**Exhibit 10.1**

** **

**SINGLE-TENANT INDUSTRIAL LEASE**

**(TRIPLE NET)**

** **

**LANDLORD:**

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**WHAMC REAL ESTATE LIMITED PARTNERSHIP,a Delaware limited partnership**

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**TENANT:**

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**ALLIANCE PHARMACEUTICAL CORP.,a New York corporation**

 

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**SUMMARY OF BASIC LEASE INFORMATION ANDDEFINITIONS**

** **

This SUMMARYOF BASIC LEASE INFORMATION AND DEFINITIONS (“Summary”) is hereby incorporatedinto and made a part of the attached Single-Tenant Industrial Lease whichpertains to the Premises described in Section 14 below  All references in the Lease to the “Lease”shall include this Summary. All references in the Lease to any term defined inthis Summary shall have the meaning set forth in this Summary for suchterm  Any initially capitalized termsused in this Summary and any initially capitalized terms in the Lease which arenot otherwise defined in this Summary shall have the meaning given to suchterms in the Lease

 
| **1 1 **Landlord’s  Address: | WHAMC REAL ESTATE LIMITED PARTNERSHIP |
|----------------------------------------|---------------------------------------|
|                                   |                                  |
|                                   | c/o  WCB Properties                   |
|                                   | 450  Newport Center Drive, Suite 304  |
|                                   | Newport  Beach, California 92660      |
|                                   | Attn:  Mr Ronald Lack                 |
|                                   | Telephone  (714) 640-6900             |
|                                   | Facsimile.  (714) 640-8399            |
|                                   |                                  |
| **1 2 **Tenant’s  Address:   | ALLIANCE PHARMACEUTICAL CORP          |
|                                   |                                  |
|                                   | 3040  Science Park Road               |
|                                   | San  Diego, California 92121          |
|                                   | Attn:  Mr Duane Roth             |
|                                   | Telephone.  (619) 558-4300            |
|                                   | Facsimile  (819) 558-3825             |

 

## **13 ****Project:**  Theindustrial development known as Pacific Corporate Plaza in the City of SanDiego, County of San Diego, State of California, as shown on the project siteplan attached hereto as Exhibit “A-1” and the legal description of whichs attached hereto as Exhibit “A-2” The Project includes all buildings, improvements and facilities now orsubsequently located within such development, including, without limitation,the Building constituting the Premises

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## **14  ****Premises:**  Thatcertain 58,799 rentable square foot building (“Building”) located within theProject known as 6175 Lusk Boulevard, San Diego, California and moreparticularly described in Exhibit “A-1” and Exhibit “B” attachedhereto

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## **15 ****Term**: Ten (10) years

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## **16 ****Commencement Date:** The earlier of (i) that date which is onehundred twenty (120) days after the date of the full execution and delivery ofthis Lease by Landlord and Tenant, (ii) the date Tenant commences businessoperations from the Premises, or (iii) March 1, 1998.

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## **17 ****Lease Expiration Date:** The last day of the tenth (10th)annual anniversary of the Commencement Date, subject to two (2) extensionoptions of three (3) years pursuant to Section 2.4 of the Lease

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## **1 8  Rent**

 

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| **Period** |   | **Annual Rent** |       | **Monthly  Rent** |
|------------|--------|-----------------|------------|-------------------|
|       |   |            |       |              |
| 1-12       |   | $               | 647,508.60 |              | $ | 53,959.05 |
| 13-24      |   | $               | 670,171.39 |              | $ | 55,847 61 |
| 25-36      |   | $               | 693,627.31 |              | $ | 57,802.28 |
| 37-48      |   | $               | 717,904 26 |              | $ | 59,825 35 |
| 49-60      |   | $               | 743,030.84 |              | $ | 61,919 24 |
| 61-72      |   | $               | 769,036 91 |              | $ | 64,086 41 |
| 73.84      |   | $               | 795,953 20 |              | $ | 68,329 43 |
| 85.98      |   | $               | 823,811 52 |              | $ | 88,650 96 |
| 97-108     |   | $               | 852,644 92 |              | $ | 71.053 74 |
| 109-120    |   | $               | 882,487.45 |              | $ | 73,540 62 |

