Exhibit 10.40

 

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE—MODIFIED NET

 

AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

 

1. Basic Provisions (“Basic Provisions”).

 

1.1 Parties: This Lease (“Lease”), dated for reference purposes only, March 9,
2004, is made by and between James S. Lindsey (“Lessor”) and Align Technology,
Inc. (“Lessee”), (collectively the “Parties,” or individually a “Party”).

 

1.2 (a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 831 Martin Avenue, located in the City
of Santa Clara, County of Santa Clara, State of California, with zip code 95050,
as outlined on Exhibit A attached hereto (“Premises”). The “Building” is that
certain building containing the Premises and generally described as (describe
briefly the nature of the Building): An approximately 34, 296 square foot
portion of an approximately 100,369 square foot freestanding building which is
part of a two building, approximately 156,282 square foot. In addition to
Lessee’s rights to use and occupy the Premises as hereinafter specified, Lessee
shall have non-exclusive rights to the Common Areas (as defined in Paragraph 2.7
below) as hereinafter specified, but shall not have any rights to the roof,
exterior walls or utility raceways of the Building or to any other buildings in
the Industrial Center. The Premises, the Building, the Common Areas, the land
upon which they are located, along with all other buildings and improvements
thereon, are herein collectively referred to as the “Industrial Center.” (Also
see Paragraph 2.)

 

1.2 (b) Parking: Eighty-two unreserved vehicle parking spaces (“Unreserved
Parking Spaces”); and zero reserved vehicle parking spaces (“Reserved Parking
Spaces”). (Also see Paragraph 2.6)

 

1.3 Term: One years and four months (“Original Term”) commencing March 1, 2004
(“Commencement Date”) and ending June 30, 2005 (“Expiration Date”). (Also see
Paragraph 3.)

 

1.4 Early Possession:                                          (“Early
Possession Date”). (Also see Paragraphs 3.2 and 3.3.)

 

1.5 Base Rent: $10,288.80 per month (“Base Rent”), payable on the first day of
each month commencing March 1, 2004. (Also see Paragraph 4).

 

1.6 (a) Base Rent Paid Upon Execution:              Base Rent for the period
            .

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1.6 (b) Lessee’s Share of Common Area Operating Expenses: 21.95% percent
(“Lessee’s Share) as determined by

 

x prorata square footage of the Premises as compared to the total square footage
of the project (31.47% of the building)

 

1.7 Security Deposit: $ See Paragraph 69 (“Security Deposit”). (Also see
Paragraph 5.)

 

1.8 Permitted Use: Office, administration, light assembly, research and
development, testing, engineering, warehousing and related legal uses
(“Permitted Uses”) (Also see Paragraph 6.)

 

1.9 Insuring Party. Lessor is the “Insuring Party.” (See also Paragraph 8.)

 

1.11 Guarantor. The obligations of the lessee under this Lease are to be
guaranteed by Not Applicable (“Guarantor”). (Also see Paragraph 37.)

 

1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda consisting
of Paragraphs 49 through 70 and Exhibits A through A, all of which constitute a
part of this Lease.

 

2. Premises, Parking and Common Areas.

 

2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions as set forth in this Lease. Unless otherwise provided
herein, any statement of square footage set forth in this Lease, or that may
have been used in calculating rental and/or Common Area Operating Expenses, is
an approximation which Lessor and Lessee agree is reasonable and the rental and
Lessee’s Share (as defined in Paragraph 1.6(b)) based thereon is not subject to
revision whether or not the actual square footage is more or less.

 

2.2 Condition. Lessor shall deliver the Premises to Lessee clean and free of
debris on the Commencement Data and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor’s expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee’s sole cost and expense.

 

2.3 Compliance with Covenants, Restrictions and Building Code. Lessor warrants
that any improvements (other than those constructed by Lessee or at Lessee’s
direction) on or in the Premises which have been constructed or installed by
Lessor or with Lessor’s consent or at Lessor’s direction shall comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement Date. Lessor further
warrants to Lessee that Lessor has no knowledge of any claim having been made by
any governmental agency that a violation or violations of applicable building
codes, regulations, or ordinances exist with

 

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regard to the Premises as of the Commencement Date. Said warrants shall not
apply to any Alterations or Utility installations (defined in Paragraph 7.3(a))
made or to be made by Lessee. If the Premises do not comply with said
warranties, Lessor shall, except as otherwise provided in this Lease, promptly
after receipt of written notice from Lessee given within six (6) months
following the Commencement Date and setting forth with specificity the nature
and extent of such non-compliance, take such action, at Lessor’s expense, as may
be reasonable or appropriate to rectify the non-compliance. Lessor makes no
warranty that the Permitted Use in Paragraph 1.8 is permitted for the Premises
under Applicable Laws (as defined in Paragraph 2.4).

 

2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has been
advised by the Broker(s) to satisfy itself with respect to the condition of the
Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, “Applicable Laws”) and the
present and future suitability of the Premises for Lessee’s intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee’s occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor’s agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.

 

2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the data set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee’s sole cost and expense, correct any
non-compliance of the Premises with said warranties.

 

2.6 Vehicle Parking. Lessee shall be entitled to use the number of Unreserved
Parking Spaces and Reserved Parking Spaces specified in Paragraph 1.2(b) on
those portions of the Common Areas designated from time to time by Lessor for
parking. Lessee shall not use more parking spaces than said number. Said parking
spaces shall be used for parking by vehicles no larger than full-size passenger
automobiles or pick-up trucks, herein called “Permitted Size Vehicles.” Vehicles
other than Permitted Size Vehicles shall be parked and loaded or unloaded as
directed by Lessor in the Rules and Regulations (as defined in Paragraph 40)
issued by Lessor. (Also see Paragraph 2.9.)

 

(a) Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessor or Lessee’s employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.

 

(b) If Lessee permits or allows any of the prohibited activities described in
this Paragraph 2.6, then Lessor shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove or tow
away the vehicle involved and change the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.

 

(c) Lessor shall at the Commencement Date of this Lease, provide the parking
facilities required by Applicable Law.

 

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2.7 Common Areas – Definition. The term “Common Areas” is defined as all areas
and facilities outside the Premises and within the exterior boundary line of the
Industrial Center and interior utility raceways within the Premises that are
provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other lessors of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.

 

2.8 Common Areas – Lessee’s Rights. Lessors hereby grants to Lessee, for the
benefit of Lessee and its employees, suppliers, shippers, contractors, customers
and invitees, during the term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers, and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Industrial Center. Under no circumstances
shall the right herein granted to use the Common Areas be deemed to include the
right to store any property, temporarily or permanently. In the Common Areas.
Any such storage shall be permitted only by the prior written consent of Lessor
or Lessor’s designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.

 

2.9 Common Areas – Rules and Regulations. Lessor or such other person(s) as
Lessor may appoint shall have the exclusive control and management of the Common
Areas and shall have the right, from time to time, to establish, modify, amend
and enforce reasonable Rules and Regulations with respect thereto in accordance
with Paragraph 40. Lessee agrees to abide by and conform to all such Rules and
Regulations, and to cause it’s employees, suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessors of the Industrial Center.

 

2.10 Common Areas – Changes. Lessor shall have the right, in Lessor’s sole
discretion, from time to time:

 

(a) To make changes to the Common Areas, including, without limitation, changes
in the location, size, shape and number of driveways, entrances, parking spaces,
parking areas, loading and unloading areas, ingress, egress, direction of
traffic, landscaped areas, walkways and utility raceways;

 

(b) To close temporarily any of the Common Areas for maintenance purposes so
long as reasonable access to the Premises remains available;

 

(c) To designate other land outside the boundaries of the Industrial Center to
be a part of the Common Areas;

 

(d) To add additional buildings and improvements to the Common Areas;

 

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(e) To use the Common Areas while engaged in making additional improvements,
repairs or allocations to the Industrial Center, or any portion thereof; and

 

(f) To do and perform such other acts and make such other changes in, to or with
respect to the Common Areas and Industrial Center as Lessor may, in the exercise
of sound business judgment, deem to be appropriate.

 

3. Term.

 

3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease
are as specified in Paragraph 1.3.

 

3.2 Early Possession. If an Early Possession Date is specified in Paragraph 1.4
and if Lessee totally or partially occupies the Premises after the Early
Possession Date but prior to the Commencement Date, the obligation to pay Base
Rent shall be abated for the period of such early occupancy. All other terms of
this Lease, however, (including but not limited to the obligations to pay
Lessee’s Share of Common Area Operating Expenses and to carry the Insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.

 

3.3 Delay in Possession. If for any reason Lessor cannot deliver possession of
the Premises to Lessee by the Early Possession Date, if one is specified in
Paragraph 1.4, or if no Early Possession Date is specified, by the Commencement
Date, Lessor shall not be subject to any liability therefore, nor shall such
failure affect the validity of this Lease, or the obligations of Lessee
hereunder, or extend the term hereof, but in such case, Lessee shall not, except
as otherwise provided herein, be obligated to pay rent or perform any other
obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee, if possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee’s right to cancel this Lease hereunder shall
terminate and be of no further force or affect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.

 

4. Rent.

 

4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as the same
may be adjusted from time to time, to Lessor in lawful money of the United
States, without offset or deduction, on or before the day on which it is due
under the terms of this Lease. Base Rent and all other rent and charges for any
period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.

