Exhibit 10.1

 

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STANDARD MULTI-TENANT OFFICE LEASE - GROSS

AIR COMMERCIAL REAL ESTATE ASSOCIATION

 

1.                                      Basic Provisions (“Basic Provisions”).

 

1.1                               Parties:  This Lease (“Lease”), dated for
reference purposes only April 14, 2008 is made by and between Allen Joseph
Blackmore, Trustee of the Blackmore Family Trust, Restated 1995 (“Lessor”) and
Genoptix, Inc., a Delaware Corporation (“Lessee”), (collectively the “Parties”,
or individually a “Party”).

 

1.2                               (a)                                 
Premises:  That certain portion of the Project (as defined below), known as
Suite Numbers(s) 100, 106 & 200, consisting of approximately 42,948 rentable
square feet and approximately 36,397 useable square feet (“Premises”).  The
Premises are located at:  1811 Aston Avenue in the City of Carlsbad, County of
San Diego, State of California, with zip code 92008.  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, the
exterior walls, the area above the dropped ceilings, or the utility raceways of
the building containing the Premises (“Building”) or to any other buildings in
the Project.  The Premises, the Building, the Common Areas, the land upon which
they are located, along with all other buildings and improvements thereon, are
herein collectively referred to as the “Project.”  The Project consists of
approximately 56,721 rentable square feet.  (See also Paragraph 2)

 

(b)                                  Parking:  one hundred seventy three (173)
unreserved and zero (0) reserved vehicle parking spaces at a monthly cost of
$zero (0) per unreserved space and $zero (0) per reserved space.  (See Paragraph
2.6)

 

1.3                               Term:  Six (6) years and zero (0) months
(“Original Term”) commencing January 1, 2009 (“Commencement Date”) and ending
December 31, 2014 (“Expiration Date”).  (See also Paragraph 3)

 

1.4                               Early Possession:  Upon substantial completion
of tenant improvements to Suite 200 (“Early Possession Date”).  (See also
Paragraphs 3.2 and 3.3)

 

1.5                               Base Rent:  $111,665.00 per month (“Base
Rent”), payable on the first day of each month commencing January 1, 2009.  (See
also Paragraph 4)

 

x  If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted.

 

1.6                               Lessee’s Share of Operating Expense Increase: 
seventy-six percent (76%) (“Lessee’s Share”).  Lessee’s Share has been
calculated by dividing the approximate rentable square footage of the Premises
by the total approximate square footage of the rentable space contained in the
Project and shall not be subject to revision except in connection with an actual
change in the size of the Premises or a change in the space available for lease
in the Project.

 

1.7                               Base Rent and Other Monies Paid Upon
Execution:

 

(a)                                  Base Rent:  $111,665.00 for the period
January 1-31, 2009.

 

(b)                                  Security Deposit:  $111.665.00 (“Security
Deposit”).  (See also Paragraph 5)

 

(c)                                  Parking:  $0.00 for the period
                        .

 

(d)                                  Other:  $0.00 for
                                      .

 

(e)                                  Total Due Upon Execution of this Lease: 
$223,330.00.

 

1.8                               Agreed Use:  General office uses and any other
legal related uses permitted under all applicable laws and zoning.  (See also
Paragraph 6)

 

1.9                               Base Year; Insuring Party. The Base Year is
2009. Lessor is the “Insuring Party”. (See also Paragraphs 4.2
and 8)

 

1.10                        Real Estate Brokers:  (See also Paragraph 15)

 

1.11                        Guarantor.  The obligations of the Lessee under this
Lease shall be guaranteed by N/A (“Guarantor”).  (See also Paragraph 37)

 

1.12                        Business Hours for the Building:  8:00 a.m. to
6:00 p.m., Mondays through Fridays (except Building Holidays) and 8:00 a.m. to
12:00 p.m. on Saturdays (except Building Holidays). 

 

 

 

 

 

 

 

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“Building Holidays” shall mean the dates of observation of New Year’s Day,
President’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day, and                                 .

 

1.13                        Lessor Supplied Services.  Notwithstanding the
provisions of Paragraph 11.1, Lessor is NOT obligated to provide the following:

 

o    Janitorial services

 

x   Electricity to individual suites

 

x   Other (specify):  telephone to individual suites

 

1.14                        Attachments.  Attached hereto are the following, all
of which constitute a part of this Lease:

 

x   an Addendum consisting of Paragraphs 50 through 73;

 

o    a plot plan depicting the Premises;

 

o    a current set of the Rules and Regulations;

 

x   Tenant Improvement Agreement ;

 

o    a janitorial schedule;

 

o    other (specify):

.

 

2.                                      Premises.

 

2.1                               Letting.  Lessor hereby leases to Lessee, and
Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and
upon all of the terms, covenants and conditions set forth in this Lease.  Unless
otherwise provided herein, any statement of size set forth in this Lease, or
that may have been used in calculating Rent, is an approximation which the
Parties agree is reasonable and any payments based thereon are not subject to
revision whether or not the actual size is more or less.

 

2.2                               Condition.  Lessor shall deliver the Premises
to Lessee in a clean condition on the Commencement Date or the Early Possession
Date, whichever first occurs (“Start Date”), and warrants that the existing
electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air
conditioning systems (“HVAC”), and all other items which the Lessor is obligated
to construct pursuant to the Work Letter attached hereto, if any, other than
those constructed by Lessee, shall be in good operating condition on said date,
that the structural elements of the roof, bearing walls and foundation of the
Unit shall be free of material defects, and that the Premises do not contain
hazardous levels of any mold or fungi defined as toxic under applicable state or
federal law.

 

2.3                               Compliance.  Lessor warrants to the best of
its knowledge that the improvements comprising the Premises and the Common Areas
comply with the building codes that were in effect at the time that each such
improvement, or portion thereof, was constructed, and also with all applicable
laws, covenants or restrictions of record, regulations, and ordinances
(“Applicable Requirements”) in effect on the Start Date.  Said warranty does not
apply to the use to which Lessee will put the Premises, modifications which may
be required by the Americans with Disabilities Act or any similar laws as a
result of Lessee’s use (see Paragraph 49), or to any Alterations or Utility
Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. 
NOTE:  Lessee is responsible for determining whether or not the zoning and other
Applicable Requirements are appropriate for Lessee’s intended use, and
acknowledges that past uses of the Premises may no longer be allowed.  If the
Premises do not comply with said warranty, Lessor shall, except as otherwise
provided, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify the
same.  If the Applicable Requirements are hereafter changed so as to require
during the term of this Lease the construction of an addition to or an
alteration of the Premises, the remediation of any Hazardous Substance, or the
reinforcement or other physical modification of the Premises (“Capital
Expenditure”), Lessor and Lessee shall allocate the cost of such work as
follows:

 

(a)                                 Subject to Paragraph 2.3(c) below, if such
Capital Expenditures are required as a result of the specific and unique use of
the Premises by Lessee as compared with uses by tenants in general, Lessee shall
be fully responsible for the cost thereof, provided, however that if such
Capital Expenditure is required during the last 2 years of this Lease and the
cost thereof exceeds 6 months’ Base Rent, Lessee may instead terminate this
Lease unless Lessor notifies Lessee, in writing, within 10 days after receipt of
Lessee’s termination notice that Lessor has elected to pay the difference
between the actual cost thereof and the amount equal to 6 months’ Base Rent.  If
Lessee elects termination, Lessee shall immediately cease the use of the
Premises which requires such Capital Expenditure and deliver to Lessor written
notice specifying a termination date at least 90 days thereafter.  Such
termination date shall, however, in no event be earlier than the last day that
Lessee could legally utilize the Premises without commencing such Capital
Expenditure.

 

(b)                                 If such Capital Expenditure is not the
result of the specific and unique use of the Premises by Lessee (such as,
governmentally mandated seismic modifications), then Lessor shall pay for such
Capital Expenditure and Lessee shall only be obligated to pay, each month during
the remainder of

 

 

 

 

 

 

 

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the term of this Lease and any exercised Option Period , on the date that on
which the Base Rent is due, an amount equal to 144th of the portion of such
costs reasonably attributable to the Premises.  Lessee shall pay Interest on the
balance but may prepay its obligation at any time.  If, however, such Capital
Expenditure is required during the last 2 years of this Lease or if Lessor
reasonably determines that it is not economically feasible to pay its share
thereof, Lessor shall have the option to terminate this Lease upon 90 days prior
written notice to Lessee unless Lessee notifies Lessor, in writing, within 10
days after receipt of Lessor’s termination notice that Lessee will pay for such
Capital Expenditure.

 

(c)                                  Notwithstanding the above, the provisions
concerning Capital Expenditures are intended to apply only to nonvoluntary,
unexpected, and new Applicable Requirements.  If the Capital Expenditures are
instead triggered by Lessee as a result of an actual or proposed change in use,
change in intensity of use, or modification to the Premises then, and in that
event, Lessee shall either:  (i) immediately cease such changed use or intensity
of use and/or take such other steps as may be necessary to eliminate the
requirement for such Capital Expenditure, or (ii) complete such Capital
Expenditure at its own expense.  Lessee shall not have any right to terminate
this Lease.

 

2.4                               Acknowledgements.  Lessee acknowledges that: 
(a) Lessee has been advised by Lessor and/or Brokers to satisfy itself with
respect to the condition of the Premises (including but not limited to the
electrical, HVAC and fire sprinkler systems, security, environmental aspects,
and compliance with Applicable Requirements), and their suitability for Lessee’s
intended use, (b) Lessee has made such investigation as it deems necessary with
reference to such matters and assumes all responsibility therefor as the same
relate to its occupancy of the Premises, and (c) neither Lessor, Lessor’s
agents, nor Brokers have made any oral or written representations or warranties
with respect to said matters other than as set forth in this Lease.  In
addition, Lessor acknowledges that:  (i) Brokers have made no representations,
promises or warranties concerning Lessee’s ability to honor the Lease or
suitability to occupy the Premises, and (ii) it is Lessor’s sole responsibility
to investigate the financial capability and/or suitability of all proposed
tenants.

 

2.5                               Vehicle Parking.  So long as Lessee is not in
default, and subject to the Rules and Regulations attached hereto, and as
established by Lessor from time to time, Lessee shall be entitled to rent and
use the number of parking spaces specified in Paragraph 1.2(b) at the rental
rate applicable from time to time for monthly parking as set by Lessor and/or
its licensee.

 

(a)                                  If Lessee commits, permits or allows any of
the prohibited activities described in the Lease or the rules then in effect,
then Lessor shall have the right, upon notice to Lessee, in addition to such
other rights and remedies that it may have, to remove or tow away the vehicle
involved and charge the cost to Lessee, which cost shall be immediately payable
upon demand by Lessor.

 

2.6                               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 Project and interior utility raceways and
installations within the Premises that are provided and designated by the Lessor
from time to time for the general nonexclusive use of Lessor, Lessee and other
tenants of the Project and their respective employees, suppliers, shippers,
customers, contractors and invitees, including, but not limited to, common
entrances, lobbies, corridors, stairwells, public restrooms, elevators, parking
areas, loading and unloading areas, trash areas, roadways, walkways, driveways
and landscaped areas.

 

2.7                               Common Areas - Lessee’s Rights.  Lessor grants
to Lessee, for the benefit of Lessee and its employees, suppliers, shippers,
contractors, customers and invitees, during the term of this Lease, the
nonexclusive 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 Project.  Under
no circumstances shall the right herein granted to use the Common Areas be
deemed to include the right to store any property, temporarily or permanently,
in the Common Areas.  Any such storage shall be permitted only by the prior
written consent of Lessor or Lessor’s designated agent, which consent may be
revoked at any time.  In the event that any unauthorized storage shall occur
then Lessor shall have the right, 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.

 

2.8                               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 adopt, modify, amend and enforce reasonable rules and regulations (“Rules and
Regulations”) 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 Project and their invitees.  The Lessee agrees to abide by and conform to
all such Rules and Regulations, and shall use its best efforts to cause its
employees, suppliers, shippers, customers, contractors and invitees to so abide
and conform.  Lessor shall not be responsible to Lessee for the noncompliance
with said Rules and Regulations by other tenants of the Project.

 

 

 

 

 

 

 

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2.9                               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 the lobbies, windows, stairways, air shafts, elevators, escalators,
restrooms, 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 Project to be a part of the Common Areas;

 

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

 

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

 

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

 

3.                                      Term.

 

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

 

3.2                               Early Possession.  If Lessee totally or
partially occupies the Premises prior to the Commencement Date, the obligation
to pay Base Rent shall be abated for the period of such early possession.  All
other terms of this Lease (including but not limited to the obligations to pay
Lessee’s Share of the Operating Expense Increase) shall be in effect during such
period.  Any such early possession shall not affect the Expiration Date.

 

3.3                               Delay In Possession.  Lessor agrees to use its
best commercially reasonable efforts to deliver possession of the Premises to
Lessee by the Commencement Date.  If, despite said efforts, Lessor is unable to
deliver possession by such date, Lessor shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease.  Lessee
shall not, however, be obligated to pay Rent or perform its other obligations
until Lessor delivers possession of the Premises and any period of rent
abatement that Lessee would otherwise have enjoyed shall run from the date of
delivery of possession and continue for a period equal to what Lessee would
otherwise have enjoyed under the terms hereof, but minus any days of delay
caused by the acts or omissions of Lessee.  If possession is not delivered
within 60 days after the Commencement Date, as the same may be extended under
the terms of any Work Letter executed by Parties, Lessee may, at its option, by
notice in writing within 10 days after the end of such 60 day period, cancel
this Lease, in which event the Parties shall be discharged from all obligations
hereunder.  If such written notice is not received by Lessor within said 10 day
period, Lessee’s right to cancel shall terminate.  If possession of the Premises
is not delivered within 120 days after the Commencement Date, this Lease shall
terminate unless other agreements are reached between Lessor and Lessee, in
writing.

 

3.4                               Lessee Compliance.  Lessor shall not be
required to deliver possession of the Premises to Lessee until Lessee complies
with its obligation to provide evidence of insurance (Paragraph 8.5).  Pending
delivery of such evidence, Lessee shall be required to perform all of its
obligations under this Lease from and after the Start Date, including the
payment of Rent, notwithstanding Lessor’s election to withhold possession
pending receipt of such evidence of insurance.  Further, if Lessee is required
to perform any other conditions prior to or concurrent with the Start Date, the
Start Date shall occur but Lessor may elect to withhold possession until such
conditions are satisfied.

 

4.                                      Rent.

 

4.1                               Rent Defined.  All monetary obligations of
Lessee to Lessor under the terms of this Lease (except for the Security Deposit)
are deemed to be rent (“Rent”).

 

4.2                               Operating Expense Increase.  Lessee shall pay
to Lessor during the term hereof, in addition to the Base Rent, Lessee’s Share
of the amount by which all Operating Expenses for each Comparison Year exceeds
the amount of all Operating Expenses for the Base Year, such excess being
hereinafter referred to as the “Operating Expense Increase”, in accordance with
the following provisions:

 

(a)                                  “Base Year” is as specified in Paragraph
1.9.

 

(b)                                  “Comparison Year” is defined as each
calendar year during the term of this Lease subsequent to the Base Year;
provided, however, Lessee shall have no obligation to pay a share

 

 

 

 

 

 

 

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of the Operating Expense Increase applicable to the first 12 months of the Lease
Term (other than such as are mandated by a governmental authority, as to which
government mandated expenses Lessee shall pay Lessee’s Share, notwithstanding
they occur during the first twelve (12) months).  Lessee’s Share of the
Operating Expense Increase for the first and last Comparison Years of the Lease
Term shall be prorated according to that portion of such Comparison Year as to
which Lessee is responsible for a share of such increase.

 

(c)                                  The following costs relating to the
ownership and operation of the Project, calculated as if the Project was at
least 100% occupied, are defined as “Operating Expenses”:

 

(i)                                    Costs relating to the operation, repair,
and maintenance in neat, clean, safe, good order and condition, but not the
replacement (see subparagraph (g)), of the following:

 

(1)                                 The Common Areas, including their surfaces,
coverings, decorative items, carpets, drapes and window coverings, and including
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, stairways, parkways, driveways, landscaped areas, striping, bumpers,
irrigation systems, Common Area lighting facilities, building exteriors and
roofs, fences and gates;

 

(2)                                 All heating, air conditioning, plumbing,
electrical systems, life safety equipment, communication systems and other
equipment used in common by, or for the benefit of, tenants or occupants of the
Project, including elevators and escalators, tenant directories, fire detection
systems including sprinkler system maintenance and repair.

 

(ii)                                The cost of trash disposal, janitorial and
security services, pest control services, and the costs of any environmental
inspections;

 

(iii)                            The cost of any other service to be provided by
Lessor that is elsewhere in this Lease stated to be an “Operating Expense”;

 

(iv)                             The cost of the premiums for the insurance
policies maintained by Lessor pursuant to paragraph 8 and any deductible portion
of an insured loss concerning the Building or the Common Areas;

 

(v)                                 The amount of the Real Property Taxes
payable by Lessor pursuant to paragraph 10;

 

(vi)                             The cost of water, sewer, gas, electricity, and
other publicly mandated services not separately metered;

 

(vii)                         Labor, salaries, and applicable fringe benefits
and costs, materials, supplies and tools, used in maintaining and/or cleaning
the Project and accounting and management fees attributable to the operation of
the Project;

 

(viii)                     The cost of any capital improvement to the Building
or the Project not covered under the provisions of Paragraph 2.3 provided;
however, that Lessor shall allocate the cost of any such capital improvement
over a 12 year period and Lessee shall not be required to pay more than Lessee’s
Share of 1/144th of the cost of such Capital Expenditure in any given month;

 

(ix)                            The cost to replace equipment or improvements
that have a useful life for accounting purposes of 5 years or less.