 

## **19 ****Security Deposit**. $297,330 00 subject to the terms of Section 5 below

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## **110  ****Permitted Use**.  ThePremises may be used only for general office and biomedical manufacturing andany other legally permitted use consistent with the character of the Projectand approved by Landlord in Landlord’s reasonable discretion

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## **111  ****Brokers**.  CBCommercial Real Estate Group, Inc representing Landlord and The Irving HughesGroup, Inc representing Tenant

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## **112  ****Interest Rate**.  Thelesser of: (a) the rate announced from time to time by Wells Fargo Bank or, ifWells Fargo Bank ceases to exist or ceases to publish such rate, then the rateannounced from time to time by the largest (as measured by deposits) charteredoperating bank operating in California, as its “prime rate” or “referencerate”, plus three percent (3%), or (b) the maximum rate permitted by law

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## **113  ****Tenant Improvements.** The tenant improvements installed or tobe installed in the Premises by Tenant, as described in the Work LetterAgreement attached hereto as Exhibit “C”.

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## **114  ****Parking Passes.** Onehundred sixty eight (168) parking privileges consisting of (i) one hundred andsixty (160) unreserved, uncovered parking privileges, and (ii) eight (8)unreserved, uncovered guest parking privileges (which guest parking shall beidentified as such and located in front of the main entrance to the Building)

 

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**SINGLE-TENANT INDUSTRIAL LEASE**

** **

This LEASE(“Lease”), which includes the preceding Summary of Basic Lease Information andDefinitions (“Summary”) attached hereto and incorporated herein by thisreference, is made as of the 7th day of November, 1997, by andbetween WHAMC REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership(“Landlord”), and ALLIANCE PHARMACEUTICAL CORP , a New York corporation(“Tenant”)

 

# **1         Premises**

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## **1 1         ****Lease of Premises. **Landlord hereby leases to Tenant andTenant hereby leases from Landlord the Premises upon and subject to the terms,covenants and conditions contained in this Lease to be performed by each partyThroughout the Term of this Lease, Tenant shall have the right to the exclusiveuse of that portion of that certain building in the Project commonly known as6173 Lusk Boulevard, San Diego, California (the “Other Building”) where theexisting HVAC system serving the Premises is situated only so long as suchOther Building contains the HVAC system servicing the Premises, provided,however, that Tenants exclusive use is limited to such portion of the OtherBuilding (where the existing HVAC system servicing the Premises is situated)and Tenant’s use is further limited for the express purposes of Tenant’saccess, maintenance and repair of such HVAC system and for no other purposeSuch Other Building shall be deemed to be part of the Premises for all purposesunder this Lease except that Tenant will not be obligated to pay Monthly Rentfor such Other Building

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## **1 2         ****Measurement of Premises and/or Project**  At Landlord’s discretion, the number ofrentable square feet of the Premises and/or the Project shall be subject toverification from time to time by Landlord’s space measurement consultant, andsuch verification shall be made in accordance with the provisions of thisSection 1 2 Tenant’s architect may consult with Landlord’s space measurementconsultant regarding verification of the number of rentable square feet of thePremises, however, the reasonable determination of Landlord’s space measurementconsultant shall be conclusive and binding upon the parties In the event thatLandlord’s space measurement consultant determines that the amounts thereofshall be different from those set forth in this Lease, Landlord shall modifyall amounts, percentages and figures appearing or referred to in this Lease toconform to such corrected rentable square footage (including, withoutlimitation, the amount of the “Rent,” as that term is defined in Section 3 ofthis Lease) If such modification is made, it will be confirmed in writing byLandlord to Tenant As used in this Lease, the following terms have the meaningsindicated