 

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4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the term
hereof, in addition to the Base Rent, Lessee’s Share (as specified in Paragraph
1.6(b)) of all Common Area Operating Expenses, as hereinafter defined, during
each calendar year of the term of this Lease. In accordance with the following
provisions:

 

(a) “Common Area Operating Expenses” are defined, for purposes of this Lease, as
all costs incurred by Lessor relating to the ownership and operation of the
Industrial Center, including, but not limited to following:

 

(i) The operation, repair and maintenance, in neat, clean, good order and
condition of the following:

 

(aa) The Common Areas, including parking areas, loading and unloading areas,
trash areas, roadways, sidewalks, walkways, parkways, driveways, landscaped
areas, striping, bumpers, irrigation systems, Common Area lighting facilities,
fences and gates, elevators and roof.

 

(bb) Exterior signs and any tenant directors.

 

(cc) Fire detection and sprinkler systems.

 

(ii) The cost of water, gas, electricity and telephone to service the Common
Areas.

 

(iii) Trash disposal, property management and security services and the costs of
any environmental inspections.

 

(iv) Reserves set aside for maintenance and repair of Common Areas.

 

(v) Real Property Taxes (as defined in Paragraph 10.2) to be paid by Lessor for
the Building and the Common Areas under Paragraph 10 hereof.

 

(vi) The cost of the premiums for the Insurance policies maintained by Lessor
under Paragraph 8 hereof.

 

(vii) Any deductible portion of an insured loss concerning the Building or the
Common Areas.

 

(viii) Any other services to be provided by Lessor that are stated elsewhere in
this Lease to be a Common Area Operating Expense.

 

(b) Any Common Area Operating Expenses and Real Property Taxes that are
specifically attributable to the Building or to any other building in the
Industrial Center or to the

 

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operation, repair and maintenance thereof, shall be allocated entirely to the
Building or to such other building. However, any Common Area Operating Expenses
and Real Property Taxes that are not specifically attributable to the Building
or to any other building or to the operation, repair and maintenance thereof,
shall be equitably allocated by Lessor to all buildings in the Industrial
Center.

 

(c) The inclusion of the improvements, facilities and services set forth in
Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to
either have said improvements or facilities or to provide those services unless
the Industrial Center already has the same, Lessor already provides the
services, or Lessor has agreed elsewhere in this Lease to provide the same or
some of them.

 

(d) Lessee’s Share of Common Area Operating Expenses shall be payable by Lessee
within ten (10) days after a reasonably detailed statement of actual expenses is
presented to Lessee by Lessor. At Lessor’s option, however, an amount may be
estimated by Lessor from time to time of Lessee’s Share of annual Common Area
Operating Expenses and the same shall be payable monthly or quarterly, as Lessor
shall designate, during each 12-month period of the Lease term, on the same day
as the Base Rent is due hereunder, Lessor shall deliver to Lessee within sixty
(60) days after the expiration of each calendar year a reasonably detailed
statement showing Lessee’s Share of the actual Common Area Operating Expenses
incurred during the preceding year. If Lessee’s payments under this Paragraph
4.2(d) during said preceding year exceed Lessee’s Share as indicated on said
statement, Lessee shall be credited the amount of such over-payment against
Lessee’s Share of Common Area Operating Expenses next becoming due. If Lessee’s
payments under this Paragraph 4.2(d) during said preceding year were less than
Lessee’s Share as indicated on said statement. Lessee shall pay to Lessor the
amount of the deficiency within ten (10) days after delivery by Lessor to Lessee
of said statement.

 

5. Security Deposit. Lessee shall deposit with Lessor upon Lessee’s execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee’s
faithful performance of Lessee’s obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1). Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys’ fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefore
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount require by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor as an addition to the Security Deposit so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the then current Base Rent as the Initial Security Deposit bears to the
initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to
keep all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the Premises, return to Lessee (or, at Lessor’s option,
to the last assignee, if any, of Lessee’s interest herein), that portion of the
Security Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall be considered
to be held in trust, to bear interest or other increment for this use, or to be
prepayment for any monies to be paid by Lessor under this Lease.

 

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6. Use.

 

6.1 Permitted Use.

 

(a) Lessee shall use and occupy the Premises only for the Permitted Use set
forth in Paragraph 1.8, or any other legal use which is reasonably comparable
thereto, and for no other purpose. Lessee shall not use or permit the use of the
Premise in a manner that is unlawful, creates waste or a nuisance, or that
disturbs owners and/or occupants of, or causes damage to the Premises or
neighboring premises or properties.

 

(b) Lessor hereby agrees to not unreasonably withhold or delay its consent to
any written request by Lessee, Lessee’s assignees or subtenants, and by
prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or in the Building
or the mechanical or electrical systems therein, does not conflict with uses by
other lessees, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall within
five (5) business days after such request give a written notification of same,
which notice shall include an explanation of Lessor’s reasonable objections to
the change in use.

 

6.2 Hazardous Substances.

 

(a) Reportable Uses Require Consent. The term “Hazardous Substance” as used in
this Lease shall mean any product, substance, chemical, material or waste whose
presence, nature, quantity and/or intensity of existence, use, manufacture,
disposal, transportation, spill, release or effect, either by itself or in
combination with other materials expected to be on the Premises, is either (i)
potentially injurious to the public health, safety or welfare, the environment,
or the Premises; (ii) regulated or monitored by any governmental authority; or
(iii) a basis for potential liability of Lessor to any governmental agency or
third party under any applicable statute or common law theory. Hazardous
Substance shall include, but not limited to, hydrocarbons, petroleum, gasoline,
crude oil or any products or by products thereof. Lessee shall not engage in any
activity in or about the Premises which constitutes a Reportable Use (as
hereinafter defined of Hazardous Substances without the express prior written
consent of Lessor and compliance in a timely manner (at Lessee’s sole cost and
expense) with all Applicable Requirements (as defined in Paragraph 6.3).
“Reportable Use” shall mean (i) the installation or use of any above or below
ground storage tank, (iii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority, and (iii) the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Law require that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor’s prior consent, but upon notice to Lessor and in compliance
with all Applicable Requirements, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of the Permitted
Use, so long as such use is not a Reportable Use and does not expose the
Premises or neighboring properties to any meaningful risk of contamination or
damage or expose Lessor to any liability therefore. In addition, Lessor may (but
without any obligation to do so) condition its consent to any Reportable Use of
any Hazardous

 

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Substance by Lessee upon Lessee’s giving Lessor such additional assurance as
Lessor. In its reasonable discretion, deems necessary to protect itself, the
public, the Premises and the environment against damage, contamination or injury
and/or liability therefore, including but not limited to the installation (and,
at Lessor’s option, removal on or before Lease expiration or earlier
termination) of reasonably necessary protective modifications to the Premises
(such as concrete encasements) and/or the deposit of an additional Security
Deposit under Paragraph 5, hereof.

 

(b) Duty to inform Lessor. If Lessee knows, or has reasonable cause to believe,
that a Hazardous Substance has come to be located in, on, under or about the
Premises or the Building, other than as previously consented to by Lessor,
Lessee shall immediately give Lessor written notice thereof, together with a
copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action or proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises, Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in, on, under or about the Premises (including,
without limitation, through the plumbing or sanitary sewer system).

 

(c) Indemnification. Lessee shall indemnify, protect, defend and hold Lessor,
its agents, employees, lenders and ground lessor, if any, and the Premises,
harmless from and against any and all damages, liabilities, judgments, costs,
claims, liens, expenses, penalties, loss of permits and attorneys’ and
consultants’ fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee’s control. Lessee’s
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation
(including consultants’ and attorneys’ fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee form its obligations under this Lease with respect to
Hazardous Substances, unless specifically so agreed by Lessor in writing at the
time of such agreement.

 

6.3 Lessee’s Compliance with Requirements. Lessee shall, at Lessee’s sole cost
and expense, fully, diligently and in a timely manner, comply with all
“Applicable Requirements,” which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor’s
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect. Lessee shall, within five (5) days after receipt of Lessor’s written
request, provide Lessor with copies of all documents and information, including
but not limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee’s compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.

 

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6.4 Inspection; Compliance with Law. Lessor, Lessor’s agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises (“Lenders”) shall have the right
to enter the Premises at any time in the case of an emergency, and otherwise at
reasonable times, for the purpose of inspecting the condition of the Premise and
for verifying compliance by Lessee with this Lease and all Applicable
Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to
employ experts and/or consultants in connection therewith to advise Lessor with
respect to Lessee’s activities, including but not limited to Lessee’s
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Premises. The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the Inspection is requested or ordered by a
governmental authority as a result of any such existing or imminent violation or
contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor’s Lender, as the case may be, for the costs and expenses of such
inspections.

 

7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations.

 

7.1 Lessee’s Obligations.

 

(a) Subject to the provisions of Paragraph 2.2 (Condition). 2.3 (Compliance with
Covenants, Restrictions and Building Code), 7.2 (Lessor’s Obligations), 9
(Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee’s sole
cost and expense and at all times, keep the Premises and every part thereof in
good order, condition and repair (whether or not such portion of the Premises
requiring repair, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee’s use, any prior use, the elements or the age of such portion
of the Premises), including, without limiting the generality of the foregoing,
all equipment or facilities specifically serving the Premises, such as plumbing,
heating, air conditioning, ventilating, electrical, lighting facilities, boilers
fired or unfired pressure vessels, fire hose connections if within the Premises,
fixtures, interior walls, interior surfaces of exterior walls, ceilings, floors,
windows, doors, plate glass, and skylights, but excluding any items which are
the responsibility of Lessor pursuant to Paragraph 7.2 below. Lessee, in keeping
the Premises in good order, condition and repair, shall exercise and perform
good maintenance practices. Lessee’s obligations shall include restorations,
replacements or renewals when necessary to keep the Premises and all
improvements thereon or a part thereof in good order, condition and state of
repair.