 

(x)                                Reserves set aside for maintenance, repair
and/or replacement of Common Area improvements and equipment.

 

(d)                                  Any item of Operating Expense that is
specifically attributable to the Premises, the Building or to any other building
in the Project or to the operation, repair and maintenance thereof, shall be
allocated entirely to such Premises, Building, or other building.  However, any
such item that is 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 Project.

 

(e)                                  The inclusion of the improvements,
facilities and services set forth in Subparagraph 4.2(c) shall not be deemed to
impose an obligation upon Lessor to either have said improvements or facilities
or to provide those services unless the Project 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.

 

(f)                                    Lessee’s Share of Operating Expense
Increase is payable monthly on the same day as the Base Rent is due hereunder. 
The amount of such payments shall be based on Lessor’s estimate of the Operating
Expense Expenses.  Within 60 days after the expiration of each calendar year,
written request (but not more than once each year) Lessor shall deliver to
Lessee a reasonably detailed statement showing Lessee’s Share of the actual
Common Area Operating Expenses incurred during the preceding year.  If Lessee’s
payments during such Year exceed Lessee’s Share, Lessee shall credit the

 

 

 

 

 

 

 

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amount of such over-payment against Lessee’s future payments.  If Lessee’s
payments during such Year were less than Lessee’s Share, Lessee shall pay to
Lessor the amount of the deficiency within 10 30 days after delivery by Lessor
to Lessee of said statement.  Lessor and Lessee shall forthwith adjust between
them by cash payment any balance determined to exist with respect to that
portion of the last Comparison Year for which Lessee is responsible as to
Operating Expense Increases, notwithstanding that the Lease term may have
terminated before the end of such Comparison Year.

 

(g)                                 Operating Expenses shall not include the
costs of replacement for equipment or capital components such as the roof,
foundations, exterior walls or a Common Area capital improvement, such as the
parking lot paving, elevators, fences that have a useful life for accounting
purposes of 5 years or more.

 

(h)                                 Operating Expenses shall not include any
expenses paid by any tenant directly to third parties, or as to which Lessor is
otherwise reimbursed by any third party, other tenant, or by insurance proceeds.

 

4.3                               Payment.  Lessee shall cause payment of Rent
to be received by Lessor in lawful money of the United States on or before the
day on which it is due, without offset or deduction.  All monetary amounts shall
be rounded to the nearest whole dollar.  In the event that any invoice prepared
by Lessor is inaccurate such inaccuracy shall not constitute a waiver and Lessee
shall be obligated to pay the amount set forth in this Lease.  Rent for any
period during the term hereof which is for less than one full calendar month
shall be prorated based upon the actual number of days of said month.  Payment
of Rent shall be made to Lessor at its address stated herein or to such other
persons or place as Lessor may from time to time designate in writing. 
Acceptance of a payment which is less than the amount then due shall not be a
waiver of Lessor’s rights to the balance of such Rent, regardless of Lessor’s
endorsement of any check so stating.  In the event that any four (4) checks,
drafts, or other instrument of payment given by Lessee to Lessor is dishonored
for any reason during the term of this lease, Lessor, at its option, may require
all future Rent be paid by cashier’s check.  Payments will be applied first to
accrued late charges and attorney’s fees, second to accrued interest, then to
Base Rent and Common Area Operating Expenses, and any remaining amount to any
other outstanding charges or costs.

 

5.                                      Security Deposit.  Lessee shall deposit
with Lessor upon execution hereof the Security Deposit as security for Lessee’s
faithful performance of its obligations under this Lease.  If Lessee fails to
pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or
retain all or any portion of said Security Deposit for the payment of any amount
due already due Lessor, for Rents which will be due in the future, and/ or to
reimburse or compensate Lessor for any liability, expense, loss or damage which
Lessor may suffer or incur by reason thereof.  If Lessor uses or applies all or
any portion of the Security Deposit, Lessee shall within 10 days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease.  If the Base Rent increases
during the term of this Lease, Lessee shall, upon written request from Lessor,
deposit additional monies with Lessor so that the total amount of the Security
Deposit shall at all times bear the same proportion to the increased Base Rent
as the initial Security Deposit bore to the initial Base Rent.  Should the
Agreed Use be amended to accommodate a material change in the business of Lessee
or to accommodate a sublessee or assignee, Lessor shall have the right to
increase the Security Deposit to the extent necessary, in Lessor’s reasonable
judgment, to account for any increased wear and tear that the Premises may
suffer as a result thereof.  If a change in control of Lessee occurs during this
Lease and following such change the financial condition of Lessee is, in
Lessor’s reasonable judgment, significantly reduced, Lessee shall deposit such
additional monies with Lessor as shall be sufficient to cause the Security
Deposit to be at a commercially reasonable level based on such change in
financial condition.  Lessor shall not be required to keep the Security Deposit
separate from its general accounts.  Within 90 sixty days after the expiration
or termination of this Lease, Lessor shall return that portion of the Security
Deposit not used or applied by Lessor.  No part of the Security Deposit shall be
considered to be held in trust, to bear interest or to be prepayment for any
monies to be paid by Lessee under this Lease.

 

6.                                      Use.

 

6.1                               Use.  Lessee shall use and occupy the Premises
only for the Agreed Use, or any other legal use which is reasonably comparable
thereto, and for no other purpose.  Lessee shall not use or permit the use of
the Premises in a manner that is unlawful, creates damage, waste or a nuisance,
or that unreasonably disturbs occupants of or causes damage to neighboring
premises or properties.  Other than guide, signal and seeing eye dogs, Lessee
shall not keep or allow in the Premises any pets, animals, birds, fish, or
reptiles.  Lessor shall not unreasonably withhold or delay its consent to any
written request for a modification of the Agreed Use, so long as the same will
not impair the structural integrity of the improvements of the Building, will
not adversely affect the mechanical, electrical, HVAC, and other systems of the
Building, and/or will not affect the exterior appearance of the Building.  If
Lessor elects to withhold consent, Lessor shall within 7 days after such request
give written notification of same, which notice shall include an explanation of
Lessor’s objections to the change in the Agreed Use.

 

6.2                               Hazardous Substances.

 

(a)                                  Reportable Uses Require Consent.  The term
“Hazardous Substance” as used in this Lease shall mean any product, substance,
or waste whose presence, use, manufacture, disposal, transportation, or release,
either by itself or in combination with other materials expected to be

 

 

 

 

 

 

 

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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 Substances shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, and/or crude oil or any products, byproducts
or fractions thereof.  Lessee shall not engage in any activity in or on the
Premises which constitutes a Reportable Use of Hazardous Substances without the
express prior written consent of Lessor and timely compliance (at Lessee’s
expense) with all Applicable Requirements.  “Reportable Use” shall mean (i) the
installation or use of any above or below ground storage tank, (ii) the
generation, possession, storage, use, transportation, or disposal 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/or (iii) the presence at the Premises of a Hazardous
Substance with respect to which any Applicable Requirements requires that a
notice be given to persons entering or occupying the Premises or neighboring
properties.  Notwithstanding the foregoing, Lessee may use any ordinary and
customary materials reasonably required to be used in the normal course of the
Agreed Use such as ordinary office supplies (copier toner, liquid paper, glue,
etc.) and common household cleaning materials, so long as such use is in
compliance with all Applicable Requirements, is not a Reportable Use, and does
not expose the Premises or neighboring property to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor.  In
addition, Lessor may condition its consent to any Reportable Use upon receiving
such additional assurances as Lessor reasonably deems necessary to protect
itself, the public, the Premises and/or the environment against damage,
contamination, injury and/or liability, including, but not limited to, the
installation (and removal on or before Lease expiration or termination) of
protective modifications (such as concrete encasements) and/or increasing the
Security Deposit.

 

(b)                                  Duty to Inform Lessor.  If Lessee knows, or
has reasonable cause to believe, that a Hazardous Substance has come to be
located in, on, under or about the Premises, other than as previously consented
to by Lessor, Lessee shall immediately give written notice of such fact to
Lessor, and provide Lessor with a copy of any report, notice, claim or other
documentation which it has concerning the presence of such Hazardous Substance.

 

(c)                                  Lessee Remediation.  Lessee shall not cause
or permit any Hazardous Substance to be spilled or released in, on, under, or
about the Premises (including through the plumbing or sanitary sewer system) and
shall promptly, at Lessee’s expense, comply with all Applicable Requirements and
take all investigatory and/or remedial action reasonably recommended, whether or
not formally ordered or required, for the cleanup of any contamination of, and
for the maintenance, security and/or monitoring of the Premises or neighboring
properties, that was caused or materially contributed to by Lessee, or
pertaining to or involving any Hazardous Substance brought onto the Premises
during the term of this Lease, by or for Lessee, or any third party.

 

(d)                                  Lessee Indemnification.  Lessee shall
indemnify, defend and hold Lessor, its agents, employees, lenders and ground
lessor, if any, harmless from and against any and all loss of rents and/or
damages, liabilities, judgments, claims, expenses, penalties, and attorneys’ and
consultants’ fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee, or any third party (provided, however, that
Lessee shall have no liability under this Lease with respect to underground
migration of any Hazardous Substance under the Premises from areas outside of
the Project not caused or contributed to by Lessee).  Lessee’s obligations shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessee, and the cost
of investigation, removal, remediation, restoration and/or abatement, and shall
survive the expiration or termination of this Lease.  No termination,
cancellation or release agreement entered into by Lessor and Lessee shall
release Lessee from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed by Lessor in writing at the time of
such agreement.

 

(e)                                  Lessor Indemnification.  Lessor and its
successors and assigns shall indemnify, defend, reimburse and hold Lessee, its
employees and lenders, harmless from and against any and all environmental
damages, including the cost of remediation, which result from Hazardous
Substances which existed on the Premises prior to Lessee’s occupancy or which
are caused by the gross negligence or willful misconduct of Lessor, its agents
or employees.  Lessor’s obligations, as and when required by the Applicable
Requirements, shall include, but not be limited to, the cost of investigation,
removal, remediation, restoration and/or abatement, and shall survive the
expiration or termination of this Lease.

 

(f)                                    Investigations and Remediations.  Lessor
shall retain the responsibility and pay for any investigations or remediation
measures required by governmental entities having jurisdiction with respect to
the existence of Hazardous Substances on the Premises prior to Lessee’s
occupancy, unless such remediation measure is required as a result of Lessee’s
use (including “Alterations”, as defined in paragraph 7.3(a) below) of the
Premises, in which event Lessee shall be responsible for such payment.  Lessee
shall cooperate fully in any such activities at the request of Lessor, including
allowing Lessor and Lessor’s agents to have reasonable access to the Premises at
reasonable times in order to carry out Lessor’s investigative and remedial
responsibilities.

 

(g)                                 Lessor Termination Option.  If a Hazardous
Substance Condition (see Paragraph 9.1(e)) occurs during the term of this Lease,
unless Lessee is legally responsible therefor (in

 

 

 

 

 

 

 

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which case Lessee shall make the investigation and remediation thereof required
by the Applicable Requirements and this Lease shall continue in full force and
effect, but subject to Lessor’s rights under Paragraph 6.2(d) 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 remediate such condition exceeds 12
times the then monthly Base Rent or $100,000, whichever is greater, give written
notice to Lessee, within 30 days after receipt by Lessor of knowledge of the
occurrence of such Hazardous Substance Condition, of Lessor’s desire to
terminate this Lease as of the date 60 days following the date of such notice. 
In the event Lessor elects to give a termination notice, Lessee may, within 10
days thereafter, give written notice to Lessor of Lessee’s commitment to pay the
amount by which the cost of the remediation of such Hazardous Substance
Condition exceeds an amount equal to 12 times the then monthly Base Rent or
$100,000, whichever is greater.  Lessee shall provide Lessor with said funds or
satisfactory assurance thereof within 30 days following such commitment.  In
such event, this Lease shall continue in full force and effect, and Lessor shall
proceed to make such remediation as soon as reasonably possible after the
required funds are available.  If Lessee does not give such notice and provide
the required funds or assurance thereof within the time provided, this Lease
shall terminate as of the date specified in Lessor’s notice of termination.

 

6.3                               Lessee’s Compliance with Applicable
Requirements.  Except as otherwise provided in this Lease, Lessee shall, at
Lessee’s sole expense, fully, diligently and in a timely manner, materially
comply with all Applicable Requirements, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor’s
engineers and/or consultants which relate in any manner to the Premises, without
regard to whether said requirements are now in effect or become effective after
the Start Date.  Lessee shall, within 10 days after receipt of Lessor’s written
request, provide Lessor with copies of all permits and other documents, and
other information evidencing Lessee’s compliance with any 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 the failure of Lessee or the Premises to comply with any Applicable
Requirements.  Likewise, Lessee shall immediately promptly give written notice
to Lessor of:  (i) any water damage to the Premises and any suspected seepage,
pooling, dampness or other condition conducive to the production of mold; or
(ii) any mustiness or other odors that might indicate the presence of mold in
the Premises.

 

6.4                               Inspection; Compliance.  Lessor and Lessor’s
“Lender” (as defined in Paragraph 30) and consultants shall have the right to
enter into Premises at any time, in the case of an emergency, and otherwise at
reasonable times, after reasonable notice, for the purpose of inspecting the
condition of the Premises and for verifying compliance by Lessee with this
Lease.  The cost of any such inspections shall be paid by Lessor, unless a
violation of Applicable Requirements, or a Hazardous Substance Condition (see
paragraph 9.1e) is found to exist or be imminent, or the inspection is requested
or ordered by a governmental authority.  In such case, Lessee shall upon request
reimburse Lessor for the cost of such inspection, so long as such inspection is
reasonably related to the violation or contamination.  In addition, Lessee shall
provide copies of all relevant material safety data sheets (MSDS) to Lessor
within 10 days of the receipt of written request therefor.

 

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

 

7.1                               Lessee’s Obligations.  Notwithstanding
Lessor’s obligation to keep the Premises in good condition and repair, Lessee
shall be responsible for payment of the cost thereof to Lessor as additional
rent for that portion of the cost of any maintenance and repair of the Premises,
or any equipment (wherever located) that serves only Lessee or the Premises, to
the extent such cost is attributable to abuse or misuse.  Lessee shall be
responsible for the cost of painting, repairing or replacing wall coverings, and
to repair or replace any improvements with the Premises.  Lessor may, at its
option, upon reasonable notice, elect to have Lessee perform any particular such
maintenance or repairs the cost of which is otherwise Lessee’s responsibility
hereunder.

 

7.2                               Lessor’s Obligations.  Subject to the
provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 4.2 (Operating
Expenses), 6 (Use), 7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14
(Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2,
shall keep in good order, condition and repair the foundations, exterior walls,
structural condition of interior bearing walls, exterior roof, fire sprinkler
system, fire alarm and/or smoke detection systems, fire hydrants, and the Common
Areas.  Lessee expressly waives the benefit of any statute now or hereafter in
effect to the extent it is inconsistent with the terms of this Lease.

 

7.3                               Utility Installations; Trade Fixtures;
Alterations.

 

(a)                                  Definitions.  The term “Utility
Installations” refers to all floor and window coverings, air lines, vacuum
lines, power panels, electrical distribution, security and fire protection
systems, communication cabling, lighting fixtures, HVAC equipment, and plumbing
in or on the Premises.  The term “Trade Fixtures” shall mean Lessee’s machinery
and equipment that can be removed without doing material damage to the
Premises.  The term “Alterations” shall mean any modification of the
improvements, other than Utility Installations or Trade Fixtures, whether by
addition or deletion.  “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).

 

 

 

 

 

 

 

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(b)                                  Consent.  Lessee shall not make any
Alterations or Utility Installations to the Premises without Lessor’s prior
written consent.  Lessee may, however, make non-structural Utility Installations
to the interior of the Premises (excluding the roof) without such consent but
upon notice to Lessor, as long as they are not visible from the outside, do not
involve puncturing, relocating or removing the roof, ceilings, floors or any
existing walls, will not adversely affect the electrical, plumbing, HVAC, and/or
life safety systems, and the cumulative cost thereof during this Lease as
extended does not exceed $2000.  Notwithstanding the foregoing, Lessee shall not
make or permit any roof penetrations and/or install anything on the roof without
the prior written approval of Lessor.  Lessor may, as a precondition to granting
such approval, require Lessee to utilize a contractor chosen and/or approved by
Lessor.  Any Alterations or Utility Installations that Lessee shall desire to
make and which require the consent of the Lessor shall be presented to Lessor in
written form with detailed plans.  Consent shall be deemed conditioned upon
Lessee’s:  (i) acquiring all applicable governmental permits, (ii) furnishing
Lessor with copies of both the permits and the plans and specifications prior to
commencement of the work, and (iii) compliance with all conditions of said
permits and other Applicable Requirements in a prompt and expeditious manner. 
Any Alterations or Utility Installations shall be performed in a workmanlike
manner with good and sufficient materials and in accordance with Building
Standard construction and finishes.  Lessee shall promptly upon completion
furnish Lessor with asbuilt plans and specifications.  Concurrently with its
consent, Lessor shall indicate in writing whether any proposed Alterations or
Utility Installations will be required to be removed upon the expiration of the
Term.

