Exhibit 10.2

*** Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 17 C.F.R. 24b-2

 

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE – NET AIR COMMERCIAL REAL
ESTATE ASSOCIATION

 

1. Basic Provisions (“Basic Provisions”).

 

1.1 Parties: This Lease (“Lease”), dated for reference purposes only April 30,
2009 is made by and between THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a
Wisconsin corporation (“Lessor”) and MASIMO CORPORATION, a Delaware corporation
(“Lessee”), (collectively the “Parties”, or individually a “Party”).

 

1.2 (a) Premises: That certain portion of the Project (as defined below),
including all improvements therein or to be provided by Lessor under the terms
of this Lease, commonly known by the street address of 60 Parker, located in the
City of Irvine, County of Orange, State of California, with zip code 92618, as
outlined on Exhibit “A” attached hereto (“Premises”) and generally described as
(describe briefly the nature of the Premises): a 32,103 square foot building
within Parker Irvine Business Center in addition to Lessee’s rights to use and
occupy the Premises as hereinafter specified, Lessee shall have non-exclusive
rights to the Common Areas (as defined in Paragraph 2.7 below) as hereinafter
specified, but shall not have any rights to the roof, exterior walls or utility
raceways of the building 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.” (See also
Paragraph 2)

 

1.2 (b) Parking: 120 unreserved vehicle parking spaces (“Unreserved Parking
Spaces”); and -0- reserved vehicle parking spaces (“Reserved Parking Spaces”).
(See also Paragraph 2.6)

 

1.3 Term: five (5) years and two (2) months (“Original Term”) commencing
August 1, 2009 (“Commencement Date”) and ending September 30, 2014 (“Expiration
Date”). (See also Paragraph 3)

 

1.4 Early Possession: May 1, 2009 (“Early Possession Date”). (See also
Paragraphs 3.2 and 3.3)

 

  

1.5 Base Rent: $[…***…] per month (“Base Rent”), payable on the first (1st) day
of each month commencing August 1, 2009. (See also Paragraph 4)

 

þ      If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted. See Paragraph 57 of the Lease Addendum.

 

1.6 Lessee’s Share of Common Area Operating Expenses: seven and 86/100 percent
(7.86%) (“Lessee’s Share”), calculated based upon the square footage of the
Premises in relation to the total square footage of the Project, as the same may
change from time to time.

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1.7 Base Rent and Other Monies Paid December 1, 2011:

 

  

(a) Base Rent: $[…***…] for the period December 1- December 31, 2011.

 

(b) Common Area Operating Expenses: $ __________ for the period __________.

 

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(c) Security Deposit: $[…***…] (“Security Deposit”). (See also Paragraph 5)

 

(d) Other: $ _______________ for _________________________________.

 

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(e) Total Due on December 1, 2011: $[…***…]. In addition, Lessee shall pay on
December 1, 2011, Lessee’s Share of Operating Expenses for the month of
December, 2011. Lessee’s Monthly Base Rent for the month of August, 2009, and
November 30, 2011 shall be paid upon execution of this Lease. Lessee’s Base Rent
and Share of Common Area Operating Expenses for the months between August 1,
2009, and November 30, 2011, shall be paid on the first day of each such month.

 

1.8 Agreed Use: General office, research and development, light manufacturing,
warehousing and similar uses that comply with Applicable Laws (See also
Paragraph 6) See paragraphs 52.1 through 52.9 of Lease Addendum.

 

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

 

1.10 Real Estate Brokers: (See also Paragraph 15)

 

(a) Representation: The following real estate brokers (the “Brokers”) and
brokerage relationships exist in this transaction (check applicable boxes):

 

þ      William A. Budge, Inc. represents Lessor exclusively (“Lessor’s Broker”);

 

¨        _________________________ represents Lessee exclusively (“Lessee’s
Broker”); or

 

¨        _________________________ represents both Lessor and Lessee (“Dual
Agency”).

 

(b) Payment to Brokers: Upon execution and delivery of this Lease by both
Parties, Lessor shall pay to the Brokers the brokerage fee agreed to in a
separate written agreement.

 

1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by None (“Guarantor”). (See also Paragraph 37)

 

1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda consisting
of Paragraphs 50 through 76 and Exhibits “A” through “D”, all of which
constitute a part of this Lease.

 

2. Premises.

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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 that portion of the Premises contained
within the Building (“Unit”) to Lessee broom clean and free of debris on the
Commencement Date or the Early Possession Date, whichever first occurs (“Start
Date”), and, so long as the required service contracts described in Paragraph
7.1(b) below are obtained by Lessee and in effect within thirty days following
the Start Date, warrants that the existing electrical, plumbing, fire sprinkler,
lighting, heating, ventilating and air conditioning systems (“HVAC”), loading
doors, if any, and all other such elements in the Unit, other than those
constructed by Lessee, shall be in good operating condition on said date and
that the structural elements of the roof, bearing walls and foundation of the
Unit shall be free of material defects. If a non-compliance with such warranty
exists as of the Start Date, or if one of such systems or elements should
malfunction or fail within the appropriate warranty period, Lessor shall, as
Lessor’s sole obligation with respect to such matter, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
setting forth with specificity the nature and extent of such non-compliance,
malfunction or failure, rectify same at Lessor’s expense. The warranty periods
shall be as follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to
the remaining systems and other elements of the Unit. If Lessee does not give
Lessor the required notice within the appropriate warranty period, correction of
any such non-compliance, malfunction or failure shall be the obligation of
Lessee at Lessee’s sole cost and expense (except for the repairs to the fire
sprinkler systems, roof, foundations, and/or bearing walls – see Paragraph 7).

2.3 Compliance. Lessor warrants that the improvements on 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 in effect on the Start Date (“Applicable Requirements”). Said
warranty does not apply to the use to which Lessee will put the Premises 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 Applicable Requirements, and especially the zoning, 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 at Lessor’s expense. If Lessee does not give
Lessor written notice of a non-compliance with this warranty within 12 months
following the Start Date, correction of that non-compliance shall be the
obligation of Lessee at Lessee’s sole cost and expense. 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 Unit, Premises
and/or Building, the remediation of any Hazardous Substance, or the
reinforcement or other physical

 

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modification of the Unit, Premises and/or Building (“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 year 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 and Lessee shall allocate the obligation to pay for
the portion of such costs reasonably attributable to the Premises pursuant to
the formula set out in Paragraph 7.1(d); provided, however, that if such Capital
Expenditure is required during the last year 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. If Lessor does not elect to terminate, and fails to tender
its share of any such Capital Expenditure, Lessee may advance such funds and
deduct same, with Interest, from Rent until Lessor’s share of such costs have
been fully paid. If Lessee is unable to finance Lessor’s share, or if the
balance of the Rent due and payable for the remainder of this Lease is not
sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the
right to terminate this Lease upon 30 days written notice to Lessor.

(c) Notwithstanding the above, (i) the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements, and (ii) Lessor shall have no obligation after the
Start Date to comply with applicable requirements of the Americans with
Disabilities Act or similar state or federal requirements, or other building
codes and regulations, all of which after the Start Date shall be the obligation
of Lessee. 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 be fully
responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.

2.4 Acknowledgements. Lessee acknowledges that: (a) it 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 the Americans with Disabilities Act), and their suitability for
Lessee’s intended use, (b) Lessee has made such investigation as it deems
necessary with reference to such matters and assumes all responsibility therefor
as the same

 

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relate to its occupancy of the Premises, and (c) neither Lessor, Lessor’s
agents, nor Brokers have made any oral or written representations or warranties
with respect to said matters other than as set forth in this Lease. In addition,
Lessor acknowledges that: (i) Brokers have made no representations, promises or
warranties concerning Lessee’s ability to honor the Lease or suitability to
occupy the Premises, and (ii) it is Lessor’s sole responsibility to investigate
the financial capability and/or suitability of all proposed tenants.

2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in Paragraph 2
shall be of no force or effect if immediately prior to the Start Date Lessee was
the owner or occupant of the Premises. In such event, Lessee shall be
responsible for any necessary corrective work.

2.6 Vehicle Parking. Lessee shall be entitled to use the number of Unreserved
Parking Spaces and Reserved Parking Spaces specified in Paragraph 1.2(b) on
those portions of the Common Areas designated from time to time by Lessor for
parking. Lessee shall not use more parking spaces than said number. Said parking
spaces shall be used for parking by vehicles no larger than full-size passenger
automobiles or pick-up trucks, herein called “Permitted Size Vehicles.” Lessor
may regulate the loading and unloading of vehicles by adopting Rules and
Regulations as provided in Paragraph 2.9. No vehicles other than Permitted Size
Vehicles may be parked in the Common Area without the prior written permission
of Lessor. Lessee’s use of the Parking Spaces and the loading areas shall be
without additional charge throughout the Term (as the same may be extended by
Lessee’s exercise of its extension option pursuant to Paragraph 60 of the Lease
Addendum) for the parking, loading and unloading of vehicles by Lessee, its
officers, employees, guests invitees, suppliers, shippers and contractors.

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

(b) Lessee shall not service or store any vehicles in the Common Areas.

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

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

2.8 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

 

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term of this Lease, the non-exclusive right to use, in common with others
entitled to such use, the Common Areas as they exist from time to time, subject
to any rights, powers, and privileges reserved by Lessor under the terms hereof
or under the terms of any rules and regulations or restrictions governing the
use of the 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.

2.9 Common Areas – Rules and Regulations. Lessor or such other person(s) as
Lessor may appoint shall have the exclusive control and management of the Common
Areas and shall have the right, from time to time, to establish, modify, amend
and enforce reasonable rules and regulations (“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. Lessee agrees to abide by and conform to all such Rules and
Regulations, and to cause its employees, suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said Rules and Regulations by
other tenants of the Project. Any and all rules and regulations adopted and/or
modified by Lessor from time to time with respect to the Building or the Project
shall (a) be in writing, (b) be in all respects consistent with the rules and
regulations adopted by other comparable industrial projects generally, (c) not
materially interfere with Lessee’s use of the Premises, (d) not impose
discriminatory burdens or restrictions on Lessee, and (e) not be enforced in a
discriminatory manner against Lessee.

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

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

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

(c) To designate other land outside the boundaries of the 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

 

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(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. Notwithstanding the foregoing, Lessor
shall not have the right to make material changes to the Common Areas unless
(i) Lessee shall at all times have reasonable access to the Premises and the
parking facilities, (ii) such changes shall not reduce the number of parking
spaces provided to Lessee, or cause a relocation of said spaces in any material
way, and (iii) any such other land and improvements that Lessor may add to the
Common Areas shall have a reasonable and functional relationship to the Project.

