Exhibit
10.21


COMPROMISE
AGREEMENT


This Compromise Agreement
(“Agreement”) is entered into by and between OAKPORT ASSOCIATES, a California
limited partnership (“Lessor”), and WORLD HEART, INC., a Delaware corporation (“Lessee”),
as of July 20, 2007 (the “Effective Date”), and is based on the following
facts.  Defined terms used herein but not
otherwise defined herein shall have the meaning given those terms in the 2002
Lease (as defined below).


RECITALS


A.            On or about
May 1, 2002, Lessor and Lessee entered into that certain Standard
Industrial/Commercial Single-Tenant Lease – Net dated for reference purposes
May 1, 2002 (the “2002 Lease”), pertaining to premises located at 7755 and
7799 Pardee Lane, Oakland, California (“Premises”).  The term of the 2002 Lease was from
May 1, 2002 through April 30, 2007. 
The 2002 Lease has expired and Lessee is presently occupying the
Premises as a holdover tenant pursuant to Paragraph 26 of the 2002 Lease.


B             The 2002 Lease
imposes upon Lessee, prior to the expiration of the term of the 2002 Lease, the
obligation to restore Lessor’s improvements to the Premises to the same
condition as existed prior to the destruction or removal of such improvements,
as more particularly set forth in the 2002 Lease and defined therein as the “Baxter
Restoration Work.”  Lessee has failed to
timely perform that obligation.


C.            Lessee acknowledges
that such obligation to restore the premises extends to both the 7755 and
7799 Pardee Lane buildings.


D.            In order to fund a
portion of the costs of the Baxter Restoration Work in the event that Lessee
did not fully perform its obligation, Lessee agreed to provide, and did
provide, to Lessor a letter of credit, Letter of Credit No.7409978, issued by
the Canadian Imperial Bank of Commerce, in the amount of $750,000 (“Letter of
Credit”).


E.             Concurrently with the
execution of the 2002 Lease, World Heart Corporation, a corporation organized
and existing under the laws of the Province of Ontario Canada (“Guarantor”),
executed a Guaranty of Lease in favor of Lessor and further agreed to deposit,
and did deposit, with Lessor the sum of $150,000 plus any accrued interest on
the sums deposited.  Lessor presently
holds $150,000 plus interest accrued on said deposits in a segregated bank
account the “Cash Collateral”).  The
funds so deposited are security for the performance of the Guaranty.


F.             Disputes have arisen
between Lessor and Lessee concerning the nature and extent of Lessee’s
obligations to restore the Premises, Lessee’s holding over and other matters.


G.            Lessee has expressed a
desire to enter into a new lease with Lessor for the premises located at
7799 Pardee Lane.  Lessor is willing
to enter into a new lease under certain terms and conditions including the
execution of this Agreement and performance of the obligations set forth in it.













AGREEMENT


Lessor and Lessee agree
to compromise the various disputes between them including but not limited to
disputes arising under the 2002 Lease in accord with the terms and conditions
expressed in this Agreement.  Accordingly,
in consideration of the covenants and other matters set forth herein, the
parties agree as follows:


1.             Month to Month
Extension of the 2002 Lease.


(a)            Commencing on
May 1, 2007, the 2002 Lease shall be extended on a month-to-month basis
until the earlier of:  January 30, 2008,
or the date upon which the Baxter Restoration Work for the 7755 Pardee
Lane building (“7755 Restoration Work”) has been Completed, subject to Force Majeure (as hereinafter
defined).  The Term “Completed” (or “Complete” or “Completion”) shall mean the
date upon which all of the following items have been delivered or
satisfied:  (i) a certificate of
completion of the 7755 Restoration Work executed by Lessee’s architect,
certifying that, except for minor punchlist items identified by Lessor and
Lessee, during a mutual walkthrough, the 7755 Restoration Work has been
completed in compliance with the plans and specifications approved by the
Lessor; (ii) a final inspection of the 7755 Restoration Work signed and
approved in all respects by the City of Oakland and any other governmental
agencies with jurisdiction over the Premises or Lessee’s operations at the
Premises, as required by applicable law; and (iii) a copy of an unconditional
waiver and release upon final payment, in the form prescribed in Section 3262
of the California Civil Code, from the general contractor and all
subcontractors (including architects and engineers) hired in connection with
the 7755 Restoration Work, and any lien or stop notice delivered in connection
with the 7755 Restoration Work has been cleared to Lessor’s satisfaction.


(b)           As used herein, “Force
Majeure” shall mean any delay caused by reason of any prevention, delay,
stoppage due to strikes, lockouts, acts of God, Lessor delay, permitting or
inspection delay of the City of Oakland or other governmental agency beyond the
standard and ordinary response time, and any other similar cause beyond the
reasonable control of Lessee, and Lessee’s obligations with respect to the 7755
Restoration Work shall be suspended by any such Force Majeure event during the
duration thereof; provided that Lessee shall give prompt notice to Lessor (not
more than 10 business days) after determining that such Force Majeure event
shall affect or hinder Lessee’s performance hereunder.  Lessee shall have an affirmative duty to
diligently pursue resolution of the Force Majeure event to the extent such
resolution is possible.  Under no
circumstances shall a Force Majeure event excuse Lessee from its obligation to
pay Rent under the 2002 Lease.


(c)           In connection with the
7755 Restoration Work, Lessee shall obtain, or cause its contractor to obtain
for the benefit of Lessee, a payment and completion bond from a
nationally-recognized surety in the amount of one hundred and ten percent
(110%) of the estimated budget for the 7755 Restoration Work and shall submit
the plans and specification therefor to Lessor for approval (which approval
shall not be unreasonable withheld) prior to submission of such plans and
specification to the City of Oakland.


(d)           In the event that
Lessee has not completed the 7755 Renovation Work by January 30, 2008, the
terms and conditions of Section 7.4 of the 2002 Lease Addendum shall apply and
Lessee shall be deemed a holdover Lessee and holdover rent shall be applicable
commencing on February 1, 2008.  Nothing
in this Section 1(d) shall be deemed Lessor’s consent to any holdover
occupancy.



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(e)           Base Rent for the
period May 1 through the end of the extended Term (but not beyond January 30,
2008) shall be Forty-One Thousand Five Hundred Seventy-Two Dollars
($41,572).  Landlord hereby waives its
right to holdover rent under the 2002 Lease for such period.


(f)            Except as extended, and except for the
express terms and conditions of this Agreement, the terms of the 2002 Lease
remain in full force and effect, including without limitation, Lessee’s
obligation to complete the 7755 Restoration Work.


2.             Letter
of Credit.  Upon execution of
this Agreement, Lessor will draw upon the Letter of Credit described above and
receive the $750,000 proceeds thereof (“Proceeds”).  Upon such draw, the Proceeds shall become the
sole and exclusive property of Lessor and Lessee shall retain no interest in
such funds.  Upon Lessor’s receipt of the
Proceeds of the Letter of Credit, Lessee shall be released from Lessee’s
obligation to perform the Baxter Restoration Work for 7799 Pardee Lane (“7799
Restoration Work”).  Lessor agrees to
confirm such release in writing promptly following Lessor’s receipt of the
Proceeds, in the form of the acknowledgment and release attached hereto as Exhibit
A.


3.             New
Lease.  The parties have entered
into that AIR Commercial Real Estate Association Standard Industrial/Commercial
Single-Tenant Lease — Net dated as of even date herewith for the 7799 Pardee
Lane building (“New Lease”).  The New
Lease shall be effective upon execution and shall be an executory agreement
between the parties however, the parties’ performance of their covenants and
promises thereunder shall not begin until the Commencement Date of the New
Lease has occurred, if it shall occur.  
The “Commencement Date” of the New Lease shall occur upon the full and
complete satisfaction of all of the following conditions:  (i) the 7755 Restoration Work has been
Completed no later than January 30, 2008 (subject to Force Majeure as provided
herein); (ii) no voluntary or involuntary petition under any applicable
bankruptcy law has been filed by or against Lessee; no trustee, receiver or
conservator has been appointed with respect to all or any substantial part of
the Lessee’s assets; and no general assignment for the benefit of creditors or
any other similar action for the protection or benefit of creditors has been
made by Lessee; and (iii) no claim has been made by Lessee or other party, in
bankruptcy or otherwise, seeking Lessor’s disgorgement of the Letter of Credit
proceeds.  Until the Commencement Date of
New Lease occurs, Lessee shall be a holdover tenant under the 2002 Lease,
except as provided in Section 1(e) above with respect to holdover rent.  If the Commencement Date of the New Lease has
not occurred by February 1, 2008, Lessor may terminate the New Lease at any
time thereafter by written notice to Lessee.


4.             Cash
Collateral. Guarantor agrees that Lessor is presently entitled to apply
the Cash Collateral to obligations owed by Lessee to Lessor including the
obligation which Lessee has failed to perform the timely restoration of
7755 Pardee Lane, Oakland, California. 
As of the commencement date of the term of the New Lease, if it should
occur, Lessor agrees to attribute $100,000 of the Cash Collateral deposited
with Lessor under the Guaranty to the security deposit required under the New
Lease and promptly return the remainder of the Cash Collateral (currently,
approximately $64,000) to the Guarantor.


5.             Release.  As of the Commencement Date of the New Lease,
if it should occur, Lessor and Lessee, on their own behalf and on behalf of
their successors, heirs and assigns do hereby fully finally and forever release
and discharge each other and all of their present and former affiliates, sister
corporations, and businesses, parent and subsidiary corporations, and their
respective officers, directors, shareholders, employees, agents, members,
sureties, attorneys, and representatives and any and all other persons from and
against all claims, demands, causes of action, rights, debts, controversies,
damages, costs, losses and expenses of every kind, nature, description or
character arising out of or relating to the 2002 Lease and the Guaranty and the
obligations of any of the parties under such agreements, except as otherwise
provided in this 



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Release.  The parties acknowledge that this Release
includes all claims, injuries or damages whatsoever known or unknown, foreseen
or unforeseen, including indemnity claims and that each party has been advised
by legal counsel about and are familiar with and understand the provisions of
California Civil Code Section 1542 which provides as follows:


A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR


This Release does not
affect nor modify the covenants, terms and conditions set forth in this Agreement
and does not apply to any of the covenants, terms and conditions set forth in
the New Lease.


6.             Alterations Due to
Parcel Map.  Lessor has advised
Lessee that Lessor is in the process of preparing a parcel map which shall
divide the real property upon which the Premises and the 7777 Pardee Lane
building are located into three separate legal parcels. In the event that the
City of Oakland requires the installation of fire-resistant windows in the 7755
Pardee Building, Lessor will undertake to make such alterations at Lessor’s
sole cost and expense.  In addition, if
the City requires any other any alterations or modifications to the 7755 Pardee
Building due to the creation of the separate parcels, Lessor agrees, at Lessor’s
option, either (a) to undertake such alterations or modifications at Lessor’s
sole cost and expense, or (b) to reimburse Lessee for all of Lessee’s costs in
making such alterations or modifications. 
Lessee agrees to obtain at least two bids for any such alterations or
modifications to be undertaken by Lessee including one from a contractor
selected by Lessor.  The delay, if any,
caused by the need to install fire-resistant windows or to make any other
alterations or modifications due to the creation of separate parcels shall be
considered Force Majeure.


7.             Miscellaneous.


(a)           Each signatory of this Agreement represents
hereby that he or she has full power and authority to execute and deliver this
Agreement on behalf of the party hereto for which such signatory is acting.


(b)           If any party brings any action to enforce
the terms hereof, the prevailing party shall be entitled to receive reasonable
attorneys’ fees and court costs from the other party.