 

(c)                                  Liens; Bonds.  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 10 days notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility.  If Lessee shall contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof.  If Lessor shall require, Lessee shall furnish a
surety bond in an amount equal to 150% of the amount of such contested lien,
claim or demand, indemnifying Lessor against liability for the same.  If Lessor
elects to participate in any such action, Lessee shall pay Lessor’s attorneys’
fees and costs.

 

7.4                               Ownership; Removal; Surrender; and
Restoration.

 

(a)                                  Ownership.  Subject to Lessor’s right to
require removal pursuant to Section 7.3 (b) or elect ownership as hereinafter
provided, all Alterations and Utility Installations made by Lessee shall be the
property of Lessee, but considered a part of the Premises.  Lessor may, at any
time, elect in writing to be the owner of all or any specified part of the
Lessee Owned Alterations and Utility Installations.  Unless otherwise instructed
per paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility
Installations shall, at the expiration or termination of this Lease, become the
property of Lessor and be surrendered by Lessee with the Premises.

 

(b)                                  Removal.  Subject to the provisions of
Section 7.3 (b), by By delivery to Lessee of written notice from Lessor not
earlier than 90 and not later than 30 days prior to the end of the term of this
Lease, Lessor may require that any or all Lessee Owned Alterations or Utility
Installations be removed by the expiration or termination of this Lease.  Lessor
may require the removal at any time of all or any part of any Lessee Owned
Alterations or Utility Installations made without the required consent.

 

7.5                               Surrender; Restoration.  Lessee shall
surrender the Premises by the Expiration Date or any earlier termination date,
with all of the improvements, parts and surfaces thereof clean and free of
debris, and in good operating order, condition and state of repair, ordinary
wear and tear excepted.  “Ordinary wear and tear” shall not include any damage
or deterioration that would have been prevented by good maintenance practice. 
Notwithstanding the foregoing, if this Lease is for 12 months or less, then
Lessee shall surrender the Premises in the same condition as delivered to Lessee
on the Start Date with NO allowance for ordinary wear and tear.  Lessee shall
repair any damage occasioned by the installation, maintenance or removal of
Trade Fixtures, Lessee owned Alterations and/or Utility Installations,
furnishings, and equipment as well as the removal of any storage tank installed
by or for Lessee.  Lessee shall also completely remove from the Premises any and
all Hazardous Substances brought onto the Premises by or for Lessee, or any
third party (except Hazardous Substances which were deposited via underground
migration from areas outside of the Premises) even if such removal would require
Lessee to perform or pay for work that exceeds statutory requirements.  Trade
Fixtures shall remain the property of Lessee and shall be removed by Lessee. 
Any personal property of Lessee not removed on or before the Expiration Date or
any earlier termination date shall be deemed to have been abandoned by Lessee
and may be disposed of or retained by Lessor as Lessor may desire.  The cost
associated with the removal or disposal of any abandoned personal property shall
be deducted from Lessee’s Security Deposit.  The failure by Lessee to timely
vacate the Premises pursuant to this Paragraph 7.4(c) without the express
written consent of Lessor shall constitute a holdover under the provisions of
Paragraph 26 below.

 

8.                                      Insurance; Indemnity.

 

8.1                               Insurance Premiums.  The cost of the premiums
for the insurance policies maintained by Lessor pursuant to paragraph 8 are
included as Operating Expenses (see paragraph 4.2 (c)(iv)).  Said costs shall
include increases in the premiums resulting from additional coverage related to
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of the holder of a mortgage or deed of trust covering the Premises, Building
and/or Project, increased valuation of the Premises, Building and/or Project,
and/or a general premium rate increase.  Said costs shall not, however, include
any premium increases resulting from the nature of the occupancy of any other
tenant of the Building.  If the Project was not insured for the entirety of the
Base Year, then the base premium shall be the lowest annual premium reasonably
obtainable for the required insurance as of the Start Date, assuming the most
nominal use possible of the Building and/or Project.  In no event, however,
shall Lessee be responsible for any portion of the premium cost attributable to
liability insurance coverage in excess of $2,000,000 procured under Paragraph
8.2(b).

 

8.2                               Liability Insurance.

 

(a)                                  Carried by Lessee.  Lessee shall obtain and
keep in force a Commercial General Liability policy of insurance protecting
Lessee and Lessor as an additional insured against claims for bodily injury,
personal injury and property damage based upon or arising out of the ownership,
use, occupancy or maintenance of the Premises and all areas appurtenant
thereto.  Such insurance shall be on an occurrence basis providing single limit
coverage in an amount not less than $1,000,000 per occurrence with an annual
aggregate of not less than $2,000,000.  Lessee shall add Lessor as an additional
insured by means of an endorsement at least as broad as the Insurance Service
Organization’s “Additional Insured-Managers or Lessors of Premises” Endorsement
and coverage shall also be extended to include damage caused by heat, smoke or
fumes from a hostile fire.  The policy shall not contain any intra-insured
exclusions as between insured persons or organizations, but shall include
coverage for liability assumed under this Lease as an “insured contract” for the
performance of Lessee’s indemnity obligations under this Lease.  The limits of
said insurance shall not, however, limit the liability of Lessee nor relieve
Lessee of any obligation hereunder.  Lessee shall provide an endorsement on its
liability policy(ies) which provides that its insurance shall be primary to and
not contributory with any similar insurance carried by Lessor, whose insurance
shall be considered excess insurance only.

 

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

 

8.3                               Property Insurance - Building, Improvements
and Rental Value.

 

(a)                                  Building and Improvements.  Lessor shall
obtain and keep in force a policy or policies of insurance in the name of
Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender
insuring loss or damage to the Building and/or Project.  The amount of such
insurance shall be equal to the full insurable replacement cost of the Building
and/or Project, as the same shall exist from time to time, or the amount
required by any Lender, but in no event more than the commercially reasonable
and available insurable value thereof.  Lessee Owned Alterations and Utility
Installations, Trade Fixtures, and Lessee’s personal property shall be insured
by Lessee under Paragraph 8.4.  If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender), including coverage for debris removal and the enforcement
of any Applicable Requirements requiring the upgrading, demolition,
reconstruction or replacement of any portion of the Premises as the result of a
covered loss.  Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property insurance
coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for All Urban Consumers for the city nearest to where
the Premises are located.  If such insurance coverage has a deductible clause,
the deductible amount shall not exceed $1,000 per occurrence.

 

(b)                                  Rental Value.  Lessor shall also obtain and
keep in force a policy or policies in the name of Lessor with loss payable to
Lessor and any Lender, insuring the loss of the full Rent for one year with an
extended period of indemnity for an additional 180 days (“Rental Value
insurance”).  Said insurance shall contain an agreed valuation provision in lieu
of any coinsurance clause, and the amount of coverage shall be adjusted annually
to reflect the projected Rent otherwise payable by Lessee, for the next 12 month
period.

 

(c)                                  Adjacent Premises.  Lessee shall pay for
any increase in the premiums for the property insurance of the Building and for
the Common Areas or other buildings in the Project if said increase is caused by
Lessee’s acts, omissions, use or occupancy of the Premises.  Lessee’s
Improvements.  Since Lessor is the Insuring Party, Lessor shall not be required
to insure Lessee Owned Alterations and Utility Installations unless the item in
question has become the property of Lessor under the terms of this Lease.

 

8.4                               Lessee’s Property; Business Interruption
Insurance.

 

(a)                                  Property Damage.  Lessee shall obtain and
maintain insurance coverage on all of Lessee’s personal property, Trade
Fixtures, and Lessee Owned Alterations and Utility Installations.  Such
insurance shall be full replacement cost coverage with a deductible of not to
exceed $1,000 $25,000 per occurrence.  The proceeds from any such insurance
shall be used by Lessee for the replacement of personal property, Trade Fixtures
and Lessee Owned Alterations and Utility Installations.  Lessee shall provide
Lessor with written evidence that such insurance is in force.

 

 

 

 

 

 

 

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

 

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

 

8.5                               Insurance Policies.  Insurance required herein
shall be by companies duly licensed or admitted to transact business in the
state where the Premises are located, and maintaining during the policy term a
“General Policyholders Rating” of at least A-, VI, as set forth in the most
current issue of “Best’s Insurance Guide”, or such other rating as may be
required by a Lender.  Lessee shall not do or permit to be done anything which
invalidates the required insurance policies.  Lessee shall, prior to the Start
Date, deliver to Lessor certified copies of policies of such insurance or
certificates evidencing the existence and amounts of the required insurance. 
Lessee shall provide Lessor written notice no later then three business days
following Lessee’s receipt of any cancellation or modification notification of
any insurance policy and shall include in the notice to Lessor copies of any
written communication from the insurance company or its agents in connection
with such cancellation or modification.  Lessee shall, at least 30 days
following the expiration of such policies, furnish Lessor with evidence of
renewals or “insurance binders” evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.  Such policies shall be for a term of
at least one year, or the length of the remaining term of this Lease, whichever
is less.  If either Party shall fail to procure and maintain the insurance
required to be carried by it, the other Party may, but shall not be required to,
procure and maintain the same.

 

8.6                               Waiver of Subrogation.  Without affecting any
other rights or remedies, Lessee and Lessor each hereby release and relieve the
other, and waive their entire right to recover damages against the other, for
loss of or damage to its property arising out of or incident to the perils
required to be insured against herein.  The effect of such releases and waivers
is not limited by the amount of insurance carried or required, or by any
deductibles applicable hereto.  The Parties agree to have their respective
property damage insurance carriers waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.

 

8.7                               Indemnity.  Except for Lessor’s gross
negligence or willful misconduct, Lessee shall indemnify, protect, defend and
hold harmless the Premises, Lessor and its agents, Lessor’s master or ground
lessor, partners and Lenders, from and against any and all claims, loss of rents
and/or damages, liens, judgments, penalties, attorneys’ and consultants’ fees,
expenses and/or liabilities arising out of, involving, or in connection with,
the use and/or occupancy of the Premises by Lessee.  If any action or proceeding
is brought against Lessor by reason of any of the foregoing matters, Lessee
shall upon notice 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 defended or
indemnified.

 

8.8                               Exemption of Lessor and its Agents from
Liability.  Notwithstanding the negligence or breach of this Lease by Lessor or
its agents, neither Lessor nor its agents shall be liable under any
circumstances for:  (i) injury or damage to the person or goods, wares,
merchandise or other property of Lessee, Lessee’s employees, contractors,
invitees, customers, or any other person in or about the Premises, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, indoor air quality, the presence of mold or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building, or from other sources or
places, (ii) any damages arising from any act or neglect of any other tenant of
Lessor or from the failure of Lessor or its agents to enforce the provisions of
any other lease in the Project, or (iii) injury to Lessee’s business or for any
loss of income or profit therefrom.  Instead, it is intended that Lessee’s sole
recourse in the event of such damages or injury be to file a claim on the
insurance policy(ies) that Lessee is required to maintain pursuant to the
provisions of paragraph 8.

 

8.9                               Failure to Provide Insurance.  Lessee
acknowledges that any failure on its part to obtain or maintain the insurance
required herein will expose Lessor to risks and potentially cause Lessor to
incur costs not contemplated by this Lease, the extent of which will be
extremely difficult to ascertain.  Accordingly, for any month or portion thereof
that Lessee does not maintain the required insurance and/or does not provide
Lessor with the required binders or certificates evidencing the existence of the
required insurance, the Base Rent shall be automatically increased, without any
requirement for notice to Lessee, by an amount equal to 10% 5% of the then
existing Base Rent or $100, whichever is greater.  The parties agree that such
increase in Base Rent represents fair and reasonable compensation for the
additional risk/costs that Lessor will incur by reason of Lessee’s failure to
maintain the required insurance.  Such increase in Base Rent shall in no event
constitute a waiver of Lessee’s Default or Breach with respect to the failure to
maintain such insurance, prevent the exercise of any of the other rights and
remedies granted hereunder, nor relieve Lessee of its obligation to maintain the
insurance specified in this Lease.

 

 

 

 

 

 

 

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9.                                      Damage or Destruction.

 

9.1                               Definitions.

 

(a)                                  “Premises Partial Damage” shall mean damage
or destruction to the improvements on the Premises, other than Lessee Owned
Alterations and Utility Installations, which can reasonably be repaired in 3
months or less from the date of the damage or destruction, and the cost thereof
does not exceed a sum equal to 6 month’s Base Rent.  Lessor shall notify Lessee
in writing within 30 days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.

 

(b)                                  “Premises Total Destruction” shall mean
damage or destruction to the improvements on the Premises, other than Lessee
Owned Alterations and Utility Installations and Trade Fixtures, which cannot
reasonably be repaired in 3 months or less from the date of the damage or
destruction and/or the cost thereof exceeds a sum equal to 6 month’s Base Rent. 
Lessor shall notify Lessee in writing within 30 days from the date of the damage
or destruction as to whether or not the damage is Partial or Total.

 

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

 

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

 

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

 

9.2                               Partial Damage - Insured Loss.  If a Premises
Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor’s
expense, repair such damage (but not Lessee’s Trade Fixtures or Lessee Owned
Alterations and Utility Installations) as soon as reasonably possible and this
Lease shall continue in full force and effect.  Notwithstanding the foregoing,
if the required insurance was not in force or the insurance proceeds are not
sufficient to effect such repair, the Insuring Party shall promptly contribute
the shortage in proceeds as and when required to complete said repairs.  In the
event, however, such shortage was due to the fact that, by reason of the unique
nature of the improvements, full replacement cost insurance coverage was not
commercially reasonable and available, Lessor shall have no obligation to pay
for the shortage in insurance proceeds or to fully restore the unique aspects of
the Premises unless Lessee provides Lessor with the funds to cover same, or
adequate assurance thereof, within 10 days following receipt of written notice
of such shortage and request therefor.  If Lessor receives said funds or
adequate assurance thereof within said 10 day period, the party responsible for
making the repairs shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect.  If such funds or assurance are not
received, Lessor may nevertheless elect by written notice to Lessee within 10
days thereafter to:  (i) make such restoration and repair as is commercially
reasonable with Lessor paying any shortage in proceeds, in which case this Lease
shall remain in full force and effect, or (ii) have this Lease terminate 30 days
thereafter.  Lessee shall not be entitled to reimbursement of any funds
contributed by Lessee to repair any such damage or destruction.  Premises
Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.

 

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

 

9.4                               Total Destruction.  Notwithstanding any other
provision hereof, if a Premises Total Destruction occurs, this Lease shall
terminate 60 days following such Destruction.  If the damage or destruction was
caused by the gross negligence or willful misconduct of Lessee, Lessor shall
have the right to recover Lessor’s damages from Lessee, except as provided in
Paragraph 8.6.

 

 

 

 

 

 

 

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9.5                               Damage Near End of Term.  If at any time
during the last 6 months of this Lease there is damage for which the cost to
repair exceeds one month’s Base Rent, whether or not an Insured Loss, Lessor may
terminate this Lease effective 60 days following the date of occurrence of such
damage by giving a written termination notice to Lessee within 30 days after the
date of occurrence of such damage.  Notwithstanding the foregoing, if Lessee at
that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, 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 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 commercially
reasonable expense, repair such damage as soon as reasonably possible and this
Lease shall continue in full force and effect.  If Lessee fails to exercise such
option and provide such funds or assurance during such period, then this Lease
shall terminate on the date specified in the termination notice and Lessee’s
option shall be extinguished.

 

9.6                               Abatement of Rent; Lessee’s Remedies.

 

(a)                                  Abatement.  In the event of Premises
Partial Damage or Premises Total Destruction or a Hazardous Substance Condition
for which Lessee is not responsible under this Lease, the Rent payable by Lessee
for the period required for the repair, remediation or restoration of such
damage shall be abated in proportion to the degree to which Lessee’s use of the
Premises is impaired , but not to exceed the proceeds received from the Rental
Value insurance.  All other obligations of Lessee hereunder shall be performed
by Lessee, and Lessor shall have no liability for any such damage, destruction,
remediation, repair or restoration except as provided herein.

 

(b)                                  Remedies.  If Lessor is obligated to repair
or restore the Premises and does not commence, in a substantial and meaningful
way, such repair or restoration within 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 60 days following the giving of such notice.  If Lessee gives such
notice and such repair or restoration is not commenced within 30 days
thereafter, this Lease shall terminate as of the date specified in said notice. 
If the repair or restoration is commenced within such 30 days, this Lease shall
continue in full force and effect.  “Commence” shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.

 

9.7                               Termination; Advance Payments.  Upon
termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an
equitable adjustment shall be made concerning advance Base Rent and any other
advance payments made by Lessee to Lessor.  Lessor shall, in addition, return to
Lessee so much of Lessee’s Security Deposit as has not been, or is not then
required to be, used by Lessor.