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 Common Area
Operating Expenses, Real Property Taxes and insurance premiums and to maintain
the Premises) shall, however, 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 as
agreed, 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 it receives
possession of the Premises. If possession is not delivered within 60 days after
the Commencement Date, Lessee may, at its option, by notice in writing within 20
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 20 day period, Lessee’s right to
cancel shall terminate. Except as otherwise provided, if possession is not
tendered to Lessee by the Start Date and Lessee does not terminate this Lease,
as aforesaid, 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.

3.4 Lessee Compliance. Lessor shall not be required to tender possession of the
Premises to Lessee until Lessee complies with its obligation to provide evidence
of insurance (Paragraph 8.5). Pending delivery of such 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.

 

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

(a) “Common Area Operating Expenses” are defined, for purposes of this Lease, in
paragraph 67 of the Lease Addendum.

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

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

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

4.3 Payment. Lessee shall cause payment of Rent to be received by Lessor in
lawful money of the United States, without offset or deduction (except as
specifically permitted in this

 

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Lease), on or before the day on which it is due. 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 check, draft, or other instrument of payment
given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to
Lessor the sum of $25 in addition to any late charges which may be due.

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 Breaches
this Lease, Lessor may use, apply or retain all or any portion of said Security
Deposit for the payment of any amount due Lessor or to reimburse or 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. Lessor shall not be required to keep the
Security Deposit separate from its general accounts. Within 14 days after the
expiration or termination of this Lease, if Lessor elects to apply the Security
Deposit only to unpaid Rent, and otherwise within 30 days after the Premises
have been vacated pursuant to Paragraph 7.4(c) below, Lessor shall 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. Subject to all of the covenants and restrictions set forth in this
Lease, Lessee shall use and occupy the Premises only for the Agreed Use, or any
other legal use which is reasonably comparable thereto, and for no other
purpose. Lessee shall not use or permit the use of the Premises in a manner that
is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of
or causes damage to neighboring premises or properties. 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 on the Premises or the mechanical or
electrical systems therein, will not materially increase the risk of
contamination with Hazardous Substances, and/or is not significantly more
burdensome to the Premises. 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. See paragraph 56 of the Lease Addendum.

(g) Lessor Termination Option. If a Hazardous Substance Condition (see Paragraph
9.1(e)) occurs during the term of this Lease, unless Lessee is legally
responsible therefor (in which case Lessee shall make the investigation and
remediation thereof required by the Applicable Requirements and this Lease shall
continue in full force and effect, but subject to

 

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Lessor’s rights under Paragraph 56 of the Lease Addendum 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 $[…***…], 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 120 days following the date of such notice;
provided, however, that Landlord’s termination right shall exist only in the
event the Hazardous Substances Condition poses a risk to the continued use and
occupancy of the Premises. 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 $[…***…], 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.

 

  

 

 

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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.

 

  

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, 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 contamination 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. Except in the event of an emergency,
in which event Lessor shall give Lessee as much advance notice as is
practicable, Lessor shall give Lessee at least 24 hours advance notice, and
Lessee may require that Lessor and all agents and other representatives of
Lessor be accompanied by a representative of Lessee during any such inspection.

  

 

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*Confidential Treatment Requested

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

7.1 Lessee’s Obligations.

(a) In General. Subject to the provisions of Paragraph 2.2 (Condition),
2.3 (Compliance), 6.3 (Lessee’s Compliance with Applicable Requirements), 7.2
(Lessor’s Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee
shall, at Lessee’s sole expense, keep the Premises, Utility Installations
(intended for Lessee’s exclusive use, no matter where located), and Alterations
in good order, condition and repair (whether or not the portion of the Premises
requiring repairs, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee’s use, any prior use, the elements or the age of such portion
of the Premises), including, but not limited to, all equipment or facilities,
such as plumbing, HVAC equipment, electrical, lighting facilities, boilers,
pressure vessels, fixtures, interior walls, interior surfaces of exterior walls,
ceilings, roof membrane, floors, windows, doors, plate glass, and skylights but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2. Lessee, in keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices, specifically including the
procurement and maintenance of the service contracts required by Paragraph
7.1(b) below. Lessee’s obligations shall include restorations, replacements or
renewals when necessary to keep the Premises and all improvements thereon or a
part thereof in good order, condition and state of repair.

(b) Service Contracts. Lessee shall, at Lessee’s sole expense, procure and
maintain contracts, with copies to Lessor, in customary form and substance for,
and with contractors specializing and experienced in the maintenance of the
following equipment and improvements, if any, if and when installed on the
Premises: (i) HVAC equipment. Lessor, at Lessor’s sole cost and expense, shall
have the right to conduct an annual inspection of the HVAC system.

(c) Failure to Perform. If Lessee fails to perform Lessee’s obligations under
this Paragraph 7.1, Lessor may enter upon the Premises after 20 days’ prior
written notice to Lessee (except in the case of an emergency, in which case as
much notice as is practicable shall be required), perform such obligations on
Lessee’s behalf, and put the Premises in good order, condition and repair, and
Lessee shall promptly reimburse Lessor for the cost thereof.

(d) Replacement. Subject to Lessee’s indemnification of Lessor as set forth in
Paragraph 8.7 below, and without relieving Lessee of liability resulting from
Lessee’s failure to exercise and perform good maintenance practices, if the
replacement of an item described in Paragraph 7.1(b) is required to be
capitalized for federal income tax purposes, then such item shall be replaced by
Lessor, and the cost thereof shall be prorated between the Parties and Lessee
shall only be obligated to pay, each month during the remainder of the term of
this Lease, on the date on which Base Rent is due, an amount required to fully
amortize such cost based upon the useful life thereof for federal income tax
purposes using an interest rate calculated at two percent (2%) above the
Treasury Bill Rate with a term reasonably equal to such useful life. Lessee may,
however, prepay its obligation at any time.

 

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7.2 Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use),
7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation),
Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good
order, condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, exterior roof, fire sprinkler system,
Common Area fire alarm and/or smoke detection systems, fire hydrants, parking
lots, walkways, parkways, driveways, landscaping, fences, signs and utility
systems serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect 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, power panels, electrical distribution, security and fire
protection systems, communication systems, lighting fixtures, HVAC equipment,
plumbing, and fencing 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).

(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, the roof membrane, or any existing walls, and the cumulative cost
thereof during this Lease as extended does not exceed a sum equal to 3 month’s
Base Rent in the aggregate or a sum equal to one month’s Base Rent in any one
year. 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. Lessee shall promptly upon completion
furnish Lessor with as-built plans and specifications. For work, other than
Lessee’s initial build-out of the Premises, which costs an amount in excess of
one month’s Base Rent, Lessor may condition its consent upon Lessee providing a
lien and completion bond in an amount equal to 150% of the estimated cost of
such Alteration or Utility Installation. Lessor agrees that it shall not
unreasonably withhold, delay or condition consent,

 

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and that such consent shall be deemed given if Lessor shall not object to such
Alterations within twenty (20) days of receipt of such notice from Lessee
together with the plans and specifications for the proposed Alteration.
Notwithstanding anything to the contrary in this Lease, the prior written
consent of Lessor shall not be required for (i) nonstructural Alterations that
do not materially affect the Building’s mechanical systems and do not cost for a
single Alteration or related series of Alterations more than Fifty Thousand
Dollars ($50,000.00), (ii) the installation of trade fixtures, and (iii) the
installation of storage systems and racks in the warehouse portion of the
Premises.

(c) Indemnification. 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
materialman’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 only if Lessee is
not diligently and in good faith contesting such lien or demand (as determined
by means of binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association) and Lessee has not provided the
bond or other security required by this paragraph. Nothwithstanding anything to
the contrary in this Paragraph 7.3(c), except for work performed by Lessor on
behalf of Lessee, all mechanics’ liens filed by a contractor, subcontractor,
materialman or laborer of Lessor or Lessor’s property manager shall be
discharged by Lessor, and Lessee shall have no responsibility for the discharge
of the same.

7.4 Ownership; Removal; Surrender; and Restoration.

(a) Ownership. Subject to Lessor’s right to require removal 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,
effective as of the expiration or earlier termination of this Lease. Except as
provided in 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. 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.
Notwithstanding anything to the contrary in the Lease, at the time an Alteration
is made by Lessee, including Lessee’s initial build-out, or concurrently with
Lessee’s request for Lessor’s consent to an Alteration, Lessee may request that
Lessor specify whether such Alteration must be removed upon the expiration or
earlier

 

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termination of this Lease. If Lessor fails to respond to this request in writing
within twenty (20) days, then Lessor shall be deemed to have elected to allow
such Alteration to remain in the Premises upon the expiration or termination of
this Lease.

(c) 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 broom clean and free of debris, and in good operating
order, condition and state of repair, ordinary wear and tear and damage from
condemnation and casualty 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 Lessee’s
agents, employees, contractors or representatives 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. The failure by Lessee to timely vacate the Premises pursuant to this
Paragraph 7.4(c) without the express written consent of Lessor shall constitute
a holdover under the provisions of Paragraph 26 below.

8. Insurance; Indemnity.

8.1 Payment of Premiums. The cost of the premiums for the insurance policies
required to be carried by Lessor, pursuant to Paragraphs 8.2(b), 8.3(a) and
8.3(b), shall be a Common Area Operating Expense. Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease shall be
prorated to coincide with the corresponding Start Date or Expiration Date.

8.2 Liability Insurance. See paragraph 68 of the Lease Addendum.

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 B+, V, as set forth in the most current issue of “Best’s Insurance
Guide”, or such other rating as may be required by a Lender. Lessee shall not do
or permit to be done anything which invalidates the required insurance policies.
Lessee shall, prior to the Start Date, deliver to Lessor certified copies of
policies of such insurance or certificates evidencing the existence and amounts
of the required insurance. No such policy shall be cancelable or subject to
modification except after 30 days prior written notice to Lessor. Lessee shall,
at least 30 days prior to the expiration of such policies, furnish Lessor with
evidence of renewals or “insurance binders” evidencing renewal thereof, or
Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable 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. Lessee may, at its option, satisfy
any

 

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or all of its insurance obligations under this Lease with any so-called
“blanket” policy or policies of insurance now or hereafter carried and
maintained by Lessee; provided, however, that the coverage afforded by such
policy or policies shall not be reduced or diminished by reason of the use of
such blanket policy or policies.

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 active 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. Lessor shall indemnify,
protect, defend and hold Lessee harmless from any and all claims, damages,
judgments, penalties, attorneys’ and consultants’ fees, expenses and/or
liabilities arising out of involving, or in connection with the breach of this
Lease by Lessor and/or the active negligence or willful misconduct of Lessor and
its agents, contractors and employees in the Common Area and/or the Project. If
any action or proceeding is brought against Lessee by reason of any of the
foregoing matters, Lessor shall upon notice defend the same at Lessor’s expense
by counsel reasonably satisfactory to Lessee and Lessee shall cooperate with
Lessor in such defense. Lessee need not have first paid any such claim in order
to be defended or indemnified.