(c)           This Agreement and each provision hereof
shall be interpreted in accordance with its fair meaning and not against or in
favor of any party.


(d)           This Agreement shall be executed in one or
more counterparts, each of which shall be deemed an original and when taken
together shall constitute one and the same document.  The parties may deliver signatures to this
Amendment by facsimile or a “pdf” version by email.


(Signatures on
following page)



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 IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date first set forth above.


	
  

  	
  LESSOR: OAKPORT
  ASSOCIATES, a

  California limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Michael S. Kuhn

  
	
   

  	
   

  	
    Michael
  S. Kuhn, General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LESSEE: WORLD
  HEART INC., a Delaware

  corporation 

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Jal S. Jassawalla

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Jal S.
  Jassawalla 

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President and
  Chief Executive Officer

  
					



 



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EXHIBIT A


Form of Acknowledgment and Release


ACKNOWLEDGEMENT
AND RELEASE


This Acknowledgement and
Release (“Release”) dated as of                ,
200     , is being delivered pursuant to Section 2 of
that certain Compromise Agreement (“Compromise Agreement”) dated as of July 20,
2007, between Oakport Associates (“Lessor”) and World Heart Inc. (“Lessee”).  Defined terms used but not otherwise defined
herein shall have the meaning given such terms in the Compromise Agreement.


Lessor and Lessee entered
into that certain Standard Industrial/Commercial Single-Tenant Lease – Net
dated for reference purposes May 1, 2002 (the “2002 Lease”), pertaining to
premises located at 7755 and 7799 Pardee Lane, Oakland, California (“Premises”).  As more fully set forth in the 2002 Lease,
Lessee was obligated to restore Lessor’s improvements to the Premises to the
same condition as existed prior to the destruction or removal of such
improvements.  Said obligations are
defined herein and in the 2002 Lease as the “Baxter Restoration Work.”  Pursuant to the terms of the Compromise
Agreement, Lessor and Lessee agreed that Lessee will satisfy the Baxter
Restoration Work obligation for the Premises located 7799 Pardee Lane (“7799
Restoration Work”) via the payment of $750,000 through Lessor’s draw on the
Letter of Credit.


Lessor hereby
acknowledges that it has received the Proceeds of the Letter of Credit and
hereby on its own behalf and on behalf of its successors, heirs and assigns,
does hereby fully finally and forever release and discharge Lessee and all of
its present and former affiliates, sister corporations, and businesses, parent
and subsidiary corporations, and their respective officers, directors,
shareholders, employees, agents, members, sureties, attorneys, representatives
and any and all other persons from and against all claims, demands, causes of
action, rights, debts, controversies, damages, costs, losses and expenses of
every kind, nature, description or character arising out of or relating to the
obligation to undertake and complete the 7799 Restoration Work.  Lessor acknowledges that this Release
includes all claims, injuries or damages whatsoever known or unknown, foreseen
or unforeseen, including indemnity claims relating to the 7799 Pardee Restoration
Work and that Lessor has been advised by legal counsel about and is familiar
with and understands the provisions of California Civil Code Section 1542 which
provides as follows:


A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR


This Release does not
affect nor modify the covenants, terms and conditions set forth in the 2002
Lease (including without limitation the Baxter Restoration Work for the 7755
Pardee Lane Premises), the Compromise Agreement nor the New Lease, except in
each case with respect to the subject matter of this Release.


IN WITNESS WHEREOF,
Lessor has executed this Agreement as of the date first set forth above.



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  LESSOR: 

  
	
   

  	
   

  	
   

  
	
   

  	
  OAKPORT ASSOCIATES, a California 

  limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
     Michael S. Kuhn, General Partner

  



 



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AIR
COMMERCIAL REAL ESTATE ASSOCIATION 

STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE — NET


(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)


1.        Basic Provisions (“Basic
Provisions”).


1.1       Parties: This Lease (“Lease”),
dated for reference purposes only July 20, 2007, is made by and between OAKPORT ASSOCIATES, a California limited
partnership (“Lessor”) and WORLD HEART, INC., a Delaware
corporation (“Lessee”),
(collectively the “Parties,” or
individually a “Party”).


1.2       Premises: That certain real property, including all improvements therein or to be
provided by Lessor under the terms of this Lease, and commonly known as 7799
Pardee Lane, located in the County of Alameda, State of California, and
generally described as (describe briefly the nature of the property and, if
applicable, the “Project”, if the
property is located within a Project) one single story concrete building (“Building”) containing approximately
19,200 square feet which is part of a three building project (“Project”). (“Premises”).
(See also Paragraph 2)


1.3       Term:
three (3) years and 0 months (“Original Term”)
commencing See Addendum (“Commencement Date”)
and ending See Addendum (“Expiration Date”).
(See also Paragraph 3)


1.4       Early Possession: N/A (“Early Possession Date”).
(See also Paragraphs 3.2 and 3.3)


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


x
If this box is checked, there are provisions in this Lease for the Base Rent to
be adjusted. See Addendum Section 1.5


1.6       Base Rent and Other Monies Paid Upon Execution:


(a)       Base Rent: $20,000.00 for the period See
Addendum.


(b)       Security Deposit: $100,000.00 (“Security Deposit”). (See also Paragraph 5)


(c)       Association Fees: $                  for
the period                                             


(d)       Other: $                  
for                                                  .


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


1.7       Agreed Use: The production, sale and distribution of medical devices and for
general and administrative offices ancillary thereto. (See also Paragraph 6)


1.8       Insuring Party: Lessor is the “Insuring Party”
unless otherwise stated herein. (See also Paragraph 8)


1.9       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):


o
(not applicable) represents Lessor exclusively (“Lessor’s Broker”);


o
(not applicable) represents Lessee exclusively (“Lessee’s Broker”); or


o
(not applicable) 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 Broker the
fee agreed to                     


	
  

  	
   

  	
   

  	
   

  	
   

  	
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  ©2001 - AIR
  COMMERCIAL REAL ESTATE ASSOCIATION

  	
   

  	
  FORM STN-8-5/05E

  



 



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in their separate written
agreement (or if there is no such agreement, the sum of                            
or none % of the total Base Rent) for the brokerage services rendered by the
Brokers.


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


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


x an Addendum consisting of certain revised
paragraphs and new Paragraphs 50 through 52;


x a plot plan depicting the Premises; as
Exhibit A


o a current set of the Rules and Regulations;


o a Work Letter;


o other (specify):                                                                                                      .


2.        Premises.


2.1       Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor,
the Premises, for the term, at the 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. Note: Lessee is
advised to verify the actual size prior to executing this Lease.


2.2       Condition. Lessor shall deliver the Premises 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, sump pumps, if any, and all other such
elements in the Premises, other than those constructed by Lessee, shall be in
good operating condition on said date, that the structural elements of the
roof, bearing walls and foundation of any buildings on the Premises (the “Building”) shall be free of material
defects, and that the Premises do not contain hazardous levels of any mold or
fungi defined as toxic under applicable state or federal law. If a
non-compliance with said 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
Building. 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.


2.3       Compliance. Lessor warrants that to the best of its knowledge the improvements on
the Premises comply with the building codes, applicable laws, covenants or
restrictions of record, regulations, and ordinances (“Applicable Requirements”) that were in
effect at the time that each improvement, or portion thereof, was constructed.
Said warranty does not apply to the use to which Lessee will put the Premises,
modifications which may be required by the Americans with Disabilities Act or
any similar laws as a result of Lessee’s use (see Paragraph 50), 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 6 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 Premises and/or Building, the remediation
of any Hazardous Substance, or the reinforcement or other physical 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 2 years of this Lease and the cost thereof exceeds 6 months’ Base
Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in
writing, within 10 days after receipt of Lessee’s termination notice that
Lessor has elected to pay the difference between the actual cost thereof and an
amount equal to 6 months’ Base Rent. If Lessee elects termination, Lessee shall
immediately cease


	
  

  	
   

  	
   

  	
   

  	
   

  	
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  ©2001 - AIR
  COMMERCIAL REAL ESTATE ASSOCIATION

  	
   

  	
  FORM STN-8-5/05E

  




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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 such costs pursuant to the
provisions of Paragraph 7.1(d); provided, however, that if such Capital
Expenditure is required during the last 2 years of this Lease or if Lessor
reasonably determines that it is not economically feasible to pay its share
thereof, Lessor shall have the option to terminate this Lease upon 90 days
prior written notice to Lessee unless Lessee notifies Lessor, in writing,
within 10 days after receipt of Lessor’s termination notice that Lessee will
pay for such Capital Expenditure. 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, the provisions concerning Capital Expenditures are intended to apply
only to non-voluntary, unexpected, and new Applicable Requirements. If the
Capital Expenditures are instead triggered by Lessee as a result of an actual
or proposed change in use, change in intensity of use, or modification to the
Premises then, and in that event, Lessee shall either: (i) immediately cease
such changed use or intensity of use and/or take such other steps as may be
necessary to eliminate the requirement for such Capital Expenditure, or (ii)
complete such Capital Expenditure at its own expense. Lessee shall not,
however, 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 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.


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 no limited to the obligations to pay Real Property
Taxes and insurance premiums and to maintain the Premises) shall be in effect
during such-period. Any such early possession shall not affect the Expiration
Date.


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


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


	
  

  	
   

  	
   

  	
   

  	
   

  	
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the Start Date shall occur but Lessor may elect to
withhold possession until such conditions are satisfied.


4.         Rent.


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


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


4.3       Association Fees. In addition to the Base Rent, Lessee shall pay to Lessor each month an
amount equal to any owner’s association or condominium fees levied or assessed
against the Premises. Said monies shall be paid at the same time and in the
same manner as the Base Rent.


5.         Security Deposit. Lessee shall deposit with Lessor upon execution hereof the Security
Deposit as security for Lessee’s faithful performance of its obligations under
this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this
Lease, Lessor may use, apply or retain all or any portion of said Security
Deposit for the payment of any amount due 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. If the Base Rent increases during the term
of this Lease, Lessee shall, upon written request from Lessor, deposit
additional moneys with Lessor so that the total amount of the Security Deposit
shall at all times bear the same proportion to the increased Base Rent as the
initial Security Deposit bore to the initial Base Rent. Should the Agreed Use
be amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase
the Security Deposit to the extent necessary, in Lessor’s reasonable judgment,
to account for any increased wear and tear that the Premises may suffer as a
result thereof. If a change in control of Lessee occurs during this Lease and
following such change the financial condition of Lessee is, in Lessor’s
reasonable judgment, significantly reduced, Lessee shall deposit such
additional monies with Lessor as shall be sufficient to cause the Security
Deposit to be at a commercially reasonable level based on such change in
financial condition. Lessor shall not be required to keep the Security Deposit
separate from its general accounts. Within 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. LESSOR HEREBY WAIVES THE PROVISIONS OF CALIFORNIA
CIVIL CODE SECTION 1950.7.


6.         Use.


6.1       Use.
Lessee shall use and occupy the Premises only for the Agreed Use, or any other
legal use which is reasonably comparable thereto, and for no other purpose.
Lessee shall not use or permit the use of the Premises in a manner that is
unlawful, creates damage, waste or a nuisance, or that disturbs occupants of or
causes damage to neighboring premises or properties. Other than guide, signal
and seeing eye dogs, Lessee shall not keep or allow in the Premises any pets,
animals, birds, fish, or reptiles. Lessor shall not unreasonably withhold or
delay its consent to any written request for a modification of the Agreed Use,
so long as the same will not impair the structural integrity of the
improvements on the Premises or the mechanical or electrical systems therein,
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.