 

10.                               Real Property Taxes.

 

10.1                        Definitions.  As used herein, the term “Real
Property Taxes” shall include any form of assessment; real estate, general,
special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Project, Lessor’s right to other income therefrom, and/or Lessor’s business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated with reference to the Project address and where
the proceeds so generated are to be applied by the city, county or other local
taxing authority of a jurisdiction within which the Project is located.  “Real
Property Taxes” shall also include any tax, fee, levy, assessment or charge, or
any increase therein:  (i) imposed by reason of events occurring during the term
of this Lease, including but not limited to, a change in the ownership of the
Project, (ii) a change in the improvements thereon, and/or (iii) levied or
assessed on machinery or equipment provided by Lessor to Lessee pursuant to this
Lease.

 

10.2                        Payment of Taxes.  Except as otherwise provided in
Paragraph 10.3, Lessor shall pay the Real Property Taxes applicable to the
Project, and said payments shall be included in the calculation of Operating
Expenses in accordance with the provisions of Paragraph 4.2.

 

10.3                        Additional Improvements.  Operating Expenses shall
not include Real Property Taxes specified in the tax assessor’s records and work
sheets as being caused by additional improvements placed upon the Project by
other lessees or by Lessor for the exclusive enjoyment of such other lessees. 
Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at
the time 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 or by reason of any alterations or improvements to the Premises
made by Lessor subsequent to the execution of this Lease by the Parties.

 

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

 

10.5                        Personal Property Taxes.  Lessee shall pay prior to
delinquency all taxes assessed against and levied upon Lessee Owned Alterations
and Utility Installations, Trade Fixtures, furnishings, equipment and all
personal property of Lessee contained in the Premises.  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 10 days after receipt of a
written statement setting forth the taxes applicable to Lessee’s property.

 

11.                               Utilities and Services.

 

11.1                        Services Provided by Lessor.  Lessor shall provide
heating, ventilation, air conditioning, reasonable amounts of electricity for
normal lighting and office machines, water for reasonable and normal drinking
and lavatory use in connection with an office, and replacement light bulbs
and/or fluorescent tubes and ballasts for standard overhead fixtures.  Lessor
shall also provide janitorial services to the Premises and Common Areas 5 times
per week, excluding Building Holidays, or pursuant to the attached janitorial
schedule, if any.  Lessor shall not, however, be required to provide janitorial
services to kitchens or storage areas included within the Premises.

 

11.2                        Services Exclusive to Lessee.  Lessee shall pay for
all electricity, water, gas, light, power, telephone and other utilities and
services specially or exclusively supplied and/or metered exclusively to the
Premises or to Lessee, together with any taxes thereon.  If a service is deleted
by Paragraph 1.13 and such service is not separately metered to the Premises,
Lessee shall pay at Lessor’s option, either Lessee’s Share or a reasonable
proportion to be determined by Lessor of all charges for such jointly metered
service.

 

11.3                        Hours of Service.  Said services and utilities shall
be provided during times set forth in Paragraph 1.12.  Utilities and services
required at other times shall be subject to advance request and reimbursement by
Lessee to Lessor of the cost thereof.

 

11.4                        Excess Usage by Lessee.  Lessee shall not make
connection to the utilities except by or through existing outlets and shall not
install or use machinery or equipment in or about the Premises that uses excess
water, lighting or power, or suffer or permit any act that causes extra burden
upon the utilities or services, including but not limited to security and trash
services, over standard office usage for the Project.  Lessor shall require
Lessee to reimburse Lessor for any excess expenses or costs that may arise out
of a breach of this subparagraph by Lessee.  Lessor may, in its sole discretion,
install at Lessee’s expense supplemental equipment and/or separate metering
applicable to Lessee’s excess usage or loading.

 

11.5                        Interruptions.  There shall be no abatement of rent
and Lessor shall not be liable in any respect whatsoever for the inadequacy,
stoppage, interruption or discontinuance of any utility or service due to riot,
strike, labor dispute, breakdown, accident, repair or other cause beyond
Lessor’s reasonable control or in cooperation with governmental request or
directions.

 

12.                               Assignment and Subletting.

 

12.1                        Lessor’s Consent Required.

 

(a)                                  Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage or encumber (collectively, “assign
or assignment”) or sublet all of Lessee’s interest in this Lease or in the
Premises without Lessor’s prior written consent or to a tenant whose use is more
intensive than original tenant.

 

(b)                                  Unless Lessee is a corporation and its
stock is publicly traded on a national stock exchange, a change in the control
of Lessee shall constitute an assignment requiring consent.  The transfer, on a
cumulative basis, of 25% or more of the voting control of Lessee shall
constitute a change in control for this purpose.

 

(c)                                  An assignment or subletting without consent
shall, at Lessor’s option, be a Default curable after notice per Paragraph
13.1(c), or a noncurable Breach without the necessity of any notice and grace
period.  If Lessor elects to treat such unapproved assignment or subletting as a
noncurable Breach, Lessor may either:  (i) terminate this Lease, or (ii) upon 30
days written notice, increase the monthly Base Rent to 110% of the Base Rent
then in effect.  Further, in the event of such Breach and rental adjustment,
(i) the purchase price of any option to purchase the Premises held by Lessee
shall be subject to similar adjustment to 110% of the price previously in
effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased to 110% of the scheduled adjusted
rent.

 

 

 

 

 

 

 

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(d)                                  Lessee’s remedy for any breach of Paragraph
12.1 by Lessor shall be limited to compensatory damages and/or injunctive
relief.  Lessor may reasonably withhold consent to a proposed assignment or
subletting if Lessee is in Default at the time consent is requested.

 

(e)                                  Notwithstanding the foregoing, allowing a
de minimis portion of the Premises, i e. 20 square feet or less, to be used by a
third party vendor in connection with the installation of a vending machine or
payphone shall not constitute a subletting.

 

12.2                        Terms and Conditions Applicable to Assignment and
Subletting.

 

(a)                                  Regardless of Lessor’s consent, no
assignment or subletting shall:  (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 obligations hereunder, or (iii) alter the
primary liability of Lessee for the payment of Rent or for the performance of
any other obligations to be performed by Lessee.

 

(b)                                  Lessor may accept 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 Rent or performance shall constitute a
waiver or estoppel of Lessor’s right to exercise its remedies for Lessee’s
Default or Breach.

 

(c)                                  Lessor’s consent to any assignment or
subletting shall not constitute a consent to any subsequent assignment or
subletting.

 

(d)                                  In the event of any Default or Breach by
Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone
else responsible for the performance of Lessee’s obligations under this Lease,
including any assignee or sublessee, without first exhausting Lessor’s remedies
against any other person or entity responsible 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 sublessee, including but not limited
to the intended use and/or required modification of the Premises, if any,
together with a fee of 10% of the current monthly base rent or $500 whichever is
greater as consideration for Lessor’s considering and processing said request. 
Lessee agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested.  (See also Paragraph 36)

 

(f)                                    Any assignee of, or sublessee under, this
Lease shall, by reason of accepting such assignment, entering into such
sublease, or entering into possession of the Premises or any portion thereof, be
deemed to have assumed and agreed to conform and comply with each and every
term, covenant, condition and obligation herein to be observed or performed by
Lessee during the term 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 to in writing.

 

(g)                                 Lessor’s consent to any assignment or
subletting shall not transfer to the assignee or sublessee any Option granted to
the original Lessee by this Lease unless such transfer is specifically consented
to by Lessor in writing.  (See Paragraph 39.2)

 

12.3                        Additional Terms and Conditions Applicable to
Subletting.  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 Rent payable on any sublease, and Lessor
may collect such Rent and apply same toward Lessee’s obligations under this
Lease; provided, however, that until a Breach shall occur in the performance of
Lessee’s obligations, Lessee may collect said Rent.  In the event that the
amount collected by Lessor exceeds Lessee’s then outstanding obligations any
such excess shall be refunded to Lessee.  Lessor shall not, by reason of the
foregoing or any assignment of such sublease, nor by reason of the collection of
Rent, be deemed liable to the sublessee for any failure of Lessee to perform and
comply with any of Lessee’s obligations to such sublessee.  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 all Rent due and to become due
under the sublease.  Sublessee shall rely upon any such notice from Lessor and
shall pay all Rents to Lessor without any obligation or right to inquire as to
whether such Breach exists, notwithstanding any claim from Lessee to the
contrary.

 

(b)                                  In the event of a Breach by Lessee, Lessor
may, at its option, require sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease 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 prior Defaults or
Breaches of such sublessor.

 

 

 

 

 

 

 

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

 

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

 

(e)                                  Lessor shall deliver a copy of any notice
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.

 

(f)                                    Notwithstanding anything contained in
Paragraph 7.3 and 12 of this lease, if a sublessee desires to modify the
Premises, Lessee will deposit with Lessor adequate funds to restore the Premises
to its original condition upon lease termination prior to Lessor’s approval of
said Sublease.

 

13.                               Default; Breach; Remedies.

 

13.1                        Default; Breach.  A “Default” is defined as a
failure by the Lessee to comply with or perform any of the terms, covenants,
conditions or Rules and Regulations under this Lease.  A “Breach” is defined as
the occurrence of one or more of the following Defaults, and the failure of
Lessee to cure such Default within any applicable grace period:

 

(a)                                  The vacating of the Premises without
providing a commercially reasonable level of security, or where the coverage of
the property insurance described in Paragraph 8.3 is jeopardized as a result
thereof, or without providing reasonable assurances to minimize potential
vandalism.

 

(b)                                  The failure of Lessee to make any payment
of Rent or any Security Deposit required to be made by Lessee hereunder, whether
to Lessor or, when due, to provide reasonable evidence of insurance or surety
bond, or to fulfill any obligation under this Lease which endangers or threatens
life or property, where such failure continues for a period of 3 5 business days
following written notice to Lessee.  THE ACCEPTANCE BY LESSOR OF A PARTIAL
PAYMENT OF RENT OR SECURITY DEPOSIT SHALL NOT CONSTITUTE A WAIVER OF ANY OF
LESSOR’S RIGHTS, INCLUDING LESSOR’S RIGHT TO RECOVER POSSESSION OF THE PREMISES.

 

(c)                                  The failure of Lessee to allow Lessor
and/or its agents access to the Premises or the commission of waste, act or acts
constituting public or private nuisance, and/or an illegal activity on the
Premises by Lessee, where such actions continue for a period of 3 business days
following written notice to Lessee.

 

(d)                                  The failure by Lessee to provide
(i) reasonable written evidence of compliance with Applicable Requirements,
(ii) the service contracts, (iii) the rescission of an unauthorized assignment
or subletting, (iv) an Estoppel Certificate or financial statements, (v) a
requested subordination, (vi) evidence concerning any guaranty and/or Guarantor,
(vii) any document requested under Paragraph 41, (viii) material data safety
sheets (MSDS), or (ix) 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 10 business days following written notice to
Lessee.

 

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

 

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

 

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

 

(h)                                 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 basis, and Lessee’s failure, within 60 days following written
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of any such event, to provide written alternative assurance or security, which,
when coupled with the then existing resources of Lessee, equals or exceeds the
combined financial resources of Lessee and the Guarantors that existed at the
time of execution of this Lease.

 

13.2                        Remedies.  If Lessee fails to perform any of its
affirmative duties or obligations, within 10 days after written notice (or in
case of an emergency, without notice), Lessor may, at its option, perform such
duty or obligation on Lessee’s behalf, including but not limited to the
obtaining of reasonably required bonds, insurance policies, or governmental
licenses, permits or approvals.  Lessee shall pay to Lessor an amount equal to
115% of the costs and expenses incurred by Lessor in such performance upon
receipt of an invoice therefor.  In the event of a Breach, Lessor may, with or
without further notice or demand, and without limiting Lessor in the exercise of
any right or remedy which Lessor may have by reason of such Breach:

 

(a)                                  Terminate Lessee’s right to possession of
the Premises by any lawful means, in which case this Lease shall terminate and
Lessee shall immediately surrender possession to Lessor.  In such event Lessor
shall be entitled to recover from Lessee:  (i) the unpaid Rent which had been
earned at the time 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 reasonably 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 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 the District within which the Premises are
located at the time of award plus one percent.  Efforts by Lessor to mitigate
damages caused by Lessee’s Breach of this Lease shall not waive Lessor’s right
to recover damages under Paragraph 12.  If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit.  If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 13.1.  In such case, the applicable grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.

 

(b)                                  Continue the Lease and Lessee’s right to
possession and recover the Rent as it becomes due, in which event Lessee may
sublet or assign, subject only to reasonable limitations.  Acts of maintenance,
efforts to relet, and/or the appointment of a receiver to protect the Lessor’s
interests, shall not constitute a termination of the Lessee’s right to
possession.

 

(c)                                  Pursue any other remedy now or hereafter
available under the laws or judicial decisions of the state wherein the Premises
are located.  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                        Late Charges.  Lessee hereby acknowledges that late
payment by Lessee of Rent 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 any Lender.  Accordingly,
if any Rent shall not be received by Lessor within 5 10 days after such amount
shall be due, then, without any requirement for notice to Lessee, Lessee shall
immediately pay to Lessor a one-time late charge equal to 10% of each such
overdue amount or $100, whichever is greater.  The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Lessor
will incur by reason of such late payment.   Acceptance of such late charge by
Lessor shall in no event constitute a waiver of Lessee’s Default or Breach with
respect to such overdue amount, nor prevent the exercise of any of the other
rights and remedies granted hereunder.

 

13.4                        Interest.  Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor, when due as to
scheduled payments (such as Base Rent) or within 30 days following the date on
which it was due for nonscheduled payment, shall bear interest from the date
when due, as to scheduled payments, or the 31st day after it was due as to
nonscheduled payments.  The interest (“Interest”) charged shall be computed at
the rate of 10% per annum but shall not exceed the maximum rate allowed by law. 
Interest is payable in addition to the potential late charge provided for in
Paragraph 13.4.

 

 

 

 

 

 

 

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13.5                        Breach by Lessor.

 

(a)                                  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, a
reasonable time shall in no event be less than 30 days after receipt by Lessor,
and any Lender whose name and address shall have been furnished 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 30 days are reasonably required for
its performance, then Lessor shall not be in breach if performance is commenced
within such 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 (collectively “Condemnation”), this Lease shall
terminate as to the part taken as of the date the condemning authority takes
title or possession, whichever first occurs.  If more than 10% of the rentable
floor area of the Premises, or more than 25% of Lessee’s Reserved Parking
Spaces, if any, are taken by Condemnation, Lessee may, at Lessee’s option, to be
exercised in writing within 10 days after Lessor shall have given Lessee written
notice of such taking (or in the absence of such notice, within 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 proportion to the reduction in utility of
the Premises caused by such Condemnation.  Condemnation awards and/or payments
shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold, the value of the part
taken, or for severance damages; provided, however, that Lessee shall be
entitled to any compensation paid by the condemnor for Lessee’s relocation
expenses, loss of business goodwill and/or Trade Fixtures, without regard to
whether or not this Lease is terminated pursuant to the provisions of this
Paragraph.  All Alterations and Utility Installations made to the Premises by
Lessee, for purposes of Condemnation only, shall be considered the property of
the Lessee and Lessee shall be entitled to any and all compensation which is
payable therefor.  In the event that this Lease is not terminated by reason of
the Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.

 

15.                               Brokerage Fees.

 

15.1                        Representations and Indemnities of Broker
Relationships.  Lessee and Lessor each represent and warrant to the other that
it has had no dealings with any person, firm, broker or finder in connection
with this Lease, and that no one is entitled to any commission or finder’s fee
in connection herewith.  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, attorneys’ fees reasonably incurred with
respect thereto.

 

16.                               Estoppel Certificates.

 

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

 

(b)                                  If the Responding Party shall fail to
execute or deliver the Estoppel Certificate within such 10 business day period,
the Requesting Party may execute an Estoppel Certificate stating that:  (i) the
Lease is in full force and effect without modification except as may be
represented by the Requesting Party, (ii) there are no uncured defaults in the
Requesting Party’s performance, and (iii) if Lessor is the Requesting Party, not
more than one month’s rent has been paid in advance.  Prospective purchasers and
encumbrancers may rely upon the Requesting Party’s Estoppel Certificate, and the
Responding Party shall be estopped from denying the truth of the facts contained
in said Certificate.

 

(c)                                  If Lessor desires to finance, refinance, or
sell the Premises, or any part thereof, Lessee and all Guarantors shall within
10 days after written notice from Lessor deliver to any potential lender or
purchaser designated by Lessor such financial statements as may be reasonably
required by such lender or purchaser, including but not limited to Lessee’s
financial statements for the past 3 years.  All such financial statements shall
be received by Lessor and such lender or purchaser in confidence and shall be
used only for the purposes herein set forth.

 

17.                               Definition of Lessor.  The term “Lessor” as
used herein shall mean the owner or owners at the time in question of the fee
title to the Premises, or, if this is a sublease, of the Lessee’s interest in
the prior lease.  In the event of a transfer of Lessor’s title or interest in
the Premises or this Lease, Lessor shall deliver to the transferee or assignee
(in cash or by credit) any unused Security Deposit held by Lessor.  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 this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined.

 

 

 

 

 

 

 

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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.                               Days.  Unless otherwise specifically indicated
to the contrary, the word “days” as used in this Lease shall mean and refer to
calendar days.

 

20.                               Limitation on Liability.  The obligations of
Lessor under this Lease shall not constitute personal obligations of Lessor or
its partners, members, directors, officers or shareholders, and Lessee shall
look to the Project, and to no other assets of Lessor, for the satisfaction of
any liability of Lessor with respect to this Lease, and shall not seek recourse
against Lessor’s partners, members, directors, officers or shareholders, or any
of their personal assets for such satisfaction.