8.8 Exemption of Lessor from Liability. Except for Lessor’s active negligence or
willful misconduct, Lessor shall not be liable for injury or damage to the
person or goods, wares, merchandise or other property of Lessee, Lessee’s
employees, contractors, invitees, customers, or any other person in or about the
Premises, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances,
plumbing, 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. Lessor shall not be
liable for any damages arising from any act or neglect of any other tenant of
Lessor nor from the failure of Lessor to enforce the provisions of any other
lease in the Project; provided, however, Lessor shall not be relieved from
liability from the active negligence or willful misconduct of Lessor or its
agents, contractors and/or employees. Notwithstanding Lessor’s negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee’s business or for any loss of income or profit therefrom.

 

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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 180 days or less from the
date of the damage or destruction. Lessor shall notify Lessee in writing within
60 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 180
days or less from the date of the damage or destruction. 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.

9.2 Partial Damage – Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor’s expense, repair such damage
(but not Lessee’s Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor’s
election, make the repair of any damage or destruction the total cost to repair
of which is $5,000 or less, and, in such event, Lessor shall make any applicable
insurance proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party
shall promptly contribute the shortage in proceeds as and when required to
complete said repairs. 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

 

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reasonably possible at Lessor’s expense, in which event this Lease shall
continue in full force and effect, or (ii) if the cost to repair exceeds
six (6) months Base Rent, 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, (i) if a
Premises Total Destruction occurs, this Lease shall terminate 60 days following
such Destruction, and (ii) in the event the required repairs to the Premises are
not completed within ten (10) months from the date of the casualty, Lessee shall
have the right to terminate this Lease sixty (60) days after delivery of written
notice to Lessor of its election to so terminate, which election shall only be
effective if Lessor thereafter fails to complete the repair of the Premises with
a 60-day period following receipt of said termination notice from Lessee. 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.

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 Lessor may elect
to terminate this Lease only if the cost to repair exceeds six (6) month’s Base
Rent, in which event Lessee may preserve this Lease by, (a) exercising such
option and (b) providing Lessor with any shortage in insurance proceeds (or
adequate assurance thereof) needed to make the repairs on or before the earlier
of (i) the date which is 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.

 

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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, the
collection of which proceeds Lessor agrees to diligently pursue. All other
obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall
have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.

(b) Remedies. If Lessor shall be obligated to repair or restore the Premises and
does not commence, in a substantial and meaningful way, such repair or
restoration within 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.

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

10. Real Property Taxes.

10.1 Definition. 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. The term “Real Property Taxes” shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring during the term of this Lease, including
but not limited to, a change in the ownership of the Project or any portion
thereof or a change in the improvements

 

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thereon. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the calculation
of Real Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common.

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

10.3 Additional Improvements. Common Area Operating Expenses shall not include
Real Property Taxes specified in the tax assessor’s records and work sheets as
being caused by additional improvements placed upon the Project by other lessees
or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding
Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at the time Common
Area Operating Expenses are payable under Paragraph 4.2, the entirety of any
increase in Real Property Taxes if assessed solely by reason of Alterations,
Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at
Lessee’s request.

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

10.5 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. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. Notwithstanding the provisions of
Paragraph 4.2, if at any time in Lessor’s reasonable judgment, Lessor determines
that Lessee is using a disproportionate amount of water, electricity or other
commonly metered utilities, or that Lessee is generating such a large volume of
trash as to require an increase in the size of the dumpster and/or an increase
in the number of times per month that the dumpster is emptied, then Lessor may
increase Lessee’s Base Rent by an amount equal to such increased costs.

 

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12. Assignment and Subletting.

12.1 Lessor’s Consent Required. See paragraphs 53.1 through 53.7 of the Lease
Addendum.

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:

(b) The failure of Lessee to make any payment of Rent or any Security Deposit
required to be made by Lessee hereunder, whether to Lessor or to a third party,
when due, to provide reasonable evidence 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 business days following
written notice to Lessee.

(c) The failure by Lessee to provide (i) reasonable written evidence of
compliance with Applicable Requirements within twenty (20) days after Lessor’s
request therefor and three (3) business days, after delivery of written notice
from Lessor that Lessee has not provided such written evidence within said
20-day period (ii) the service contracts within twenty (20) days after Lessor’s
request therefor and three (3) business days after delivery of written notice
from Lessor that Lessee has not provided said service contracts, (iii) the
rescission of an unauthorized assignment or subletting, (iv) an Estoppel
Certificate in accordance with Paragraph 71 within three (3) business days after
the delivery of written notice that Lessee has not provided an Estoppel
Certificate within the time period required in Paragraph 71, (v) a requested
subordination in accordance with Paragraph 30 of this Lease within
three (3) business days after the delivery of written notice that Lessee has not
provided a subordination agreement complying with the requirements of this Lease
within the time period set forth in Paragraph 30, (vii) any document requested
under Paragraph 41 (easements), or 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 20 days following written notice to
Lessee and three (3) business days after delivery of written notice from Lessor
that Lessee has not provided such documents or information within twenty
(20) days after Lessor’s request therefor.

(d) A Default by Lessee as to the terms, covenants, conditions or provisions of
this Lease, or of the rules adopted under Paragraph 2.9 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.

(e) 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

 

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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 30 days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee’s assets located at the
Premises or of Lessee’s interest in this Lease, where such seizure is not
discharged within 30 days; provided, however, in the event that any provision of
this subparagraph (e) is contrary to any applicable law, such provision shall be
of no force or effect, and not affect the validity of the remaining provisions.

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

(g) If the performance of Lessee’s obligations under this Lease is guaranteed:
(i) the death of a Guarantor, (ii) the termination of a Guarantor’s liability
with respect to this Lease other than in accordance with the terms of such
guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy
filing, (iv) a Guarantor’s refusal to honor the guaranty, or (v) a Guarantor’s
breach of its guaranty obligation on an anticipatory basis, and Lessee’s
failure, within 60 days following written notice 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 20 days after written notice (or in case of an emergency
involving imminent danger of personal injury or material damage to property,
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. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee upon receipt of invoice therefor. If any check given to
Lessor by Lessee shall not be honored by the bank upon which it is drawn twice
in any twelve (12) month period, Lessor, at its option, may require all future
payments to be made by Lessee to be by cashier’s check. 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 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 and tenant improvements construction costs paid by Lessor in
connection with this Lease applicable

 

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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 Inducement Recapture. Any agreement for free or abated rent or other
charges, or for the giving or paying by Lessor to or for Lessee of any cash or
other bonus, inducement or consideration for Lessee’s entering into this Lease,
all of which concessions are hereinafter referred to as “Inducement Provisions,”
shall be deemed conditioned upon Lessee’s full and faithful performance of all
of the terms, covenants and conditions of this Lease. Upon Breach of this Lease
by Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other charge,
bonus, inducement or consideration theretofore abated, given or paid by Lessor
under such an Inducement Provision shall be immediately due and payable by
Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee.
The acceptance by Lessor of rent or the cure of the Breach which initiated the
operation of this paragraph shall not be deemed a waiver by Lessor of the
provisions of this paragraph unless specifically so stated in writing by Lessor
at the time of such acceptance.

13.4 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 10 days after such amount shall be due, then,
without any requirement for notice to Lessee, Lessee shall pay to Lessor a
one-time late charge equal to 6% of each such overdue amount or $100, whichever
is greater; provided,

 

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however, notwithstanding the foregoing, Lessee shall not be liable for a late
charge on the first or second late payment (beyond the above 10-day grace
period) in any twelve-month period. 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.

13.5 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 non-scheduled
payment, shall bear interest from the date when due, as to scheduled payments,
or the 31st day after it was due as to non-scheduled payments. The interest
(“Interest”) charged shall be equal to the prime rate reported in the Wall
Street Journal as published closest prior to the date when due plus 4%, 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.

13.6 Breach by Lessor.

(a) Notice of Breach. Lessor shall not be deemed in breach of this Lease unless
Lessor fails within a reasonable time to perform an obligation required to be
performed by Lessor. For purposes of 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.

(b) Performance by Lessee on Behalf of Lessor. In the event that neither Lessor
nor Lender cures said breach within 30 days after receipt of said notice, or if
having commenced said cure they do not diligently pursue it to completion, then
Lessee may elect to cure said breach at Lessee’s expense and offset from Rent an
amount equal to the greater of one month’s Base Rent or the Security Deposit,
and to pay an excess of such expense under protest, reserving Lessee’s right to
reimbursement from Lessor. Lessee shall document the cost of said cure and
supply said documentation to Lessor.

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 floor area of the Unit, or more than 25%
of Lessee’s Reserved Parking Spaces, is taken by Condemnation, Lessee may, at
Lessee’s option, to be exercised in writing within 10 days after Lessor shall
have given 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

 

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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 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.

15.3 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 (other than the Brokers, if any) in connection
with this Lease, and that no one other than said named Brokers 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. See paragraphs 54, 71, and 72 of the Lease Addendum.

17. Definition of Lessor. The term “Lessor” as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee’s interest in the prior lease. In the event of a
transfer of Lessor’s title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and 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,
provided that the new Lessor assumes in writing for the benefit of Lessee the
obligations under this Lease of 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. Notwithstanding the
above, and subject to the provisions of Paragraph 20 below, the original Lessor
under this Lease, and all subsequent holders of the Lessor’s interest in this
Lease shall remain liable and responsible with regard to the potential duties
and liabilities of Lessor pertaining to Hazardous Substances as outlined in
Paragraph 6.2 above.

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.

 

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20. Limitation on Liability. Subject to the provisions of Paragraph 17 above,
the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
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.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the use, nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. The liability (including court costs and attorneys’
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation
on each Broker’s liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.

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.

 

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23.2 Date of Notice. Any notice sent by registered or certified mail, return
receipt requested, shall be deemed given on the date of delivery shown on the
receipt card, or if no delivery date is shown, the postmark thereon. If sent by
regular mail the notice shall be deemed given three (3) business days 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. 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. 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.

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 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

 

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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 Lessor 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 advice is desired, consult a competent
professional.

(b) Brokers have no responsibility with respect to any default or breach hereof
by either Party. The liability (including court costs and attorneys’ fees), of
any Broker with respect to any breach of duty, error or omission relating to
this Lease shall not exceed the fee received by such Broker pursuant to this
Lease; provided, however, that the foregoing limitation on each Broker’s
liability shall not be applicable to any gross negligence or willful misconduct
of such Broker.

(c) Buyer and Seller agree to identify to Brokers as “Confidential” any
communication or information given Brokers that is considered by such Party to
be confidential.