 

(b) Lessee shall, at Lessee’s sole cost and expense, procure and maintain a
contract, with copies to Lessor, in customary form and substance for and with a
contractor specializing and experienced in the inspection, maintenance and
service of the heating, air conditioning and ventilation system for the
Premises. However, Lessor reserves the right, upon notice to Lessee, to procure
and maintain the contract for the heating, air conditioning and ventilating
systems, and if Lessor so elects, Lessee shall reimburse Lessor, upon demand,
for the cost thereof.

 

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(c) If Lessee fails to perform Lessee’s obligations under this Paragraph 7.1,
Lessor may enter upon the Premises after ten (10) days’ prior written notice to
Lessee (except in the case of an emergency, in which case no notice shall be
required), perform such obligations on Lessee’s behalf, and put the Premises in
good order, condition and repair, in accordance with Paragraph 13.2 below.

 

7.2 Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee’s Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor’s expense or to terminate this
Lease because of Lessor’s failure to keep the Building, Industrial Center or
Common Areas in good order, condition and repair.

 

7.3 Utility Installations, Trade Fixtures, Alterations.

 

(a) Definitions; Consent Required. The term “Utility Installations” is used in
this Lease to refer to all air lines, power panels, electrical distribution,
security, fire protection systems, communications systems, lighting fixtures,
heating, ventilating and air conditioning equipment, plumbing, and fencing in,
on or about the Premises. The term “Trade Fixtures” shall mean Lessee’s
machinery and equipment which can be removed without doing material damage to
the Premises. The term “Alterations” shall mean any modification of the
improvements on the Premises which are provided by Lessor under the terms of
this Lease, other than Utility Installations or Trade Fixtures. “Lessee-Owned
Alterations and/or Utility Installations” are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor pursuant
to Paragraph 7.4(a). Lessee shall not make nor cause to be made any Alterations
or Utility Installations in, on, under or about the Premises without Lessor’s
prior written consent. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof) without
Lessor’s consent but upon notice to Lessor, so long as they are not visible from
the outside of the Premises, do not involve puncturing, relocating or removing
the roof or any existing walls, or changing or interfering with the fire
sprinkler or the fire detection systems and the cumulative cost thereof during
the term of this Lease as extended does not exceed $2,500.00.

 

(b) Consent. Any Alterations or Utility Installations that Lessee shall desire
to make and which require the consent of the Lessor shall be presented to Lessor
in written form with

 

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detailed plans. All consents given by Lessor, whether by virtue of Paragraph
7.3(a) or by subsequent specific consent, shall be deemed conditioned upon: (i)
Lessee’s acquiring all applicable permits required by governmental authorities;
(ii) the furnishing of copies of such permits together with a copy of the plans
and specifications for the Alteration or Utility Installation to Lessor prior to
commencement of the work thereon; and (iii) the compliance by Lessee with all
conditions of said permits in a prompt and expeditious manner. Any Alterations
or Utility Installations by Lessee during the term of this Lease shall be done
in a good and workmanlike manner, with good and sufficient materials, and be in
compliance with all Applicable Requirements. Lessee shall promptly upon
completion thereof furnish Lessor with as-built plans and specifications
therefore. Lessor may, (but without obligation to do so) condition its consent
to any requested Alteration or Utility Installation that costs $2,500.00 or more
upon Lessee’s providing Lessor with a lien and completion bond in an amount
equal to one and one-half times the estimated cost of such Alteration or Utility
Installation.

 

(c) Lien Protection. Lessee shall pay when due all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use on
the Premises, which claims are or may be secured by any mechanic’s or
materialmen’s lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days’ notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend and protect itself.
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor of the Premises. If Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to one
and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor’s attorney’s fees and costs in
participating in such action if Lessor shall decide it is its best interest to
do so.

 

7.4 Ownership, Removal, Surrender and Restoration.

 

(a) Ownership. Subject to Lessor’s right to require their removal and to cause
Lessee to become the owner thereof as hereinafter provided in this Paragraph
7.4, all Alterations and Utility Installations made to the Premises by Lessee
shall be the property of an owned by Lessee, but considered a part of the
Premises. Lessor may, at any time and at its option, elect in writing to Lessee
to be the owner of all or any specified part of the Lessee-Owned Alterations and
Utility Installations. Unless otherwise instructed per Subparagraph 7.4(b)
hereof, all Lessee-Owned Alterations and Utility Installations shall, at the
expiration or earlier termination of this Lease, become the property of Lessor
and remain upon the Premises and be surrendered with the Premises by Lessee.

 

(b) Removal. Unless otherwise agreed in writing, Lessor may require that any or
all Lessee-Owned Alterations or Utility Installations be removed by the
expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.

 

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(c) Surrender/Restoration. Lessee shall surrender the Premises by the end of the
last day of the Lease term or any earlier termination date, clean and free of
debris and in good operating order, condition and state of repair, ordinary wear
and tear excepted. Ordinary wear and tear shall not include any damage or
deterioration that would have been prevented by good maintenance practice or by
Lessee performing all of its obligations under this Lease. Except as otherwise
agreed or specified herein, the Premise, as surrendered, shall include the
Alterations and Utility Installations. The obligation of Lessee shall include
the repair of any damage occasioned by the installation, maintenance or removal
of Lessee’s Trade Fixtures, furnishings, equipment, and Lessee-Owned Alterations
and Utility Installations, as well as the removal of any storage tank installed
by or for Lessee, and the removal, replacement or remediation of any soil,
material or ground water contaminated by Lessee, as may then be required by
Applicable Requirements and/or good practice. Lessee’s Trade Fixtures shall
remain the property of Lessee and shall be removed by Lessee subject to its
obligation to repair and restore the Premises per this Lease.

 

8. Insurance; Indemnity.

 

8.1 Payment of Premiums. The cost of the premiums for the insurance policies
maintained by Lessor under this Paragraph 8 shall be a Common Area Operating
Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods commencing
prior to, or extending beyond, the term of this Lease shall be prorated to
coincide with the corresponding Commencement Date or Expiration Date.

 

8.2 Liability Insurance.

 

(a) Carried by Lessee. Lessee shall obtain and keep in force during the term of
this Lease a Commercial General Liability policy of Insurance protecting Lessee,
Lessor and any Lender(s) whose names have been provided to Lessee in writing (as
additional insureds) against claims for bodily injury, personal injury and
property damage based upon, involving 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 “Additional
Insured-Managers or Lessors of Premises” endorsement and contain the “Amendment
of the Pollution Exclusion” endorsement for damage caused by heat, smoke or
fumes from a hostile fire. The policy shall not contain any intra-insured
exclusions as between insured persons or organizations, but shall include
coverage for liability assumed under this Lease as an “Insured contract” for the
performance of Lessee’s indemnity obligations under this Lease. The limits of
said insurance required by this Lease or as carried by Lessee shall not,
however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be required by this Lease or as carried by Lessee
shall not, however, limit the liability of Lessee nor relieve Lessee of any
obligation hereunder. All insurance to be carried by Lessee shall be primary to
and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.

 

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(b) Carried by Lessor. Lessor shall also maintain liability insurance described
in Paragraph 8.2(a) above, in addition to and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an additional
insured therein.

 

8.3 Property insurance-Building, Improvements and Rental Value.

 

(a) Building and Improvements. Lessor shall obtain and keep in force during the
term of this Lease a policy or policies in the name of Lessor, with loss payable
to Lessor and to any Lender(s), insuring against loss or damage to the Premises.
Such insurance shall be for full replacement cost, as the same shall exist from
time to time, or the amount required by any Lender(s), but in no event more than
the commercially reasonable and available insurable value thereof if, by reason
of the unique nature or age of the improvements involved, such latter amount is
less than full replacement cost. Lessee-Owned Alterations and Utility
Installations, Trade Fixtures and Lessee’s personal property shall be insured by
Lessee pursuant to Paragraph 8.4. If the coverage is available and commercially
appropriate, Lessor’s policy or policies shall insure against all risks of
direct physical loss or damage (except the perils of flood and/or earthquake
unless required by a Lender), including coverage for any additional costs
resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Building required to be demolished or removed
by reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered loss, but not including plate glass insurance. Said
policy or policies shall also contain an agreed valuation provision in lieu of
any co-insurance clause, waiver or 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 of
All Urban Consumers for the city nearest to where the Premises are located.

 

(b) Rental Value. Lessor shall also obtain and keep in force during the term of
this Lease a policy or policies in the name of Lessor, with loss payable to
Lessor and any Lender(s), insuring the loss of the full rental and other charges
payable by all lessees of the Building to Lessor for one year (including all
Real Property Taxes, insurance costs, all Common Area Operating Expenses and any
scheduled rental increases). Said insurance may provide that in the event the
Lease is terminated by reason of an insured loss, the period of indemnity for
such coverage shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year’s loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any co-insurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income, Real
Property Taxes, Insurance premium costs and other expenses, if any, otherwise
payable, for the next 12-month period. Common Area Operating Expenses shall
include any deductible amount in the event of such loss.

 

(c) Adjacent Premises. Lessee shall pay for any increase in the premiums for the
property insurance of the Building and for the Common Areas or other buildings
in the Industrial Center if said increase is caused by Lessee’s acts, omissions,
use or occupancy of the Premises.

 

(d) Lessee’s Improvements. Since Lessor is the Insuring Party, Lessor shall not
be required to insure Lessee-Owned Alterations and Utility Installations unless
the item in question has become the property of Lessor under the terms of this
Lease.