 

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

 

22.                               No Prior or Other Agreements; Broker
Disclaimer.  This Lease contains all agreements between the Parties with respect
to any matter mentioned herein, and no other prior or contemporaneous agreement
or understanding shall be effective.

 

23.                               Notices.

 

23.1                        Notice Requirements.  All notices required or
permitted by this Lease or applicable law shall be in writing and may be
delivered in person (by hand or by courier) or may be sent by regular, certified
or registered mail or U.S.  Postal Service Express Mail, with postage prepaid,
or by facsimile transmission, and shall be deemed 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 notices.  Either Party may by written notice to the other specify a
different address for notice, except that upon Lessee’s taking possession of the
Premises, the Premises shall constitute Lessee’s address for notice.  A copy of
all notices to Lessor shall be concurrently transmitted to such party or parties
at such addresses as Lessor may from time to time hereafter designate in
writing.

 

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 72
hours after the same is addressed as required herein and mailed with postage
prepaid.  Notices delivered by United States Express Mail or overnight courier
that guarantee next day delivery shall be deemed given 24 hours after delivery
of the same to the Postal Service or courier.  Notices transmitted by facsimile
transmission or similar means shall be deemed delivered upon telephone
confirmation of receipt (confirmation report from fax machine is sufficient),
provided a copy is also delivered via delivery or mail.  If notice is received
on a Saturday, Sunday or legal holiday, it shall be deemed received on the next
business day.

 

24.                               Waivers.

 

(a)                                  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 of any other term, covenant or
condition hereof.  Lessor’s consent to, or approval of, any act shall not be
deemed to render unnecessary the obtaining of Lessor’s consent to, or approval
of, any subsequent or similar act by Lessee, or be construed as the basis of an
estoppel to enforce the provision or provisions of this Lease requiring such
consent.

 

(b)                                  The acceptance of Rent by Lessor shall not
be a waiver of any Default or Breach by Lessee.  Any payment 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 effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.

 

(c)                                  THE PARTIES AGREE THAT THE TERMS OF THIS
LEASE SHALL GOVERN WITH REGARD TO ALL MATTERS RELATED THERETO AND HEREBY WAIVE
THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE TO THE EXTENT THAT SUCH STATUTE
IS INCONSISTENT WITH THIS LEASE.

 

25.                               Disclosures Regarding The Nature of a Real
Estate Agency Relationship.

 

(a)                                  When entering into a discussion with a real
estate agent regarding a real estate transaction, a Lessor or Lessee should from
the outset understand what type of agency relationship or representation it has
with the agent or agents in the transaction.  Lessor and Lessee acknowledge
being advised by the Brokers in this transaction, as follows:

 

(i)                                    Lessor’s Agent.  A Lessor’s agent under a
listing agreement with the Lessor acts as the agent for the Lessor only.  A
Lessor’s agent or subagent has the following affirmative obligations:  To the
Lessor: A fiduciary duty of utmost care, integrity, honesty, and loyalty in
dealings with the Lessor.  To the Lessee and the Lessor: a. Diligent exercise of
reasonable skills and care in performance of the agent’s duties.  b. A duty of
honest and fair dealing and good faith.  c. A duty to

 

 

 

 

 

 

 

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disclose all facts known to the agent materially affecting the value or
desirability of the property that are not known to, or within the diligent
attention and observation of, the Parties.  An agent is not obligated to reveal
to either Party any confidential information obtained from the other Party which
does not involve the affirmative duties set forth above.

 

(ii)                                Lessee’s Agent.  An agent can agree to act
as agent for the Lessee only.  In these situations, the agent is not the
Lessor’s agent, even if by agreement the agent may receive compensation for
services rendered, either in full or in part from the Lessor.  An agent acting
only for a Lessee has the following affirmative obligations.  To the Lessee: A
fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with
the Lessee.  To the Lessee and the Lessor: a. Diligent exercise of reasonable
skills and care in performance of the agent’s duties.  b. A duty of honest and
fair dealing and good faith.  c. A duty to disclose all facts known to the agent
materially affecting the value or desirability of the property that are not
known to, or within the diligent attention and observation of, the Parties.  An
agent is not obligated to reveal to either Party any confidential information
obtained from the other Party which does not involve the affirmative duties set
forth above.

 

(iii)                            Agent Representing Both Lessor and Lessee.  A
real estate agent, either acting directly or through one or more associate
licenses, can legally be the agent of both the Lessor and the Lessee in a
transaction, but only with the knowledge and consent of both the Lessor and the
Lessee.  In a dual agency situation, the agent has the following affirmative
obligations to both the Lessor and the Lessee: a.  A fiduciary duty of utmost
care, integrity, honesty and loyalty in the dealings with either Lesser or the
Lessee.  b.  Other duties to the Lessor and the Lessee as stated above in
subparagraphs (i) or (ii).  In representing both Lessor and Lessee, the agent
may not without the express permission of the respective Party, disclose to the
other Party that the Lessor will accept rent in an amount less than that
indicated in the listing or that the Lessee is willing to pay a higher rent than
that offered.  The above duties of the agent in a real estate transaction do not
relieve a Lessor or Lessee from the responsibility to protect their own
interests.  Lessor and Lessee should carefully read all agreements to assure
that they adequately express their understanding of the transaction.  A real
estate agent is a person qualified to advise about real estate.  If legal or tax
advise is desired, consult a competent professional.

 

26.                               No Right To Holdover.  Lessee has no right to
retain possession of the Premises or any part thereof beyond the expiration or
termination of this Lease.  In the event that Lessee or Lessee’s sublessee as
approved by Lessor in accordance with Paragraph 12 hereof holds over, then the
Base Rent shall be increased to 150% of the Base Rent applicable immediately
preceding the expiration or termination.  Nothing contained herein shall be
construed as consent by Lessor to any holding over by Lessee.

 

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

 

28.                               Covenants and Conditions; Construction of
Agreement.  All provisions of this Lease to be observed or performed by Lessee
are both covenants and conditions.  In construing this Lease, all headings and
titles are for the convenience of the Parties only and shall not be considered a
part of this Lease.  Whenever required by the context, the singular shall
include the plural and vice versa.  This Lease shall not be construed as if
prepared by one of the Parties, but rather according to its fair meaning as a
whole, as if both Parties had prepared it.

 

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

 

30.                               Subordination; Attornment; Non-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 upon the Premises, to any and all advances
made on the security thereof, and to all renewals, modifications, and extensions
thereof.  Lessee agrees that the holders of any such Security Devices (in this
Lease together referred to as “Lender”) shall have no liability or obligation to
perform any of the obligations of Lessor under this Lease.  Any Lender may elect
to have this Lease and/or any Option granted hereby superior to the lien of its
Security Device by giving written notice thereof to Lessee, whereupon this Lease
and such Options shall be deemed prior to such Security Device, notwithstanding
the relative dates of the documentation or recordation thereof.

 

30.2                        Attornment.  In the event that Lessor transfers
title to the Premises, or the Premises are acquired by another upon the
foreclosure or termination of a Security Devise to which this Lease is
subordinated (i) Lessee shall, subject to the non-disturbance provisions of
Paragraph 30.3, attorn to such new owner, and upon request, enter into a new
lease, containing all of the terms and provisions of this Lease, with such new
owner for the remainder of the term hereof, or, at the election of the new
owner, this Lease will automatically become a new lease between Lessee and such
new owner, and (ii) Lessor shall thereafter be relieved of any further
obligations hereunder and such new owner shall assume all of Lessor’s
obligations, except that such new owner shall not:  (a) be liable for any act or
omission of any prior lessor or with respect to events occurring prior to
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offsets or defenses which Lessee might have against any prior lessor, (c) be
bound by prepayment of more than one month’s rent, or (d) be liable for the
return of any security deposit paid to any prior lessor which was not paid or
credited to such new owner.

 

30.3                        Non-Disturbance.  With respect to Security Devices
entered into by Lessor after the execution of this Lease, Lessee’s subordination
of this Lease shall be subject to receiving a commercially reasonable
non-disturbance agreement (a “Non-Disturbance Agreement”) from the Lender which
Non-Disturbance Agreement provides that Lessee’s possession of the Premises, and
this Lease, including any options to extend the term hereof, will not be
disturbed so long as Lessee is not in Breach hereof 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 the Premises, Lessee and
Lessor shall execute such further writings as may be reasonably required to
separately document any subordination, attornment and/or Non-Disturbance
Agreement provided for herein.

 

31.                               Attorneys’ Fees.  If any Party or Broker
brings an action or proceeding involving the Premises whether founded in tort,
contract or equity, or to declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys’ fees.  Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment.  The term, “Prevailing Party” shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense.  The
attorneys’ fees award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys’ fees reasonably
incurred.  In addition, Lessor shall be entitled to attorneys’ fees, costs and
expenses incurred in the preparation and service of notices of Default and
consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such Default or resulting Breach ($200
is a reasonable minimum per occurrence for such services and consultation).

 

32.                               Lessor’s Access; Showing Premises; Repairs. 
Lessor and Lessor’s agents shall have the right to enter the Premises at any
time, in the case of an emergency, and otherwise at reasonable times after
reasonable prior notice for the purpose of showing the same to prospective
purchasers, lenders, or tenants, and making such alterations, repairs,
improvements or additions to the Premises as Lessor may deem necessary or
desirable and the erecting, using and maintaining of utilities, services, pipes
and conduits through the Premises and/or other premises as long as there is no
material adverse effect on Lessee’s use of the Premises.  All such activities
shall be without abatement of rent or liability to Lessee.

 

33.                               Auctions.  Lessee shall not conduct, nor
permit to be conducted, any auction upon the Premises without Lessor’s prior
written consent.  Lessor shall not be obligated to exercise any standard of
reasonableness in determining whether to permit an auction.

 

34.                               Signs.  Lessor may place on the Premises
ordinary “For Sale” signs at any time and ordinary “For Lease” signs during the
last 6 months of the term hereof.

 

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 lesser estate in the Premises; provided, however, that Lessor may
elect to continue any one or all existing subtenancies.  Lessor’s failure within
10 days following any such event to elect to the contrary by written notice to
the holder of any such lesser interest, shall constitute Lessor’s election to
have such event constitute the termination of such interest.

 

36.                               Consents.  Except 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, 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 upon receipt of an invoice and supporting documentation therefor. 
Lessor’s consent to any act, assignment or subletting shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.  The failure to specify herein any particular condition to
Lessor’s consent shall not preclude the imposition by Lessor at the time of
consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given.  In the
event that either Party disagrees with any determination made by the other
hereunder and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail
within 10 business days following such request.

 

 

 

 

 

 

 

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37.                               Guarantor.

 

37.1                        Execution.  The Guarantors, if any, shall each
execute a guaranty in the form most recently published by the AIR Commercial
Real Estate Association.

 

37.2                        Default.  It shall constitute a Default of the
Lessee if any Guarantor fails or refuses, upon request to provide:  (a) evidence
of the execution of the guaranty, including the authority of the party signing
on Guarantor’s behalf to obligate Guarantor, and in the case of a corporate
Guarantor, a certified copy of a resolution of its board of directors
authorizing the making of such guaranty, (b) current financial statements,
(c) an Estoppel Certificate, or (d) written confirmation that the guaranty is
still in effect.

 

38.                               Quiet Possession.  Subject to payment by
Lessee of the Rent and performance of all of the covenants, conditions and
provisions on Lessee’s part to be observed and performed under this Lease,
Lessee shall have quiet possession and quiet enjoyment of the Premises during
the term hereof.

 

39.                               Options.  If Lessee is granted an Option, as
defined below, then the following provisions shall apply.

 

39.1                        Definition.  “Option” shall mean:  (a) the right to
extend or reduce the term of or renew this Lease or to extend or reduce the term
of or renew any lease that Lessee has on other property of Lessor; (b) the right
of first refusal or first offer to lease either the Premises or other property
of Lessor; (c) the right to purchase, the right of first offer to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.

 

39.2                        Options Personal To Original Lessee.  Any Option
granted to Lessee in this Lease is personal to the original Lessee, and cannot
be assigned or exercised by anyone other than said original Lessee and only
while the original Lessee is in full possession of the Premises and, if
requested by Lessor, with Lessee certifying that Lessee has no intention of
thereafter assigning or subletting.  Notwithstanding the foregoing, any Option
shall be assignable to any Permitted Transferee.

 

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

 

39.4                        Effect of Default on Options.

 

(a)                                  Lessee shall have no right to exercise an
Option:  (i) during the period commencing with the giving of any notice of
Default and continuing until said Default is cured, (ii) during the period of
time any Rent is unpaid (without regard to whether notice thereof is given
Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) in the
event that Lessee has been given 3 or more notices of separate Default, whether
or not the Defaults are cured, during the 12 month period immediately preceding
the exercise of the Option or (v) if Lessee has been delinquent in paying Base
Rent more than six (6) times during the lease term.

 

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

 

(c)                                  An Option shall terminate and be of no
further force or effect, notwithstanding Lessee’s due and timely exercise of the
Option, if, after such exercise and prior to the commencement of the extended
term or completion of the purchase if Lessee commits a Breach of this Lease.

 

40.                               Security Measures.  Lessee hereby acknowledges
that the Rent payable to Lessor hereunder does not include the 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.  In the event, however, that Lessor should elect
to provide security services, then the cost thereof shall be an Operating
Expense.

 

41.                               Reservations.

 

(a)                                  Lessor reserves the right:  (i) to grant,
without the consent or joinder of Lessee, such easements, rights and dedications
that Lessor deems necessary, (ii) to cause the recordation of parcel maps and
restrictions, (iii) to create and/or install new utility raceways, so long as
such easements, rights, dedications, maps, restrictions, and utility raceways do
not unreasonably interfere with the use of the Premises by Lessee.  Lessor may
also:  change the name, address or title of the Building or Project upon at
least 90 days prior written notice; provide and install, at Lessee’s expense,
Building standard graphics on the door of the Premises and such portions of the
Common Areas as Lessor shall reasonably deem appropriate; grant to any lessee
the exclusive right to conduct any business as long as such exclusive right does
not conflict with any rights expressly given herein; and to place such signs,
notices or displays as Lessor reasonably deems necessary or advisable upon the
roof, exterior of the Building or the Project or on signs in the Common Areas. 
Lessee agrees to sign any documents reasonably requested by Lessor to effectuate
such rights.  The obstruction of Lessee’s view, air, or light by any structure

 

 

 

 

 

 

 

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erected in the vicinity of the Building, whether by Lessor or third parties,
shall in no way affect this Lease or impose any liability upon Lessor.

 

(b)                                  Lessor also reserves the right to move
Lessee to other space of comparable size in the Building or Project.  Lessor
must provide at least 45 days prior written notice of such move, and the new
space must contain improvements of comparable quality to those contained within
the Premises.  Lessor shall pay the reasonable out of pocket costs that Lessee
incurs with regard to such relocation, including the expenses of moving and
necessary stationary revision costs.  In no event, however, shall Lessor be
required to pay an amount in excess of two months Base Rent.  Lessee may not be
relocated more than once during the term of this Lease.

 

(c)                                  Lessee shall not:  (i) use a representation
(photographic or otherwise) of the Building or Project or their name(s) in
connection with Lessee’s business; or (ii) suffer or permit anyone, except in
emergency, to go upon the roof of the Building.

 

42.                               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 on the
part of said Party to pay such sum or any part thereof, said Party shall be
entitled to recover such sum or so much thereof as it was not legally required
to pay.  A Party who does not initiate suit for the recovery of sums paid “under
protest” within 6 months shall be deemed to have waived its right to protest
such payment.

 

43.                               Authority; Multiple Parties; Execution

 

(a)                                  If either Party hereto is a corporation,
trust, limited liability company, partnership, or similar entity, each
individual executing this Lease on behalf of such entity represents and warrants
that he or she is duly authorized to execute and deliver this Lease on its
behalf.  Each Party shall, within 30 days after request, deliver to the other
Party satisfactory evidence of such authority.

 

(b)                                  If this Lease is executed by more than one
person or entity as “Lessee”, each such person or entity shall be jointly and
severally liable hereunder.  It is agreed that any one of the named Lessees
shall be empowered to execute any amendment to this Lease, or other document
ancillary thereto and bind all of the named Lessees, and Lessor may rely on the
same as if all of the named Lessees had executed such document.

 

(c)                                  This Lease may be executed by the Parties
in counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.

 

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

 

45.                               Offer.  Preparation of this Lease by either
party or their agent and submission of same to the other Party shall not be
deemed an offer to lease to the other Party.  This Lease is not intended to be
binding until executed and delivered by all Parties hereto.

 

46.                               Amendments.  This Lease may be modified only
in writing, signed by the Parties in interest at the time of the modification. 
As long as they do not materially change Lessee’s obligations hereunder, Lessee
agrees to make such reasonable nonmonetary modifications to this Lease as may be
reasonably required by a Lender in connection with the obtaining of normal
financing or refinancing of the Premises.

 

47.                               Waiver of Jury Trial.  THE PARTIES HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
INVOLVING THE PROPERTY OR ARISING OUT OF THIS AGREEMENT.