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.
Nothing contained herein shall be construed as consent by Lessor to any holding
over by Lessee. If Lessee nonetheless retains possession of the Premises after
the expiration or earlier termination of the Term, then such occupancy shall be
on a month-to-month basis with a Base Rent equal to one hundred twenty-five
percent (125%) of the Base Rent payable by Lessee under this Lease for the
period immediately prior to the termination or expiration of this Lease. In the
event that such occupancy exceeds sixty (60) days, then the Base Rent shall be
increased effective the sixty-first (61st) day to one hundred fifty percent
(150%) of the Base Rent payable for the period immediately prior to the
expiration or termination of the Lease and Lessor may exercise any and all
remedies available at law or in equity in connection with such occupancy,
including without limitation the commencement of proceedings to regain
possession of the Premises.

 

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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. Subject to the provisions of this Article 30.1, 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 Device to which this Lease is subordinated (i) Lessee shall, subject to
the non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and
upon request, enter into a new lease, containing all of the terms and provisions
of this Lease, with such new owner for the remainder of the term hereof, or, at
the election of such new owner, this Lease shall automatically become a new
Lease between Lessee and such new owner, upon all of the terms and conditions
hereof, for the remainder of the term hereof, and (ii) Lessor shall thereafter
be relieved of any further obligations hereunder and such new owner shall assume
all of Lessor’s obligations hereunder, except that such new owner shall not:
(a) be liable for any act or omission of any prior lessor or with respect to
events occurring prior to acquisition of ownership; (b) be subject to any
offsets or defenses which Lessee might have against any prior lessor, (c) be
bound by prepayment of more than one month’s rent, or (d) be liable for the
return of any security deposit paid to any prior lessor. Notwithstanding the
foregoing, such owner shall not be excused from curing, or released from
liability for existing defaults that are of an ongoing or recurring nature, but
such owner’s liability shall be limited to damages arising after the date of
transfer.

 

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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. Further,
concurrently with Lessor’s execution of this Lease, Lessor shall use its
commercially reasonable efforts to obtain and deliver to Lessee a commercially
reasonable Non-Disturbance Agreement from the holder of any pre-existing
Security Device which is secured by the Premises. In the event that Lessor is
unable to provide the Non-Disturbance Agreement by such time, then Lessee may,
at Lessee’s option, directly contact Lender and attempt to negotiate for the
execution and delivery of a Non-Disturbance Agreement.

30.4 Self-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. Upon at least twenty four
(24) hours prior written notice (except in the event of emergency, in which
event, as much prior notice as is practicable shall be given by Lessor), and
further provided that Lessor (or its representative) maybe accompanied by an
employee of Lessee. Lessor and Lessor’s agents shall have the right to enter the
Premises at any time, in the case of an emergency, and otherwise at reasonable
times for the purpose of showing the same to prospective purchasers, lenders, or
tenants, and making such alterations, repairs, improvements or additions to the
Premises as lessor may deem necessary. All such activities shall be without
abatement of rent or liability to Lessee. Lessor may at any time place on the
exterior of the Premises any ordinary “For Sale” signs and, provided that Tenant
has not exercised any options that it may have to extend the term of this Lease,
Lessor may during the last 6 months of the term hereof place on the exterior of
the

 

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Premises any ordinary “For Lease” signs. Lessee may at any time place on the
Premises any ordinary “For Sublease” sign.

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. Within thirty (30) days after the expiration or earlier termination
of this Lease, at Lessee’s sole cost and expense, Lessee shall remove all
signage installed by Lessee and repair damage to the Building caused by such
removal. Lessee shall have the right to install at Lessee’s sole cost and
expense, signage on the Premises and the Building, subject to and to the extent
permitted by Applicable Requirements.

35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a 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.

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, and
each such Guarantor shall have the same obligations as Lessee under this Lease.

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

 

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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 hereof.

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. See paragraph 60 of the Lease Addendum.

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.

41. Reservations. Lessor reserves the right: (i) to grant, without the consent
or joinder of Lessee, such easements, rights and dedications that Lessor deems
necessary, (ii) to cause the recordation of parcel maps and restrictions, and
(iii) to create and/or install new utility raceways, so long as such easements,
rights, dedications, maps, restrictions, and utility raceways do not
unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to
sign any documents reasonably requested by Lessor to effectuate such rights.

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.

43. Authority. 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.

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.

 

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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 non-monetary 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. Multiple Parties. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.

48. 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.

49. 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 x is not attached to this Lease.

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

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

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

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

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

 

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

 

Executed at:         Executed at:     On:         On:     By LESSOR:     By
LESSEE: THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin corporation
   

Masimo Corporation,

a Delaware corporation

By: Northwestern Investment Management     By:   /s/ Yongsam Lee Company, LLC, a
Wisconsin limited liability     Name Printed:   YONGSAM LEE company, its
wholly-owned affiliate and     Title:   EVP, OPS & CIO authorized agent      
By:   /s/ Don Morton     By:     Name Printed:   DON MORTON     Name Printed:  
  Title:   DIRECTOR – Field Asset Management     Title:     By:         Address:
    Name Printed:           Title:           Address:         Telephone: (__)  
        Facsimile: (__)           Federal ID No:     Telephone: (__)          
Facsimile: (__)           Federal ID No:           BROKER:     BROKER:          
      Att:         Att:     Title:         Title:     Address:         Address:
                   

Telephone: (__)

       

Telephone: (__)

   

 

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Facsimile: (__)         Facsimile: (__)     Federal ID No:        
Federal ID No:    

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

©Copyright 1999 By AIR Commercial Real Estate Association.

All rights reserved.

No part of these works may be reproduced in any form without permission in
writing.

 

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LEASE ADDENDUM

(NET LEASE-MULTI-TENANT)

50. Premises Size. Lessor and Lessee acknowledge that they have stipulated to
the area of the Premises and that the actual size of such area is not subject to
dispute. Lessee agrees that Lessor shall have no liability in the event that the
size of the Premises is other than the amount specified and Lessee shall have no
right to terminate this Lease should such discrepancy be discovered.

51. No Payment to Lessee if Lessee in Default. In the event of any default by
Lessee under any provision of this Lease, then notwithstanding any provision of
this Lease to the contrary which requires Lessor to make any payment to Lessee,
Lessor shall not be obligated to make such payment to Lessee, but may instead
apply the amount of such payment as follows: first, against Rent or Additional
Rent past due; second, against any costs incurred by Lessor to cure any default
by Lessee; and third, the balance, if any, shall be paid to Lessee.

52. Use of the Premises.

52.1 Compliance. Lessee acknowledges its lease of the Premises is subject to all
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and any covenants or
restrictions of record, and accepts this Lease subject thereto and to all
matters disclosed thereby and by any exhibits attached hereto. Lessee shall not
use the Premises which will in any way conflict with any law, statute, zoning
restriction, ordinance or governmental law, rule, regulation or requirement of
any duly constituted public authority having jurisdiction over the Premises now
in force or which may hereafter by in force, or any covenants, conditions,
easements or restrictions now or hereafter encumbering the Premises. Lessee
shall not commit any public or private nuisance or any other act or thing that
might or would disturb the quiet enjoyment or any other Lessee of Lessor or any
occupant of nearby property. Lessee shall place no loads upon the floors, walls
or ceilings in excess of the maximum designed load specified by Lessor or which
may damage the building or outside areas; nor place any harmful liquids in the
drainage systems; nor dump or store waste materials, refuse or other materials
or allow such to remain outside the building, except in the enclosed trash areas
provided.

52.2 Compliance with Governmental Regulations. Notwithstanding anything to the
contrary set forth in this Lease, if and to the extent modifications or
improvements to the structure of the Premises or any portion thereof or to any
fire prevention or other emergency system are deemed necessary by any
governmental authority or Applicable Law, Lessor shall, subject to reimbursement
pursuant to paragraph 4.2, make such modifications and improvements and Lessee
shall cooperate with Lessor in the making of any such modifications or
improvements. Notwithstanding the foregoing sentence, Lessor shall not be
responsible for the costs and expenses of such modifications or improvements in
the event that such improvements or modifications are required as the result of
Lessee’s use of the Premises or conduct including, but not limited to, Lessee’s
alterations, improvements or modifications of the Premises. In the event that
any alterations, modifications or improvements undertaken by either party
pursuant to this Section result in any interruption of the business of Lessee,
Lessor shall have no liability to

 

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Lessee for such interruption and Lessee shall be limited to such business
interruption insurance coverage, if any, as it may elect to carry.

52.3 Lessee ADA Obligations. At all times during the term of this Lease, Lessee,
at Lessee’s sole cost and expense, shall cause the Premises, and all alterations
and improvements in the Premises, and Lessee’s use and occupancy of the
Premises, and Lessee’s performance of its obligations under this Lease, to
comply with the requirements of Title III of the Americans with Disabilities Act
of 1990 (42 U.S.C. 12181, et seq., the Provisions Governing Public
Accommodations and Services Operated by Private Entities), and all regulations
promulgated thereunder, and all amendments, revisions or modifications thereto
now or hereafter adopted or in effect in connection therewith (hereinafter
collectively referred to as the “ADA”) and to take such actions and make such
alternations and improvements as are necessary for such compliance; provided,
however, that Lessee shall not make any such alterations or improvements except
upon Lessor’s prior written consent pursuant to the terms and conditions of this
Lease. If Lessee fails to diligently take such actions or make such alterations
or improvements as are necessary for such compliance, Lessor may, but shall not
be obligated to, take such actions and make such alterations and improvements
and may recover all of the costs and expenses of such actions, alterations and
improvements from Lessee as additional rent. Notwithstanding anything in this
Lease to the contrary, no act or omission of Lessor, including any approval,
consent or acceptance by Lessor or Lessor’s agents, employees or other
representatives, shall be deemed an agreement, acknowledgment, warranty or other
representation by Lessor that Lessee has complied with the ADA or that any
action, alteration or improvement by Lessee complies or will comply with the ADA
or constitutes a waiver by Lessor of Lessee’s obligations to comply with the ADA
under this Lease or otherwise. Notwithstanding anything to the contrary set
forth herein, (i) in no event shall Lessee be required to pay the cost of the
installation of elevators in the Premises at any time during the Lease term if
such installation is required pursuant to the ADA, and (ii) in the event any
alteration is required pursuant to the ADA that is a capital item for federal
income tax purposes, Lessor and Lessee shall share said expense pursuant to the
formula set forth in Section 7.1(d) of the Lease.

52.4 Forklift Restrictions. Asphaltic cement cannot withstand noninflatable
forklift tires. In the event the asphalt is damaged by Lessee’s use of a
forklift with noninflatable tires, it shall be Lessee’s obligation to repair the
damaged asphaltic cement at Lessee’s sole expense.

52.5 Battery Chargers. Battery charging units not equipped with an automatic
shut-off feature can cause substantial and expensive damage to warehouse floors
resulting from battery acid spills from over-charged batteries. Lessee
acknowledges and agrees that Lessee shall be solely and fully liable for the
expense of repair or replacement of floors within the Premises, including
concrete slab floors, required as a result of damage caused by battery charging
units. In order to reduce the risk that any such damage shall occur, all battery
charging units operated or maintained by Lessee at the Premises shall be
equipped with an original equipment automatic shut-off feature, or shall have an
after-market automatic shut-off device added thereto.