 

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8.4 Lessee’s Property Insurance. Subject to the requirements of Paragraph 8.5,
Lessee at its cost shall either by separate policy or, at Lessor’s option, by
endorsement to a policy already carried, maintain insurance coverage on all of
Lessee’s personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 6.3(a). Such insurance
shall be full replacement cost coverage with a deductible not to exceed $1,000
per occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property and the restoration of Trade Fixtures and
Lessee-Owned Alterations and Utility Installations. Upon request from Lessor,
Lessee shall provide Lessor with written evidence that such insurance is in
force.

 

8.5 Insurance Policies. Insurance required hereunder shall be in companies duly
licensed to transact business in the state where the Premises are located, and
maintaining during the policy term a “General Policyholders Rating” of at least
B+, V, or such other rating as may be required by a Lender, as set forth in the
most current issue of “Best’s Insurance Guide.” Lessee shall not do or permit to
be done anything which shall invalidate the insurance policies referred to in
this Paragraph 8. Lessee shall cause to be delivered to Lessor, within seven (7)
days after the earlier of the Early Possession Date or the Commencement Date,
certified copies of, or certificates evidencing the existence and amounts of,
the insurance required under Paragraph 8.2(a) and 8.4. No such policy shall be
cancelable or subject to modification except after thirty (30) days’ prior
written notice to Lessor. Lessee shall at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
“insurance binders” evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
to Lessee to Lessor upon demand.

 

8.6 Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages (whether in contract or in tort) against the
other, for loss or damage to their property arising out of or incident to the
perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.

 

8.7 Indemnity. Except for Lessor’s negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor’s master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys’ and consultants’
fees, expenses and/or liabilities arising out of, involving, or in connection
with the occupancy of the Premises by Lessee, the conduct of Lessee’s business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee’s part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee upon notice from Lessor shall defend the
same at Lessee’s expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified.

 

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8.8 Exemption of Lessor from Liability. Lessor shall not be liable for injury or
damage to the person or goods, wares, merchandise or other property of Lessee,
Lessee’s employees, contractors, invitees, customers, or any other person in or
about the Premises, whether such damage or injury is caused by or results from
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether said injury or damage results from conditions arising upon the Premises
or upon other portions of the Building of which the Premises are a part, from
other sources or places, and regardless of whether the cause of such damage or
injury or the means of repairing the same as accessible or not. Lessor shall not
be liable for any damages arising from any act or neglect of any other lessee or
Lessor nor from the failure by Lessor to enforce the provisions of any other
lease in the Industrial Center. Notwithstanding Lessor’s negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee’s
business or for any loss of income or profit therefrom.

 

9. Damage or Destruction.

 

9.1 Definitions.

 

(a) “Premises Partial Damage” shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility installations, the repair cost
of which damage or destruction is less than fifty percent (50%) of the then
Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises (excluding
Lessee-Owned Alterations and Utility Installations and Trade Fixtures)
immediately prior to such damage or destruction.

 

(b) “Premises Total Destruction” shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.

 

(c) “Insured Loss” shall mean damage or destruction to the Premises, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures, which was
caused by an event required to be covered by the insurance described in
Paragraph 8.3(a) irrespective of any deductible amounts of coverage limits
involved.

 

(d) Replacement Cost” shall mean the cost to repair or rebuild the improvements
owned by Lessor at the time of the occurrence to their condition existing
immediately prior thereto, including demolition, debris removal and upgrading
required by the operation of applicable building codes, ordinances or laws, and
without deduction or depreciation.

 

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(e) “Hazardous Substance Condition” shall mean the occurrence or discovery of a
condition involving the presence of, or a contamination by a Hazardous Substance
as defined in Paragraph 6.2(a), in, on, or under the Premises.

 

9.2 Premises Partial Damage – Insured Loss. If Premises Partial Damage that is
an Insured Loss occurs, then Lessor shall, at Lessor’s expense, repair such
damage (but not Lessee’s Trade Fixtures of Lessees-Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect. In the event, however, that there is a shortage of
insurance proceeds and such shortage is due to the fact that, by reason of the
unique nature of the improvements in the Premises, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefore. If
Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, Lessor shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect. If Lessor does not receive such
funds or assurance within said period, Lessor may nevertheless elect by written
notice to Lessee within ten (10) days thereafter to make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within such ten (10) day period,
and if Lessor does not so elect to restore and repair, then this Lease shall
terminate sixty (60) days following the occurrence of the damage or destruction.
Unless otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor for any funds contributed by Lessee to repair any such
damage or destruction. Premises Partial Damage due to flood or earthquake shall
be subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that
there may be some insurance coverage, but the net proceeds of any such Insurance
shall be made available for the repairs if made by either Party.

 

9.3 Partial Damage – Uninsured Loss. If Premises Partial Damage that is not an
insured Loss occurs, unless caused by a negligent or willful act of Lessee (in
which event Lessee shall make the repairs at Lessee’s expense and this Lease
shall continue in full force and effect). Lessor may at Lessor’s option, either
(i) repair such damage as soon as reasonably possible at Lessor’s expense. In
which event this Lease shall continue in full force and effect, or (ii) give
written notice to Lessee within thirty (30) days after receipt by Lessor of
knowledge of the occurrence of such damage of Lessor’s desire to terminate this
Lease as of the date sixty (60) days following the date of such notice. In the
event Lessor elects to give such notice of Lessor’s intention to terminate this
Lease, Lessee shall have the right within ten (10) days after the receipt of
such notice to give written notice to Lessor of Lessee’s commitment to pay for
the repair of such damage totally at Lessee’s expense and without reimbursement
from Lessor. Lessee shall provide Lessor with the required funds or satisfactory
assurance thereof within thirty (30) days following such commitment from Lessee.
In such event this Leas shall continue in full force and effect, and Lessor
shall proceed to make such repairs as soon as reasonably possible after the
required funds are available. If Lessee does not give such notice and provide
the funds or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Lessor’s notice of termination.

 

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9.4 Total Destruction. Notwithstanding any other provision hereof, if Premises
Total Destruction occurs (including any destruction required by any authorized
public authority), this Lease shall terminate sixty (60) days following the date
of such Premises Total Destruction, whether or not the damage or destruction is
an insured Loss or was caused by a negligent or willful act of Lessee. In the
event, however, that the damage or destruction was caused by Lessee, Lessor
shall have the right to recover Lessor’s damages from Lessee except as released
and waived in Paragraph 9.7.

 

9.5 Damage Near End of Term. If at any time during the last six (6) months of
the term of this Lease there is damage for which the cost to repair exceeds one
month’s Base Rent, whether or not an insured Loss, Lessor may, at Lessor’s
option, terminate this Lease effective sixty (60) days following the date of
occurrence of such damage by giving written notice to Lessee of Lessor’s
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days after Lessee’s
receipt of Lessor’s written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor’s expense repair such damage as soon as reasonably possible and
this Lease shall continue in full force and effect. If Lessee fails to exercise
such option and provide such funds or assurance during such period, then this
Lease shall terminate as of the date set forth in the first sentence of this
Paragraph 9.5.

 

9.6 Abatement of Rent; Lessee’s Remedies.

 

(a) In the event of (i) Premises Partial Damage or (ii) Hazardous Substance
Condition of which Lessee is not legally responsible, the Base Rent, Common Area
Operating Expenses and other charges, if any, payable by Lessee hereunder for
the period during which such damage or condition, its repair, remediation or
restoration continues, shall be abated in proportion to the degree to which
Lessee’s use of the Premises is impaired, but not in excess of proceeds from
insurance required to be carried under Paragraph 8.3(b) Except for abatement of
Base Rent, Common Area Operating Expenses and other charges, if any, as
aforesaid, all other obligations of Lessee hereunder shall be performed by
Lessee, and Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair remediation or restoration.

 

(b) If Lessor shall be obligated to repair or restore the Premises under the
provisions of this Paragraph 9 and shall not commence, in a substantial and
meaningful way, the repair or restoration of the Premises within ninety (90)
days after such obligation shall accrue, Lessee may, at any time prior to the
commencement of such repair or restoration, give written notice to Lessor and to
any Lenders of which Lessee has actual notice of Lessee’s election to terminate
this Lease on a date not less than sixty (60) days following the giving of such
notice. If Lessee gives

 

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such notice to Lessor and such Lenders and such repair of restoration is not
commenced within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender
commences the repair or restoration of the Premises within thirty (30) days
after the receipt of such notice, this Lease shall continue in full force and
effect. “Commence” as used in this Paragraph 9.6 shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever occurs first.

 

9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition occurs,
unless Lessee is legally responsible therefore (in which case Lessee shall make
the investigation and remediation thereof required by Applicable Requirements
and this Lease shall continue in full force and effect, but subject to Lessor’s
rights under Paragraph 6.2(c) and Paragraph 13). Lessor may at Lessor’s option
either (i) investigate and remediate such Hazardous Substance Condition, if
required, as soon as reasonably possible at Lessor’s expense, in which event
this Lease shall continue in full force and effect, or (ii) if the estimated
cost to investigate and remediate such condition exceeds twelve (12) times the
then monthly Base Rent or $100,000 whichever is greater, give written notice to
Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such Hazardous Substance Condition of Lessor’s desire to terminate
this Lease as of the date sixty (60) days following the date of such notice. In
the event Lessor elects to give such notice of Lessor’s intention to terminate
this Lease. Lessee shall have the right within ten (10) days after the receipt
of such notice to give written notice to Lessor of Lessee’s commitment to pay
for the excess costs of (a) investigation and remediation of such Hazardous
Substance Condition to the extent required by Applicable Requirements, over (b)
an amount equal to twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty (30) days following said
commitment by Lessee, in such event this Lease shall continue in full force and
effect, and Lessor shall proceed to make such investigation and remediation as
soon as reasonably possible after the required funds are available. If Lessee
does not give such notice and provide the required funds or assurance thereof
within the time period specified above, this Lease shall terminate as of the
date specified in Lessor’s notice of termination.