 

48.                               Mediation and Arbitration of Disputes.  An
Addendum requiring the Mediation and/or the Arbitration of all disputes between
the Parties and/or Brokers arising out of this Lease ¨ Is þ is not attached to
this Lease.

 

49.                               Americans with Disabilities Act.  Since
compliance with the Americans with Disabilities Act (ADA) is dependent upon
Lessee’s specific use of the Premises, Lessor makes no warranty or
representation as to whether or not the Premises comply with ADA or any similar
legislation.  In the event that Lessee’s use of the Premises requires
modifications or additions to the Premises in order to be in ADA compliance,
Lessee agrees to make any such necessary modifications and/or additions at
Lessee’s expense.

 

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO.  THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY

 

 

 

 

 

 

 

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REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.

 

ATTENTION:  NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL
REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES.  THE PARTIES ARE URGED TO:

 

1.                                      SEEK ADVICE OF COUNSEL AS TO THE LEGAL
AND TAX CONSEQUENCES OF THIS LEASE.

 

2.                                      RETAIN APPROPRIATE CONSULTANTS TO REVIEW
AND INVESTIGATE THE CONDITION OF THE PREMISES.  SAID INVESTIGATION SHOULD
INCLUDE BUT NOT BE LIMITED TO:  THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES,
THE ZONING AND SIZE OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF
THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE AMERICANS WITH DISABILITIES
ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE’S INTENDED USE.

 

WARNING:  IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES ARE LOCATED.

 

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

 

Executed at: 1811 Aston Carlsbad

 

Executed at: 2110 Rutherford Rd, Carlsbad, CA
92008

 

 

 

On: 4/15/08

 

On: 4/15/08

 

 

 

By LESSOR:

 

By LESSEE:

 

 

 

Allen Joseph Blackmore, Trustee of the
Blackmore Family Trust, Restated 1995

 

Genoptix, Inc., a Delaware Corporation

 

 

 

By:

/s/ Allen J. Blackmore

 

By:

/s/ Tina Nova Bennett

 

 

 

 

 

Name  Printed: Allen Joseph Blackmore

 

Name Printed:   Tina Nova Bennett, Ph.D.

 

 

 

Title:

 

 

Title: President & CEO

 

 

 

 

 

 

By:

 

 

By:

/s/ C. V. Kuhlen MD

 

 

 

 

 

Name Printed:

 

 

Name Printed:  Christian V. Kuhlen

 

 

 

 

Title:

 

 

Title:  VP, General Counsel

 

 

 

 

Address:   Mail:   P.O. Box 1810, Rancho Santa
Fe, CA 92067, Physical: 1811 Aston Ave, Ste
102 Carlsbad, CA 92008

 

Address:  2110 Rutherford Rd.
Carlsbad, CA 92008

 

 

 

Telephone:   (760) 804-9600

 

Telephone:   (760) 268-6200

 

 

 

Facsimile:   (760) 804-9607

 

Facsimile:   (760) 268-6201

 

 

 

Federal ID No.

 

 

Federal ID No.

 

 

NOTICE:  These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form: AIR Commercial Real Estate Association, 800 W 6th Street,
Suite 800, Los Angeles, CA 90017. Telephone No. (213) 687-8777. Fax No.: (213)
687-8616.

 

 

 

 

 

 

 

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ADDENDUM TO STANDARD MULTI-TENANT OFFICE LEASE GROSS

BY AND BETWEEN

ALLEN JOSEPH BLACKMORE, TRUSTEE OF THE BLACKMORE FAMILY TRUST,

RESTATED 1995, LESSOR

AND

GENOPTIX, INC., A DELAWARE CORPORATION, LESSEE

DATED APRIL 14, 2008

 

This Addendum to Standard Multi-Tenant Office Lease – Gross dated as of
April 14, 2008, is attached to and made a part of that certain Standard
Multi-Lessee Office Lease – Gross dated as of April 14, 2008 (the “Lease”) by
and between Allen Joseph Blackmore, Trustee of the Blackmore Family Trust,
Restated 1995 (“Lessor”), and Genoptix, Inc., a Delaware Corporation
(“Lessee”).  In the event of any express or implied inconsistency between the
provisions of this Addendum and the Lease, the provisions of this Addendum shall
control.  Initially capitalized terms used but not otherwise defined herein
shall have the meanings given to them in the Lease.

 

50.                                 SUBSTANTIAL COMPLETION:  The term
“Substantially Completed” or “Substantial Completion” shall mean: (a) the shell
and core of the Building are complete and in compliance with all Applicable
Requirements and all of the Building’s plumbing, heating, life safety
ventilating, air conditioning, or electrical systems (“Building Systems”) are
operational to the extent necessary to service the Premises such that Tenant can
conduct normal business operations from the Premises, (b) Lessor has completed
all the work required to be performed by Lessor in accordance with the Tenant
Improvement Agreement, except minor “punch-list” items which can be, and shall
thereafter be, promptly completed, (c) Lessor has obtained a certificate of
occupancy for the Premises, or a final sign off of the Permit by the City
Inspector or its equivalent, (d) Lessee has been provided with the number of
parking spaces to which it is entitled under the Lease, (e) Lessee has been
tendered continuous and uninterrupted access to the Premises, and (f) Lessee has
received a Non-Disturbance Agreement signed by Landlord and each current lien
holder, ground lessor or mortgage holder of record.

 

51.                                 EARLY ACCESS:  Lessee, along with its
contractors, subcontractors, agents, etc., shall be permitted to enter the
Premises at any time prior to the anticipated Commencement Date provided said
access has been coordinated in advance with Reno Contracting with no obligation
to pay rent, for the purpose of installing furniture, fixtures, equipment, and
leasehold improvements.  Such entry shall not interfere with or delay completion
of the tenant improvements, or result in additional construction costs to
Lessor.  Lessee shall be obligated to comply with all terms of the Lease except
for the payment of Base Rent and Lessee’s Share of Operating Expenses during
such early access period.

 

52.                                 BASE RENT INCREASES:

 

On January 1, 2010, the monthly Base Rent shall be increased to $115,015.00;

On January 1, 2011, the monthly Base Rent shall be increased to $118,465.00;

On January 1, 2012, the monthly Base Rent shall be increased to $122,019.00;

On January 1, 2013, the monthly Base Rent shall be increased to $125,680.00;

On January 1, 2014, the monthly Base Rent shall be increased to $129,450.00.

 

53.                                 MONUMENT SIGNAGE:  Lessee shall be granted
signage rights on the monument sign located at the entrance to the Premises. 
Said signage shall be designed by Lessor’s signage contractor using Tenant’s
corporate logo and name, in accordance with the Building Signage Program, the
CC&R’s and all City ordinances.  The cost of the sign, permit, design,
fabrication and installation shall be charged to Lessee’s Tenant Improvement
Allowance in an amount not to exceed $ 2,500 unless mutually agreed upon by
Lessor and Lessee.  All costs associated with sign removal shall be at Lessee’s
sole cost and expense.

 

54.                                 TENANT DIRECTORY AND SUITE IDENTIFICATION: 
Lessee shall be granted Tenant Directory and Suite Identification signage in
accordance with the Building Signage Program, which shall include a sign
adjacent to Tenant’s suites and a directory listing.  All costs associated with
the fabrication, installation and removal of said signage shall be at Lessee’s
sole cost and expense in an amount not to exceed $ 300 unless mutually agreed
upon by Lessor and Lessee.

 

55.                                 BUILDING SIGNAGE:  Lessee shall have the
right to one exterior building top signage. Said signage shall be designed by
Lessor’s signage contractor using Tenant’s corporate logo and name, in
accordance with the Building Signage Program, the CC&R’s and all City
ordinances.  The cost of the sign, permit, design, fabrication and installation
shall be charged to Lessee’s Tenant Improvement Allowance in an amount not to
exceed $5,000 unless mutually agreed upon by Lessor and Lessee. All costs
associated with sign removal shall be at Lessee’s sole cost and expense.

 

56.                                 HEATING, VENTILATING, & AIR CONDITIONING: 
Lessor, at Lessor’s expense, which expense shall be included in the Operating
Expenses for the Base Year, shall furnish heating, ventilating and
air-conditioning (HVAC) to the Premises, during the hours set forth in Paragraph
1.12 hereof.  After Hours HVAC usage shall be reimbursed to Lessor based upon
Lessor’s actual cost for such usage.  If reimbursed, such actual costs shall be
billed to Lessee monthly in addition to Base Rent.  Any dispute regarding the
calculation of Landlord’s actual costs shall be determined by the Building’s
HVAC maintenance contractor based upon data provided to Lessee.

 

 

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57.                                 REFUSE:  The trash bins are provided for the
disposal of ordinary office refuse.  The use of the bins for the disposal of
large items which do not constitute customary office refuse, i.e., packing
crates, furniture, storage pallets, etc., is expressly prohibited, and shall be
disposed of promptly in some other manner by Lessee at Lessee’s expense.

 

58.                                 ELECTRICAL AND PHONE SERVICES:  It is
understood by the parties hereto that Lessee shall contract directly with the
appropriate vendors for electricity and phone services to its suite and said
costs shall be paid directly by Lessee to such vendors. These costs shall not be
included in the Operating Expenses.  The costs of installing any separate meters
for the Premises shall be borne solely by Lessor, and shall not be charged to
Lessee as an Operating Expense.

 

59.                                 BUILDING MAINTENANCE:  Lessor has warranted
the Building condition and compliance in Paragraphs 2.2 and 2.3.  To the extent
that any system replacement or repair of any key component to the Building’s
system is required to be made within nine (9) months of the Commencement Date,
or Lessor receives notice within such nine (9) month period that any such
replacements or repairs are required, such repair or replacement shall be paid
for solely by Lessor and shall not be charged to Lessee as Building Operating
Expenses provided such repair or replacement is not occasioned by Lessee’s
negligence or abuse.

 

60.                                 RIGHT OF FIRST OFFER ON FIRST FLOOR SUITES
103 AND 104:  During the Term of the Lease, provided that Lessee is not in
Breach of the Lease, Lessee shall have a continuing right to lease
(a) Suite 103, located on the first floor of the Building (approximately 4,649
rentable square feet), a depiction of which space is attached as Exhibit F-1
hereto (“Suite 103 Space”), and (b) Suite 104, located on the first floor of the
Building (approximately 6,886 rentable square feet), a depiction of which space
is attached as Exhibit F-2 hereto (“Suite 104 Space”) should Lessor receive a
bona fide, third party offer to lease either Suite 103 Space or Suite 104 Space
(together the “First Floor Suites”).  If Lessor receives an offer from a bona
fide third party to lease either of the First Floor Suites, then Lessor will
notify Lessee in writing of the terms and conditions of such offer along with
the terms and conditions that Lessor would be willing to accept. Such written
notice shall be accompanied with a copy of the third party offer for
verification purposes. Lessee shall keep such notices confidential.  Lessee
shall have five (5) business days following receipt of Lessor’s notice to either
(i) accept or reject the terms and conditions upon which Lessor would be willing
to lease the applicable First Floor Suite, or (ii) enter into further
negotiations with Lessor for the subject space for a period not to exceed ten
(10) business days following the expiration of the five (5) business day period
following receipt of Lessor’s notice, and if such negotiations do not result in
a lease for such space, then Lessee shall be deemed to have rejected Lessor’s
offer.  If Lessee elects to enter into negotiations, then before the termination
of such negotiation, Lessee shall present Lessor with an offer (“Best and Final
Offer”) containing the provision upon which Lessee would be willing to lease the
proposed space.

 

If Lessee elects to accept the terms and conditions in Lessor’s notice or if
Lessor and Lessee agree to terms during the negotiations or Lessor elects to
accept the terms of the Best and Final Offer, then the accepting party shall
notify the other party in writing and Lessee and Lessor shall then execute a
amendment for one or both of the First Floor Suites upon which the parties have
agreed to lease to be upon the same terms and conditions as the existing Lease,
with the only changes (e.g. rent, commencement date, term tenant improvements,
etc.) being those contained in the notice that Lessor delivered to Lessee.
Lessee’s failure to notify Lessor in writing within five (5) business days
following receipt of Lessor’s notice of Lessee’s intention to exercise its
rights to lease either of the First Floor Suites as described herein shall be
deemed a rejection of Lessee’s right to lease such space.  If Lessee should not
accept Lessor’s offer (whether by notice, inaction or failure of negotiations)
and does not present Lessor with a Best and Final Offer, then Lessor shall have
four (4) months to consummate a lease with said third party at such terms and
conditions as Lessor deems appropriate.  If Lessee presents a Best and Final
Offer to Lessor, then Lessor shall have four (4) months to consummate a lease
with said third party at such terms and conditions no more favorable to the
third party than those contained in the Best and Final Offer.  If during
negotiations with the proposed tenant, the proposed lease terms and conditions
change to be more favorable to the third party than those contained in the Best
and Final Offer, or if the four (4) month negotiation period lapses, then all
rights of First Offer shall be reinstated and Lessee shall be granted a new
Right of First Offer on the applicable space pursuant to the procedures
described above.

 

This right of first offer to lease additional space shall be personal to Lessee,
and, notwithstanding any provision to the contrary contained elsewhere in the
Lease, may not be assigned to any person or entity (except to a Permitted
Transferee (defined below)).

 

61.                                 LIEN WAIVER:  Lessor acknowledges Lessee’s
right to finance and to secure under the Uniform Commercial Code, inventory,
furnishings, furniture, equipment, machinery, leasehold improvements and other
personal property located in or at the Premises, and Lessor agrees, upon
Lessee’s request, to execute the waiver forms attached hereto as Exhibit C
releasing liens in favor of any purchase money seller, Lessor or lender who has
financed or may finance in the future such items.  Without limiting the
effectiveness of the foregoing, provided that no default shall have occurred and
be continuing, Lessor shall, upon the request of Lessee, and at the Lessee’s
sole cost and expense (including Lessor’s reasonable attorney fees incurred in
relation thereto), execute and deliver any commercially reasonable instruments
necessary or appropriate to confirm any such grant, release, dedication,
transfer, annexation

 

 

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or amendment to any person or entity permitted under this paragraph including
Lessor waivers with respect to any of the foregoing.

 

62.                                 OPTION TO EXTEND:  Provided that Lessee is
not then in default under any of the terms, covenants and conditions of the
Lease beyond any applicable notice and cure period, Lessor hereby grants to
Lessee, subject to the conditions hereinafter set forth, one (1), five (5) year
option to extend the Term of this Lease (the “Option Term.”).  This option shall
be on all of the same terms and conditions as this Lease, except for Base Rent,
which shall be adjusted as set forth in Paragraph 63 below.  This option shall
remain personal to Lessee and shall not be transferable to other entities except
to a Permitted Transferee.  Lessee shall give Lessor written notification of
Lessee’s intent to exercise the option no later than June 1, 2014.  All
references to “Term” in the Lease shall include the Option Term as exercised in
accordance with the Lease.

 

63.                                 BASE RENT INCREASES DURING OPTION PERIODS:

 

On January 1, 2015, the monthly Base Rent shall be increased to $133,334.00

On January 1, 2016, the monthly Base Rent shall be increased to $137,334.00;

On January 1, 2017, the monthly Base Rent shall be increased to $141,454.00;

On January 1, 2018, the monthly Base Rent shall be increased to $145,698.00;

On January 1, 2019, the monthly Base Rent shall be increased to $150,069.00.

 

64.                                 PERMITTED TRANSFERS:  Notwithstanding
anything to the contrary contained in the Lease (including Section 12 thereof),
Lessee may assign the Lease or sublease all of the Premises without Lessor’s
consent, but with ten (10) days advance written notice to (each, a “Permitted
Transferee”): (i) any corporation, partnership or other business entity that
controls, is controlled by, or is under common control with Lessee, (ii) any
corporation, partnership or other business entity resulting from a merger or
consolidation with Lessee, or (iii) to any entity which acquires substantially
all of Lessee’s assets or capital stock.  In no event shall any public offering
of stock of Lessee on a national stock exchange constitute a transfer requiring
Lessor’s consent pursuant to Article 12 of the Lease.   The provisions of
Section 12.1(c) are hereby deleted from the Lease.

 

65.                                 RULES AND REGULATIONS AND USE:  Lessor
agrees that the Rules and Regulations attached as Exhibit D to the Lease shall
not be changed, revised or enforced in any unreasonable or non-discriminatory
way by Lessor, nor modified or added to by Lessor in such a way as to interfere
with Lessee’s permitted use of the Premises set forth in the Lease.  Lessor
shall not enforce the Rules and Regulations in an unreasonable manner or in a
manner which shall unreasonably interfere with the normal and customary use of
the Premises by Lessee for the Agreed Use, and Lessor shall not unreasonably
interfere with Lessee’s occupancy of the Premises in connection with any Lessor
activity in the Building or Project, including, without limitation, repairs or
alterations to the Common Areas.