(a) Reportable Uses Require Consent. The term “Hazardous Substance” as used in this Lease
shall mean any product,


	
  

  	
   

  	
   

  	
   

  	
   

  	
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substance, or waste whose presence, use, manufacture,
disposal, transportation, or release, either by itself or in combination with
other materials expected to be on the Premises, is either: (i) potentially
injurious to the public health, safety or welfare, the environment or the
Premises, (ii) regulated or monitored by any governmental authority, or
(iii) a basis for potential liability of Lessor to any governmental agency or
third party under any applicable statute or common law theory. Hazardous
Substances shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, and/or crude oil or any products, by-products or fractions thereof.
Lessee shall not engage in any activity in or on the Premises which constitutes
a Reportable Use of Hazardous Substances without the express prior written
consent of Lessor and timely compliance (at Lessee’s expense) with all
Applicable Requirements. “Reportable Use”
shall mean (i) the installation or use of any above or below ground storage
tank, (ii) the generation, possession, storage, use, transportation, or
disposal of a Hazardous Substance that requires a permit from, or with respect
to which a report, notice, registration or business plan is required to be
filed with, any governmental authority, and/or (iii) the presence at the
Premises of a Hazardous Substance with respect to which any Applicable
Requirements requires that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may use any ordinary and customary materials reasonably required to be used in
the normal course of the Agreed Use, ordinary office supplies (copier toner,
liquid paper, glue, etc.) and common household cleaning materials, so long as
such use is in compliance with all Applicable Requirements, is not a Reportable
Use, and does not expose the Premises or neighboring property to any meaningful
risk of contamination or damage or expose Lessor to any liability therefor. In
addition, Lessor may condition its consent to any Reportable Use upon receiving
such additional assurances as Lessor reasonably deems necessary to protect
itself, the public, the Premises and/or the environment against damage,
contamination, injury and/or liability, including, but not limited to, the
installation (and removal on or before Lease expiration or termination) of
protective modifications (such as concrete encasements) and/or increasing the
Security Deposit.


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


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


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


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


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


(g) Lessor Termination Option. If a Hazardous
Substance Condition (see Paragraph 9.1(e)) occurs during the term of this
Lease,


	
  

  	
   

  	
   

  	
   

  	
   

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


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


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


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


7.1       Lessee’s Obligations.


(a) In General. Subject to the provisions of
Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee’s Compliance
with Applicable Requirements), 7.2 (Lessor’s Obligations), 9 (Damage or
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, fire protection
system, fixtures, walls (interior and exterior), foundations, ceilings, roofs,
roof drainage systems, floors, windows, doors, plate glass, skylights, landscaping,
driveways, parking lots, fences, retaining walls, and  signs, sidewalks and parkways
located in, on, or adjacent appurtenant to the Premises. 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. Lessee shall, during the term of this Lease,
keep the exterior appearance of the Building in a first-class condition
(including, e.g. graffiti removal) consistent with the exterior appearance of
other similar facilities of comparable age and size in the vicinity, including,
when necessary, the exterior repainting of the Building.


(b) Service Contracts. Lessee shall, at Lessee’s
sole expense, procure and maintain contracts, with copies to Lessor, in
customary form and substance for, and with contractors specializing and
experienced in the maintenance of the following equipment and improvements, if
any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler,
and pressure vessels, (iii) fire extinguishing systems,


	
  

  	
   

  	
   

  	
   

  	
   

  	
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including fire alarm and/or
smoke detection, (iv) landscaping and irrigation systems, (v) roof
covering and drains, (vi) clarifiers (vii) basic utility feed to the perimeter
of the Building, and (viii) any other equipment, if reasonably required by
Lessor. However, Lessor reserves the right, upon notice to Lessee, to procure
and maintain any or all of such service contracts, and Lessee shall reimburse
Lessor, upon demand, for the cost thereof.


(c)
Failure to Perform. If Lessee
fails to perform Lessee’s obligations under this Paragraph 7.1, Lessor may
enter upon the Premises after 10 days’ prior written notice to Lessee (except
in the case of an emergency, in which case no notice shall be required),
perform such obligations on Lessee’s behalf, and put the Premises in good
order, condition and repair, and Lessee shall promptly pay to Lessor a sum
equal to 115% of the cost thereof.


(d)
Replacement. Subject to Lessee’s
indemnification of Lessor as set forth in Paragraph 8.7 below, and without
relieving Lessee of liability resulting from  Lessee’s failure to exercise and perform good
maintenance practices, if an item described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 50% of the cost of
replacing such item, then such item shall be replaced by Lessor, and the cost
thereof shall be prorated between the Parties and Lessee shall only be obligated
to pay, each month during the remainder of the term of this Lease, on the date
on which Base Rent is due, an amount equal to the product of multiplying the
cost of such replacement by a fraction, the numerator of which is one, and the
denominator of which is 144 (ie. 1/144th of the cost per month). Lessee shall
pay interest on the unamortized balance but may prepay its obligation at any
time.


7.2       Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14
(Condemnation), and the Addendum  it
is intended by the Parties hereto that Lessor have no obligation, in any manner
whatsoever, to repair and maintain the Premises, or the equipment therein, all
of which obligations are intended to be that of the Lessee. It is the intention
of the Parties that the terms of this Lease govern the respective obligations
of the Parties as to maintenance and repair of the Premises, and they expressly
waive 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 and/or vacuum lines, power panels, electrical
distribution, security and fire protection systems, communication cabling,
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 or any existing walls, will
not affect the electrical, plumbing, HVAC, and/or life safety systems, 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
which costs an amount in excess of one month’s Base Rent, Lessor may condition
its consent upon Lessee providing a lien and completion bond in an amount equal
to 150% of the estimated cost of such Alteration or Utility Installation and/or
upon Lessee’s posting an additional Security Deposit with Lessor.


(c) Liens; Bonds. Lessee shall pay, when due,
all claims for labor or materials furnished or alleged to have been furnished
to or for Lessee at or for use on the Premises, which claims are or may be
secured by any mechanic’s or materialmen’s lien against the Premises or any
interest therein. Lessee shall give Lessor not less than 10 days notice prior
to the commencement of any work in, on or about the Premises, and Lessor shall
have the right to post notices of non-responsibility. If Lessee shall contest
the validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof. If Lessor shall require, Lessee shall furnish a
surety bond in an amount equal to 150% of the amount of such contested lien,
claim or demand, indemnifying Lessor against liability for the same. If Lessor
elects to participate in any such action, Lessee shall pay Lessor’s attorneys’
fees and costs.


	
  

  	
   

  	
   

  	
   

  	
   

  	
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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. Unless otherwise instructed per
paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installations
shall, at the expiration or termination of this Lease, become the property of
Lessor and be surrendered by Lessee with the Premises.


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


(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 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 completely remove from the Premises any and all
Hazardous Substances brought onto the Premises by or for Lessee, or any
third party (except Hazardous Substances which were deposited via
underground migration from areas outside of the Premises, or if applicable, the
Premises) even if such removal would require Lessee to perform or pay for work
that exceeds statutory requirements. Trade Fixtures shall remain the property
of Lessee and shall be removed by Lessee. Any personal property of Lessee not
removed on or before the Expiration Date or any earlier termination date shall
be deemed to have been abandoned by Lessee and may be disposed of or retained
by Lessor as Lessor may desire. The 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 For Insurance. Lessee shall pay for all insurance required
under Paragraph 8 except to the extent of the cost attributable to liability
insurance carried by Lessor under Paragraph 8.2(b) in excess of $2,000,000
$5,000,000 per occurrence. Premiums for policy periods commencing prior to or
extending beyond the Lease term shall be prorated to correspond to the Lease
term. Payment shall be made by Lessee to Lessor within 10 days following
receipt of an invoice.


8.2       Liability Insurance.


(a)
Carried by Lessee. Lessee shall
obtain and keep in force a Commercial General Liability policy of insurance
protecting Lessee and Lessor as an additional insured against claims for bodily
injury, personal injury and property damage based upon or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $5,000,000 per occurrence with
an annual aggregate-of not less than $2,000,000. Lessee shall add Lessor as
an additional insured by means of an endorsement at least as broad as the
Insurance Service Organization’s “Additional Insured-Managers or Lessors of
Premises” Endorsement and coverage shall also be extended to include damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not
contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this
Lease as an “insured contract” for
the performance of Lessee’s indemnity obligations under this Lease. The limits
of said insurance shall not, however, limit the liability of Lessee nor relieve
Lessee of any obligation hereunder. Lessee shall provide an endorsement on its
liability policy(ies) which provides that its insurance shall be primary to and
not contributory with any similar insurance carried by Lessor, whose insurance
shall be considered excess insurance only.


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


8.3       Property Insurance - Building, Improvements and Rental
Value.


(a)
Building and Improvements. The
Insuring Party shall obtain and keep in force a policy or policies in the name
of Lessor, with loss payable to Lessor, any ground lessor, and to any Lender
insuring loss or damage to the Premises. The amount of such insurance shall be
equal to the full insurable replacement cost of the Premises, as the same shall
exist from time to time, or the amount required by any Lender, but in no event
more than the commercially reasonable and available insurable value thereof. If
Lessor is the Insuring Party, however, Lessee Owned Alterations and Utility
Installations, Trade Fixtures, and Lessee’s personal property shall be insured
by Lessee under Paragraph 8.4 rather than by Lessor. If the coverage is
available and commercially appropriate, such policy or policies shall insure
against all risks of direct physical loss or damage (except


	
  

  	
   

  	
   

  	
   

  	
   

  	
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  COMMERCIAL REAL ESTATE ASSOCIATION

  	
   

  	
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including
the perils of flood and/or earthquake unless required by a Lender),
including coverage for debris removal and the enforcement of any Applicable
Requirements requiring the upgrading, demolition, reconstruction or replacement
of any portion of the Premises as the result of a covered loss. Said policy or
policies shall also contain an agreed valuation provision in lieu of any
coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a
factor of not less than the adjusted U.S. Department of Labor Consumer Price
Index for All Urban Consumers for the city nearest to where the Premises are
located. If such insurance coverage has a deductible clause, the deductible amount
shall not exceed $1,000 per occurrence, and Lessee shall be liable for such
deductible amount in the event of an Insured Loss.


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


(c) Adjacent Premises. If
the Premises are part of a larger building, or of a group of buildings owned by
Lessor which are adjacent to the Premises, the Lessee shall pay for any
increase in the premiums for the property insurance of such building or
buildings if said increase is caused by Lessee’s acts, omissions, use or
occupancy of the Premises.


8.4       Lessee’s Property; Business Interruption Insurance.


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


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


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


8.5       Insurance Policies. Insurance required
herein shall be by companies duly licensed or admitted to transact business in
the state where the Premises are located, and maintaining during the policy
term a “General Policyholders Rating” of at least A-, VI, 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 10 days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or “insurance binders” evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand. Such policies shall be for a term of
at least one year, or the length of the remaining term of this Lease, whichever
is less. If either Party shall fail to procure and maintain the insurance
required to be carried by it, the other Party may, but shall not be required
to, procure and maintain the same.


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


8.7       Indemnity. Except for Lessor’s gross
negligence or willful misconduct, Lessee shall indemnify, protect, defend and
hold harmless the Premises, Lessor and its agents, Lessor’s master or ground
lessor, partners and Lenders, from and against any and all claims, loss of
rents and/or damages, liens, judgments, penalties, attorneys’ and consultants’
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the use and/or occupancy of the Premises by Lessee. If any action or
proceeding is brought against Lessor by reason of any of the foregoing matters,
Lessee shall upon notice defend the same at Lessee’s expense by counsel
reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in
such defense. Lessor need not have first paid any such claim in order to be
defended or indemnified.