52.6 Department of Treasury Restrictions. Lessee warrants and represents to
Lessor that Lessee and all persons and entities (i) owning (directly or
indirectly) an ownership interest in Lessee, (ii) whom or which are an assignee
of Lessee’s interest in this Lease; (iii) whom or

 

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which are a guarantor of Lessee’s obligations under this Lease; or
(iv) executing any separate indemnity agreement in favor of Lessee in connection
with this Lease or with the leasing of the Premises: (a) is not, and shall not
become, a person or entity with whom Lessor is restricted from doing business
with under regulations of the Office of Foreign Asset Control (“OFAC”) of the
Department of Treasury (including, but not limited to, those named on OFAC’s
Specifically Designated and Blocked Persons list) or under any statute,
executive order (including, but not limited to, the September 24, 2001,
Executive Order Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism), or other governmental action,
(b) is not knowingly engaged in, and shall not knowingly engage in any dealings
or transaction or be otherwise associated with such persons or entities
described in clause (a) above; and (c), is not, and shall not become, a person
or entity whose activities are regulated by the International Money Laundering
Abatement and Financial Anti-Terrorism Act of 2001 or the regulations or orders
thereunder.

52.7 Mold and Mildew Control. Lessee shall not use the Premises in any manner
that will cause mold, mildew or similar conditions to arise at the Premises.
Lessee shall provide appropriate climate control in the Premises, and shall not
block or cover any of the heating, ventilation or air-conditioning vents. Lessee
shall keep all ice and coffee machines that Lessee places in the Premises in
good condition and repair and immediately remove any water discharged or spilled
from such ice or coffee machines. Lessee shall regularly monitor the Premises
for the presence of mold or mildew or any conditions that can reasonably be
expected to contribute to the growth of mold or mildew and shall immediately
report to Lessor (i) any evidence of a water leak or excessive moisture in the
Premises, (ii) any evidence of mold or mildew in the premises, and (iii) any
failure or malfunction in the heating, ventilation and air-conditional system
serving the Premises. Lessee shall indemnify and hold Lessor harmless from any
cost or expense incurred by Lessor in order to remove or eradicate any mold,
mildew or similar condition at the Premises caused by Lessee’s use of the
Premises or breach of its obligations under this Section 52.7.

52.8 Lender’s Request for Lessor’s Consent. If at any time during the Lease
Term, or any extension thereof, Lessee shall make and enter into any secured
financing or other transaction in which a lender to Lessee shall request the
consent of the Lessor to the granting of a security interest by Lessee in any
assets of Lessee that may be located at the Premises, together with Lessor’s
consent to permit such lender access to the Premises for the purpose of
assembling and/or selling any such collateral, Lessor will enter into a
Landlord’s Waiver and Consent in the form attached hereto as Exhibit “B” (“the
“Approved Consent Form”). In the event Lessee nonetheless requests Lessor to
modify the Approved Consent Form or enter into a form provided by Lessee’s
Lender, such request shall be in writing and shall be accompanied by the fee
referred to below. As a condition to Lessor’s requirement to consider any
request from Lessee for such consent, Lessee shall first pay to Lessor, as
Additional Rent, the sum of $2,500.00 as a fixed fee to compensate Lessor for
expenses to be incurred by Lessor in reviewing such request and preparing such
Landlord’s Waiver and Consent (whether or not Lessor and Lessee actually execute
any such instrument), the parties hereto agreeing that such sum is a reasonable
approximation of the cost of Northwestern’s expenses relating thereto, the exact
cost thereof being impractical to determine. Lessee acknowledges and agrees that
Lessor is under no obligation whatsoever to modify such Approved Consent Form or
enter into any such agreement on a form supplied by any lender to Lessee.

 

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52.9 Registration of Food Facility Under Bioterrorism Act. 21 U.S.C.
Section 350c, also known as the FDA Bioterrorism Preparedness and Response Act
of 2002, and the regulations promulgated thereunder, 21 CFR Section 1.225,
require that an owner, operator, or agent in charge of a domestic facility that
is engaged in the manufacturing/processing, packing, or holding of food for
consumption in the United States must register the facility with the FDA unless
certain exemptions are met which do not apply to Lessee. Lessee hereby agrees
that it shall register the Premises with the FDA and that Lessor shall have no
obligation to do so. Lessee shall provide Lessor with satisfactory evidence that
it has registered the Premises with the FDA within five (5) business days after
the date of this Lease.

53. Assignment and Subletting.

53.1 Consent Required. Lessee shall not, without the prior written consent of
Lessor, assign, transfer, convey, mortgage, pledge, hypothecate or encumber this
Lease or any interest herein, sublease the Premises or any part thereof or any
right or privilege appurtenant thereto, or permit the use or occupancy of the
Premises by any other person other than Lessee and Lessee’s representatives and
invitees. Each of the foregoing acts, transactions and events are sometimes
referred to herein as a “Transfer.” The person in whose favor such Transfer is
made is sometimes referred to herein as a “Transferee.” If Lessee shall complete
any Transfer without such consent the Transfer shall be void and shall
constitute a material default and breach of this Lease by Lessee. This Lease or
any interest herein shall not be assignable or otherwise transferable by
operation of law, as to the interest of Lessee, without the prior written
consent of Lessor and any such assignment or other Transfer shall be void and
shall be a material default and breach of the Lease by Lessee.

53.2 Request for Transfer. If at any time during the Lease Term, or any
extension thereof, Lessee desires the consent of the Lessor to a Transfer of
this Lease, Lessee’s request to Lessor for such consent shall be in writing and
shall include the information and documents described below, hereinafter
referred to as “Lessee’s Request for Transfer”. Lessee agrees to pay Lessor, as
Additional Rent, all expenses reasonably incurred by Lessor in reviewing any
information in order to determine whether consent to a requested Transfer should
be given (whether or not such consent is given) in an amount not to exceed
$500.00, including, but not limited to, costs and expenses incurred for credit
investigations, reasonable attorneys’ fees and the costs of preparation of any
necessary documents. The information and documents to be included with Lessee’s
Request for Transfer are as follows:

(a) A statement that Lessee requests consent to the proposed Transfer and the
type of Transfer proposed;

(b) The name of the proposed Transferee;

(c) The nature of the use or business to be carried on in the Premises by the
proposed Transferee;

(d) A description of the area of the Premises to be covered by the Transfer;

 

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(e) The terms and provisions of the proposed Transfer including a copy of the
proposed document of Transfer and any other agreements to be entered into
concurrently therewith;

(f) Such financial information as Lessor may reasonably request concerning the
proposed Transferee; and

(g) To the extent that the proposed Transfer is other than an assignment or
sublease, the information described in (a) through (f) above shall be modified
to correspond to the type of Transfer for which consent is requested.

53.3 Lessor’s Option. Within thirty (30) days after Lessor’s receipt of Lessee’s
Request for Transfer, Lessor may, in its sole discretion, exercise anyone of the
options described below by providing written notice to Lessee of Lessor’s
election. If for any reason, Lessor fails to give Lessee written notice of
Lessor’s election as authorized by this subparagraph 53.3 within the said
thirty (30) day period, Lessor shall be deemed to have elected to consent to the
Transfer. The options available to Lessor are as follows:

(a) Consent to the requested Transfer (subject in all circumstances to the
provisions of subparagraph 53.5, whether or not so expressly stated in the
Notice to Lessee setting forth such consent); or

(b) Withhold consent to the requested Transfer. If Lessor withholds consent,
Lessor shall inform Lessee of the reasons therefor.

53.4 Lessor Entitled to Withhold Consent to Transfer in its Reasonable
Discretion. Lessor shall not unreasonably withhold its consent to any Transfer.

53.5 Consent Given. Should Lessor consent to a Transfer, Lessor may impose upon
such Transfer all such reasonable conditions as Lessor may desire, i.e., the
following conditions:

(a) Lessee completing the negotiations for a valid and bona fide Transfer to the
Transferee identified in Lessee’s Request for Transfer within sixty (60) days
after the date of Lessor’s consent and such Transfer being in accordance with
all the terms and provisions contained in Lessee’s Request for Transfer. If for
any reason this condition fails, any consent given by Lessor shall be deemed of
no force and effect and Lessee shall be required to again comply with all
conditions of this Paragraph 53 as if no consent had been given.

(b) Lessee delivering to Lessor, prior to the earlier of the date the Transfer
occurs or the date the Transferee takes possession of the Premises or any part
thereof, executed originals of the document of transfer and any other agreement
entered into in connection with such Transfer. If the Transfer is by way of
assignment, the form of assignment shall expressly state that the Transferee
assumes all of Lessee’s obligations under this Lease. If the Transfer is by way
of sublease, the sublease shall expressly state that: It is subject to the
provisions of this Lease; it does not extend beyond the Termination Date; the
sublessee’s right to transfer its interest in the sublease is subject to
Lessor’s rights under this Paragraph 53.

 

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(c) Lessee paying to Lessor as Additional Rent under this Lease, without
affecting or reducing any other obligations of Lessee under this Lease, fifty
percent (50%) of any sums of money or other economic consideration received by
Lessee or to be received by Lessee as result of such Transfer (but not any loan
proceeds if the Transfer is a bona fide loan), including, but not limited to:
Bonuses, key money or the like; any payment made to Lessee by the Transferee,
however denominated, which is attributed to either the amortization of the cost
of any improvements made to the Premises which were paid by Lessee and are to be
used by the Transferee, leasing commissions or any additional Lessee
improvements (the installation of which shall at all times be subject to the
provisions of this Lease); and, if the Transfer is a subletting, all rentals,
whether so denominated or not under the sublease, which exceed in the aggregate
sums Lessee is to pay under this Lease. All sums due Lessor pursuant to this
subparagraph 53.5(c) shall, provided the Transfer is a subletting, be prorated
if the sublease covers less than all of the Premises Area according to the ratio
that the Premises area transferred bears to the total Premises area.
Notwithstanding the foregoing, Lessee shall be entitled to deduct from such
amounts payable to Lessor pursuant to this Section such reasonable costs and
expenses as Lessee actually incurs in obtaining a Transferee, i.e., commissions
paid to brokers in connection with such transfer, advertising costs paid by
Lessee in connection with such Transfer, the cost of any improvements made by
Lessee, of its cost, for the Transferee, and similar items. Lessee shall be
obligated, however, to provide evidence to Lessor substantiating such costs and
expenses to Lessor’s reasonable satisfaction.