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### (a)                                  Theterm “usable area” or “usable square footage” means the usable area asdetermined in accordance with the Standard Method for Measuring Floor Area inOffice Buildings, ANSI/BOMA Z65 1 - 1996 (the “BOMA Standard”); and

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### (b)                                 Theterm rentable area” or “rentable square footage” means the rentable areameasured in accordance with the BOMA Standard

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# **2         Term**

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## **2 1         ****Term; Notice of Lease Dates.** This Lease shall be effective uponthe date first above written (the “Effective Date”) Subject to Section 2.4below, the term of this Lease (the “Term”) shall commence upon the CommencementDate and shall expire on the Lease Expiration Date, unless sooner terminated orextended as permitted herein, and if extended, the “Term” will Include theapplicable Option Period

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## **2 2         ****Early Occupancy.**  Subject to Section 2 4 below, Landlord shall deliver possessionof the Premises but not the Occupied Portion (as such term is defined inSection 2 4 below) within three (3) days following the full execution anddelivery of this Lease (the “Early Occupancy Date”) for purposes ofconstruction of improvements to the Premises (but not the Occupied Portion) inaccordance with the Work letter attached hereto as Exhibit “C” (“WorkLetter”) Such early occupancy shall be subject to all of the terms andconditions of this Lease, including, without limitation, those provisionsrequiring that Tenant shall be responsible for all costs, expenses andobligations relating to the Premises (including, without limitation, Sections 32, 3 3, 4, 6, 10, 11, 17, 20 and 22) except that Tenant will not be obligatedto pay

 

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## Monthly Rent during the period of such earlyoccupancy end Tenant will not, unless and until Tenant enters or occupies suchOccupied Portion, be subject to any of the terms and conditions of this Leasefor the Occupied Portion until Landlord delivers possession of the OccupiedPortion to Tenant, which delivery date is anticipated to occur on or about January1, 1998, subject to the surrender of such Occupied Portion by the existingtenant thereof.

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## **2 3         ****Options to Extend.** Tenant shell have two (2) options (each, an “Extension Option” to extendthe Term (for the entire Premises only) for a period (each, an “Option Period”)of three (3) years, commencing upon the Lease Expiration Date or, asapplicable, the second Option Period, upon the same terms and conditionspreviously applicable, except for the grant of any exercised Extension Optionand Annual Rent (which shall be determined as set forth below) Each ExtensionOption may be validly exercised only by notice in writing received by Landlordnot later than three hundred sixty (360) calendar days prior to commencement ofthe applicable Option Period, provided, however, that each such ExtensionOption may the validly exercised only if no uncured material Tenant defaultexists as of the date of exercise and, at Landlord’s option, as of thecommencement of the applicable Option Period If Tenant does not exercise theapplicable Extension Option during the exercise period set forth above instrict accordance with the provisions hereof, the Extension Option and anyunexercised Extension Option (if any) shall forever terminate and be of nofurther force or effect Each such Extension Option is personal to the originalTenant, may not be exercised by any person or entity other than the originalTenant and shall become null and void if the original Tenant assigns itsinterest in this Lease unless such assignment is to an Affiliate of Tenant (asthat term is defined in Section 14 5) or to a Transferee who is a PermittedBusiness (as defined in Section 14 1) but only to the extent such Transferee isconducting the biomedical manufacturing portion of Tenant’s Permitted Use (“SpecialTransferee”) For purposes of this Section 2 3 and Section 33, the term“material” relative to a Tenant default shall mean any monetary default and anymaterial non-monetary default