8.8       Exemption
of Lessor and its Agents from Liability. Notwithstanding the
negligence or breach of this Lease by Lessor or its agents, neither Lessor nor
its agents shall be liable under any circumstances for: (i) injury or damage to
the person or goods, wares, merchandise or other property of Lessee, Lessee’s
employees, contractors, invitees, customers, or any other person in or about
the Premises, whether such damage or


	
  

  	
   

  	
   

  	
   

  	
   

  	
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injury
is caused by or results from fire, steam, electricity, gas, water or rain, indoor
air quality, the presence of mold or from the breakage, leakage, obstruction or
other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or
lighting fixtures, or from any other cause, whether the said injury or damage
results from conditions arising upon the Premises or upon other portions of the
building of which the Premises are a part, or from other sources or places,
(ii) any damages arising from any act or neglect of any other tenant of Lessor
or from the failure of Lessor or its agents to enforce the provisions of any
other lease in the Project, or (iii) injury to Lessee’s business or for any
loss of income or profit therefrom. Instead, it is intended that Lessee’s sole
recourse in the event of such damages or injury be to file a claim on the
insurance policy(ies) that Lessee is required to maintain pursuant to the
provisions of paragraph 8.


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


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 6 months 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.
Notwithstanding the foregoing, Premises Partial Damage shall not include damage
to windows, doors, and/or other similar items which Lessee has the
responsibility to repair or replace pursuant to the provisions of Paragraph
7.1.


(b) “Premises Total Destruction”
shall mean damage or destruction to the Premises, other than Lessee Owned
Alterations and Utility Installations and Trade Fixtures, which cannot
reasonably be repaired in 6 months 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 which requires repair, remediation, or
restoration.


9.2       Partial
Damage - Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor’s expense, repair such damage
(but not Lessee’s Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor’s
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for
that purpose. Notwithstanding the foregoing, if the required insurance was not
in force or the insurance proceeds are not sufficient to effect such repair,
the insuring Party shall promptly contribute the shortage in proceeds (except
as to the deductible which is Lessee’s responsibility) as and when required to
complete said repairs. In the event, however, such shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within 10 days
following receipt of written notice of such shortage and request therefor. If
Lessor receives said funds or adequate assurance thereof within said 10 day
period, the party responsible for making the repairs shall complete them as
soon as reasonably possible and this Lease shall remain in full force and
effect. If such funds or assurance are not received, Lessor may nevertheless
elect by written notice to Lessee within 10 days thereafter to: (i) make such
restoration and repair as is commercially reasonable with Lessor paying any


	
  

  	
   

  	
   

  	
   

  	
   

  	
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  COMMERCIAL REAL ESTATE ASSOCIATION

  	
   

  	
  FORM STN-8-5/05E

  




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shortage in proceeds, in
which case this Lease shall remain in full force and effect, or (ii) have this
Lease terminate 30 days thereafter. Lessee shall not be entitled to
reimbursement of any funds contributed by Lessee to repair any such damage or
destruction. Premises Partial Damage due to flood or earthquake shall be
subject to Paragraph 9.3, notwithstanding that there may be some insurance
coverage, but the net proceeds of any such insurance shall be made available
for the repairs if made by either Party.


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


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


9.5       Damage
Near End of Term. If at any time during the last 6 months of this
Lease there is damage for which the cost to repair exceeds one month’s Base
Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective
60 days following the date of occurrence of such damage by giving a written
termination notice to Lessee within 30 days after the date of occurrence of
such damage. Notwithstanding the foregoing, if Lessee at that time has an
exercisable option to extend this Lease or to purchase the Premises, then
Lessee may preserve this Lease by, (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.


9.6       Abatement
of Rent; Lessee’s Remedies.


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


(b) Remedies. If Lessor 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,


	
  

  	
   

  	
   

  	
   

  	
   

  	
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  COMMERCIAL REAL ESTATE ASSOCIATION

  	
   

  	
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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 Premises or the
Project, Lessor’s tight 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 Building 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 Premises are located. Real
Property Taxes shall also include any tax, fee, levy, assessment or charge, or
any increase therein; (i) imposed by reason of events occurring during the term
of this Lease, including but not limited to, a change in the ownership of the
Premises, and (ii) levied or assessed on machinery or equipment provided by
Lessor to Lessee pursuant to this Lease.


10.2     Payment
of Taxes. As part of the Common Area Operating Expenses under
Paragraph 51 In addition to Base  Rent, Lessee Lessor shall pay
and Lessee  shall reimburse to
Lessor an amount equal to the Real Property Taxes applicable to  the Premises during the term of this
Lease, installment due-at-least 20 days prior to the applicable delinquency
date. If any such installment Real Property Taxes
shall cover any period of time prior to or after the expiration or termination
of this Lease, Lessee’s share of such installment Real Property Taxes
shall be prorated to cover  only
that portion  of the tax bill
applicable to the period  that
this Lease is in effect, and Lessor shall reimburse Lessee for any overpayment.
In the event Lessee incurs a late charge on any Rent payment, Lessor may
estimate the current Real Property Taxes, and require that such taxes be paid
in advance to Lessor by Lessee monthly-in advance-with the payment of the Base
Rent. Such monthly payments shall be an amount equal to the amount of the
estimated installment of taxes divided by the number of months remaining before
the month in which said installment becomes delinquent. When the actual amount
of the applicable tax bill is known, the amount of such equal monthly advance
payments shall be adjusted as required to-provide the funds needed-to-pay the
applicable taxes. If the amount collected by Lessor is insufficient to pay such
Real Property Taxes when due Lessee shall pay Lessor,-upon demand such
additional sum as is necessary. Advance-payments may be intermingled with other
moneys of Lessor and shall not bear-interest. In the event of a Breach
by-Lessee in the performance of its obligations-under this Lease, then any such advance
payments-may be treated by Lessor as on additional Security-Deposit.


10.3     Joint
Assessment. If the Premises are not separately assessed, Lessee’s
liability 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 conclusively determined by Lessor from the respective
valuations assigned in the assessor’s work sheets or such other information as
may be reasonably available.


10.4     Personal
Property Taxes. Lessee shall pay, prior to delinquency, all taxes
assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, Lessee shall cause its Lessee Owned Alterations and
Utility Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee’s said property shall be assessed with Lessor’s real property,
Lessee shall pay Lessor the taxes attributable to Lessee’s property within 10
days after receipt of a written statement setting forth the taxes applicable to
Lessee’s property.


11.       Utilities
and Services. 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. If any such services are not
separately metered or billed to Lessee, Lessee shall pay a reasonable
proportion, to be determined by Lessor, of all charges jointly metered or
billed. There shall be no abatement of rent and Lessor shall not be liable in
any respect whatsoever for the inadequacy, stoppage, interruption or
discontinuance of any utility or service due to riot, strike, labor dispute,
breakdown, accident, repair or other cause beyond Lessor’s reasonable control or
in cooperation with governmental request or directions.


12.       Assignment
and Subletting.


12.1     Lessor’s
Consent Required.


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


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


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


	
  

  	
   

  	
   

  	
   

  	
   

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


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


(f) Lessor may reasonably withhold consent to a proposed assignment or
subletting if Lessee is in Default at the time consent is requested.


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


12.2     Terms and Conditions
Applicable to Assignment and Subletting.


(a) Regardless of Lessor’s consent, no assignment or subletting shall:
(i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, or (iii) alter the primary liability of Lessee for
the payment of Rent or for the performance of any other obligations to be
performed by Lessee.


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


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


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


(e) Each request for consent to an assignment or subletting shall be in
writing, accompanied by information relevant to Lessor’s determination as to
the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee, including but not limited to the intended use
and/or required modification of the Premises, if any, together with a fee of
$500 as consideration for Lessor’s considering and processing said request.
Lessee agrees to provide Lessor with such other or additional information
and/or documentation as may be reasonably requested. (See also Paragraph 36)


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


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


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


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


(b) In the event of a Breach by Lessee, Lessor may, at its option,
require sublessee to attorn to Lessor, in which event Lessor shall undertake
the obligations of the sublessor under such sublease from the time of the
exercise of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.


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


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


	
  

  	
   

  	
   

  	
   

  	
   

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


13.       Default; Breach; Remedies.


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


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


(b) The failure of Lessee to make any payment of Rent or any Security
Deposit required to be made by Lessee hereunder, whether to Lessor or to a
third party, when due, to provide reasonable evidence 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 commission of waste, act or acts constituting public or private
nuisance, and/or an illegal activity on the Premises by Lessee, where such
actions continue for a period of 3 business days following written notice to
Lessee.


(d) The failure by Lessee to provide (i) reasonable written evidence of
compliance with Applicable Requirements, (ii) the service contracts, (iii) the
rescission of an unauthorized assignment or subletting, (iv) an Estoppel
Certificate, (v) a requested subordination, (vi) evidence concerning any
guaranty and/or Guarantor, (vii) any document requested under Paragraph 42,
(viii) material safety data sheets (MSDS), or (ix) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of 10 days following
written notice to Lessee.


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


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


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


(h) If the performance of Lessee’s obligations under this Lease is
guaranteed: (i) the death of a  Guarantor,
(ii) the termination of a Guarantor’s liability with respect to this Lease
other than in accordance with the terms of such guaranty, (iii) a Guarantor’s
becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’s
refusal to honor the guaranty, or (v) a Guarantor’s breach of its guaranty
obligation on an anticipatory basis, and Lessee’s failure, within 60 days
following written 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 10 days after written notice (or in
case of an emergency, without notice), Lessor may, at its option, perform such
duty or obligation on Lessee’s behalf, including but not limited to the
obtaining of reasonably required bonds, insurance policies, or governmental
licenses, permits or approvals. Lessee shall pay to Lessor an amount equal to
115% of the costs and expenses incurred by Lessor in such performance upon
receipt of an invoice therefor. In the event of a Breach, Lessor may, with or
without further notice or demand, and without limiting Lessor in the exercise
of any right or remedy which Lessor may have by reason of such Breach:


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


	
  

  	
   

  	
   

  	
   

  	
   

  	
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the
Lessee proves could be reasonably avoided; and (iv) any other amount necessary
to compensate Lessor for all the detriment proximately caused by the Lessee’s
failure to perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom, including but not limited
to the cost of recovering possession of the Premises, expenses of reletting,
including necessary renovation and alteration of the Premises, reasonable
attorneys’ fees, and that portion of any leasing commission paid by Lessor in
connection with this Lease applicable to the unexpired term of this Lease. The
worth at the time of award of the amount referred to in provision (iii) of the
immediately preceding sentence shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of the District within which the
Premises are located at the time of award plus one percent. Efforts by Lessor
to mitigate damages caused by Lessee’s Breach of this Lease shall not waive
Lessor’s right to recover damages under Paragraph 12. If termination of this
Lease is obtained through the provisional remedy of unlawful detainer, Lessor
shall have the right to recover in such proceeding any unpaid Rent and damages
as are recoverable therein, or Lessor may reserve the right to recover all or
any part thereof in a separate suit. If a notice and grace period required
under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or
to perform or quit given to Lessee under the unlawful detainer statute shall
also constitute the notice required by Paragraph 13.1. In such case, the
applicable grace period required by Paragraph 13.1 and the unlawful detainer
statute shall run concurrently, and the failure of Lessee to cure the Default
within the greater of the two such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the remedies
provided for in this Lease and/or by said statute.


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


(c) Pursue any other remedy now or hereafter available under the laws or
judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee’s
right to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee’s occupancy of the Premises.