53.6 Transfer to a Related Party. The provisions of this Section 53 to the
contrary notwithstanding, Lessee shall have the right, without Lessor’s consent,
to assign or otherwise transfer this Lease, or to sublet the Premises, (i) to
any parent or subsidiary of Lessee, and (ii) to any successor to Lessee by way
of merger, consolidation, sale of substantially all of Lessee’s assets, sale of
capital stock or the like; provided that Lessor is notified in writing of the
assignment prior to the effective date thereof and the assignee assumes in
writing for the direct benefit of Lessor all of Lessee’s obligations under this
Lease

53.7 No Release of Liability. No Transfer shall release Lessee of its
obligations to pay the Rent and to perform all the other obligations to be
performed by Lessee under this Lease. The acceptance of Rent by Lessor from any
person shall not be deemed to be the waiver by Lessor of any provision of this
Lease or to be a consent to any assignment or subletting. A consent to one
Transfer shall not be deemed to be a consent to any subsequent Transfer. In the
event of default by a Transferee in the performance of any of the terms of this
Lease, Lessor may proceed directly against Lessee without the necessity of
exhausting its remedies against the Transferee. If Lessee enters into a
sublease, with or without Lessor’s consent, Lessee shall be deemed to have
immediately and irrevocably assigned to Lessor, as security for Lessee’s
obligations under this Lease, all subrent or other sums due to Lessee under the
sublease, and Lessor, as assignee and as attorney-in-fact for Lessee, or a
receiver for Lessee appointed on Lessor’s application, may collect such subrent
or other sums due and apply it towards Lessee’s obligations under this Lease,
except, that, until the occurrence of an act of default by Lessee, Lessee shall
have the right to collect such subrent or other sums due. Lessor may, as a
condition to Lessor’s consent to any proposed sublease, require Lessee and the
proposed sublessee to enter into an agreement with Lessor whereby the proposed
sublessee agrees: To pay subrent or all other sums due directly to Lessor upon
notice from Lessor of Lessee’s default; not to pay subrent more than one month
in advance, and, notwithstanding Lessor’s receipt of subrent or other sums

 

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due, Lessor shall not be liable to the proposed sublessee for anything under the
sublease or under this Lease and Lessor may pursue any remedy available to it
under this Lease.

54. Non-Disturbance and Attornment; Lessee Statement. At such time during the
Lease Term as Lessor shall elect to encumber the Premises with a deed of trust,
mortgage, or other form of security agreement, Lessor shall cause such trust
deed beneficiary or mortgagee to make an enter into a form of Non-Disturbance
and Attornment Agreement with Lessee in a commercially reasonable form
reasonable acceptable to Lessee and such beneficiary or mortgagee. In addition,
Lessee shall within ten (10) business days following written request by Lessor
execute and deliver to Lessor any documents requested by Lessor, including
estoppel certificates, in a commercially reasonable form prepared by Lessor.

55. Lessee’s Remedies. The obligations of Lessor do not constitute the personal
obligation of the individual partners, trustees, directors, officers or
shareholders of Lessor or its constituent partners. If Lessor shall fail to
perform any covenant, term or condition of this Lease upon Lessor’s part to be
performed, Lessee shall be required to deliver to Lessor written notice of the
same. If, as a consequence of such default, Lessee shall recover a money
judgment against Lessor, such judgment shall be satisfied only out of the
proceeds of sale received upon execution of such judgment and levied thereon
against the right, title and interest of Lessor in the Premises and out of Rent
or other income from such property receivable by Lessor or out of consideration
received by Lessor from the sale or other disposition of all or any part of
Lessor’s right, title or interest in the project of which the Premises are a
part, and no action for any deficiency may be sought or obtained by Lessee.

56. Hazardous Substances.

(a) For purposes of this Lease, the term “Hazardous Substances” includes (i) any
“hazardous material” as defined in Section 25501(o) of the California Health and
Safety Code, (ii) hydrocarbons, polychlorinated biphenyls or asbestos, (iii) any
toxic or hazardous materials, substances, wastes or materials as defined
pursuant to any other applicable state, federal or local law or regulation, and
(iv) any other substance or matter which may result in liability to any person
or entity as result of such person’s possession, use, release or distribution of
such substance or matter under any statutory or common law theory.

(b) Lessee shall not cause or permit any Hazardous Substances to be brought
upon, stored, used, generated, released or disposed of on, under, from or about
the Premises (including without limitation the soil and groundwater thereunder)
without the prior written consent of Lessor, which consent may be given or
withheld in Lessor’s sole and absolute discretion. Notwithstanding the
foregoing, Lessee shall have the right, without obtaining prior written consent
of Lessor, to utilize within the Premises a reasonable quantity of standard
office products that may contain Hazardous Substances (such as photocopy toner,
“White Out”, and the like), provided however, that (i) Lessee shall maintain
such products in their original retail packaging, shall follow all instructions
on such packaging with respect to the storage, use and disposal of such
products, and shall otherwise comply with all applicable laws with respect to
such products, and (ii) all of the other terms and provisions of this Paragraph
56 shall apply with respect to Lessee’s storage, use and disposal of all such
products. Lessor may, in its sole and absolute discretion, place such conditions
as Lessor deems appropriate with respect to Lessee’s

 

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use of any such Hazardous Substances, and may further require that Lessee
demonstrate that any such Hazardous Substances are necessary or useful to
Lessee’s business and will be generated, stored, used and disposed of in a
manner that complies with all applicable laws and regulations pertaining thereto
and with good business practices. Lessee understands that Lessor may utilize an
environmental consultant to assist in determining conditions of approval in
connection with the storage, generation, release, disposal or use of Hazardous
Substances by Lessee on or about the Premises, and/or to conduct periodic
inspections of the storage, generation, use, release and/or disposal of such
Hazardous Substances by Lessee on and from the Premises, and Lessee agrees that
any costs incurred by Lessor in connection therewith shall be reimbursed by
Lessee to Lessor as additional rent hereunder upon demand.

(c) Prior to the execution of this Lease, Lessee shall complete, execute and
deliver to Lessor an Environmental Questionnaire and Disclosure Statement (the
“Environmental Questionnaire”) in the form of Exhibit “C” attached hereto. The
completed Environmental Questionnaire shall disclose all Hazardous Substances
Lessee intends to bring upon, store, use, generate, release or dispose of on,
under, from or about the Premises, and shall be deemed incorporated into this
Lease for all purposes, and Lessor shall be entitled to rely fully on the
information contained therein. On each anniversary of the Commencement Date
until the expiration or sooner termination of this Lease, Lessee shall disclose
to Lessor in writing the names and amounts of all Hazardous Substances which
were stored, generated, used, released and/or disposed of on, under or about the
Premises for the twelve-month period prior thereto, and which Lessee desires to
store, generate, use, release and/or dispose of on, under or about the Premises
for the succeeding twelve-month period. In addition, to the extent Lessee is
permitted to utilize Hazardous Substances upon the Premises, Lessee shall
promptly provide Lessor with complete and legible copies of all the following
environmental documents relating thereto: reports filed pursuant to any
self-reporting requirements; permit applications, permits, monitoring reports,
emergency response or action plans, workplace exposure and community exposure
warnings or notices and all other reports, disclosures, plans or documents (even
those which may be characterized as confidential) relating to water discharges,
air pollution, waste generation or disposal, and underground storage tanks for
Hazardous Substances; orders, reports, notices, listings and correspondence
(even those which may be considered confidential) of or concerning the release,
investigation of, compliance, cleanup, remedial and corrective actions, and
abatement of Hazardous Substances; and all complaints, pleadings and other legal
documents filed by or against Lessee related to Lessee’s use, handling, storage,
release and/or disposal of Hazardous Substances.

(d) Lessor and its agents shall have the right, but not the obligation, to
inspect, sample and/or monitor the Premises and/or the soil or groundwater
thereunder at any time to determine whether Lessee is complying with the terms
of this Paragraph 56, and in connection therewith Lessee shall provide Lessor
with full access to all facilities, records and personnel related thereto.
Within the 90-day period prior to the expiration of this Lease, or within the
90-day period following the early termination of this Lease as a result of
Lessee breach thereof, Lessor, at Lessee’s cost and expense, shall cause its
environmental consultants to undertake a comprehensive environmental audit of
the Premises to determine whether Lessee Hazardous Substances are located at the
Premises for which Lessee is responsible under the terms of this Lease. If
Lessee, either during the Lease Term or upon the expiration or earlier
termination thereof, is not in compliance with any of the provisions of this
Paragraph 56, or in the event of a

 

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release of any Hazardous Material on, under or about the Premises caused or
permitted by Lessee, its agents, employees, contractors, licensees or invitees,
Lessor and its agents shall have the right at any time, but not the obligation,
without limitation upon any of Lessor’s other rights and remedies under this
Lease, to immediately enter upon the Premises without notice and to discharge
Lessee’s obligations under this Paragraph 56 at Lessee’s expense, including
without limitation the taking of emergency or long-term remedial action and
notwithstanding that Lessee may have already commenced remediation and/or
reconstruction activities. Lessor and its agents shall endeavor to minimize
interference with Lessee’s business in connection therewith, but shall not be
liable for any such interference. In addition, Lessor, at Lessee’s expense,
shall have the right, but not the obligation, to join and participate in any
legal proceedings or actions initiated in connection with any claims arising out
of the storage, generation, use, release and/or disposal by Lessee or its
agents, employees, contractors, licensees or invitees of Hazardous Substances
on, under, from or about the Premises. In the event Lessor shall elect to
perform Lessee’s obligations under this Paragraph 56 as permitted above, Lessee
shall reimburse Lessor all costs and expenses incurred by Lessor within twenty
(20) days of receipt from Lessor of an invoice therefor, accompanied by
reasonable evidence of such costs and expenses. Lessor shall have the right to
provide such invoices to Lessee monthly during the period of time that Lessor is
in the process of performing such Lessee obligations hereunder in order to
obtain reimbursement from Lessee of costs and expenses incurred by Lessor as of
the date of each such invoice.