 

66.                                 EXCLUSIONS FROM OPERATING EXPENSES:

 

(a)                                  Notwithstanding anything to the contrary in
the definition of Operating Expenses and Real Property Taxes set out in the
Lease, Operating Expenses and Real Property Taxes shall not include the
following, except to the extent specifically permitted by a specific exception
to the following:

 

(i)                                     Any ground lease rental;

 

(ii)                                  Rentals for items (except when needed in
connection with normal repairs and maintenance of permanent systems) which if
purchased, rather than rented, would constitute a Capital Expenditure which is
specifically excluded in Paragraph 2.3 of the Lease (excluding, however,
equipment not affixed to the Building which is used in providing janitorial or
similar services);

 

(iii)                               Costs incurred by Lessor for the repair of
damage to the Building, to the extent that Lessor is reimbursed by insurance
proceeds;

 

(iv)                              Costs, including permit, license and
inspection costs, incurred with respect to the installation of tenants’ or other
occupants’ improvements in the Building or incurred in renovating or otherwise
improving, decorating, painting or redecorating vacant space for tenants or
other occupants of the Building;

 

(v)                                 Depreciation, amortization and interest
payments, except as provided herein and except on materials, tools, supplies and
vendor-type equipment purchased by Lessor to enable Lessor to supply services
Lessor might otherwise contract for with a third party where such depreciation,
amortization and interest payments would otherwise have been included in the
charge for such third party’s services.

 

(vi)                              Marketing costs including, without limitation,
leasing commissions, attorneys’ fees in connection with the negotiation and
preparation of letters, deal memos, letters of intent, leases, subleases and/or
assignments, space planning costs, and other costs and expenses incurred in
connection with lease, sublease and/or assignment negotiations and transactions
with present or prospective tenants or other occupants of the Building;

 

(vii)                           Expenses in connection with services or other
benefits which are not offered to Lessee or for which Lessee is charged for
directly but which are provided to another tenant or occupant of the Building;

 

(viii)                        Costs incurred by Lessor due to the violation by
Lessor or any tenant of the terms and conditions of any lease of space in the
Building; Exclusions from Operating Expenses, continued.

 

 

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(ix)                                Overhead and profit increment paid to Lessor
or to subsidiaries or affiliates of Lessor for goods and/or services in or to
the Building to the extent the same exceeds the costs of such goods and/or
services rendered by unaffiliated third parties on a competitive basis;

 

(x)                                   Interest, principal, points and fees on
debts or amortization on any mortgage or mortgages or any other debt instrument
encumbering the Building or the Project;

 

(xi)                                Lessor’s general corporate overhead and
general and administrative expenses;

 

(xii)                             Advertising and promotional expenditures, and
costs of signs in or on the Building identifying the owner of the Building or
other tenants’ signs;

 

(xiii)                          Costs incurred in connection with upgrading the
Building to comply with disability, life, fire and safety codes, ordinances,
statutes, or other laws in effect prior to the Commencement Date, including,
without limitation, the Americans with Disabilities Act, including penalties or
damages incurred to such non-compliance;

 

(xiv)                         Tax penalties incurred as a result of Lessor’s
negligence, inability or unwillingness to make payments and/or file any tax or
information returns when due:

 

(xv)                            Costs for which Lessor has been compensated by a
management fee, and any management fees in excess of those management fees which
are normally and customarily charged by comparable landlords of Comparable
Buildings;

 

(xvi)                         Costs arising from the negligence or fault of
other tenants or Lessor or its agents, or any vendors, contractors, or providers
or materials or services selected, hired or engaged by Lessor or its agents;

 

(xvii)                      Notwithstanding any contrary provisions of the
Lease, including, without limitation, any provision relating to capital
expenditures, any and all costs arising from the presence of hazardous materials
or substances in or about the Premises, the Building or the Project including,
without limitation, hazardous substances in the ground water or soil, not placed
in the Premises, the Building or the Project by Lessee;

 

(xviii)                   Costs arising from Lessor’s charitable or political
contributions;

 

(xix)                           Costs arising from latent defects in the base,
shell or core of the Building or improvements installed by Lessor or repair
thereof;

 

(xx)                              Costs for sculpture, paintings or other
objects of art;

 

(xxi)                           Costs (including in connection therewith all
attorneys’ fees and costs of settlement judgments and payments in lieu thereof)
arising from claims, disputes or potential disputes in connection with potential
or actual claims litigation or arbitrations pertaining to Lessor and/or the
Building and/or the Project;

 

(xxii)                        Costs associated with the operation of the
business of the partnership or entity which constitutes Lessor as the same are
distinguished from the costs of operation of the Building, including partnership
accounting and legal matters, costs of defending any lawsuits with any mortgagee
(except as the action of Lessee may be in issue), costs of selling, syndicating,
financing, mortgaging or hypothecating any of Lessor’s interest in the Building,
costs of any disputes between Lessor and its employees (if any) not engaged in
Building operation, disputes of Lessor with Building management, or outside fees
paid in connection with disputes with other tenants;

 

(xxiii)                     Any “finders fees”, brokerage commissions, job
placement costs or job advertising cost, other than with respect to a
receptionist or secretary in the Building office, once per year;

 

(xxiv)                    Any “above-standard” cleaning, including, but not
limited to construction cleanup or special cleanings associated with
parties/events and specific tenant requirements in excess of service provided to
Lessee, including related trash collection, removal, hauling and dumping;

 

(xxv)                       The cost of any magazine, newspaper, trade or other
subscriptions;

 

(xxvi)                    The cost of any training or incentive programs, other
than for tenant life safety information services;

 

(xxvii)                 The cost of any “tenant relations” parties, events or
promotion not consented to by an authorized representative of Lessee in writing;

 

(xxviii)              “In-house” legal and/or accounting fees in excess of the
management fees.

 

(b)                                 In the event any facilities, services or
utilities used in connection with the Building are provided from another
building owned or operating by Lessor or vice versa, the costs incurred by
Lessor in connection therewith shall be allocated to Operating Expenses by
Lessor on a reasonably equitable basis.

 

67.                                 AUDIT RIGHTS RELATING TO OPERATING
EXPENSES:  Within sixty (60) days following the end of each Comparison Year,
Lessor shall furnish Lessee a statement of the actual expenses incurred by
Lessor during the previous Comparison Year compared to the actual expenses
incurred by Lessor during the Base Year. If the actual expenses incurred by
Lessor during the Comparison Year exceed those expenses incurred by Lessor
during the Base Year, Lessee shall pay Lessor its prorata portion of the
deficiency within thirty (30) days after delivery of Lessor’s Statement.  At
Lessor’s option, the amount of this reimbursement may be estimated annually in
advance with estimated payments being due monthly in addition to Base Rent.

 

For up to sixty (60) days following delivery of Lessor’s Statement, Lessee shall
have the right (on not less than ten (10) days prior written notice to Lessor)
to audit financial records of Lessor related to Operating Expenses incurred
during the previous Comparison

Year as covered by the most recent Lessor’s Statement.  Any audit shall be
conducted during normal business hours at Lessor’s office, or any other

 

 

INITIALS

 

 

 

 

 

 

4

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location reasonably designated by Lessor and shall be conducted by a certified
public accounting firm reasonably approved by Lessor, provided it is not
retained on a contingency or percentage of recovery basis.  Lessee must make any
claim to Lessor for an adjustment to the Lessor’s Statement within thirty (30)
days of any audit of Lessor’s Statement performed by Lessee.

 

68.                                 PARKING:  Except for maintenance and
emergency, Lessee’s parking privileges shall be available to Lessee twenty-four
(24) hours per day, seven (7) days per week, every day of the year, in any
location where Lessee shall maintain its parking privileges.  In no event shall
Lessee be charged any fee for parking during the Original Term or any Option
Term.

 

69.                                 ALTERATIONS:  Notwithstanding any provision
in the Lease to the contrary, including Section 1.2 (a) of the Lease, Lessee
shall have the right to, at Lessee’s sole cost and expense (subject to the
requirements of Section 7.3 of the Lease applicable to Alterations), install and
maintain (i) a “key card” security system in the Building for purposes of
protecting the Premises against unauthorized access, and (ii) telephone, data
and IT cabling in the Premises.

 

70.                                 TERMINATION OF FARADAY LEASE:  Effective
upon the occurrence of the Commencement Date under the Lease, Lessor shall cause
that certain Standard Multi-Tenant Office Lease – Gross (with Addendum attached
thereto), dated as of January 30, 2008 (the “Faraday Lease”) by and between
Blackmore Signal Hill, a California limited partnership (“Faraday Lessor”) and
Lessee for certain premises located at 1555 Faraday Avenue, Carlsbad, California
(the “Faraday Premises”) to be terminated on behalf of the Faraday Lessor. 
Lessee agrees to accept such termination concurrently therewith and thereafter
neither Lessee nor the Faraday Lessor shall have any further obligation under
the Faraday Lease except with respect to such matters as are intended to survive
the expiration or earlier termination of the Faraday Lease pursuant to its
terms.  Lessee shall perform all obligations of the Faraday Lease through the
date of termination (including, without limitation, restoring the premises
before vacating) and at Faraday Lessor’s request, Lessee and Faraday Lessor
shall execute a termination agreement for the Faraday Lease in a commercially
reasonable form (but such termination agreement shall not include any
termination fee). Faraday Lessor shall have the right to enter into a lease for
the Faraday Premises with a third party tenant prior to the scheduled
Commencement Date under the Lease, in which event the Faraday Lease termination
shall occur on the date that Lessee has effected its computer, data, telephony
and furniture, fixture and equipment installations in, and physical move into,
already improved space on the first floor of the Building (the “Relocation
Space”), such that Lessee can commence business operations therein as the same
are then conducted in the Faraday Premises.  Notwithstanding the foregoing,
following vacation of the Faraday Premises, Lessee shall pay rent and other
charges under the Faraday Lease through the Commencement Date (and shall be
entitled to occupy the Relocation Space at no additional charges beyond the
amounts to be paid under the Faraday Lease, but shall perform all other
obligations under this Lease with respect to its occupancy of the Relocation
Space during such period), at which time the terms of the Lease shall govern the
Premises as a whole including the Relocation Space.  In no event shall Lessor’s
construction activities in the balance of the Premises during such period of
relocation from the Faraday Premises adversely affect Lessee’s use or occupancy
of the Relocation Space for the conduct of Lessee’s business.  Lessor represents
and warrants that the Faraday Lessor is an affiliate of Lessor and Lessor has
the authority to cause the termination of the Faraday Lease as contemplated
hereinabove.

 

71.                                 COOPERATION REGARDING RUTHERFORD LEASE: 
Lessee currently subleases certain space at 2110 Rutherford Road, Carlsbad,
California (“Rutherford Premises”) from a sublandlord that is a tenant of an
affiliate of Lessor. The sublease rental rate that Lessee pays at the Rutherford
Premises is less than the amount that the landlord of the Rutherford Premises
receives from the sublandlord. Lessor and Lessee shall cooperate in good faith
to attempt to extend Lessee’s current tenancy at the Rutherford Premises through
December 31, 2014, but recognize that the sublandlord must cooperate for such
extension to occur.  Such cooperation shall require neither Lessor (or its
affiliate) nor Lessee to incur any additional liability or to modify the rents
currently being paid or received under the existing lease and sublease
arrangements affecting the Rutherford Premises.   If the sublandlord at the
Rutherford Premises does not exercise its option to extend its lease, then
Lessor shall cause Lessor’s affiliate to enter into a direct lease with Lessee
for the Rutherford Premises for the period of July 1, 2012, through December 31,
2014, at a base monthly rent schedule of $123,114.44 for the period of July 1,
2012 through June 30, 2013; $126,807.87 for the period of July 1, 2013 through
June 30, 2014; and $130,612.11 for the period of July 1, 2014 through
December 31, 2014.

 

72.                                 ENTIRE AGREEMENT; COUNTERPARTS:  There are
no oral agreements between the parties hereto affecting this Addendum and the
Lease (collectively herein, the “Lease”), and this Lease supersedes and cancels
any and al previous negotiations, arrangements, brochures, agreements and
understandings, if any, between the parties hereto or displayed by Lessor to
Lessee with respect to the subject matter thereof, and none thereof shall be
used to interpret or construe this Lease.  This Addendum may be executed in
counterparts, which, when taken together, shall constitute a single document.

 

73.                                 EXHIBITS:  The following exhibits are
attached hereto and made a part hereof:

 

Exhibit A-1– Floor Plan-Suite 100;

Exhibit A-2– Floor Plan-Suite 106;

Exhibit A-3– Floor Plan-Suite 200;

Exhibit B – Site Plan;

 

 

INITIALS

 

 

 

 

 

 

5

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Exhibit C - Landlord Waiver and Consent Form;

Exhibit D – Building Rules and Regulations;

Exhibit E-1- Condition of Building Upon Possession-Suite 100;

Exhibit E-2- Condition of Building Upon Possession-Suite 106;

Exhibit E-3- Condition of Building Upon Possession-Suite 200;

Exhibit F-1 – Suite 103 Floor Plan;

Exhibit F-2 – Suite 104 Floor Plan.

 

IN WITNESS WHEREOF, Lessor and Lessee have entered into this Addendum as of the
date first written above.

 

LESSOR:

 

LESSEE:

 

 

 

ALLEN JOSEPH BLACKMORE, TRUSTEE OF
THE BLACKMORE FAMILY TRUST, RESTATED
1995

 

GENOPTIX, INC., A DELAWARE CORPORATION

 

 

 

By:

/s/ Allen J. Blackmore, TTE

 

By:

/s/ Tina Nova Bennett

 

Allen Joseph Blackmore, Trustee

 

 

 

of the Blackmore Family Trust

 

 

 

Restated 1995, General Partner

 

 

 

 

 

 

Date:

4/15/08

 

It’s:

President & CEO

 

 

 

 

(title of officer)

 

 

 

 

 

 

 

Date:

4/15/08

 

 

 

 

 

By:

/s/ C.V. Kuhlen

 

 

 

 

 

Its:

VP, General Counsel

 

 

 

 

 

Date:

4/15/08

 

6

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EXHIBIT B

 

TENANT IMPROVEMENT AGREEMENT

 

This Tenant Improvement Agreement (“Agreement”) is entered into as of April 14,
2008, between Allen Joseph Blackmore, Trustee of the Blackmore Family Trust
Restated 1995 (“Lessor”) and Genoptix, Inc., a Delaware corporation (“Lessee”),
in connection with the execution of the Lease (with Addendum attached thereto)
between Lessor and Lessee executed simultaneously with this Agreement
(“Lease”).  This Agreement is the “Work Letter” referred to in said Lease. 
Lessor and Lessee hereby agree as follows:

 

1.                                       General.

 

a.                                       The purpose of this Agreement is to set
forth how the interior improvements on the second floor of the Premises,
including, without limitation, offices, employee services facilities, demising
walls, window coverings and floor covering (“Tenant Improvements”) are to be
constructed, who will perform the construction of the Tenant Improvements, and
who will pay for the construction of the Tenant Improvements. The Premises are
located on the 2nd floor of the multi-tenant building located at 1811 Aston
Avenue, Carlsbad, California (“Building”).  The first floor of the Premises has
already been improved and is not part of this Agreement (although it is included
in the definition of “Premises” in the Lease).

 

b.                                      Except as defined in this Agreement to
the contrary, all terms utilized in this Agreement shall have the same meaning
as the defined terms in the Lease.

 

c.                                       The provisions of the Lease, except
where clearly inconsistent or inapplicable to this Agreement, are incorporated
into this Agreement.

 

2.                                       Designer/Architect.  The plans for the
Tenant Improvements shall be prepared by Richard Yen & Associates, or such other
designer approved by Lessor and Lessee (“Designer”) who is familiar with the
design of the Building and with all Applicable Requirements applicable to
construction and completion of the Tenant Improvements and the customary tenant
improvements for Class A office buildings in Carlsbad, California.  The cost of
the space planning, architectural and engineering services (including “value
engineering” services) relating to the preparation of the plans for the Tenant
Improvements shall be included in the cost of the Tenant Improvements in an
amount not to exceed $2.00 per usable square foot of the Premises.  Lessor shall
contract with the Designer.

 

3.                                       Preparation of Plans and Construction
Schedule for Tenant Improvements.  Lessor has provided instructions and Building
background drawings to the Designer specifically identified above prior to the
execution of the Lease (or, if such identified Designer is yet to be selected by
the parties, promptly after such selection) to complete the plans and
specifications, and Lessor shall contract on behalf of Lessee for the
construction of the Tenant Improvements and supervise the Contractor in
accordance with the following schedule:

 

a.                                       Upon the execution of the Lease, Lessee
shall provide Designer with sufficient information to allow Designer to prepare
preliminary Schematic Drawings (“Schematic Drawings”) for the Tenant
Improvements, which Schematic Drawings shall be delivered to Lessor and Lessee
upon completion.  Upon receipt of the Schematic Drawings, if such Tenant
Improvements are of a nature that are inconsistent with either customary
improvements for Class A office space in Carlsbad, California or Building
Standard Tenant Improvement Items (as defined below), then Lessor shall notify
Lessee of such proposed improvements, if any, that Lessee will need to remove
and restore the Premises to the existing condition at the termination or
expiration of the Lease so that Lessee can modify its proposed improvement plans
accordingly.  Except with respect to such non-standard tenant improvements that
Lessor has disapproved as provided hereinabove and which Lessee nonetheless
elects to have Lessor construct, Lessee shall have no obligation to remove any
of the Tenant Improvements.

 

b.                                      Lessee shall approve such Schematic
Drawings not later than five (5) business days of receipt or designate by
written notice to Lessor the specific changes required to be made to the
Schematic Drawings, which Lessor shall make as soon as reasonably possible. 
Lessee’s failure to give notice within such five (5) business day period of
receipt shall be deemed an approval of the Schematic Drawings.