13.3     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 5 days after such amount shall
be due, then, without any requirement for notice to Lessee, Lessee shall
immediately pay to Lessor a one-time late charge equal to 10% of each such
overdue amount or $100, whichever is greater. The Parties hereby agree
that such late charge represents a fair and reasonable estimate of the costs
Lessor will incur by reason of such late payment. Acceptance of such late
charge by Lessor shall in no event constitute a waiver of Lessee’s Default or
Breach with respect to such overdue amount, nor prevent the exercise of any of
the other rights and remedies granted hereunder. In the event that a late
charge is payable hereunder, whether or not collected, for 3 consecutive
installments of Base Rent, then notwithstanding any provision of this Lease to
the contrary, Base Rent shall, at Lessor’s option, become due and payable
quarterly in advance.


13.5     Interest.
Any monetary payment due 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 computed at the
rate equal to the prime  rate of
10% per annum but shall not exceed the maximum rate allowed by law.
Interest is payable in addition to the potential late charge provided for in Paragraph
13.4.


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.


	
  

  	
   

  	
   

  	
   

  	
   

  	
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(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 the actual and
reasonable cost to perform such cure, provided, however, that such offset shall
not exceed an amount equal to the greater of one month’s Base Rent or the
Security Deposit, reserving Lessee’s right to seek reimbursement from Lessor
for any such expense in excess of such offset. Lessee shall document the cost
of said cure and supply said documentation to Lessor.


14.       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 Building, or more than 25% of that portion of the Premises not occupied
by any building, 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 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.


15.1     Additional Commission. In addition to the payments owed pursuant to
Paragraph 1.0 above, and unless Lessor and the Brokers otherwise agree in
writing, Lessor agrees that: (a) If Lessee exercises any Option, (b) if Lessee
acquires any rights to the Premises or other premises owned by Lessor and
located within the same Project, if any, within which the Premises is located,
(c) if Lessee remains in possession of the Premises, with the consent of
Lessor, after the expiration of this Lease, or (d) if Base Rent is increased,
whether by agreement or operation of an escalation clause herein, then, Lessor
shall pay Brokers a fee in accordance with the schedule of the Brokers in
effect at the time of the execution of this Lease.


15.2     Assumption of Obligations.  Any buyer or transferee of Lessor’s
interest in this Lease shall be deemed to have assumed Lessor’s obligation
hereunder. Brokers shall be third-party beneficiaries of the provisions of
Paragraphs 1.9, 15, 22 and 31. If Lessor fails to pay to Brokers any amounts
due as and for brokerage fees pertaining to this Lease when due, then such
amounts shall accrue Interest. In addition, if Lessor fails to pay any amounts
to Lessee’s Broker when due, Lessee’s Broker may send written notice to Lessor
and Lessee of such failure and if Lessor fails to pay such amounts within 10
days after said notice, Lessee shall pay said monies to its Broker and offset
such amounts against Rent. In addition, Lessee’s Broker shall be deemed to be a
third-party beneficiary of any commission agreement entered into by and/or
between Lessor and Lessor’s Broker for the limited purpose of collecting any
brokerage fee owed.


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.


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


(b) If the Responding Party shall fail to execute or deliver the
Estoppel Certificate within such 10 day period, the Requesting Party may
execute an Estoppel Certificate stating that: (i) the Lease is in full force
and effect without modification except as may be represented by the Requesting
Party, (ii) there are no uncured defaults in the Requesting Party’s
performance, and (iii) if Lessor is the Requesting Party, not more than one


	
  

  	
   

  	
   

  	
   

  	
   

  	
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  COMMERCIAL REAL ESTATE ASSOCIATION

  	
   

  	
  FORM STN-8-5/05E

  




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month’s rent has been
paid in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party’s Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.


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


17.       Definition
of Lessor. The term “Lessor” as used herein shall mean
the owner or owners at the time in question of the fee title to the Premises,
or, if this is a sublease, of the Lessee’s interest in the prior lease. In the
event of a transfer of Lessor’s title or interest in the Premises or this
Lease, Lessor shall deliver to the transferee or assignee (in cash or by
credit) any unused Security Deposit held by Lessor. Except as provided in
Paragraph 15, upon such transfer or assignment and 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. 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 above. 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.


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


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


20.       Limitation
on Liability. Subject to the provision of Paragraph 17 above, Tthe
obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor or its partners, members, directors, officers or
shareholders, and Lessee shall look to the Premises, and to no other assets of
Lessor, for the satisfaction of any liability of Lessor with respect to this
Lease, and shall not seek recourse against Lessor’s partners, members,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.


21.       Time of
Essence. Time is of the essence with respect to the performance of
all obligations to be 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 or by overnight courier, with postage prepaid, or
by facsimile transmission, and shall be deemed sufficiently given if served in
a manner specified in this Paragraph 23. The addresses noted adjacent to a
Party’s signature on this Lease shall be that Party’s address for delivery or
mailing of notices. Either Party may by written notice to the other specify a
different address for notice, except that upon Lessee’s taking possession of
the Premises, the Premises shall constitute Lessee’s address for notice. A copy
of all notices to Lessor shall be concurrently transmitted to such party or
parties at such addresses as Lessor may from time to time hereafter designate
in writing.


23.2     Date of
Notice. Any notice sent by registered or certified mail, return
receipt requested, shall be deemed given on the date of delivery shown on the
receipt card, or if no delivery date is shown, the postmark thereon. If sent by
regular mail the notice shall be deemed given 72 hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight


	
  

  	
   

  	
   

  	
   

  	
   

  	
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courier that guarantee
next day delivery shall be deemed given 24 hours on the next business
day 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 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 Parties agree that
no lawsuit or other legal proceeding involving any breach of duty, error or
omission relating to this Lease may be brought against Broker more than one
year after the Start Date and that the liability (including court costs and
attorneys’ fees), of any Broker with respect to any such lawsuit and/or legal
proceeding 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)       Lessor and Lessee 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


	
  

  	
   

  	
   

  	
   

  	
   

  	
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this Lease. In the event that Lessee holds over, then
the Base Rent shall be increased to 150% of the Base Rent applicable
immediately preceding the expiration or termination. Nothing contained herein
shall be construed as consent by Lessor to any holding over by Lessee.


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


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


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


30.       Subordination;
Attornment; Non-Disturbance.


30.1       Subordination.
This Lease and any Option granted hereby shall be subject and subordinate to
any ground lease, mortgage, deed of trust, or other hypothecation or security
device (collectively, “Security Device”),
now or hereafter placed upon the Premises, to any and all advances made on the
security thereof, and to all renewals, modifications, and extensions thereof.
Lessee agrees that the holders of any such Security Devices (in this Lease
together referred to as “Lender”)
shall have no liability or obligation to perform any of the obligations of
Lessor under this Lease. Any Lender may elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device by giving
written notice thereof to Lessee, whereupon this Lease and such Options shall
be deemed prior to such Security Device, notwithstanding the relative dates of
the documentation or recordation thereof.


30.2       Attornment.
In the event that Lessor transfers title to the Premises, or the Premises are
acquired by another upon the foreclosure or termination of a Security Device to
which this Lease is subordinated (i) Lessee shall, subject to the
non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and
upon request, enter into a new lease, containing all of the terms and
provisions of this Lease, with such new owner for the remainder of the term
hereof, or, at the election of the new owner, this Lease will automatically
become a new lease between Lessee and such new owner, 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, 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.


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, within 60 days after the execution of
this Lease, Lessor shall use its commercially reasonable efforts to obtain a
Non-Disturbance Agreement from the holder of any pre-existing Security Device
which is secured by the Premises. In the event that Lessor is unable to provide
the Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee’s
option, directly contact Lender and attempt to negotiate for the execution and
delivery of a Non-Disturbance Agreement.


30.4     Self-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.


	
  

  	
   

  	
   

  	
   

  	
   

  	
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The attorneys’ fees award shall not be computed in
accordance with any court fee schedule, but shall be such as to fully reimburse
all attorneys’ fees reasonably incurred. In addition, Lessor shall be entitled
to attorneys’ fees, costs and expenses incurred in the preparation and service
of notices of Default and consultations in connection therewith, whether or not
a legal action is subsequently commenced in connection with such Default or
resulting Breach ($200 is a reasonable minimum per occurrence for such services
and consultation).


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


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


34.         Signs.
Lessor may place on the Premises ordinary “For
Sale” signs at any time and ordinary “For Lease” signs during the last 6 months of the term hereof.
Except for ordinary “for sublease” signs, Lessee shall not place any sign upon
the Premises without Lessor’s prior written consent. All signs must comply with
all Applicable Requirements.


35.       Termination;
Merger. Unless specifically stated otherwise in writing by Lessor,
the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a 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 authority of the party signing on Guaranter’s behalf to obligate
guarantor, and in the case of a corporate Guarantor, a certified copy of a
resolution of its board of directors authorizing the making of such guaranty,
(b) current financial statements, (c) an Estoppel Certificate, or (d) written
confirmation that the guaranty is still in effect.


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


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


	
  

  	
   

  	
   

  	
   

  	
   

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


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


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


39.4     Effect-of-Default on-Options.


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


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


(c) An Option shall terminate and be of no further
force or effect, notwithstanding Lessee’s due and timely exercise of the
Option, if, after such exercise-and-prior to the commencement of the
extended-term or completion of the purchase, (i) Lessee fails to-pay Rent for a
period of 30 days-after such Rent becomes due (without any necessity of Lessor
to give notes thereof), or (ii) if Lessee commits a Breach of this Lease.


40.       Multiple
Buildings. If the Premises are a part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by and conform to all
reasonable rules and regulations which Lessor may make from time to time for
the management, safety, and care of said properties, including the care and
cleanliness of the grounds and including the parking, loading and unloading of
vehicles, and to cause its employees, suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessee also agrees to pay its
fair share of common expenses incurred in connection with such rules and
regulations.


41.       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.


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


43.       Performance
Under Protest. If at any time a dispute shall arise as to any amount
or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted
shall have the right to make payment “under protest” and such payment shall not
be regarded as a voluntary payment and there shall survive the right on the
part of said Party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said Party to pay
such sum or any part thereof, said Party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay. A Party who does not
initiate suit for the recovery of sums paid “under protest” with 6 months shall
be deemed to have waived its right to protest such payment.


44.       Authority; Multiple Parties;
Execution.


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


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


	
  

  	
   

  	
   

  	
   

  	
   

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


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


46.       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.


47.       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.


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 o
is þ 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.


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


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, AND THE SUITABILITY
OF THE PREMISES FOR LESSEE’S INTENDED USE.


WARNING: IF THE PREMISES IS 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 IS
LOCATED.


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


	
  

  	
   

  	
   

  	
   

  	
   

  	
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  ©2001 - AIR
  COMMERCIAL REAL ESTATE ASSOCIATION

  	
   

  	
  FORM STN-8-5/05E

  




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  Executed at:

  	
   

  	
   

  	
  Executed at:

  	
   

  
	
  On:

  	
   

  	
   

  	
  On:

  	
   

  
	
   

  	
   

  	
   

  
	
  By LESSOR:

  	
   

  	
  By LESSEE:

  
	
    OAKPORT
  ASSOCIATES, a California limited 

  	
   

  	
  WORLD HEART, INC., a Delaware corporation

  
	
    partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Michael Kuhn

  	
   

  	
  By:

  	
   /s/ Jal S.
  Jassawalla

  
	
  Name Printed: 

  	
  Michael Kuhn

  	
   

  	
  Name Printed:

  	
   JAL S.
  JASSAWALLA

  
	
  Title: 

  	
  General Partner

  	
   

  	
  Title:

  	
  PRES & CEO

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name Printed:

  	
   

  	
   

  	
  Name Printed:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
  50 San Pablo
  Court

  	
   

  	
  Address:

  	
   7799 Pardee
  Lane

  
	
   

  	
  Moraga, CA 94556

  	
   

  	
   

  	
  Oakland, CA

  
	
  Telephone:(415)

  	
  860-5014 

  	
   

  	
  Telephone:(      )

  	
   

  
	
  Facsimile:(      )

  	
   

  	
   

  	
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  Federal ID No.