(e) If the presence of any Hazardous Substances on, under, from or about the
Premises or the Project caused or permitted by Lessee or its agents, employees,
contractors, licensees or invitees results in (i) injury to any person,
(ii) injury to or any contamination of the Premises or the Project, or
(iii) injury to or contamination of any real or personal property wherever
situated, Lessee, at its expense, shall promptly commence and diligently
complete all actions necessary to return the Premises and the Project and any
other affected real or personal property owned by Lessor to the condition
existing prior to the introduction of such Hazardous Substances and to remedy or
repair any such injury or contamination, including without limitation, any
cleanup, remediation, removal, disposal, neutralization or other treatment of
any such Hazardous Substances. Notwithstanding the foregoing, Lessee shall not,
without Lessor’s prior written consent to the remediation and reconstruction
activities to be undertaken by Lessee, which consent may be given or withheld in
Lessor’s sole and absolute discretion, take any remedial action in response to
the presence of any Hazardous Substances on, from, under or about the Premises
or the Project or any other affected real or personal property owned by Lessor
or enter into any similar agreement, consent, decree or other compromise with
any governmental agency with respect to any Hazardous Substances claims;
provided however, Lessor’s prior written consent shall not be necessary in the
event that the presence of Hazardous Substances on, under or about the Premises
or the Project or any other affected real or personal property owned by Lessor
(i) imposes an immediate threat to the health, safety or welfare of any
individual and (ii) is of such a nature that an immediate remedial response is
necessary and it is not possible to obtain Lessor’s consent before taking such
action. In the event that the permissible levels or concentrations of Hazardous
Substances are subject to ambiguous regulatory standards or different regulatory
standards of governmental agencies having jurisdiction (including without
limitation the State of California under Proposition 65), Lessor shall have the
right to identify the applicable standard for remediation to which Lessee must
adhere in performing its obligations under this Lease. To the fullest extent
permitted by law, Lessee shall indemnify, hold harmless, protect and defend
(with attorneys acceptable to Lessor) Lessor and any successors to all or any

 

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portion of Lessor’s interest in the Premises and the Project and any other real
or personal property owned by Lessor from and against any and all liabilities,
losses, damages, diminution in value, judgments, fines, demands, claims,
recoveries, deficiencies, costs and expenses (including without limitation
attorneys’ fees, court costs and other professional expenses), whether
foreseeable or unforeseeable, arising directly or indirectly out of the use,
generation, storage, treatment, release, on-site or off-site disposal or
transportation of Hazardous Substances (A) on, into, from, under or about the
Premises during the Term regardless of the source of such Hazardous Substances
unless caused solely by Lessor or (B) on, into, from, under or about the
Premises, the Building or the Project and any other real or personal property
owned by Lessor caused or permitted by Lessee, its agents, employees,
contractors, licensees or invitees. Such indemnity obligation shall specifically
include, without limitation, the cost of any required or necessary repair,
restoration, cleanup or detoxification of the Premises, the Building and the
Project and any other real or personal property owned by Lessor, the preparation
of any closure or other required plans, whether or not such action is required
or necessary during the Term or after the expiration of this Lease and any loss
of rental due to the inability to lease the Premises or any portion of the
Building or Project as a result of such Hazardous Material or remediation
thereof. If it is at any time discovered that Hazardous Substances have been
released on, into, from, under or about the Premises during the Term, or that
Lessee or its agents, employees, contractors, licensees or invitees may have
caused or permitted the release of a Hazardous Material on, under, from or about
the Premises, the Building or the Project or any other real or personal property
owned by Lessor, Lessee shall, at Lessor’s request, immediately prepare and
submit to Lessor a comprehensive plan, subject to Lessor’s approval, specifying
the actions to be taken by Lessee to return the Premises, the Building or the
Project or any other real or personal property owned by Lessor to the condition
existing prior to the introduction of such Hazardous Substances. Upon Lessor’s
approval of such cleanup plan, Lessee shall, at its expense, and without
limitation of any rights and remedies of Lessor under this Lease or at law or in
equity, immediately implement such plan and proceed to cleanup such Hazardous
Substances in accordance with all applicable laws and as required by such plan
and this Lease. The provisions of this Paragraph 56 shall expressly survive the
expiration or sooner termination of this Lease.

57. Monthly Base Rent Adjustments. Monthly Base Rent during the Term shall be
adjusted at the times and to the amounts set forth below:

 

     

Month of Lease Term

  

Monthly Base Rent

        

May 1, 2009 – July 31, 2009 Early Occupancy

   $[…***…]                

August 1, 2009 – November 30, 2011

   $[…***…] NNN      

December 1, 2011 – November 30, 2012

   $[…***…] NNN    *   

December 1, 2012 – November 30, 2013

   $[…***…] NNN      

December 1, 2013 – September 30, 2014

   $[…***…] NNN   

All Base Rental Rates are “triple net”, and Lessee shall be responsible for its
pro rata share of all Common Area Operating Expenses for the project, including
without limitation common area expenses, real property taxes and required
insurance. Notwithstanding anything to

 

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*Confidential Treatment Requested

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the contrary set forth herein, Lessee shall be entitled to rent-free occupancy
for the months of May, June, and July, 2009.

58. No Recordation. This Lease shall not be recorded.

59. Force Majeure. If either Lessor or Lessee cannot perform any of its
obligations (other than Lessee’s obligation to pay Rent hereunder) due to events
beyond such party’s control, the time provided for performing such obligations
shall be extended by a period of time equal to the duration of such events.
Events beyond a party’s control include, but are not limited to, acts of God,
war, civil commotion, labor disputes, strikes, fire, flood or other casualty,
shortages of labor or material, government regulation or restriction and weather
conditions.

60. Intentionally Left Blank.

61. Relationship of Parties. Neither the method of computation of rent nor any
other provisions contained in this Lease nor any acts of the parties shall be
deemed or construed by the parties or by any third person to create the
relationship of principal and agent or of partnership or of joint venture or of
any association between Lessor and Lessee, other than the relationship of Lessor
and Lessee.

62. Singular and Plural. When required by the context of this Lease, the
singular shall include the plural, the plural shall include the singular, and
the masculine gender shall include the feminine and neuter gender.

63. Captions. The captions and titles of the Articles and Paragraphs, are for
convenience only and do not in any way define, limit or construe the content of
such Articles or Paragraphs and shall have not effect on their interpretation.

64. No Offer to Lease. The submission of this Lease to Lessee by Lessor, its
agent and/or real estate broker is solely for the purpose of examination and
negotiations and does not constitute an offer to lease, a reservation of, or
option for the Premises. If this Lease is acceptable to Lessee, it should be
executed and delivered to Lessor and shall thereafter be deemed an offer by
Lessee to lease, the Premises upon the terms and conditions in this Lease.
Lessor shall not be bound by the terms and conditions of this Lease until Lessor
has fully executed and delivered this Lease to Lessee.

65. No Lien. Lessor at no time shall have any security interest, lien or similar
such right with respect to any property of Lessee, whether located at the
Premises or otherwise; provided, however, that nothing herein shall preclude
Lessor from obtaining any attachment, judgment, and/or execution lien against
Lessee and Lessee’s property in any action against Lessee by Lessor.

66. Rent Payment. If any person to whom Lessee shall not then be required to pay
rent under this Lease shall demand payment or rent from Lessee alleging his or
her right to receive such rent as a result of a transfer of Lessor’s interest in
the Lease or otherwise, Lessee shall not be obligated to honor such demand
unless Lessee shall have received written instructions to do so from the person
to whom Lessee shall then be paying rent or shall otherwise receive written
evidence satisfactory to Lessee of the right of such person making the demand.

 

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67. Common Area Operating Expenses.

(a) The term “Common Area Operating Expenses” shall mean and include all Project
Costs, as defined immediately below, and Real Property Taxes, as defined in
Paragraph 10.1 of this Lease. The term “Project Costs” shall include all
expenses of operation, repair and maintenance of the Building and the Project,
including without limitation all appurtenant Common Areas, and shall include the
following charges by way of illustration but not limitation: water and sewer
charges; insurance premiums and deductibles and/or reasonable premium and
deductible equivalents should Lessor elect to self-insure all or any portion of
any risk that Lessor is authorized to insure hereunder; license, permit, and
inspection fees; heat; light; power; janitorial services to any interior Common
Areas; air conditioning; supplies; materials; equipment; tools; the cost of any
environmental, insurance, tax or other consultant utilized by Lessor in
connection with the Building and/or Project; establishment of reasonable
reserves for replacements and/or repairs; costs incurred in connection with
compliance with any laws or changes in laws applicable to the Building or the
Project; the cost of any capital investments or replacements (other than tenant
improvements for specific tenants) to the extent of the amortized amount thereof
over the useful life of such capital investments or replacements calculated at a
market cost of funds, all as determined by Lessor, for each such year of useful
life during the Term; costs associated with the maintenance of an air
conditioning, heating and ventilation service agreement, and maintenance of an
intrabuilding network cable service agreement for any intrabuilding network
cable telecommunications lines within the Project, and any other installation,
maintenance, repair and replacement costs associated with such lines; capital
costs associated with a requirement related to demands on utilities by Project
tenants, including, without limitation, the cost to obtain additional phone
connections; labor; reasonable allocated wages and salaries, fringe benefits,
and payroll taxes for administrative and other personnel directly applicable to
the Building and/or Project, including both Lessor’s personnel and outside
personnel; any expense incurred pursuant to Paragraphs 7.2 and 68; and a
reasonable overhead/management fee for the professional operation of the
Project. It is understood and agreed that Project Costs may include competitive
charges for direct services provided by any subsidiary, division or affiliate of
Lessor.

(b) Upon the expiration of earlier termination of this Lease, even though this
Lease has terminated and Lessee has vacated the Premises, when the final
determination is made of Lessee’s Share of Common Area Operating Expenses for
the calendar year in which this Lease terminated, Lessee shall within
thirty (30) days of written notice pay the entire increase over the estimated
Lessee’s Share of Common Area Operating Expenses already paid. Conversely, any
overpayment by Lessee shall be rebated by Lessor to Lessee not later than
thirty (30) days after such final determination.

68. Insurance.

(a) Lessor’s Insurance. At all times during the Lease Term, Lessor shall procure
and keep in full force and effect the following insurance:

(i) All-Risk property insurance (including earthquake if coverage is available
and commercially reasonable) insuring the Building and Improvements, its
equipment

 

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and Common Area furnishings, all in such amounts and with such deductibles as
Lessor considers appropriate.

(ii) Commercial General Liability insuring its interest in the Building and
Improvements.

(iii) Rental Value insurance, in the name of Lessor, with loss payable to
Lessor, insuring the full rental and other charges payable by Lessee to Lessor
under this Lease (including all real estate taxes, insurance costs, and any
scheduled rental increases) for such period of time as Lessor shall from time to
time determine. Lessee shall be liable for any deductible amount in the event of
such loss.

(iv) Such other insurance as Lessor reasonably determines from time to time.

(b) Lessee’s Insurance. Lessee shall, at its sole cost and expense, keep in full
force and effect the following insurance:

(i) All-Risk property insurance on “Lessee’s Property” for the full replacement
value. Such policy shall contain an agreed amount endorsement in lieu of a
coinsurance clause. “Lessee’s Property” is defined to be all improvements,
betterments and personal property of Lessee located in or on the Premises,
Common Areas or Building, excluding that which may be insured by Lessor’s
All-Risk property insurance as set forth in subparagraph 68 (a) (i), above.

(ii) Commercial General Liability insurance insuring Lessee against any
liability arising out of its use, occupancy or maintenance of the Premises or
the business operated by Lessee pursuant to this Lease. Such insurance shall be
in the amount of at least $2,000,000 per occurrence. Such policy shall name
Lessor, Lessor’s wholly owned subsidiaries and agents, including without
limitation Lessor’s property managers (William A. Budge, Inc. and Maureen M.
Corona Corporation) and any mortgagees, as additional insureds on a separate
endorsement form.

(iii) Worker’s Compensation insurance as required by state law.