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Annual Rentduring the applicable Option Period shall be equal to ninety-five percent (95%)of the Fair Market Rental as of the commencement of the applicable OptionPeriod, but in no event less than Annual Rent payable immediately prior to theapplicable Option Period  For purposeshereof, “Fair Market Rental” shall mean the base rent then being charged torenewal tenants by Landlord in the Project (or, if not enough comparabletransactions exist In the Project, then the base rent payable during theapplicable Option Period to a willing landlord by a willing renewal tenant forcomparable space in comparable buildings in the vicinity of the Building) withtenants having a similar financial responsibility, credit rating andcapitalization as Tenant then has, taking into account all other relevantfactors for like and comparable space, improved with tenant Improvements oflike and comparable quality to those then existing In the Premises  At least four (4) months prior to theapplicable Option Period, Landlord shall notify Tenant of the Fair MarketRental as determined by Landlord  Anydispute between the parties hereto with respect to the amount so determinedshall be resolved by arbitration, as set forth below; provided, however, thatthere shall be deemed not to be such a dispute unless Tenant notifies Landlordthereof in writing within one (1) month after Landlord so notifies Tenant ofthe Fair Market Rental and Tenant sets forth in such notice Tenant’sdetermination of Fair Market Rental If, in the event of a dispute, thearbitrators have not determined the Fair Market Rental by commencement of theapplicable Option Period, Tenant shall pay as Annual Rent the amount determinedby Landlord until such time as the Fair Market Rental has been determined byarbitration, whereupon Tenant shall pay any additional amount due to Landlordbased upon such subsequent determination of Fair Market Rental. If the AnnualRent so paid by Tenant is higher than that ultimately determined by thearbitration process, then Landlord shall reimburse such difference to Tenant.

 

If Tenanttimely notifies Landlord in writing of Tenant’s dispute regarding Landlord’sdetermination of the Fair Market Rental, then Fair Market Rental shall bedetermined as follows. Landlord and Tenant shall each appoint one arbitratorwho shall by profession be a real estate appraiser active over the five (5)year period ending on the date of such appointment in the appraisal ofcommercial properties in San Diego County and who shall not have been employedor engaged by either party during said five (5) year period Each such arbitratorshall be appointed within fifteen (15) days after Tenant notifies Landlord ofTenant’s dispute of Landlord’s determination of Fair Market Rental The twoarbitrators so appointed shall within fifteen (15) days of the date of theappointment of the last appointed arbitrator agree upon and appoint a

 

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thirdarbitrator who shall be qualified under the same criteria set forth above Thethree arbitrators shall, within thirty (30) days of the appointment of thethird arbitrator, reach a decision as to whether the parties shall useLandlord’s or Tenant’s submitted Fair Market Rental for the Premises, and shallnotify Landlord and Tenant thereof Such decision shall be based upon thecriteria and variables set forth above The new Annual Rent shall thereafter beequal to the Fair Market Rental of the Premises so selected by the arbitrators.The decision of the majority of the three arbitrators shall be binding uponLandlord and Tenant. If either Landlord or Tenant fails to appoint anarbitrator within the time period specified hereinabove, the arbitratorappointed by one of them shall reach a decision, notify Landlord and Tenantthereof, and such arbitrator’s decision shall be binding upon Landlord andTenant If the two arbitrators fail to agree upon and appoint a thirdarbitrator, both arbitrators shall be dismissed and the matter to be decidedshall be forthwith submitted to arbitration under the provisions of theAmerican Arbitration Association in accordance with the method described aboveThe cost of arbitration shall be paid by Landlord and Tenant equally.

 