  	
   

  	
   

  	
  Federal ID No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BROKER:

  	
   

  	
  BROKER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attn:

  	
   

  	
   

  	
  Attn:

  	
   

  
	
  Title:

  	
   

  	
   

  	
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  Address:

  	
   

  	
   

  	
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  Federal ID No.

  	
   

  	
   

  	
  Federal ID No.

  	
   

  
																				



 


NOTE:
These forms are often modified to meet the changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form: AIR COMMERCIAL REAL ESTATE ASSOCIATION, 700 So. Flower Street,
Suite 600, Los Angeles, California 90017. (213) 687-8777. Fax No. (213)
687-8616


© Copyright 2001 - 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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  INITIALS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ©2001 - AIR
  COMMERCIAL REAL ESTATE ASSOCIATION

  	
   

  	
  FORM STN-8-5/05E

  



 



 23















ADDENDUM

TO

STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET


This Addendum (“Addendum”) forms an integral part of the printed form
Standard Industrial/Commercial Single-Tenant Lease – Net, dated for reference
purposes only July 20, 2007 (the “Form
Lease”), entered into by and between OAKPORT ASSOCIATES, a California limited
partnership (“Lessor”), and WORLD HEART, INC., a Delaware corporation (“Lessee”),
demising the Premises commonly known as 7799 Pardee Lane, Oakland, Alameda
County, California. Part A of this Addendum sets forth provisions which modify
and supplement the correspondingly numbered and lettered paragraphs of the Form
Lease, while part B of this Addendum contains paragraphs which are in addition
to those of the Form Lease. Unless otherwise defined herein, capitalized terms
used in this Addendum have the meanings given them in the Form Lease. Where
provisions of this Addendum are in conflict with the Form Lease, this Addendum
shall control. References in the Form Lease and this Addendum to “the Lease,” “this
Lease,” and words of similar import shall refer to the Form Lease and this
Addendum collectively.


A.        MODIFICATIONS TO EXISTING PARAGRAPHS OF FORM
LEASE


1.3     Term; Commencement Date;
Parties Performance. Lessor and Lessee acknowledge and agree that this
Lease shall be effective upon execution and shall be an executory agreement
between the parties, however the parties’ performance of their covenants and
promises hereunder shall not begin until the Commencement Date has occurred.
The Commencement Date shall occur, if it shall occur, upon the date on which
all of the conditions precedent set forth in Section 3 of that certain
Compromise Agreement between Lessor and Lessee, dated as of even date herewith,
have been satisfied. A copy of the Compromise Agreement is attached hereto as Exhibit
B. The parties agree to promptly execute a Memorandum of Commencement Date
memorializing the Commencement Date and Expiration Date in the form of the
memorandum attached hereto as Exhibit C. Until satisfaction of all of
the conditions precedent set forth in Section 3 of the Compromise Agreement
have been met and the Commencement Date of this Lease has occurred, Lessee
shall be holdover tenant of the Premises pursuant to the 2002 Lease described
in Paragraph 1.4  below, except as
provided in Section 1(e) of the Compromise Agreement with respect to holdover
rent. Notwithstanding any other provision of this Lease, if the Commencement
Date of this Lease has not occurred by February 1, 2008, Lessor shall have the
right at any time thereafter, upon written notice to Lessee, to terminate this
Lease.


	
  

  	
   

  	
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 1
 









1.4     Possession Under Existing Leases. Lessee
acknowledges that, prior to the Commencement Date of this Lease, Lessee
occupied the Premises and a neighboring building, 7755 Pardee Lane (“7755
Pardee Lane”) pursuant to that certain Standard Industrial/Commercial
Single-Tenant Lease – Net, dated for reference purposes only May 1, 2002,
between Lessor and Lessee (“2002 Lease”). Prior to entering into the 2002
Lease, Lessee occupied the Premises and 7755 Pardee Lane pursuant to two
subleases (“Subleases”) between Lessee, as Subtenant, and Edwards Novacor LLC,
a Delaware limited liability company (“Edwards”), as Sublandlord, which are
subject and subordinate to two leases (individually, an “Prior Lease” and
collectively, the “Prior Leases”) described as follows: the Standard
Industrial/Commercial Multi-Tenant Lease-Net, dated December 21, 1999 between
Baxter Healthcare Corporation (“Baxter”) and Lessor for the building at 7755
Pardee Lane, Oakland, California; and the Standard Form Lease, dated January
14, 1981, between Lessor and Baxter (as successor to Andros Incorporated), as
amended by Lease Extension and Amendment dated April 27, 1988, Lease Amendment
dated October 30, 1988, Second Lease Amendment dated May 10, 1990, Third Lease
Amendment dated May 31, 1990, Fourth Lease Amendment dated August 5, 1992,
Fifth Lease Amendment dated July 3, 1996, Sixth Lease Amendment dated January
28, 1998 and Seventh Lease Amendment dated December 24, 1999, for the building
at 7799 Pardee Lane, Oakland, California. The interest of tenant under the
Prior Leases was assigned by Baxter to Edwards and Edwards assumed all
obligations of the tenant under the Prior Leases.


1.5      Base Rent Increases. The
Base Rent payable under Paragraph 1.5 of the Form Lease shall be as follows:


(a)       Lease
Year 1 (commencing on the Commencement Date) - $20,000 per month.


(b)       Lease
Year 2 (commencing on the first (1st)
anniversary of the Commencement Date) - $21,000 per month;


(c)       Lease
Year 3 (commencing on the second (2nd)
anniversary of the Commencement Date) - $22,000 per month.


2.2     Condition of Premises. Lessee
acknowledges that, by virtue of Lessee’s occupancy of the Premises pursuant to
the 2002 Lease, Lessee is fully familiar with the current physical and
environmental conditions on or affecting the Premises. Lessee agrees to accept
the Premises on the Commencement Date in their present (or their then existing)
condition, AS IS and WITH ALL FAULTS.


	
  

  	
   

  	
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 2
 









Lessor shall not
be required to alter, repair, modify the Premises or any part thereof in
connection with Lessee’s occupancy under this Lease, it being expressly
understood that, as between Lessor and Lessee, Lessor shall have no
responsibility whatsoever in regard to the present or future condition of the
Premises, except as otherwise expressly provided in this Lease.


6.1     If Lessor fails to respond to Lessee’s request to modify the Agreed Use
of the Premises, Lessee may send Lessor a second notice reiterating such
request and, citing that specific provision of this Lease, stating that Lessor’s
failure to respond within twenty (20) business days after receipt of such
notice shall be deemed to constitute Lessor’s approval of the modification to
the Agreed Use initially requested by Lessee. If Lessor fails to timely reply
to such second notice, the modification to the Agreed Use will be deemed
approved.


6.2(a)  Reportable Uses Require
Consent. As used in the next to last sentence of Paragraph 6.2(a) of
the Form Lease, Lessee’s “use of any ordinary and customary materials
reasonably required to be used in the normal course of the Agreed Use” shall be
construed to include the use, transport, warehousing and distribution of such
materials, including those which may constitute a Hazardous Substance, provided
all such activities are conducted strictly in compliance with all Applicable
Requirements.


7.2 Lessor’s Obligations


(a)  Lessor
shall maintain in reasonably good order, condition and repair the Common Areas
(as defined in Paragraph 50 below) of the Project, conditioned upon Lessee’s
full and prompt performance of its obligation to reimburse Lessor for Lessee’s
Share of the Common Area Operating Expenses (as defined in Paragraph 51 below).


(b)  Notwithstanding
Paragraph 7.1(a) of the Form Lease, Lessee shall not be responsible for
replacing the roof on Building, although Lessee shall be responsible for
maintaining and repairing such roof.


(c)  Also notwithstanding Paragraph
7.1(a) of the Form Lease, Lessor rather than Lessee shall be responsible for
replacing this existing HVAC units in the Premises which were installed at the
time of the original construction of the Buildings (the “Original HVAC Units”).
Lessee shall remain responsible for the maintenance and repair of all HVAC
units (including the Original HVAC Units) and also shall be responsible for the
replacement of all HVAC units which are not Original HVAC Units.


	
  

  	
   

  	
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 3
 









7.3     Utility
Installations and Alterations. Lessee Owned Alterations
and Utility Installations shall include, without limitation, all such other
items as are defined in the Lease which were installed in the Premises by
Lessee during its occupancy under the 2002 Lease, the Subleases or by Baxter or
Edwards during their occupancy under the Prior Leases.


7.4     Ownership, Removal;
Surrender and Restoration. Pursuant to the terms of the 2002 Lease,
Lessee was obligated to restore Lessor’s improvements to the Premises to the
same condition as existed prior to Baxter’s alterations to the Premises (the “Baxter
Restoration Work”). Pursuant to the terms of the Compromise Agreement, Lessor
and Lessee agreed that Lessee’s obligations to perform the Baxter Restoration
Work for the Premises will be satisfied upon receipt by Lessor of the $750,000
proceeds of the Letter of Credit (“Proceeds”) provided under the 2002 Lease, as
more specifically provided in the Compromise Agreement. Upon Lessor’s receipt
of the Proceeds, if received, Lessee shall be released from performing the
Baxter Restoration Work with respect to the Premises and Paragraph 7.4(b) of
the Lease shall be amended to provide that Lessee shall not be required to
remove any Lessee Owned Alterations or Utility Installations or any other
tenant improvements existing in the Premises as of the Effective Date of this
Lease. Lessor may, however, require removal of any Lessee Owned Alterations or
Utility Installations in accordance with Paragraph 7.4(b) of this Lease with
respect to any Lessee Owned Alterations, Utility Installations or other tenant
improvements constructed or installed by Lessee on or after the Effective Date
of this Lease if so identified by Lessor in writing at the time of
installation.


8.2(a)   Carried by Lessee. With
respect to the Commercial General Liability insurance to be maintained by
Lessee under Paragraph 8.2(a) of the Form Lease, up to $5,000,000 of the
required coverage may be maintained by Lessee under an umbrella policy.


12.1(a)  Lessor’s Consent Required.
Lessor’s consent shall not be required for an assignment of this Lease or a
subletting of all or any part of the Premises to an Affiliate of Lessee,
provided that: (i) Lessee gives Lessor written notice of the assignment or
transfer not less than five (5) days after the effective date thereof (which
notice shall include evidence of compliance with all requirements stated in
this Addendum Paragraph 12.1 (a)); (ii) the aggregate tangible net worth of
Lessee and the Affiliate equals or exceeds $100,000,000; (iii) in the case of
an assignment, the assignee has assumed and agreed in writing to perform all
obligations of Lessee under this Lease; and (iv) in the case of a sublease, the
subtenant has agreed in writing that Lessor is a third-party beneficiary of all
covenants and obligations of the subtenant thereunder, and is entitled to
enforce


	
  

  	
   

  	
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 4
 









the same directly against
the subtenant. If Lessee assigns this Lease or sublets all or any part of the
Premises to an Affiliate, Lessor’s prior written consent shall be required for
any event or condition which would result in the assignee or subtenant no
longer being an Affiliate of Lessee; and Lessor shall not unreasonably withhold
such consent. As used herein, an “Affiliate” means an entity which controls
Lessee, is controlled by Lessee or is under common control with Lessee; and “control”
shall mean: (x) in the case of a corporation, ownership of a majority of the
outstanding stock and the ability to elect a majority of the board of
directors; (y) in the case of a partnership, ownership of a majority of the
partnership interests and the ability to appoint the managing partner (or a
majority of the managing partners if there is more than one); and (z) in the
case of a limited liability company, ownership of a majority of the membership
interests and the ability to appoint the managing member (or a majority of the
managing members if there is more than one).