 

9.8 Terminate – Advance Payments. Upon termination of this Lease pursuant to
this Paragraph 9, Lessor shall return to Lessee any advance payment made by
Lessee to Lessor and so much of Lessee’s Security Deposit as has not been, or is
not then required to be, used by Lessor under the terms of this Lease.

 

9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises and the
Building with respect to the termination of this Lease and hereby waive the
provisions of any present or future statute to the extent it is inconsistent
herewith.

 

10. Real Property Taxes

 

10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as defined in
Paragraph 10.2, applicable to the Industrial Center, and except as otherwise
provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.

 

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10.2 Real Property Tax Definition. As used herein, the term “Real Property
Taxes” shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed upon the Industrial Center by any authority having the
direct or indirect power to tax, including any city, state or federal
government, or any school agricultural, sanitary, fire, street, draining, or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Industrial Center or any portion thereof. Lessor’s
right to rent or other income therefrom, and/or Lessor’s business of leasing the
Premises. The term “Real Property Taxes” shall also include any tax, fee, levy,
assessment or charge, or any increase therein, imposed by reason of events
occurring, or changes in Applicable Law taking effect, during the term of this
Lease, including but not limited to a change in the ownership of the Industrial
Center or the improvements thereon, the execution of this Lease, or any
modification, amendment or transfer thereof, and whether or not contemplated by
the Parties. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the calculation
of Real Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common.

 

10.3 Additional Improvements. Common Area Operating Expenses shall not include
Real Property Taxes specified in the tax assessor’s records and work sheets as
being caused by additional improvements place upon the Industrial Center by
other lessees or by Lessor for the exclusive enjoyment of such other lessees.
Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to Lessor at
the time Common Area Operating Expenses are payable under Paragraph 4.2, the
entirety of any increase in Real Property Taxes if assessed solely by reason of
Alterations, Trade Fixtures or Utility Installations placed upon the Premises by
Lessee or at Lessee’s request.

 

10.4 Joint Assessment. If the Building is not separately assessed, Real Property
Taxes allocated to the Building shall be an equitable proportion of the Real
Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor’s work sheets or such other information as
may be reasonably available. Lessor’s reasonable determination thereof, in good
faith, shall be conclusive.

 

10.5 Lessee’s Property Taxes. Lessee shall pay prior to delinquency all taxes
assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee’s said property shall be assessed with Lessor’s real property,
Lessee shall pay Lessor the taxes attributable to Lessee’s property within ten
(10) days after receipt of written statement setting fort the taxes applicable
to Lessee’s property.

 

11. Utilities. Lessee shall pay directly for all utilities and services supplied
to the Premises, including but not limited to electricity, telephone, security,
gas and cleaning of the Premises, together with any taxes thereon. If any such
utilities or services are not separately metered to the Premises or separately
billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to be
determined by Lessor of all such charges jointly metered or billed with other
premises in the Building, in the manner and within the time periods set forth in
Paragraph 4.2(d).

 

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12. Assignment and Subletting.

 

12.1 Lessor’s Consent Required.

 

(a) Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage or otherwise transfer or encumber (collectively, “assign”) or sublet
all or any part of Lessee’s interest in this Lease or in the Premises without
Lessor’s prior written consent given under the subject to the terms of Paragraph
36.

 

(b) A change in the control of Lessee shall constitute an assignment requiring
Lessor’s consent. The transfer, on a cumulative basis, of twenty-five percent
(25%) or more of the voting control of Lessee shall constitute a change in
control for this purpose.

 

(c) The involvement of Lessee or its assets in any transaction, or series of
transactions (by way of merger, sale, acquisition, financing, refinancing,
transfer, leveraged by-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee’s assets occurs, which results or will
result in a reduction of the Net Worth of Lessee, as hereinafter defined, by an
amount equal to or greater than twenty-five percent (25%) of such Net Worth of
Lessee as it was represented to Lessor at the time of full execution and
delivery of this Lease or at the time of the most recent assignment to which
Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, at whichever time said Net Worth of
Lessee was or is greater, shall be considered an assignment of this Lease by
Lessee to which Lessor may reasonably withhold its consent. “Net Worth of
Lessee” for purposes of this Lease shall be the net worth of Lessee (excluding
any Guarantors) established under generally accepted accounting principles
consistently applied.

 

(d) An assignment of subletting of Lessee’s Interest in this Lease without
Lessor’s specific prior written consent shall, at Lessor’s option be a Default
curable after notice per Paragraph 13.1 or a non-curable Breach without the
necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment of subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days’ written notice (“Lessor’s Notice”), increase the monthly Base Rent for the
Premises to the greater of the then fair market rental value of the Premises as
reasonably determined by Lessor, or one hundred ten percent (110%) of the Base
Rent then in effect. Pending determination of the new fair market rental value,
if disputed by Lessee, Lessee shall pay the amount set forth in Lessor’s Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence, and considering the Premises at its
highest and best use and in good condition) or one hundred ten percent (110%) of
the price previously in effect, (ii) any index-oriented rental or price
adjustment

 

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formulas contained in this Lease shall be adjusted to require that the base
index be determined with reference to the index applicable to the time of such
adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Lessor’s Notice.

 

(e) Lessee’s remedy for any breach of this Paragraph 12.1 by Lessor shall be
limited to compensatory damages and/or injunctive relief.

 

12.2 Terms and Conditions Applicable to Assignment and Subletting.

 

(a) Regardless of Lessor’s consent, any assignment or subletting shall not (i)
be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligation hereunder, nor (iii) after the primary liability of Lessee for
the payment of Base Rent and other sums due Lessor hereunder or for the
performance of any other obligations to be performed by Lessee under this Lease.

 

(b) Lessor may accept any rent or performance of Lessee’s obligations from any
person other than Lessee pending approval or disapproval of an assignment.
Neither a delay in the approval or disapproval of such assignment nor the
acceptance of any rent for performance shall constitute a waiver or estoppel of
Lessor’s right to exercise its remedies for the Default or Breach by Lessee of
any of the terms, covenants or conditions of this Lease.

 

(c) The consent of Lessor to any assignment or subletting shall not constitute a
consent to any subsequent assignment or subletting by Lessee or to any
subsequent or successive assignment or subletting by the assignee or sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee or
anyone else liable under this Lease or the sublease without obtaining their
consent, and such action shall not relieve such persons from liability under
this Lease or the sublease.

 

(d) In the event of any Default or Breach of Lessee’s obligation under this
Lease, Lessor may proceed directly against Lessee, any Guarantors or anyone else
responsible for the performance of the Lessee’s obligations under this Lease,
including any sublessee, without first exhausting Lessor’s remedies against any
other person or entity responsible therefore to Lessor, or any security held by
Lessor.

 

(e) Each request for consent to an assignment or subletting shall be in writing,
accompanied by information relevant to Lessor’s determination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublesee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000, as reasonable consideration for Lessor’s considering and
processing the request for consent. Lessee agrees to provide Lessor with such
other or additional information and/or documentation as may be reasonably
requested by Lessor.

 

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(f) Any assignee of, or sublessee under, this Lease shall, by reason of
accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.

 

12.3 Additional Terms and Conditions Applicable to Subletting. The following
terms and conditions shall apply to any subletting by Lessee of all or any part
of the Premises and shall be deemed included in all subleases under this Lease
whether or not expressly incorporated therein:

 

(a) Lessee hereby assigns and transfers to Lessor all of Lessee’s interest in
all rentals and income arising from any sublease of all or a portion of the
Premises, heretofore or hereafter made by Lessee, and Lessor may collect such
rent and income and apply same toward Lessee’s obligations under this Lease;
provided, however, that until a Breach (as defined in Paragraph 13.1) shall
occur in the performance of Lessee’s obligations under this Lease, Lessee may,
except as otherwise provided in this Lease, receive, collect and enjoy the rents
accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor, nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee’s obligations
to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee’s obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.

 

(b) In the event of a breach by Lessee in the performance of its obligations
under this Lease, Lessor, at its option and without any obligation to do so, may
require any sublessee to attorn to Lessor, in which event Lessor shall undertake
the obligations of the sublessor under such sublease from the time of the
exercise of said option to the expiration of such sublease; provided, however,
Lessor shall not be liable for any prepaid rents or security deposit paid by
such sublessee to such sublessor or for any other prior defaults or breaches of
such sublessor under such sublease.

 

(c) Any matter or thing requiring the consent of the sublessor under a sublease
shall also require the consent of Lessor herein.

 

(d) No sublessee under a sublease approved by Lessor shall further assign or
sublet all or any part of the Premises without Lessor’s prior written consent.

 

(e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to
the sublessee, who shall have the right to cure the Default of Lessee within the
grace period, if any, specified in such notice. The sublessee shall have a right
of reimbursement and offset from and against Lessee for any such Defaults cured
by the sublessee.

 

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13. Default; Breach; Remedies.

 

13.1 Default; Breach. Lessor and Lessee agree that if an attorney is consulted
by Lessor in connection with a Lessee Default or Breach (as hereinafter
defined). $350.00 is a reasonable minimum sum per such occurrence for legal
services and costs in the preparation and service of a notice of Default, and
that Lessor may include the cost of such services and costs in said notice as
rent due and payable to cure said default. A “Default” by Lessee is defined as a
failure by Lessee to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A “Breach”
by Lessee is defined as the occurrence of any one or more of the following
Defaults, and, where a grace period for cure after notice is specified herein,
the failure by Lessee to cure such Default prior to the expiration of the
applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:

 

(a) The vacating of the Premises without the intention to reoccupy same, or the
abandonment of the Premises.