 

c.                                       After Lessee has approved the Schematic
Drawings, Lessor shall cause the Designer to prepare and deliver to Lessee final
Construction Documents (“Plans”) which shall be defined as, and shall consist
of, complete architectural

 

B-1

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plans (inclusive of Schematic Drawings) and construction detail and
specifications necessary to allow the Contractor to build the Tenant
Improvements in accordance with the final Plans. The term “Tenant Improvements”
shall mean all improvements shown on the final Plans as approved by Lessee and
Lessor under this Agreement.

 

d.                                      Lessee shall approve such Plans within
three (3) business days of receipt or designate by written notice to Lessor the
specific changes required to be made to such Plans, which Lessor shall cause
Designer to make as soon as reasonably possible following Lessor’s approval. 
Lessee’s failure to give notice within such three (3) business day period shall
be deemed an approval of the Plans.

 

e.                                       The Tenant Improvements shall not
affect the Building’s structure, systems (excluding HVAC and utilities hook-ups
to service the Premises), equipment or appearance (including, without
limitation, any modification of the existing lobby, core or other improvements
in the Building) except as expressly agreed to by Lessor or as required under
Applicable Requirements, shall incorporate the “Building Standard Tenant
Improvement Items” as described on Schedule “1” attached hereto and otherwise
shall be consistent with tenant improvements in Class A office space in
Carlsbad, all as determined in Lessor’s sole and absolute discretion.  Prior to
final approval of the Plans, Lessor shall have the right to disapprove any
Tenant Improvements requested by Lessee that Lessor determines do not at least
meet the minimum of the above standards (“Landlord’s Minimum Standard”).

 

4.             Construction of Tenant Improvements.

 

a.                                       Lessor, as soon as this Agreement is
executed, shall make arrangements for Reno Contracting, Inc. (“Contractor”) to
construct the Tenant Improvements as indicated on the Plans as soon as
commercially possible and consistent with industry custom and practice. Although
Lessor will enforce the contract with Contractor to have the Tenant Improvements
completed as soon as reasonably possible, Lessor shall not be liable for delay
in the construction of the Tenant Improvements that cause the date of
Substantial Completion to occur after December 31, 2008 (as extended by delays
due to Lessee’s breach of its obligations hereunder or due to a delay arising
from a Change Order requested by Lessee) except to the extent that such delay is
caused by (i) Lessor’s failure to respond to Schematic Drawings or Plans within
three (3) business days of their submission to Lessor, (ii) any willful
misconduct by Contractor which actually delays completion of the Tenant
Improvements, and (iii) Lessor’s gross negligence or intentional misconduct. 
Lessor shall direct Contractor to secure independent bids from three
(3) subcontractors mutually acceptable to Lessor and Lessee (to the extent that
such bids are reasonably available) for each trade (except for HVAC, fire
safety, plumbing and electrical, for which the same subcontractors that
completed lobby and core work and first floor tenant improvements at the
Building will perform the work for such items in the Premises).  Unless mutually
agreed by Lessor and Lessee, the lowest bidding subcontractor shall be retained
by Contractor to perform the work.  Lessee shall be provided with the bid
packages submitted for bid and, based on the winning bids, a budget of Total
Costs (defined below) shall be prepared by Contractor and submitted to Lessor
and Lessee for final approval (the “Approved Budget”). In connection with its
approval of the Approved Budget, subject to Landlord’s Minimum Standard, Lessee
shall have the right to eliminate or modify any elements of the Tenant
Improvements and cause the Total Cost estimate to be revised accordingly,
however Lessee shall be solely liable for any additional cost or delay in
completion of the Tenant Improvements resulting therefrom.  Lessee shall have
the benefit of the lowest pricing Contractor provides to Lessor for comparable
construction on other properties owned by Lessor or its affiliated companies.

 

b.                                      Lessor shall not be paid a separate fee
in connection with Lessor’s obligations set forth in this Agreement with respect
to reviewing the design and construction of the Tenant Improvements for the
Premises and supervising Contractor in the construction of the Tenant
Improvements.

 

5.                                       Lessee Representative.  Lessee will
designate a representative with decision making authority to attend the Tenant
Improvement Construction Meetings that shall occur on a weekly basis or as
needed in order to ensure that the construction process progresses smoothly and
on schedule.

 

6.                                       Tenant Improvement Allowance.  The cost
of the planning, design and construction of the Tenant Improvements (“Total
Cost”) shall be at Lessee’s sole and entire cost except for the Allowance
(defined below). The Total Cost shall include all direct and indirect costs and
expenses incurred by Lessor relating to the Tenant Improvements as indicated by

 

B-2

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

 

the Plans, as modified, including, without limitation, all direct and indirect
costs related to the architectural, engineering and inspection fees,
construction management fees, the costs of the Schematic Drawings and the Plans,
payments made under all construction contracts, premiums for all bonds and
insurance, all sales, use or similar taxes relating to the construction of the
Tenant Improvements, permit fees and other governmental fees, losses and
expenses not compensated by insurance or otherwise sustained by Lessor,
blueprinting expenses and all other ordinary and reasonable expenses incurred by
Lessor applicable to the construction of the Tenant Improvements all as shown on
the Approved Budget, excluding costs required to bring the Building or Project
into compliance with Applicable Requirements.  Lessor represents and warrants
that the existing construction in the Project and the Building complies with
Applicable Requirements (including, without limitation, the Americans with
Disabilities Act requirements applicable to the Project and Building for normal
office use). Except with respect to modifications to the Project or the Building
(outside of the Premises) that are necessary to comply with Applicable
Requirements, Lessor shall have no obligation to make any modifications to the
Premises or the Building following the execution of this Agreement and any such
changes to the Premises or the Building related to Lessee’s occupancy of the
Premises shall be included in the Total Cost. Lessor will provide a Tenant
Improvement allowance of $60.00 per useable square foot of the second floor of
the Premises (which the parties agree consists of 24,494 useable square feet)
(“Allowance”); provided, however, for avoidance of doubt, the cost of compliance
with American with Disabilities Act requirements for portions of the Building
and Project outside of the Premises as a result of the initial Tenant
Improvements shall be at Lessor’s sole cost and expense. If the estimated Total
Cost of the Tenant Improvements under the Approved Budget exceeds the Allowance,
then Lessee shall pay such overage to Lessor (within five business days after
Lessor’s written request) at the time that at least 75% of the Allowance has
been expended for the costs of construction of the Tenant Improvements.  If
Lessee requests a Change Order in the Tenant Improvements from that shown on the
Plans and the additional cost of the Change Order causes the Total Cost under
the Approved Budget to exceed the Allowance, then, the Approved Budget shall be
modified to include the cost of such Change Order and Lessee shall pay such
additional cost of the Change Order to Lessor before the Change Order is
approved. Lessor shall perform the services of fund control with respect to the
construction costs and shall disburse funds on a percentage of completion basis
as construction progresses thereon.  When all the Tenant Improvements are
Substantially Complete, if the Total Cost of the Tenant Improvements is less
than the sum of the Allowance plus any amounts Lessee paid to Lessor, then
Lessor shall apply the entirety of such overage to the Base Rent due under the
Lease commencing on the date that Base Rent is first due until fully expended.

 

7.                                       Substantially Complete.  Lessor shall
use diligent efforts to cause Substantial Completion of the Tenant Improvements
(as defined in Section 50 of the Lease) to occur on or before January 1, 2009,
and Lessee shall cooperate therewith in the timely performance of its
obligations hereunder.  The actual date of Substantial Completion shall not
impact the Commencement Date of the Term of the Lease, but no rent shall be
payable under the Lease by Lessee until Substantial Completion has occurred
except to the extent of Lessee’s breach of its obligations hereunder or due to a
delay arising from a Change Order requested by Lessee as provided below.

 

a.                                       If Lessee delays the date of
Substantial Completion due to Change Orders or the non-timely response to
clarification or direction requested by the Designer, Contractor or Lessor, such
delays shall not cause any delay in the Commencement Date of the Lease nor shall
it delay Lessee’s obligation to pay rent for the Premises.

 

b.                                      Whenever possible and practical, Lessor
will utilize, for the construction of the Tenant Improvements, the items and
materials designated in the Plans.  However, whenever Lessor determines in its
judgment that it is not practical or efficient to use such materials, Lessor
shall have the right to substitute comparable items and materials.  However, if
such substitute materials increase the cost of construction or operate to delay
Substantial Completion, then Lessor shall not make such substitution without the
consent of Lessee.

 

c.                                       If the date of Substantial Completion
occurs before the scheduled Commencement Date, then Lessee shall be entitled to
occupy the Premises during the period commencing on the date of Substantial
Completion and ending on the Commencement Date without payment of monthly Base
Rent or Operating Expenses during such period, but all other obligations of
Lessee under the Lease shall apply.  The foregoing shall be without prejudice to
Lessee’s early occupancy rights under the Lease.

 

8.                                       Change Orders.  If Lessee requests any
changes to the Plans other than those that are necessary due to acts or
omissions of Lessor or the Designer (“Change Order”), Lessor shall not
unreasonably withhold its consent to any such Change Order, provided the

 

B-3

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Change Order does not materially affect the Building’s structure, systems,
equipment or appearance (including, without limitation, any modification of the
existing lobby, core or other improvements in the Building) unless such Change
Order is required to comply with Applicable Requirements, and does not result in
the use of materials in the construction of the Tenant Improvements of a lesser
quality than the Building Standard Tenant Improvement Items. Lessee shall
request Change Orders in writing consistent with the provisions of Paragraph 3
of this Agreement and if the Change Order increases the cost of the Tenant
Improvements, then Lessee shall pay such increased costs to Lessor before the
request is approved if the additional cost of the Change Order exceeds the
Allowance.

 

9.                                       No Lessor Liability.  Lessor shall not
be liable for any loss, cost, damage, or expense incurred or claimed by Lessee
or any other person or party on account of the construction or installation of
the Tenant Improvements or any other improvements to the Premises made by
Lessee, except to the extent caused by Lessor’s negligence, recklessness or
intentional acts. Lessee agrees and understands that Lessor shall not be the
guarantor of, nor responsible for, the correctness or accuracy of any Plans, the
compliance of such Plans with applicable laws or the operation of the Tenant
Improvements in the Premises. Lessor assumes no liability or responsibility
resulting from the failure of the Lessee to comply with applicable governmental
laws, codes and regulations or for any defect in any of the Tenant Improvements
or other alteration to the Premises made by Lessee.  Notwithstanding the
foregoing, Lessor shall enforce for the benefit of Lessee all contracts,
warranties, indemnities and guaranties applicable to the design and construction
of the Tenant Improvements.  Lessee shall indemnify, defend and hold Lessor
harmless from and against claims for personal injury or property damage to the
extent caused by Lessee’s gross negligence and intentional misconduct in
connection with its entry onto and activities on the Premises during the
construction of the Tenant Improvements.

 

10.                                 Future Improvements by Lessee to the
Premises.  In the event that Lessee shall desire to perform future improvements
to the Premises during the term of the Lease or any extension thereof, Lessee
shall construct such improvements in accordance with the terms and conditions of
the Lease.

 

11.                                 Default.  Any default by Lessee or Lessor
under the terms of this Agreement, subject to applicable notice and cure
periods, shall constitute a default under the Lease and shall entitle the other
to exercise all remedies set forth in the Lease.  The defaulting party shall
have all rights to remedy such default pursuant to the provisions of the Lease.

 

12.                                 Reasonable Diligence and Cooperation.  Both
Lessor and Lessee agree to use reasonable diligence and cooperation in
performing all of their respective obligations and duties under this Agreement
and in proceeding with the construction and completion of all Tenant
Improvements in the Premises.

 

 

LESSOR:

 

 

 

 

 

/s/ Allen J. Blackmore, TTE

 

Allen Joseph Blackmore, Trustee of

 

the Blackmore Family Trust Restated 1995

 

 

 

LESSEE:

 

 

 

GENOPTIX, INC.,

 

a Delaware corporation

 

 

 

 

 

By:

/s/ Tina Nova Bennett

 

 

 

 

Its:

President & CEO

 

 

 

(title of officer)

 

 

 

 

By:

/s/ C.V. Kuhlen

 

 

 

 

Its:

VP, General Counsel

 

 

(title of officer)

 

B-4

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SCHEDULE “1”

 

Building Standard Tenant Improvement Items

 

1.             DEMISING WALLS

 

a.                       Demising walls:  (For stud heights =< 14’-9”) 3-5/8” x
25 ga. Metal studs at 24”o.c. with 5/8” Type ‘x’ Gyp Bd.  Attach with 1” Type
‘S’ screws at 8” o.c. vert. And 12” o.c. at bottom and top track and at
intermediate studs.  Complete and full height from floor to structure above. 
Set bottom tack in two (2) beads of silicon sealant.  Provide slip track at top
of demising wall where attaching to building structure.

 

b.                      Wall Insulation:  3” unfaced fiberglass batt insulation.

 

c.                       Finish:  Level 4 finish in accordance with ASTM C 840
Gypsum Association standard GA-214-96.

 

d.                      Sound Rating:  Minimum STC 49.

 

2.             INTERIOR PARTITIONS

 

a.                       Interior Partitions:  (For stud heights =< 14’-9”)
3-5/8” x 25 ga. Metal studs at 24”o.c. with 5/8” Type ‘x’ Gyp Bd.  Attach with
1” Type ‘S’ screws at 8” o.c. vert. And 12” o.c. at bottom and top track and at
intermediate studs.

 

b.                      Wall Insulation:  3” unfaced fiberglass batt insulation,
where required for sound attenuation.

 

c.                       Finish:  Level 4 finish in accordance with ASTM C 840
Gypsum Association standard GA-214-96.

 

3.             INTERIOR DOORS, FRAMES, AND SIDELIGHTS

 

a.                       Interior Doors:  3’-0” x 8’-10” x 1-3/4” thick solid
core, plain sliced, Grade ‘A’ per WDMA I.S. 1-A (1993), book matched, Am. Cherry
veneer, stained per Architect’s sample.

 

b.                      Frames:  Pre-finished metal door frame; fire-rated
assembly (20-min.) where required.

 

c.                       Sidelights:  Integral sidelights with 1/4” clear
tempered float glass.

 

4.             DOOR HARDWARE

 

a.                       Hardware:  Standard hardware sets as required for each
door.

 

b.                      Mortise Locksets:  Schlage, L Series Mortise Lockset at
tenant entry door, or as required, Athens lever, 626

 

c.                       Cylinder Locksets:  Schlage, D Series, Athens lever,
626.

 

5.             ACOUSTICAL CEILINGS

 

a.                       Metal Suspension System, Standard:  Armstrong World
Industries, Inc., Superfine XL 9/16” Exposed Tee System, white.

 

b.                      Metal Suspension System (Optional Upgrade):  Armstrong
World Industries, Inc., Interlude XL 9/16” Dimensional Tee System, white.

 

c.                       Acoustical Panels:  Armstrong World Industries, Inc.,
Dune, fine textured, white, 15/16” angled tegular, 24” x 24”.

 

d.                      Ceiling heights shall be maintained at a minimum of
9’-0” above finish floor, except at certain feature areas or soffits.

 

6.             WALL BASE

 

a.                       Carpet Base:  4” carpet base at carpeted floors, to
match adjacent carpet.

 

b.                      Resilient Wall Base (at VCT or linoleum flooring):  4”
rubber top-set carpet base, smooth.  Color:  to be selected from manufacturer’s
standard colors.

 

B-5

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7.             FLOOR COVERING

 

a.                       Carpet:

 

1.               Cut pile carpet: Equal to Prince Street; Entendre [Tip
Sheared]; 409806 Biomass.

 

2.               Level loop carpet: Equal to Shaw- 5A036 Kendari.

 

b.                      Vinyl composition Tile:  Armstrong, Excelon, 12” x 12”,
1/8 gage. Color to be selected from manufacturer’s standard colors.

 

c.                       Linoleum Floor Covering:  Armstrong World
Industries, Inc., Marmoette sheet linoleum floor covering.  Color and pattern to
be selected from manufacturer’s standard colors.

 

8.             PAINT

 

a.                       Interior Paint:  ICI, Frazee, or Dunn-Edwards, Flat
latex interior wall paint.  Colors to be selected from manufacturer’s standard
colors.

 

9.             ARCHITECTURAL WOODWORK

 

a.                       Plastic Laminate Cabinets:  WIC Premium grade,
frameless, flush overlay, high-pressure decorative laminate by Nevamar.  Color
and pattern to be selected from manufacturer’s standard selection.

 

10.           WINDOW TREATMENT

 

a.                       Vertical Blinds:  3 1/2” flat vinyl vanes, perforated,
white.

 

11.           HVAC SYSTEMS

 

a.                       Water source heat pumps for the primary air systems,
condenser water piping, main supply air ducts, main

 

12.           LIGHTING CONTROL

 

a.                       A/B switching  as required, “Decora” swiches, white.

 

13.           LIGHTING

 

a.                       Recessed Fluorescent Fixtures:  Columbia Lighting,
Stratus, STR24-3, 2’x4’ 3 lamp, linear indirect recessed luminaire, white.

 

b.                      Recessed Downlight:  Prescolite, Virtual Source, Compact
Fluorescent Downlight, 8” aperature.

 

B-6

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