(iv) Any other form or forms of insurance or increased amounts of insurance as
Lessor or any mortgagees of Lessor may reasonably require from time to time.

All such policies shall be written in a form and with an insurance company
satisfactory to Lessor and any mortgagees of Lessor, and shall provide that
Lessor, and any mortgagees of Lessor, shall receive not less than thirty (30)
days’ prior written notice of any cancellation. Prior to or at the time that
Lessee takes possession of the Premises, Lessee shall deliver to Lessor copies
or certificates evidencing the existence of the amounts and forms of coverage
satisfactory to Lessor. Lessee shall, within thirty (30) days prior to the
expiration of such policies, furnish Lessor with renewals or “binders” thereof,
or Lessor may order such insurance and charge the cost thereof to Lessee as
additional rent.

 

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(c) Forms of Policies. All policies maintained by Lessee will provide that they
may not be terminated nor may coverage be reduced except after thirty (3) days’
prior written notice to Lessor. All Commercial General Liability and All-Risk
property policies maintained by Lessee shall be written as primary policies, not
contributing with and not supplemental to the coverage that Lessor may carry.

(d) Adequacy of Coverage. Lessor, its subsidiaries, agents and employees make no
representation that the limits of liability specified to be carried by Lessee
pursuant to this paragraph 69 are adequate to protect Lessee. If Lessee believes
that any of such insurance coverage is inadequate, Lessee will obtain such
additional insurance coverage as Lessee deems adequate, at Lessee’s sole cost
and expense.

(e) Certain Insurance Risks. Lessee shall not do or permit to be done any act or
thing upon the Premises or the project of which the Premises area part which
would (i) jeopardize or be in conflict with fire insurance policies covering the
project or fixtures and property in the project, (ii) increase the rate of fire
insurance applicable to the project to an amount higher than it otherwise would
be for the Agreed Use set forth at paragraph 1.8 of the Lease, or (iii) subject
Lessor to any liability or responsibility for the injury to any person or
persons or to property by reason of any business or operation being carried on
upon the Premises.

69. Indemnification, Waiver and Release. Except for any injury to persons or
damage to property that is caused by or results from the gross negligence or
willful misconduct of Lessor, its employees, or agents, and subject to the
provisions of paragraph 68, above, Lessee shall indemnify and hold Lessor,
Lessor’s wholly owned subsidiaries and the employees and agents of Lessor and
Lessor’s wholly owned subsidiaries (hereinafter collectively referred to as the
“Indemnified Parties” and individually as an “Indemnified Party”) harmless from
and against any and all demands, claims, causes of action, fines, penalties,
damages, liabilities, judgments, and expenses (including without limitation
reasonable attorneys’ fees) incurred in connection with or arising from:

(a) the use or occupancy or manner of use or occupancy of the Premises by Lessee
or any person claiming under Lessee.

(b) any activity, work, or thing done or permitted by Lessee in or about the
Premises, the Building, or the project.

(c) any breach by Lessee or its employees, agents, contractors, or invitees of
this Lease.

(d) any injury or damage to the person, property, or business of Lessee, its
employees, agents, contractors, or invitees entering upon the Premises under the
express or implied invitation of Lessee.

(e) any alleged violation by Lessee of the ADA and/or any other law, rule, code
or regulation.

 

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(f) any injury or damage to the person, property, or business of Lessee, its
employees, agents, contractors, or invitees entering upon the Premises, caused
by the occurrence of any terrorist activity or any act of god.

If any action or proceeding is brought against an Indemnified Party by reason of
the foregoing, Lessee, upon written notice from such Indemnified Party, shall
defend the same at Lessee’s expense, with legal counsel reasonably satisfactory
to Lessor.

70. Waiver and Release. Lessee, as a material part of the consideration for this
Lease, by this paragraph 71 waives and releases all claims against Lessor,
Lessor’s wholly owned subsidiaries, and all of Lessor’s and its wholly owned
subsidiaries’ employees and agents with respect to all matters for which Lessor
has disclaimed liability pursuant to the provisions of this Lease.

71. Lessee Statement. Lessee shall within ten (10) business days following
written request by Lessor execute and deliver to Lessor any documents, including
estoppel certificates, in a mutually acceptable form prepared by Lessor which
shall provide the following information:

(a) certifying that this Lease is unmodified and in full force and effect or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect and the date to which the
Rent and other charges are paid in advance, if any;

(b) acknowledging that there are not, to Lessee’s knowledge, any uncured
defaults on the part of the Lessor or stating the nature of any uncured
defaults;

(c) certifying the current Rent amount and the amount and form of Security
Deposit on deposit with Lessor; and

(d) certifying to such other information as Lessor, Lessor’s agents, mortgagees,
prospective mortgagees and purchasers may reasonably request.

Lessee’s failure to deliver an estoppel certificate within ten (10) business
days after delivery of Lessor’s written request therefor shall be conclusive
upon Lessee:

(a) that this Lease is in full force and effect, without modification except as
may be represented by Lessor;

(b) that there are now no uncured defaults in Lessor’s performance;

(c) that not more than one (1) month’s Rent has been paid in advance; and

(d) that the other information requested by Lessor is correct as stated in the
form presented by Lessor.

 

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72. Financial Information. Lessee shall, upon Lessor’s request, deliver to
Lessor the current financial statements of Lessee, and financial statements of
the two (2) years prior to the current financial statement’s year, certified to
be true, accurate and completed by the chief financial officer of Lessee,
including a balance sheet and profit and loss statement for the most recent
prior year, which statements shall accurately and completely reflect the
financial condition of Lessee. Lessor agrees that it will keep such financial
statements confidential, except that Lessor shall have the right to deliver the
same to any proposed purchaser of the Premises, or any portion thereof and to
the mortgagees or beneficiaries of Lessor or such purchaser, provided that such
parties agree in writing to keep such statements confidential.

 

  

73. Early Occupancy. Provided that Lessee has delivered to Lessor the
certificates of insurance required under the Lease, Lessee shall be entitled to
[…***…] early occupancy of the Premises commencing on May 1, 2009; provided,
however, that Tenant shall not interfere with Lessor’s construction of the
improvements referred to in Paragraphs 74, below, which shall be ongoing during
such early occupancy period.

 

  

 

*

74. Lessee Construction Allowance. Lessor shall provide to Lessee an $[…***…]
construction allowance (the “Allowance”) to be used by Lessee for general
purpose improvements in the Premises. All such improvements to be constructed by
Lessee shall be subject to the provisions of Paragraphs 7.3 and 7.4 of the
Lease. Lessor and Lessee have mutually agreed upon a space plan for the
Premises, a true and correct copy of which is attached hereto as Exhibit “D.”
Lessor shall cause to be prepared plans and specifications for such
improvements. Bids will then be submitted by Lessor to two contractors on a
design/build basis, and the low bidder shall be selected to undertake the work.
Lessor’s architect shall be responsible to submit and process all building plans
and permits. Lessor’s property manager, William A. Budge, shall supervise all
construction activity and shall pay all design and construction invoices from
the Allowance upon presentation to Lessor of invoices detailing the work
incurred to date and cost thereof, accompanied by lien releases with respect
thereto. If the cost of said improvements exceeds the Allowance, Lessee shall be
responsible for all such excess costs; provided, however, that Lessor shall pay
any such excess that results solely from ADA compliance requirements with
respect to general building improvements only. Lessee shall continue to be
responsible for the cost of ADA compliance requirements with respect to
specialized improvements for Lessee and not standard improvements that may be
used by industrial tenants in general. If the cost of said improvements is less
than the Allowance, Lessee may use such remaining Allowance for construction of
general purpose improvements at Lessee’s 40 Parker, Irvine, California premises,
also leased from Lessor. In no event shall Lessee have any restoration
obligations with respect to the improvements in the Premises constructed by
Lessee pursuant to this Paragraph 74 unless such improvements are specialized
improvements for Lessee and not standard improvements that may be used by
industrial tenants in general. Lessor shall identify any such specialized
improvements that must be removed by Lessee, if any, at the time Lessor consents
to the construction thereof.    *

 

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*Confidential Treatment Requested

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75. Required Notice of Intent Not to Renew Lease. Not later than August 31,
2013, Lessee shall notify Landlord in writing whether Lessee intends not to
renew this Lease for an additional five (5) year term. In the event Lessee fails
to notify Lessor by said date that Lessee does not intend to renew this Lease,
then, at the election of Lessor, this Lease shall be automatically extended for
an additional five (5)-year period. Base Rent for the 5-year extended term shall
be at one hundred percent (100%) of the prevailing market rental rate in the
area determined in the manner described below, but in no event less than the
Base Rent in effect at the expiration of the initial Lease term. Base Rent for
each successive year shall be at prevailing market rate increases over the first
year Base Rent.

The parties shall have thirty (30) days in which to agree on monthly Base Rent
for the first year of the applicable extended term and on market rate increases,
if any, in one or more successive years thereafter. If the parties are unable to
agree on the minimum monthly Base Rent within that period, then within
ten (10) days after the expiration of that period, either (i) Lessor and Lessee
shall appoint a mutually acceptable appraiser or broker to establish the new
market rental rate and terms (“MRRT”) in the area within the next thirty (30)
days, including market rate increases during one or more successive years of the
extended term (all costs associated with said appraisal shall be split equally
between Lessor and Lessee), or (ii) each of Lessor and Lessee shall select and
pay the appraiser or broker of their choosing to establish a MRRT within the
next 30 days. If for any reason either one of the appraisals is not completed
within the next 30 days as stipulated, then the appraisal that is completed at
that time shall automatically become the new MRRT. If both appraisals are
completed and the two appraisers/brokers cannot agree on a reasonable average
MRRT then they shall immediately select a mutually acceptable appraiser, broker
to establish which of the two appraisals is closest to the MRRT. Whichever
appraisal is determined by the third broker/appraiser to be closest to the MRRT
shall be the new MRRT. The new Base Rent shall be the MRRT as determined by said
broker/appraiser. In determining the MRRT, the appraisers shall take into
account that Lessor is not making any tenant improvements, or giving Lessee any
free rent. In no event shall the new Base Rent be less than the Base Rent
payable for the month immediately preceding the date for rent adjustment.

76. Lease Contingent on Other Leases. Lessee is currently entering into a new
Lease with Lessor at 40 Parker and a lease extension at 50 Parker (jointly, the
“40 and 50 Parker Leases”). The effectiveness of this Lease is also expressly
conditioned upon Lessor and Lessee entering into the 40 and 50 Parker Leases on
or before May 4, 2009. If the 40 and 50 Parker Leases are not entered into on or
before May 4, 2009, Lessor shall have the option by written notice to Lessee
delivered on or before May 11, 2009, either to (i) terminate this Lease, in
which event neither Lessor nor Lessee shall have any further obligations to each
other, or (ii) continue this Lease in full force and effect.

 

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