 

(b) Except as expressly otherwise provided in this Lease, the failure by Lessee
to make any payment of Base Rent, Lessee’s Share of Common Area Operating
Expenses, or any other monetary payment required to be made by Lessee hereunder
as and when due, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surety bond required under this Lease, or the failure
of Lessee to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) days following written notice thereof by or on behalf of Lessor to Lessee.

 

(c) Except as expressly otherwise provided in this Lease, the failure by Lessee
to provide Lessor with reasonable written evidence (in duly executed original
form, if applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non-subordination of this Lease per Paragraph 30, (vi)
the guaranty of the performance of Lessee’s obligations under this Lease if
required under Paragraphs 1.11 and 3.7, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.

 

(d) A Default by Lessee as to the terms, covenants, conditions or provisions of
this Lease, or of the rules adopted under Paragraph 40 hereof that are to be
observed, complied with or performed by Lessee, other than those described in
SubParagraphs 13.1(a), (b) or (c), above, where such Default continues for a
period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee’s Default is
such that more than thirty (30) days are reasonably required for its cure, than
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.

 

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(e) The occurrence of any of the following events: (i) the making by Lessee of
any general arrangement or assignment for the benefit of the creditors; (ii)
Lessee’s becoming a “debtor” as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days; (iii) the appointment of a
trustee or receiver to take possession of substantially all of Lessee’s assets
located at the Premises or of Lessee’s interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee’s assets
located at the Premises or of Lessee’s interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this SubParagraph 13.1(a) is contrary to any
applicable law, such provision shall be of no force or effect, and shall affect
the validity of the remaining provisions.

 

(f) The discovery by Lessor that any financial statement of Lessee or of any
Guarantor, given to Lessor by Lessee or any Guarantor, was materially false.

 

(g) If the performance of Lessee’s obligations under this Lease is guaranteed:
(i) the death of a Guarantor, (ii) the termination of a Guarantor’s liability
with respect to this Lease other than in accordance with the terms of such
guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy
filing, (iv) a Guarantor’s refusal to honor the guaranty, or (v) a Guarantor’s
breach of its guaranty obligation on an anticipatory breach basis, and Lessee’s
failure, within sixty (60) days following written notice by or on behalf of
Lessor to Lessee of any such event, to provide Lessor with written alternative
assurances of security, which, when coupled with the then existing resources of
Lessee, equals or exceeds the combined financial resources of Lessee and the
Guarantors that existed at the time of execution of this Lease.

 

13.2 Remedies. If Lessee fails to perform any affirmative duty or obligation of
Lessee under this Lease, within ten (10) days after written notice to Lessee (or
in case of an emergency, without notice), Lessor may at its option (but without
obligation to do so), perform such duty or obligation on Lessee’s behalf,
including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which is drawn, Lessor, all its own
option, may require all future payments to be made under this Lease by Lessee to
be made only by cashier’s check. In the event of a Breach of this Lease by
Lessee (as defined in Paragraph 13.1), with or without further notice or demand,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Breach, Lessor may:

 

(a) Terminate Lessee’s right to possession of the Premises by any lawful means,
in which case this Lease and the term hereof shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event Lessor
shall be entitled to recover from Lessee: (i) the worth at the time of the award
of the unpaid rent which had been earned at the time of termination; (ii) the
worth at the time of award of the amount by which the unpaid rent which would
have been earned after termination until the time of award exceeds the amount of
such rental loss that the Lessee proves could have been reasonable avoided;
(iii) 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 Lessee proves could be reasonably avoided; and (iv) any
other

 

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amount necessary to compensate Lessor for all the detriment proximately caused
by the Lessee’s failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, including but
not limited to the cost of recovering possession of the Premises, expenses of
reletting, including necessary renovation and alteration of the Premises,
reasonable attorneys’ fees, and that portion of any leasing commission paid by
Lessor in connection with this Lease applicable to the unexpired term of this
Lease. The worth at the time of award of the amount referred to in provision
(iii) of the immediately preceding sentence shall be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San Francisco or
the Federal Reserve Bank District in which the Premises are located at the time
of award plus one percent (1%). Efforts by Lessor to mitigate damages caused by
Lessee’s Default or Breach of this Lease shall not waive Lessor’s right to
recover damages under this Paragraph 13.2. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have
the right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Lessor may reserve the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under SubParagraph 13.1(b), (c) or (d) was not previously given
a notice to pay rent or quit, or to perform or quit, as the case may be, given
to Lessee under any statute authorizing the forfeiture of leases for unlawful
detainer shall also constitute the applicable notice for grace period purposes
required by SubParagraph 13.1(b), (c) or (d). In such case, the applicable grace
period under the unlawful detainer statute shall run concurrently after the one
such statutory notice, and the failure of Lessee to cure the Default within the
greater of the two (2) such grace periods shall constitute both an unlawful
detainer and a Breach of this Lease entitling Lessor to the remedies provided
for in this Lease and/or by said statute.

 

(b) Continue the Lease and Lessee’s right to possession in effect (in California
under California Civil Code Section 1951.4) after Lessee’s Breach and recover
the rent as it becomes due, provided Lessee has the right to sublet or assign,
subject only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable. Acts of
maintenance or preservation, efforts to relet the Premises, or the appointment
of a receiver to protect the Lessor’s interest under this Lease, shall not
constitute a termination of the Lessee’s right to possession.

 

(c) Pursue any other remedy now or hereafter available to Lessor under the laws
or judicial decisions of the state wherein the Premises are located.

 

(d) The expiration or termination of this Lease and/or the termination of
Lessee’s right to possession shall not relieve Lessee from liability under any
indemnity provisions of this Lease as to matters occurring or accruing during
the term hereof or by reason of Lessee’s occupancy of the Premises.

 

13.3 Inducement Recapture in Event of Breach. Any agreement by Lessor for free
or abated rent or other charges applicable to the Premises, or for the giving or
paying by Lessor to or for Lessee of any cash or other bonus, inducement or
consideration for Lessee’s entering into this Lease, all of which concessions
are hereinafter referred to as “Inducement Provisions” shall be deemed
conditioned upon Lessee’s full and faithful performance of all of the terms,
covenants and conditions of this Lease to be performed or observed by Lessee
during the term hereof as the same may be extended. Upon the occurrence of a
Breach (as defined in Paragraph 13.1) of this Lease by

 

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Lessee, any such Inducement Provision shall automatically be deemed deleted from
this Lease and of no further force or effect, and any rent, other charge, bonus,
inducement or consideration theretofore abated, given or paid by Lessor under
such an Inducement Provision shall be immediately due and payable by Lessee to
Lessor, and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.

 

13.4 Late Charges. Lessee hereby acknowledges that the late payment by Lessee to
Lessor of rent and other sums due hereunder will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor’s designee within ten (10) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary. Base Rent shall, at a Lessor’s option, become due and payable
quarterly in advance.

 

13.5 Breach by Lessor. Lessor shall not be deemed in breach of this Lease unless
Lessor fails within a reasonable time to perform an obligation required to be
performed by Lessor. For purposes of this Paragraph 13.5, a reasonable time
shall in no event be less than thirty (30) days after receipt by Lessor, and by
any Lender(s) whose name and address shall have been furnished to Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor’s obligation is such that more than thirty (30) days after such notice
are reasonably required for its performance, then Lessor shall not be in breach
of this Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.

 

14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called “condemnation”), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee’s parking, is taken by condemnation,
Lessee may, at Lessee’s option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to

 

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the total rentable floor area of the Premises. No reduction of Base Rent shall
occur if the condemnation does not apply to any portion of the Premises. Any
award for the taking of all or any part of the Premises under the power or
eminent domain or any payment made under threat of the exercise of such power
shall be the property of Lessor, whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee’s relocation
expenses and/or loss of Lessee’s Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above Lessee’s Share of the legal and
other expenses incurred by Lessor in the condemnation matter, repair any damage
to the Premises caused by such condemnation authority. Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.

 

15. Brokers’ Fees.

 

15.1 Procuring Cause. The Broker(s) named in Paragraph 1.10 is/are the procuring
cause of this Lease.

 

15.4 Representations and Warranties. Lessee and Lessor each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder’s fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the Indemnifying Party, including any costs, expenses, and/or attorneys’ fees
reasonably incurred with respect thereto.

 

16. Tenancy and Financial Statements.

 

16.1 Tenancy Statement. Each Party (as “Responding Party”) shall within ten (10)
days after written notice from the other Party (the “Requesting Party”) execute,
acknowledge and deliver to the Requesting Party a statement in writing in a form
similar to the then most current “Tenancy Statement” form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.

 

16.2 Financial Statement. If Lessor desires to finance, refinance, or sell the
Premises or the Building, or any part thereof, Lessee and all Guarantors shall
deliver to any potential lender or purchaser designated by Lessor such financial
statements of Lessee and such Guarantors as may be reasonably required by such
lender or purchaser, including but not limited to Lessee’s financial statements
for the past three (3) years. All such financial statements shall be received by
Lessor and such lender or purchaser in confidence and shall b used only for the
purposes herein set forth.

 

17. Lessor’s Liability. The term “Lessor” as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises. In the event of
a transfer of Lessor’s title or interest

 

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in the Premises or in this Lease, Lessor shall deliver to the transferee or
assignee (in cash or by credit) any unused Security Deposit held by Lessor at
the time of such transfer or assignment. Except as provided in Paragraph 15.3,
upon such transfer or assignment and delivery of the Security Deposit, as
aforesaid, the prior Lessor shall be relieved of all liability with respect to
the obligations and/or covenants under this Lease thereafter to be performed by
the Lessor. Subject to the foregoing, the obligations and/or covenants in the
Lease to be performed by the Lessor shall be binding only upon the Lessor as
hereinabove defined.