## **2 4         ****Conditions Precedent.** Landlord will not be obligated todeliver possession of the Premises to Tenant (but Tenant will be liable,subject to Section 2 2 hereof and the occurrence of the Commencement Date, forRent if Landlord can otherwise deliver the Premises, or the applicable portionthereof, to Tenant as required hereunder) until (A) Landlord has received fromTenant all of the following: (i) a copy of this Lease fully executed by Tenant;(ii) evidence satisfactory to Landlord of the deposit of the Security Depositin accordance with Section 5 below, and the first installment of Monthly Rentin accordance with Section 3 1 below; and (iii) copies of policies of insuranceor certificates thereof as required under Section 21 of this Lease and (B)NextLevel Systems, Inc., the existing tenant (“Existing Tenant”) in a portion(the “Occupied Portion”) of the Premises as of the date hereof has vacated thePremises; provided, however, that Landlord and Tenant acknowledge and agreethat, subject to the other condition precedents set forth in this Section 2 4,Landlord shall deliver possession of the Premises (but not the OccupiedPortion) to Tenant in accordance with Section 2 2 and Tenant shall accept possessionof such portion of the Premises on the date of Landlord’s delivery thereofNotwithstanding anything above to the contrary, the Commencement Date of thisLease shall occur in the event that Landlord is unable to deliver possession ofthe Occupied Portion to Tenant by the Commencement Date of the Lease withrespect to the other portion of the Premises (not including the OccupiedPortion), provided, however, that (i) Tenant’s obligation to pay Monthly Rentwith respect to the Occupied Portion of the Premises will, on a per diem basis,be waived by Landlord (in the proportion that the rentable square feet of theOccupied Portion bears to the total rentable square feet of the Premises), foreach day past March 1, 1998 (“Outside Date”) that Landlord so fails to deliverpossession of the Occupied Portion of the Premises to Tenant and (ii) inaccordance with, and subject to, Section 2 2 of this Lease, Tenant will not besubject to any of the other terms and conditions of this Lease until Landlorddelivers possession of the Occupied Portion to Tenant (unless Tenant enters oroccupies such Occupied Portion)

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# **3         Rent**

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## **3 1         ****Annual Rent**   Tenantagrees to pay Landlord, as rent for the Premises, the Annual Rent designated inSection 1 8 of the Summary. The Annual Rent shall be paid by Tenant in twelve(12) equal monthly installments of Monthly Rent in the amounts designated inSection 1 8 of the Summary in advance on the first day of each and everycalendar month commencing upon the Commencement Date, except that the firstfull month’s Monthly Rent for the Premises shall be paid upon execution of thisLease by Tenant  Monthly Rent for anypartial month shall be prorated in the proportion that the number of days thisLease is in effect during such month bears to the actual number of days in suchmonth

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## **3 2         ****Additional Rent**.  Allamounts and charges payable by Tenant under this Lease in addition to theAnnual Rent described in Section 3 1 above shall be considered additional rentfor the purposes of this Lease, and the word “Rent” in this Lease shall includesuch additional rent unless the context specifically or clearly implies thatonly the Annual Rent is referenced The Annual Rent and additional rent shall bepaid to landlord as provided in Section 7, without any prior demand thereforand without any deduction or offset except as specified elsewhere in the Lease,in lawful money of the United States of America.

 

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## **3 3**          **Late Payments**.  Late payments of Monthly Rent and/or anyitem of additional rent will be subject to Interest and a late charge asprovided in Sections 22 6 and 22 7 below

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## **3 4**          **Tenant’s Obligations**  Except as otherwise provided herein, allRent shall be absolutely net to Landlord so that this Lease shall yield net toLandlord, the Rent to be paid each month during the Term of this Lease Nothingherein contained shall be deemed to require Tenant to pay or discharge anyliens or mortgages of any character whatsoever which may exist or hereafter beplaced upon the Premises by an affirmative act or omission of Landlord

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# **4         Common Areas: Operating Expenses**

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## **4 1         ****Definition of Common Area.** The term “Common Area,” as used in this Lease means all areas and theimprovements thereon within the exterior boundaries of the Project now or latermade available for the general use of Landlord, Tenant and other personsentitled to occupy floor area in the Project and their customers, including,without limitation, the parking facilities of the Project, loading andunloading areas, trash areas, roadways, sidewalks, walkways, parkways,driveways, landscaped areas, and similar areas and facilities situated withinthe Project which are not reserved for the exclusive use of any Projectoccupants and the exterior surfaces and roofs of all buildings (including theBuilding) located within the Project Without limiting this definition, Landlordmay include in**the Common Area those portionsof the Project presently or later sold or leased to purchasers or tenants, asthe case may be, until the commencement of construction of the building(s) thereon,at which time there shall be withdrawn from the Common Area those areas notprovided by such owner or lessee for common use. Common Area shall not Include(i) the entryway to a tenant’s premises, (ii) any improvements Installed by atenant outside of its premises, whether with or without Landlord’s knowledge orconsent, or (iii) any areas or facilities that are included in the descriptionof premises leased to a tenant