32.  Lessor’s Access. In
exercising its right of access under Paragraph 32 of the Form Lease, Lessor
shall undertake all reasonable efforts to avoid undue interference with Lessee’s
business operations in the Premises.


B.       PARAGRAPHS ADDED TO LEASE


50.     Common Areas.


50.1    Definition. The term “Common
Areas” is defined as all areas and facilities outside the Premises and within
the exterior boundary lines of the Project and interior utility raceways and
installations within the Building (if any) that are provided and designed by
Lessor from time to time for general non-exclusive use of Lessor, Lessee and
other tenants of the Project and their respective employees, suppliers,
shippers, customers, contractors and invitees, including without limitation
parking areas, loading and unloading areas, trash areas, roadways, walkways,
driveways and landscaped areas.


50.2    Lessee’s Rights of Use.
Lessor grants to Lessee, for the benefit of Lessee and its employees,
suppliers, shippers, contractors, customers and invitees, during the term of
this Lease, the 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 of this
Lease, under any Rules and Regulations (as defined below), or under the terms
of any covenants, conditions, easements or restrictions (“CC&Rs”) governing
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


	
  

  	
   

  	
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 5
 









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 withheld
in Lessor’s sole discretion and 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.


50.3    Rules and Regulations. Lessor or such other person(s) as Lessor may
appoint or who shall be appointed under any CC&Rs 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.


50.4    Lessor’s Right to Make Changes. Subject to any CC&Rs, 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.


50.5  Lessee’s
Consent for Certain Changes. Lessor shall obtain Lessee’s consent to
changes in the Common Area which will materially interfere with Lessee’s use of
or access to the Premises. Lessee shall not unreasonably withhold, condition or
delay its consent to such changes. Notwithstanding the foregoing, Lessee hereby
acknowledges that Lessor has advised Lessee that Lessor is in the process of
subdividing the land upon which the Building is located into three parcels and,
in connection therewith, shall be recording CC&Rs which shall be binding on
the new parcels comprising the Project and the owners thereof. Lessee hereby
acknowledges and agrees that the Lease shall be subordinate and subject to the
terms of the CC&Rs upon recordation thereof.


51.      Common Area Operating
Expense.


51.1  Definition. As used in this Lease, “Common
Area Operating Expenses” shall mean all costs and expenses incurred by Lessor
relating to the ownership and operation of the Project. Common Area Operating
Expenses shall include, without limitation, all of the following:


(a)         The operation, repair and maintenance, in neat, clean,
good order and condition of: (i) the Common Areas and Common Area improvements,
including parking areas, loading and unloading areas, trash areas, roadways,
parkways, walkways, driveways, landscaped area, bumpers, irrigation systems;
(ii) exterior signs and any tenant directories; and (iii) any fire detection
and/or sprinkler systems serving the Common Areas.


(b)        The cost of water, gas,
electricity and telephone to service the Common Areas and any utilities not
separately metered.


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


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


(e)        Real Property Taxes (as
defined in Paragraph 10).


(f)         The cost of the premiums
for the insurance maintained by Lessor pursuant to Paragraph 8.


	
  

  	
   

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


(h)        The cost of any Capital
Expenditure to the Building or the Project not covered under the provisions of
Paragraph 2.3 provided, however, that Lessor shall amortize the cost of any
such Capital Expenditure (together with interest thereon) over the useful life
of such Capital Expenditure.


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


51.2    Lessee’s Share. Lessor
shall pay to Lessor Lessee’s Share of Common Area Operating Expenses in
accordance with this Paragraph 51.2.


(a)        As used in this Lease, “Lessee’s
Share” shall mean that proportion of the Common Area Operating Expenses
(expressed as a percentage) that the square footage of the Buildings comprising
the Premises bears to the total square footage of all three buildings in the Project,
which the parties stipulate to be thirty-three and one-third percent (33.33%).


(b)        Concurrently with each monthly payment
of Base Rent, Lessee shall pay to Lessor Lessee’s Share of the estimated Common
Area Operating Expenses, as reasonably determined by Lessor. As of the
Commencement Date, Lessee’s Share of the estimated Common Area Operating
Expenses is $5,047 per month. Lessor may revise such estimated Common Area
Operating Expenses upon not less than 30 days prior notice to Lessee, whereupon
Lessee shall pay such revised estimated Common Area Operating Expenses.


(c)         Lessor shall deliver to Lessee within 120 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 calendar year. If Lessee’s payments under Paragraph 51.2(b) 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 Paragraph
51.2(b) 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.


52.       Parking. Lessee
shall be entitled to use a proportionate share of the parking spaces in those
portions of the Common Areas designated from time to time by Lessor for parking
by vehicles no larger than full-size passenger


	
  

  	
   

  	
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automobiles or pick-up
trucks, herein called “Permitted Size Vehicles.” Lessor may regulate the
loading and unloading of vehicles by adopting Rules and Regulations. No
vehicles other than Permitted Size Vehicles may be parked in the Common Area
without the prior written permission of Lessor. 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.


[Signatures
on following page.]


	
  

  	
   

  	
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IN WITNESS WHEREOF,
Lessor and Lessee have duly executed this Addendum concurrently with their
execution of the Form Lease, intending to be bound by all terms, covenants and
provisions of this Lease.


	
  LESSOR

  	
   

  	
  LESSEE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OAKPORT ASSOCIATES,

  a California limited
  partnership

  	
   

  	
  WORLD HEART, INC.,

  a Delaware
  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Michael Kuhn

  	
   

  	
  By:

  	
  /s/ Jal S. Jassawalla

  
	
   

  	
  Michael Kuhn

  	
   

  	
  Name:

  	
  JAL S. JASSAWALLA

  
	
   

  	
  General Partner

  	
   

  	
  Title:

  	
  PRES & CEO

  
	
   

  	
   

  	
   

  	
   

  	
  (Print name and title)

  



 



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Exhibit A


Description of the Premises


(See attached.)



 Exhibit A














EXHIBIT A


 



















Exhibit B


Compromise  Agreement


(See
attached.)



 Exhibit B















COMPROMISE AGREEMENT


This
Compromise Agreement (“Agreement”) is entered into by and between OAKPORT
ASSOCIATES, a California limited partnership (“Lessor”), and WORLD HEART, INC.,
a Delaware corporation (“Lessee”), as of July 20, 2007 (the “Effective Date”),
and is based on the following facts. Defined terms used herein but not
otherwise defined herein shall have the meaning given those terms in the 2002
Lease (as defined below).


RECITALS


A.        On or about May 1, 2002, Lessor and
Lessee entered into that certain Standard Industrial/Commercial Single-Tenant
Lease – Net dated for reference purposes May 1, 2002 (the “2002 Lease”),
pertaining to premises located at 7755 and 7799 Pardee Lane, Oakland,
California (“Premises”). The term of the 2002 Lease was from May 1, 2002
through April 30, 2007. The 2002 Lease has expired and Lessee is presently
occupying the Premises as a holdover tenant pursuant to Paragraph 26 of the
2002 Lease.


B.         The 2002 Lease imposes upon Lessee,
prior to the expiration of the term of the 2002 Lease, the obligation to
restore Lessor’s improvements to the Premises to the same condition as existed
prior to the destruction or removal of such improvements, as more particularly
set forth in the 2002 Lease and defined therein as the “Baxter Restoration
Work.” Lessee has failed to timely perform that obligation.


C.         Lessee acknowledges that such
obligation to restore the premises extends to both the 7755 and 7799 Pardee
Lane buildings.


D.         In order to fund a portion of the costs
of the Baxter Restoration Work in the event that Lessee did not fully perform
its obligation, Lessee agreed to provide, and did provide, to Lessor a letter
of credit, Letter of Credit No.7409978, issued by the Canadian Imperial Bank of
Commerce, in the amount of $750,000 (“Letter of Credit”).


E.         Concurrently with the execution of the
2002 Lease, World Heart Corporation, a corporation organized and existing under
the laws of the Province of Ontario Canada (“Guarantor”), executed a Guaranty
of Lease in favor of Lessor and further agreed to deposit, and did deposit,
with Lessor the sum of $150,000 plus any accrued interest on the sums
deposited. Lessor presently holds $150,000 plus interest accrued on said
deposits in a segregated bank account the “Cash Collateral”). The funds so
deposited are security for the performance of the Guaranty.


F.
       Disputes have arisen between Lessor
and Lessee concerning the nature and extent of Lessee’s obligations to restore
the Premises, Lessee’s holding over and other matters.


G.         Lessee has expressed a desire to enter
into a new lease with Lessor for the premises located at 7799 Pardee Lane.
Lessor is willing to enter into a new lease under certain terms and conditions
including the execution of this Agreement and performance of the obligations set
forth in it.













AGREEMENT


Lessor and Lessee agree
to compromise the various disputes between them including but not limited to
disputes arising under the 2002 Lease in accord with the terms and conditions
expressed in this Agreement. Accordingly, in consideration of the covenants and
other matters set forth herein, the parties agree as follows:


1.        Month to Month Extension of the 2002
Lease.


(a)        Commencing on May 1, 2007, the 2002
Lease shall be extended on a month-to-month basis until the earlier of: January
30, 2008, or the date upon which the Baxter Restoration Work for the 7755
Pardee Lane building (“7755 Restoration Work”) has been Completed, subject to
Force Majeure (as hereinafter defined). The Term “Completed” (or “Complete” or “Completion”)
shall mean the date upon which all of the following items have been delivered
or satisfied: (i) a certificate of completion of the 7755 Restoration Work
executed by Lessee’s architect, certifying that, except for minor punchlist
items identified by Lessor and Lessee, during a mutual walkthrough, the 7755
Restoration Work has been completed in compliance with the plans and
specifications approved by the Lessor; (ii) a final inspection of the 7755
Restoration Work signed and approved in all respects by the City of Oakland and
any other governmental agencies with jurisdiction over the Premises or Lessee’s
operations at the Premises, as required by applicable law; and (iii) a copy of
an unconditional waiver and release upon final payment, in the form prescribed
in Section 3262 of the California Civil Code, from the general contractor and
all subcontractors (including architects and engineers) hired in connection
with the 7755 Restoration Work, and any lien or stop notice delivered in
connection with the 7755 Restoration Work has been cleared to Lessor’s
satisfaction.


(b)       As used herein, “Force Majeure” shall mean
any delay caused by reason of any prevention, delay, stoppage due to strikes,
lockouts, acts of God, Lessor delay, permitting or inspection delay of the City
of Oakland or other governmental agency beyond the standard and ordinary
response time, and any other similar cause beyond the reasonable control of
Lessee, and Lessee’s obligations with respect to the 7755 Restoration Work
shall be suspended by any such Force Majeure event during the duration thereof;
provided that Lessee shall give prompt notice to Lessor (not more than 10
business days) after determining that such Force Majeure event shall affect or
hinder Lessee’s performance hereunder. Lessee shall have an affirmative duty to
diligently pursue resolution of the Force Majeure event to the extent such
resolution is possible. Under no circumstances shall a Force Majeure event
excuse Lessee from its obligation to pay Rent under the 2002 Lease.