 

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

 

19. Interest on Past-Due Obligations. Any monetary payment due Lessor hereunder,
other than late charges, not received by Lessor within ten (10) days allowing
the date on which it was due, shall bear interest from the date due at the prime
rate charged by the largest state chartered bank in the state in which the
Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.

 

20. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.

 

21. Rent Defined. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.

 

22. No Prior or other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party beneficiary
of the provisions of this Paragraph 22.

 

23. Notices.

 

23.1 Notice Requirements. All notices required or permitted by this Lease shall
be in writing and may be delivered in person (by hand or by messenger or courier
service) or may be sent by regular, certified or registered mail or U.S. Postal
Service Express Mail, with postage prepaid, or by facsimile transmission during
normal business hours, and shall be deemed sufficiently given if served in a
manner specified in this Paragraph 23. The addresses noted adjacent to a Party’s
signature on this Lease shall be that Party’s address for delivery or mailing of
notice purposes. Either Party may be written notice to the other specify a
different address for notice purposes, except that upon Lessee’s taking
possession of the Premises, the Premises shall constitute Lessee’s address for
the purpose of mailing or delivery notices to Lessee. A copy of all notices
required or permitted to be given to Lessor hereunder shall be concurrently
transmitted to such party or parties at such addresses as Lessor may from time
to time hereafter designate by written notice to Lessee.

 

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23.2 Date of Notice. Any notice sent by registered or certified mail, return
receipt requested, shall be deemed given on the date of delivery shown on the
receipt card, or if no delivery date is shown, the postmark thereon. If sent by
regular mail, the notice shall be deemed given forty-eight (48) hours after the
same is addressed as required herein and mailed with postage prepaid. Notices
delivered by United States Express Mail or overnight courier that guarantees
next day delivery shall be deemed given twenty-four (24) hours after delivery of
the same to the United States Postal Service or courier. If any notice is
transmitted by facsimile transmission or similar means, the same shall be deemed
served or delivered upon telephone or facsimile confirmation of receipt of the
transmission thereof, provided a copy is also delivered via delivery or mail. If
notice is received on a Saturday or Sunday or a legal holiday, it shall be
deemed received on the next business day.

 

24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or any other term, covenant or condition hereof. Lessor’s consent
to, or approval of, any such act shall not be deemed to render unnecessary the
obtaining of Lessor’s consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor’s
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of
any provision hereof. Any payment given Lessor by Lessee may be accepted by
Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or affect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.

 

25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.

 

26. No Right to Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.

 

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

 

28. Covenants and Conditions. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.

 

29. Binding Effect; Choice of Law. This Lease shall be binding upon the Parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties thereto concerning this Lease shall be initiated in the county in which
the Premises are located.

 

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30. Subordination; Attornment; Non-Disturbance.

 

30.1 Subordination. This Lease and any Option granted hereby shall be subject
and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, “Security Device”), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidation, replacements and extensions thereof. Lessee agrees
that the Lenders holding any such Security Device shall have no duty, liability
or obligation to perform any of the obligations of Lessor under this Lease, but
that in the event of Lessor’s default with respect to any such obligation,
Lessee will give any Lender whose name and address have been furnished Lessee in
writing for such purpose notice of Lessor’s default pursuant to Paragraph 13.5.
If any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.

 

30.2 Attornment. Subject to the non-disturbance provisions of Paragraph 30.3,
Lessee agrees to attorn to a Lender or any other party who acquires ownership of
the Premises by reason of a foreclosure of a Security Device, and that in the
event of such foreclosure, such new owner shall not: (i) be liable for any act
or omission of any prior lessor or with respect to events occurring prior to
acquisition of ownership, (ii) be subject to any offsets or defenses which
Lessee might have against any prior lessor, or (iii) be bound by prepayment of
more than one month’s rent.

 

30.3 Non-Disturbance. With respect to Security Devices entered into by Lessor
after the execution of this lease, Lessee’s subordination of this Lease shall be
subject to receiving assurance (a “non-disturbance agreement”) from the Lender
that Lessee’s possession and this Lease, including any options to extend the
term hereof, will not be disturbed so long as Lessee is not in Breach hereof and
attorns to the record owner of the Premises.

 

30.4 Self-Executing. The agreements contained in this Paragraph 30 shall be
effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.

 

32. Lessor’s Access; Showing Premises; Repairs. Lessor and Lessor’s agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times for the purpose of showing the same to
prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary “For Sale” signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary “For Lease” signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee.

 

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33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor’s prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.

 

34. Signs. Lessee shall not place any sign upon the exterior of the Premises or
the Building, except that Lessee may, with Lessor’s prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee’s own business so long as such signs are in a location designated by
Lessor and comply with applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee’s business; Lessor shall be entitled to all revenues from such
advertising signs.

 

35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lessr estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor’s failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor’s election to have such
event constitute the termination of such interest.

 

36. Consents.

 

(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided herein,
wherever in this Lease the consent of a Party is required to an act by or for
the other Party, such consent shall not be unreasonably withheld or delayed.
Lessor’s actual reasonable costs and expenses (including but not limited to
architects’, attorneys’, engineers’ and other consultants’ fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent
pertaining to this Lease or the Premises, including but not limited to consents
to an assignment a subletting or the presence or use of a Hazardous Substance,
shall be paid by Lessee to Lessor upon receipt of an invoice and supporting
documentation therefor. In addition to the deposit described in Paragraph
12.2(a), Lessor may, as a condition to considering any such request by Lessee,
require that Lessee deposit with Lessor an amount of money (in addition to the
Security Deposit held under Paragraph 5) reasonably calculated by Lessor to
represent the cost Lessor will incur in considering and responding to Lessee’s
request. Any unused portion of said deposit shall be refunded to Lessee without
interest. Lessor’s consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by lessee of this Lease exists, nor shall such consent be deemed a waiver
of any then existing Default or Breach, except as may be otherwise specifically
stated in writing by Lessor at the time of such consent.

 

(b) All conditions to Lessor’s consent authorized by this Lease are acknowledged
by Lessee as being reasonable. The failure to specify herein any particular
condition to Lessor’s consent shall not preclude the impositions by Lessor at
the time of consent of such further or other conditions as are then reasonable
with reference to the particular matter for which consent is being given.

 

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37. Guarantor.

 

37.1 Form of Guaranty. If there are to be any Guarantors of this Lease per
Paragraph 1.11, the form of the guaranty to be executed by each such Guarantor
shall be in the form most recently published by the American Industrial Real
Estate Association, and each such Guarantor shall have the same obligations as
Lessee under this lease, including but not limited to the obligation to provide
the Tenancy Statement and information required in Paragraph 16.

 

37.2 Additional Obligations of Guarantor. It shall constitute a Default of the
Lessee under this lease if any such Guarantor fails or refuses, upon reasonable
request by Lessor to give: (a) evidence of the due execution of the guaranty
called for by this Lease, including the authority of the Guarantor (and of the
party signing on Guarantor’s behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.

 

38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and
the performance of all of the convenants, conditions and provisions on Lessee’s
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.

 

39. Options.

 

39.1 Definition. As used in this Lease, the word “Option” has the following
meaning: (a) the right to extend the term of this Lease or to renew this Lease
or to extend or renew any lease that Lessee has on other property of Lessor; (b)
the right of first refusal to lease the Premises or the right of first offer to
lease the Premises or the right of first refusal to lease other property of
Lessor or the right of first offer to lease other property of Lessor; (c) the
right to purchase the Premises, or the right of first refusal to purchase the
Premises, or the right of first offer to purchase the Premises, or the right to
purchase other property of Lessor, or the right of first refusal to purchase
other property of Lessor, or the right of first offer to purchase other property
of Lessor.

 

39.2 Options Personal to Original Leases. Each Option granted to Lessee in this
Lease is personal to the original Lessee named in Paragraph 1.1 hereof, and
cannot be voluntarily or involuntarily assigned or exercised by any person or
entity other than said original lessee while the original Lessee is in full and
actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.

 

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39.3 Multiple Options. In the event that Lessee has any multiple Options to
extend or renew this Lease, a later option cannot be exercised unless the prior
Options to extend or renew this Lease have been validly exercised.

 

39.4 Effect of Default on Options.

 

(a) Lessee shall have no right to exercise an Option, notwithstanding any
provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of separate Defaults under Paragraph 13.1 during the twelve
(12) month period immediately preceding the exercise of the Option, whether or
not the Defaults are cured.

 

(b) The period of time within which an Option may be exercised shall not be
extended or enlarged by reason of Lessee’s inability to exercise an Option
because of the provisions of Paragraph 39.4(a).

 

(c) All rights of Lessee under the provisions of an Option shall terminate and
be of no further force or effect, notwithstanding Lessee’s due and timely
exercise of the Option, if, after such exercise and during the term of this
Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee for a
period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.

 

40. Rules and Regulations. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations (“Rules and Regulations”) which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.

 

41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.

 

42. Reservations. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.

 

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43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment “under protest” and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation the party of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.

 

44. Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.

 

45. Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.

 

46. Offer. Preparation of this Lease by either Lessor or Lessee or Lessor’s
agent or Lessee’s agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.

 

47. Amendments. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee’s obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.

 

48. Multiple Parties. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.

 

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LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREEE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

 

IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY’S
REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND
STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE
BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS
TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A
STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS
LOCATED SHOULD BE CONSULTED.