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## **4 2**          **Maintenance and Use ofCommon Area.**  The manner inwhich the Common Area shall be maintained shall be solely determined byLandlord in Landlord’s reasonable discretion If any owner or tenant of anyportion of the Project maintains Common Area located upon its parcel or demisedpremises (Landlord shall have the right in its sole discretion to allow anypurchaser or tenant to so maintain Common Area located upon its parcel ordemised premises and to be excluded from participation in the payment of CommonArea Expenses as provided below), Landlord shall not have any responsibility forthe maintenance of that portion of the Common Area and Tenant shall have noclaims against Landlord arising out of any failure of such owner or tenant toso maintain its portion of the Common Area The use and occupancy by Tenant ofthe Premises shall include the right to use the Common Area (except areas usedin the maintenance or operation of the Project), in common with Landlord andother tenants of the Project and their customers and invitees, subject to (i)any covenants, conditions and restrictions now or hereafter of record (the“Declaration”), and (ii) such reasonable, non-discriminatory rules andregulations concerning the Project as may be established by Landlord from timeto time Tenant agrees to promptly comply with all such rules and regulations andany reasonable, non-discriminatory amendments thereto upon receipt of writtennotice from Landlord.

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## **4 3         ****Control of and Changes to Common Area.**  Landlord shall have the sole and exclusivecontrol of the Common Area, as well as the right to make reasonable changes tothe Common Area. Provided Landlord does not materially interfere with Tenant’suse of and access to the Premises, Landlord’s rights shall include, but not belimited to, the right to (a) restrain the use of the Common Area byunauthorized persons; (b) cause Tenant to remove or restrain persons from anyunauthorized use of the Common Area if they are using the Common Area by reasonof Tenant’s presence in the Project, (c) utilize from time to time any portionof the Common Area for promotional, entertainment, and related matters, (d)temporarily close any portion of the Common Area for repairs, improvements oralterations, to discourage non-customer use, to prevent public dedication or aneasement by prescription from arising, or for any other reason deemedappropriate in Landlord’s judgment, and (e) reasonably change the shape andsize of the Common Area, add, eliminate or change the location of improvementsto the Common Area, including, without limitation, buildings, lighting, parkingareas, landscaped areas, roadways, walkways, drive aisles and curb cuts

 

