lease.

34.3 Landlord’s Obligations. Except as set forth in the Existing Phase I,
Landlord represents and warrants that to the best of Landlord’s knowledge, as of
the date of this Lease, the Premises and the Building are free of all Hazardous
Materials. Except to the extent of any liability of Tenant under Section 34.2.6
above, Landlord shall indemnify, protect, defend and hold Tenant (and its
employees and agents) harmless from and against any and all claims, costs,
expenses, suits, judgments, actions, investigations, proceedings and liabilities
arising out of or in connection with the presence of any Hazardous Materials
currently existing in, under or about the Premises or released thereon by or on
behalf of Landlord, including, but not limited to, all foreseeable and
unforeseeable consequential damages resulting therefrom. The foregoing indemnity
shall be in addition to and not a limitation of the indemnification provisions
of Section 9 of this Lease. Landlord’s obligations pursuant to this Section 34.3
shall survive the termination or expiration of the Lease.

 

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ARTICLE 35

MISCELLANEOUS

35.1 Gender. Whenever the singular number is used in this Lease, the same shall
include the plural, and the masculine gender shall include the feminine and
neuter genders, and the word “person” shall include corporation, firm, or
association, when required by the context.

35.2 Headings. The headings or title to the paragraphs of this Lease are for
convenience only and do not in any way define, limit or construe the contents of
such paragraphs.

35.3 Integration. This instrument contains all of the agreements and conditions
made between the parties with respect to the hiring of the Premises and may not
be modified orally or in any other manner other than by a written instrument
signed by all the parties to this Lease.

35.4 Choice of Laws. The laws of the State of California as applied to contracts
entered into between citizens of the State of California and to be performed
within the State of California shall govern the validity, performance and
enforcement of this Lease.

35.5 Severability. If any provision of this Lease is determined to be void by
any court of competent jurisdiction, such determination shall not affect any
other provisions of this Lease and such other provisions shall remain in full
force and effect. If any provision of this Lease is capable of two
constructions, one which would render the provision void and one which would
render the provision valid, the provision shall be interpreted in the manner
which would render it valid.

35.6 Amendment for Financing. Upon written request of Landlord, Tenant agrees to
execute any lease amendments not materially altering the terms of this Lease, if
required by a Mortgagee incident to the financing of the real property of which
the Premises constitute a part. Any change affecting the consideration to be
paid by Tenant or modifying the term of this Lease or imposing any additional
costs or liability on Tenant or reducing any of Tenant’s rights shall be deemed
as materially alter the terms hereof.

35.7 Payments. Except as may otherwise be expressly stated, each payment
required to be made by Tenant shall be in addition to and not in substitution
for other payments to be made by Tenant.

35.8 Time of Essence. Time is of the essence in this Lease.

35.9 Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts,
labor disputes, acts of God, inability to obtain labor or materials or
reasonable substitutes thereof, governmental restrictions, regulations, or
controls, enemy or hostile governmental action, civil commotion, fire or other
casualty, and other causes beyond the reasonable control of the party obligated
to perform, shall excuse the performance by such party for a period equal to
that resulting from such prevention, delay or stoppage, except those obligations
of Tenant to make payment for rental and other charges pursuant to the terms of
this Lease.

 

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35.10 Notices. All notices to be given by one party to the other under this
Lease shall be in writing, mailed or delivered to the other party at the
following address:

 

To Landlord:

  

PDG CARLSBAD 47 & 48, LP

1825 Gillespie Way, Suite 102

El Cajon, CA 92020

(619) 258-2900 Fax: (619) 258-2909

  

To Tenant:

  

IRIS INTERNATIONAL, INC.

1891 Rutherford Road, Suite 200

Carlsbad, CA 92008

     

With copy to:

IRIS INTERNATIONAL, INC.

9158 Eton Avenue

Chatsworth, CA 91311

Mailed notices shall be sent by United States Postal Service, certified or
registered mail, postage prepaid and shall be deemed to have been given on the
date of posting in the United States Postal Service.

Either party may, with proper notice, at any time designate a different address
to which notices shall be sent.

35.11 Brokers. Landlord and Tenant each represents that it has had no dealings
with any real estate broker or agent in connection with the negotiation and/or
execution of this Lease except as follows: Roger Carlson of CB Richard Ellis.
Landlord and Tenant shall indemnify and defend each other against all liability,
costs, expenses and charges (including without limitation attorneys’ fees and
disbursements) arising from any claims that may be made against either Landlord
or Tenant by an real estate broker, agent, finder, or other person, alleging to
have acted on behalf of Tenant. Landlord agrees to pay all brokerage
commissions.

35.12 Special Provisions. Landlord and Tenant acknowledge that Articles 36 and
37 are attached hereto and made a part hereof.

 

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day
and year set forth at the beginning hereof.