 

The parties hereto have executed this Lease at the Place and on the dates
specified above their respective signatures.

 

Executed at:

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Executed at: Align Technology

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on: 3-10-04

  

on: 3-9-04

By LESSOR:

  

By LESSEE:

James S. Lindsey

  

Align Technology, Inc.

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

By: /s/ James S. Lindsey

--------------------------------------------------------------------------------

  

By: /s/ Emory Wright

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Name Printed: James S. Lindsey

--------------------------------------------------------------------------------

  

Name Printed: Emory Wright

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Title:

--------------------------------------------------------------------------------

  

Title: Director Operations

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By:

--------------------------------------------------------------------------------

  

By:

--------------------------------------------------------------------------------

Name Printed:

--------------------------------------------------------------------------------

  

Name Printed:

--------------------------------------------------------------------------------

Title:

--------------------------------------------------------------------------------

  

Title:

--------------------------------------------------------------------------------

 

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Address: 18 Cypress Avenue

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Address: 881 Martin Avenue

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Kentfield, CA 94904

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Santa Clara, CA 95050

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Telephone: (415) 453-2583

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Telephone: (408) 470-1238

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Facsimile: (415) 453-8465

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Facsimile: (408) 470-1011

--------------------------------------------------------------------------------

BROKER:

  

BROKER:

Executed at:

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Executed at:

--------------------------------------------------------------------------------

on:

--------------------------------------------------------------------------------

  

on:

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By:

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By:

--------------------------------------------------------------------------------

Name Printed:

--------------------------------------------------------------------------------

  

Name Printed:

--------------------------------------------------------------------------------

Title:

--------------------------------------------------------------------------------

  

Title:

--------------------------------------------------------------------------------

Address:

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Address:

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

  

 

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Telephone: (        )

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Telephone: (        )

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Facsimile: (        )

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Facsimile: (        )

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NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South Flower
Street, Suite 600, Los Angeles, CA 90017. (213) 687-8777.

 

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Addendum to

Standard Industrial/Commercial Multi-Tenant Lease Modified Net

between

James S. Lindsey

and

Align Technology, Inc.

 

This Addendum is entered into this day March 9, 2004, by and between James S.
Lindsey (“Lessor”) and Align Technology, Inc. (“Lessee”) for Premises located at
831 Martin Avenue, Santa Clara, CA 95050.

 

This Addendum modifies the Standard Industrial/Commercial Multi-Tenant Lease -
Modified Net (“Agreement”), and all “Section” references are to the numbered
Paragraphs of the relevant portions of the Agreement. Notwithstanding anything
to the contrary set forth in the Agreement, any attachment, appendix or other
document, the following terms and conditions shall apply, and all conflicting,
inconsistent or additional terms or conditions shall be of no force or effect.

 

49. Notwithstanding Paragraph 4.2(a), Lessee shall engage and pay for its own
separate trash service.

 

50. Lessee shall not embark upon any new penetrations of the roof membrane
without specific written approval by Lessor.

 

51. Notwithstanding Paragraph 4.2(a) (vii), if an insured loss occurs within
Lessee’s demised premises, then Lessee shall pay the entire insurance deductible
amount, not to exceed $5000.00. In case of glass breakage upon the premises from
vandalism, Lessee shall pay for the costs of replacement in excess of what is
available from insurance.

 

52. Notwithstanding anything contained in the Lease, Lessor shall be
responsible, at Lessor’s sole cost, to make repairs to the roof membrane. Should
the roof membrane require replacement, Lessor shall accomplish the replacement
at Lessor’s sole cost. Subsequent to any roof replacement, roof maintenance and
repairs shall be governed by Paragraph 4.2.

 

53. Paragraph 13.1 (b) is to be deleted and the following language substituted:

 

13.1(b)(i) The failure by Lessee to make any payment of Base Rent, Lessee’s
Share of Common Area Operation Expenses, or any other monetary payment required
to be made by Lessee hereunder as and when due.

 

13.1(b)(ii) Except as expressly otherwise provided in this Lease, the failure of
Lessee to fulfill any obligation under this Lease which endangers or threatens
life or property, where such failure continues for a period of three (3) days
following written notice thereof by or on behalf of Lessor to Lessee.

 

54. Paragraphs 15.2, 15.3, and 31 of the Lease are hereby deleted.

 

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55. DISCLOSURE: One of the principals of the Premises is a licensed California
real estate agent acting as an agent in this transaction.

 

56. At the end of Paragraph 6.2 (c), add “The foregoing indemnity does not apply
to any Hazardous Substance or other material which is present in, on or about
the Premises or the Property as of the Commencement Date or such Hazardous
Substance or material which migrates to or under the Premises or the Property
from outside the Property or Premises during the term of this Lease, unless due
to release by Tenant or its employees, agents, contractors and invitees. Lessor
hereby releases Tenant from any liability to Lessor for any such contamination
or release which existed as of the Commencement Date or was caused by someone
other than Tenant, its employees, agents, contractors or invitees”

 

57, Notwithstanding Paragraph 7.1 (a), Lessee shall not be responsible for a
repair if Lessee can show that the repair is required exclusively because of a
prior use.

 

58. The consents required of Lessor in Paragraphs 12.1 (a) and (b) shall not be
unreasonably withheld by Lessor.

 

59. Paragraph 12.2 (e) line 4, the phrase “or ten percent (10%) of the monthly
Base Rent applicable to the portion of the Premises which is the subject of the
proposed assignment or sublease, whichever is greater” is deleted.

 

60. Paragraph 12.2 (g) shall be deleted.

 

61. Paragraph 16.2 shall be modified to the effect that Lessor shall only
require Lessee to furnish a financial statement once in any twelve- (12)- month
period.

 

62. Add the following language to the beginning of Paragraph 3.1: “Lessee shall
have access to the premises 24 hours per day, 7 days a week.”

 

63. Section 8.8. Insert at the beginning of Section 8.8: “Except to the extent
caused by the willful misconduct of Lessor or persons under Lessor’s control.”

 

64. Section 40.0 Insert as the last sentence. “To the extent that there is a
conflict between the terms of this Lease and the Rules and Regulation, the terms
of this Lease shall control.”

 

65. Notwithstanding anything to the contrary contained in Sections 6.4 or 32 or
elsewhere in this Lease, except in case of emergency, neither Lessor nor any
parties under Lessor’s control shall enter onto the Premises unless (i) Lessor
has given Lessee at least 24 hours prior notice (ii) Lessor has complied and
shall comply with Lessee’s security requirement (which Lessor acknowledges will
be extensive, due to the extremely sensitive and confidential nature of Lessee’s
business), which may include but are not limited to the requirement that a
representative of Lessee accompany Lessor or the parties under Lessor’s control
when in certain parts of the premises.

 

66. The terms of Article 12 of this Lease and Articles 59 through 60 of this
Addendum also shall not apply to any assignment or other transfer to an entity
which controls, is controlled by or is under common control with Lessee or any
successor to Lessee or which succeeds, to substantially all of

 

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Lessee’s assets and business by merger, consolidation, reorganization or
purchase. Notwithstanding anything to the contrary in this Lease, for the
purposes of Article 12 of this lease and Articles 59 through 60 of this
Addendum, the term “assignment” shall not be deemed to include the trading of
Lessee’s stock on a nationally recognized exchange or pursuant to an initial
public offering.

 

67. The phrase “Reasonable amounts of” shall be inserted before the text of
Section 4.2(a)(iv).

 

68. The following sentence shall be inserted after the first sentence of Section
7.4(c); “Notwithstanding the foregoing, if this Lease is terminated due to
damage pursuant to the terms of Article 9, Lessee shall not be required to
repair any damage to the premises due to casualty upon surrender of the Premises
to Lessor.”

 

69. The premises are leased “as-is”. Lessor makes no warranty or representation
regarding lighting, electrical services, or HVAC systems.

 

69. Lessee has deposited a security deposit of One Million One Hundred
Seventy-five Thousand Dollars ($1,175,000.00) with Lessor as security for the
lease of the premises at 881 Martin Ave (the “881 Martin Deposit”). Upon the
happening of any event which would entitle Lessor to use or apply monies from a
security deposit pursuant to Paragraph 5 of this lease, Lessor will be entitled
to use, apply, or retain funds from the 881 Martin Deposit and thereafter
require Lessee to restore the 881 Martin Deposit pursuant to Paragraph 5 of this
lease.

 

70. CAPITAL EXPENDITURES. If any repair or replacement of existing buildings,
equipment or facilities (i.e., HVAC components, roof membrane, parking lot) is
required during the term, or any improvement is required to comply with laws
enacted after the commencement date, and such repair, replacement and/or
improvement constitutes a capital expenditure under generally accepted
accounting principles, and the cost apportioned to Lessee under this (831
Martin) lease will exceed $10,000.00, Lessor may

 

1. Make the repair, replacement, or improvement, under which circumstance
Lessee’s obligation shall be limited to $10,000, or

 

2. Decline to make the repair, replacement, or improvement, in which case Lessee
may also decline to make the repair, or may undertake to make the repair at
Lessee’s sole cost.

 

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In Witness Whereof, Align Technology, Inc., and Lessor have executed this
Addendum to the Agreement as of the date first written above.

 

LESSOR:

     

LESSEE: Align Technology, Inc.

By:

 

/s/ James S. Lindsey

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By:

 

/s/ Emory Wright

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James S. Lindsey

           

Date:

 

3-10-04

     

Name:

 

Emory Wright

--------------------------------------------------------------------------------

           

Title:

 

Director Operations

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Date:

 

3-9-04

           

By:

 

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Name:

 

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Title:

 

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Date:

 

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