(c)       In connection with the 7755 Restoration
Work, Lessee shall obtain, or cause its contractor to obtain for the benefit of
Lessee, a payment and completion bond from a nationally-recognized surety in
the amount of one hundred and ten percent (110%) of the estimated budget for
the 7755 Restoration Work and shall submit the plans and specification therefor
to Lessor for approval (which approval shall not be unreasonable withheld)
prior to submission of such plans and specification to the City of Oakland.


(d)       In the event that Lessee has not completed
the 7755 Renovation Work by January 30, 2008, the terms and conditions of
Section 7.4 of the 2002 Lease Addendum shall apply and Lessee shall be deemed a
holdover Lessee and holdover rent shall be applicable commencing on February 1,
2008. Nothing in this Section l(d) shall be deemed Lessor’s consent to any
holdover occupancy.



 2
 









(e)       Base
Rent for the period May 1 through the end of the extended Term (but not beyond
January 30, 2008) shall be Forty-One Thousand Five Hundred Seventy-Two Dollars
($41,572). Landlord hereby waives its right to holdover rent under the 2002
Lease for such period.


(f)        Except as extended, and except for the
express terms and conditions of this Agreement, the terms of the 2002 Lease
remain in full force and effect, including without limitation, Lessee’s
obligation to complete the 7755 Restoration Work.


2.        Letter of Credit. Upon execution of this Agreement, Lessor
will draw upon the Letter of Credit described above and receive the $750,000
proceeds thereof (“Proceeds”). Upon such draw, the Proceeds shall become the
sole and exclusive property of Lessor and Lessee shall retain no interest in
such funds. Upon Lessor’s receipt of the Proceeds of the Letter of Credit,
Lessee shall be released from Lessee’s obligation to perform the Baxter
Restoration Work for 7799 Pardee Lane (“7799 Restoration Work”). Lessor agrees
to confirm such release in writing promptly following Lessor’s receipt of the
Proceeds, in the form of the acknowledgment and release attached hereto as Exhibit
A.


3.
       New Lease.
The parties have entered into that AIR Commercial Real Estate Association
Standard Industrial/Commercial Single-Tenant Lease - Net dated as of even
date herewith for the 7799 Pardee Lane building (“New Lease”). The New Lease
shall be effective upon execution and shall be an executory agreement between
the parties however, the parties’ performance of their covenants and promises
thereunder shall not begin until the Commencement Date of the New Lease has
occurred, if it shall occur. The “Commencement Date” of the New Lease shall
occur upon the full and complete satisfaction of all of the following
conditions: (i) the 7755 Restoration Work has been Completed no later than
January 30, 2008 (subject to Force Majeure as provided herein); (ii) no
voluntary or involuntary petition under any applicable bankruptcy law has been
filed by or against Lessee; no trustee, receiver or conservator has been
appointed with respect to all or any substantial part of the Lessee’s assets;
and no general assignment for the benefit of creditors or any other similar
action for the protection or benefit of creditors has been made by Lessee; and
(iii) no claim has been made by Lessee or other party, in bankruptcy or
otherwise, seeking Lessor’s disgorgement of the Letter of Credit proceeds.
Until the Commencement Date of New Lease occurs, Lessee shall be a holdover
tenant under the 2002 Lease, except as provided in Section l(e) above with
respect to holdover rent. If the Commencement Date of the New Lease has not
occurred by February 1, 2008, Lessor may terminate the New Lease at any time
thereafter by written notice to Lessee.


4.
       Cash Collateral. Guarantor
agrees that Lessor is presently entitled to apply the Cash Collateral to
obligations owed by Lessee to Lessor including the obligation which Lessee has
failed to perform the timely restoration of 7755 Pardee Lane, Oakland,
California. As of the commencement date of the term of the New Lease, if it
should occur, Lessor agrees to attribute $100,000 of the Cash Collateral
deposited with Lessor under the Guaranty to the security deposit required under
the New Lease and promptly return the remainder of the Cash Collateral
(currently, approximately $64,000) to the Guarantor.


5.          Release. As of
the Commencement Date of the New Lease, if it should occur, Lessor and Lessee,
on their own behalf and on behalf of their successors, heirs and assigns do
hereby fully finally and forever release and discharge each other and all of
their present and former affiliates, sister corporations, and businesses,
parent and subsidiary corporations, and their respective officers, directors,
shareholders, employees, agents, members, sureties, attorneys, and
representatives and any and all other persons from and against all claims, demands,
causes of action, rights, debts, controversies, damages, costs, losses and
expenses of every kind, nature, description or character arising out of or
relating to the 2002 Lease and the Guaranty and the obligations of any of the
parties under such agreements, except as otherwise provided in this



 3
 









Release. The parties acknowledge that this Release includes all claims,
injuries or damages whatsoever known or unknown, foreseen or unforeseen,
including indemnity claims and that each party has been advised by legal
counsel about and are familiar with and understand the provisions of California
Civil Code Section 1542 which provides as follows:


A GENERAL RELEASE DOES NOT
EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR
HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER
MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR


This
Release does not affect nor modify the covenants, terms and conditions set
forth in this Agreement and does not apply to any of the covenants, terms and
conditions set forth in the New Lease.


6.        Alterations
Due to Parcel Map. Lessor
has advised Lessee that Lessor is in the process of preparing a parcel map
which shall divide the real property upon which the Premises and the 7777
Pardee Lane building are located into three separate legal parcels. In the
event that the City of Oakland requires the installation of fire-resistant
windows in the 7755 Pardee Building, Lessor will undertake to make such
alterations at Lessor’s sole cost and expense. In addition, if the City
requires any other any alterations or modifications to the 7755 Pardee Building
due to the creation of the separate parcels, Lessor agrees, at Lessor’s option,
either (a) to undertake such alterations or modifications at Lessor’s sole cost
and expense, or (b) to reimburse Lessee for all of Lessee’s costs in making
such alterations or modifications. Lessee agrees to obtain at least two bids
for any such alterations or modifications to be undertaken by Lessee including
one from a contractor selected by Lessor. The delay, if any, caused by the need
to install fire-resistant windows or to make any other alterations or
modifications due to the creation of separate parcels shall be considered Force
Majeure.


7.        Miscellaneous.


(a) Each signatory of this Agreement represents
hereby that he or she has full power and authority to execute and deliver this
Agreement on behalf of the party hereto for which such signatory is acting.


(b) If any party brings any action to enforce the
terms hereof, the prevailing party shall be entitled to receive reasonable
attorneys’ fees and court costs from the other party.


(c) This Agreement and each provision hereof shall be
interpreted in accordance with its fair meaning and not against or in favor of
any party.


(d) This Agreement shall be executed in one or more
counterparts, each of which shall be deemed an original and when taken together
shall constitute one and the same document. The parties may deliver signatures
to this Amendment by facsimile or a “pdf” version by email.


(Signatures on following page)



 4
 









IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first set forth above.


 


	
   

  	
   

  	
  LESSOR: OAKPORT ASSOCIATES,
  a 

  California limited partnership

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
   

  	
  Michael
  S. Kuhn, General Partner

  



 


	
   

  	
   

  	
  LESSEE: WORLD HEART INC., a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  

  Name:

  	
   

  
	
   

  	
   

  	
  

  Title:

  	
   

  
							



 



 5
 









EXHIBIT A


Form of Acknowledgment and Release


ACKNOWLEDGEMENT AND RELEASE


This
Acknowledgement and Release (“Release”) dated as of                 ,
200    , is  being delivered pursuant to Section 2 of that certain Compromise
Agreement (“Compromise Agreement”) dated as of July 20, 2007, between Oakport
Associates (“Lessor”) and World Heart Inc. (“Lessee”). Defined terms used but
not otherwise defined herein shall have the meaning given such terms in the
Compromise Agreement.


Lessor
and Lessee entered into that certain Standard Industrial/Commercial
Single-Tenant Lease – Net dated for reference purposes May 1, 2002 (the “2002
Lease”), pertaining to premises located at 7755 and 7799 Pardee Lane, Oakland,
California (“Premises”). As more fully set forth in the 2002 Lease, Lessee was
obligated to restore Lessor’s improvements to the Premises to the same
condition as existed prior to the destruction or removal of such improvements.
Said obligations are defined herein and in the 2002 Lease as the “Baxter
Restoration Work.” Pursuant to the terms of the Compromise Agreement, Lessor
and Lessee agreed that Lessee will satisfy the Baxter Restoration Work
obligation for the Premises located 7799 Pardee Lane (“7799 Restoration Work”)
via the payment of $750,000 through Lessor’s draw on the Letter of Credit.


Lessor
hereby acknowledges that it has received the Proceeds of the Letter of Credit
and hereby on its own behalf and on behalf of its successors, heirs and
assigns, does hereby fully finally and forever release and discharge Lessee and
all of its present and former affiliates, sister corporations, and businesses,
parent and subsidiary corporations, and their respective officers, directors,
shareholders, employees, agents, members, sureties, attorneys, representatives
and any and all other persons from and against all claims, demands, causes of
action, rights, debts, controversies, damages, costs, losses and expenses of
every kind, nature, description or character arising out of or relating to the
obligation to undertake and complete the 7799 Restoration Work. Lessor
acknowledges that this Release includes all claims, injuries or damages
whatsoever known or unknown, foreseen or unforeseen, including indemnity claims
relating to the 7799 Pardee Restoration Work and that Lessor has been advised
by legal counsel about and is familiar with and understands the provisions of
California Civil Code Section 1542 which provides as follows:


A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT
WITH THE DEBTOR


This
Release does not affect nor modify the covenants, terms and conditions set
forth in the 2002 Lease (including without limitation the Baxter Restoration
Work for the 7755 Pardee Lane Premises), the Compromise Agreement nor the New
Lease, except in each case with respect to the subject matter of this Release.


IN
WITNESS WHEREOF, Lessor has executed this Agreement as of the date first set
forth above.



 6
 









 


	
   

  	
   

  	
  LESSOR: 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OAKPORT ASSOCIATES, a
  California 

  limited partnership

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
   

  	
  Michael S. Kuhn, General
  Partner

  



 



 7















Exhibit C 


Form
of Memorandum of Commencement Date


MEMORANDUM OF COMMENCEMENT DATE


This
Memorandum of Commencement Date is executed as of             ,
2007, between Oakport Associates, a California limited partnership (“Lessor”),
and World Heart, Inc., a Delaware corporation (“Lessee”) pursuant to Section
1.3 of the Addendum to that certain Standard Industrial/Commercial
Single-Lessee Lease — Net, dated for reference purposes only  July       , 2007, between Lessor and Lessee (“Lease”)
for premises located at 7799 Pardee Lane, Oakland, California. Capitalized terms used but not otherwise defined
herein shall have the meaning given such terms in the Lease.


Lessor and Lessee hereby
acknowledge and agree:


1.
        The Commencement Date of the Lease
is:                                                           .


2.
        The Expiration Date of the Lease
is:                                                    .


This
Memorandum of Commencement Date shall constitute an amendment to the Lease.


This
Memorandum of Commencement Date may be signed in counterparts, each of which
shall be deemed an original and when taken together shall constitute one and
the same document. The parties agree that an executed copy of this document may
be delivered by facsimile or an emailed “pdf” version.


Lessor
and Lessee have executed this Memorandum of Commencement Date as of the date
first set forth above.



 Exhibit C
 









 


	
  LESSOR

  	
   

  	
  LESSEE

  
	
   

  	
   

  	
   

  
	
  OAKPORT ASSOCIATES,

  	
   

  	
  WORLD HEART, INC.,

  
	
  a California limited partnership

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  Michael Kuhn

  	
   

  	
  Name:

  	
   

  
	
   

  	
  General Partner

  	
   

  	
  Title:

  	
   

  
						



 



 Exhibit C