 

LANDLORD:     TENANT:

PDG CARLSBAD 47 & 48, LP

a California limited partnership

   

IRIS INTERNATIONAL, INC.

a Delaware corporation

By:   Diversified Carlsbad 47 & 48, LLC     By:  

/s/ Cesar Garcia

  General Partner      

Cesar Garcia, Chairman, CEO

and President

By:  

/s/ William P. Tschantz

        William P. Tschantz, Manager      

 

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ARTICLE 36

OPTION TO EXTEND

36.1 Options To Extend. Tenant shall have the option to extend the term of this
Lease for one (1), five (5) year period, subject to the following provisions:

36.1.1 Tenant shall exercise the option by delivery of written notice to
Landlord not more than Three Hundred Sixty (360) days and not less than Two
Hundred Seventy (270) days prior to the expiration of the initial term of this
Lease (the “Exercise Period”). If said notice is not delivered within said time
period(s), this option shall terminate.

36.1.2 This option to extend shall terminate in the event that Tenant is in
default under the terms of this Lease, after all applicable notice and cure
periods, during the period of the Exercise Period.

36.2 Rent. The Base Monthly Rental payable by Tenant for the first year of the
option period shall be based on the Base Monthly Rental being paid for the last
year of the Lease Term, increased by three and one-half (3  1/2) percent and
shall be increased by three and one-half (3  1/2) percent for each of the
following years of the option period.

ARTICLE 37

EARLY TERMINATION RIGHT

37.1 Early Termination Right. Tenant shall have a onetime right to terminate
this Lease at the end of sixtieth (60th) month of the initial term (the “Early
Termination Right”), subject to the following provisions:

37.1.1 Tenant shall exercise the Early Termination Right by delivery of written
notice to Landlord, prior to the end of the Fifty Fourth (54th) month of the
initial term, stating its intent to exercise its right to terminate the Lease
(the “Termination Notice”).

37.1.2 The Termination Notice shall be accompanied by payment to Landlord in the
amount of Two Hundred Seventy Nine Thousand Eight Hundred Twenty One Dollars
($279,821.00) (the “Termination Fee”).

37.1.3 In the event that the Termination Notice and the Termination Fee are not
delivered to Landlord prior to the end of the Fifty Fourth (54th) month of the
initial term then the Early Termination Right shall terminate.

 

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EXHIBIT A

PREMISES AND LEGAL DESCRIPTION

1891 Rutherford Road, Suite 200, Carlsbad, CA 92008.

LOT 48 OF CARLSBAD TRACT NO. 85-24, UNIT NO. 03, IN THE CITY OF CARLSBAD, COUNTY
OF SAND DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF 11810, FILED IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY MAY 19, 1987. TAX ASSESSORS
PARCEL NO. 212-120-28.

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EXHIBIT B

PREMISES AND BUILDING

1891 Rutherford Road

Suite 200

 

September 30, First Floor        18,441 S.F.    Second Floor        5,548 S.F.
   Common Area Allocation        1,777 S.F.    Total Area        25,776 S.F.   

LOGO [g272326g82v43.jpg]

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EXHIBIT C

TENANT IMPROVEMENTS

Prior to the Commencement Date, Landlord, at its sole expense, shall cause the
modifications and/or improvements to be constructed in the Premises as set forth
on the attached floor plans covering the first and second floors of the
Premises. The improvements shall be of the same general quality as those
improvements which currently exist and that are to remain in the Premises. A
general description of the modifications and/or improvements to be performed by
Landlord is as follows:

 

1.

Demising wall between the Premises and Suite 100 and performing all work
incidental thereto including, without limitation, modifying the HVAC system and
all other utility systems as necessary to ensure the Premises is fully
functional.

 

2.

All improvements associated with the common area lobby currently under design by
Landlord and Landlord’s architect.

 

3.

Termination of the mechanical and process piping that currently extends into
Suite 100 so that the central plant and backup generator are solely dedicated to
the Premises.

 

4.

Repair the lab benches and associated counter tops as required in order to be
fully functional.

 

5.

Installation of new flooring throughout the Premises, with a combination of VCT,
seamless vinyl, epoxy, sealed concrete and carpet as set forth on the attached
flooring plan of the 1st floor. The second floor and the stairwell are to be
carpet.

 

6.

Re-painting of all interior walls within the Premises.

 

7.

Construction of two (2) single restrooms on the second floor mezzanine area.

 

8.

Construction of a full height wall to ceiling height, in the lab area.

 

9.

Construction of a break room with upper and lower cabinets and a sink.

 

10.

Construction of two (2) single restrooms on the first floor.

 

11.

Demolition of existing areas and construction of new interior partitions
required to accomplish the attached plan layout.

Notwithstanding the attached floor plan, the following are specifically excluded
from the Landlord’s responsibility under the Lease:

 

1.

Any tenant fixtures or furniture, systems furniture or movable cubicles.

 

2.

Phone or security systems or caballing.