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## **4 4         ****Operating Expenses.**  As used in this Section 4 4, the term “Building’s Share” shall mean afraction, the numerator of which is the rentable square footage of theBuilding, and the denominator of which is the rentable square footage of theProject Throughout the Term of this Lease, commencing on the Commencement Date,and in addition to Tenant’s obligations set forth in Section 3 4 hereof, Tenantagrees to pay Landlord, as additional rent in accordance with the terms of thisSection 4, the Building’s Share of Operating Expenses for the operation,maintenance, repair, and replacement of the Project and the Common Areaincluding, without limitation: (i) any form of real property tax, assessment(including, without limitation, change in ownership taxes and assessments),license fee, license tax, business license fee, commercial rental tax, levy,charge, improvement bond or similar imposition of any kind or nature imposed byany authority having the direct power to tax, including any city, county, stateor federal government, or any school, agricultural, lighting, drainage or otherimprovement or special assessment district thereof, (ii) any and allassessments under any covenants, conditions and restrictions affecting theProject, (iii) water, sewer and other utility charges for the Common Area, (iv)costs of commercially reasonable insurance obtained by landlord, (v) wastedisposal and janitorial services, (vi) security (if any), (vii) labor, (viii)commercially reasonable management costs including, without limitation (A)wages and salaries (and payroll taxes and similar charges) of propertymanagement employees for the Common Area, (B) management office rental,supplies, equipment and related operating expenses for the Common Area, (C)commercially reasonable management/administrative fees, and (D) associationfees and assessments, (ix) supplies, materials, equipment and tools includingrental of personal property, (x) repair and maintenance of the structuralportions of the buildings within the Project, including the plumbing, heating,ventilating, air-conditioning and electrical systems installed or furnished byLandlord; (xi) maintenance, sweeping, repairs, resurfacing, and upkeep of all partingand other Common Areas; (xii) amortization on a straight line basis over theuseful life together with interest at the Interest Rate on the unamortizedbalance of all capitalized expenditures to the Project, (xiii) gardening andlandscaping, (xiv) maintenance of signs (other than signs of tenants of theProject), (xv) personal property taxes levied on or attributable to personalproperty used in connection with the Common Areas; (xvi) reasonable accounting,audit, verification, legal and other consulting fees, and (xvii) any othercosts and expenses of repairs, maintenance, painting, fighting, cleaning, andsimilar items, including commercially reasonable reserves. Notwithstandinganything above to the contrary, the term “Operating Expenses” shall not includecosts to correct latent defects in the base, shell and core of the Premises tothe extent not caused by Tenant or Tenant’s Improvements to the Premises.

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## **4 5         ****Tenant’s Monthly Operating Expense Charge.**  From and after the Commencement Date, Tenantshall pay to Landlord, on the first day of each calendar month during the Termof this Lease, the Building’s Share of an amount estimated by Landlord to bethe Monthly Operating Expenses for the Project for that month (“Tenants MonthlyOperating Expanse Charge”) Notwithstanding anything in this Section 4 to thecontrary, in no event will Tenant be liable, in any calendar year of thisLease, for Operating Expense increases in excess of ten percent (10%) over theOperating Expenses for the immediately preceding calendar year (the “Cap”);provided, however, that for purposes of the Cap, costs of commerciallyreasonable insurance maintained by Landlord, Real Property Taxes and the costsof capital expenditures, shall not be deemed to be part of Operating Expenses

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## **4 6         ****Estimate Statement.** Prior to the Commencement Date and on or about May 1st of eachsubsequent calendar year**during theTerm of this Lease, Landlord will endeavor to deliver to Tenant a statement(“Estimate Statement”) wherein Landlord will estimate Tenant’s MonthlyOperating Expense Charge for the then currant calendar year Tenant agrees topay Landlord, as additional rent, Tenant’s estimated Monthly Operating ExpenseCharge each month thereafter, beginning with the next installment of rent due, untilsuch time as Landlord issues a revised Estimate Statement or the EstimateStatement for the succeeding calendar year; except that, concurrently with theregular monthly rent payment next due following the receipt of each suchEstimate Statement, Tenant agrees to pay Landlord an amount equal to onemonthly installment of Tenant’s estimated Monthly Operating Expense Charge(less any applicable Operating Expenses already paid) multiplied by the numberof months from January, in the current calendar year, to the month of such rentpayment next due, all months inclusive If at any time during the Term of this Lease, but not more often thanquarterly, Landlord reasonably determines that the Building’s Share ofOperating Expenses for the current calendar year will be greeter than theamount set forth in the then current Estimate Statement, Landlord may issue arevised Estimate Statement and

 

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## Tenant agrees to pay Landlord, within thirty(30) days of receipt of the revised Estimate Statement, the difference betweenthe amount owed by Tenant under such revised Estimate Statement and the amountowed by Tenant under the original Estimate Statement for the portion of thethen current calendar year which has expired Thereafter Tenant agrees to payTenant’s Monthly Operating Expense Charge based on such revised EstimateStatement until Tenant receives the next calendar year’s Estimate Statement ora new revised Estimate Statement for the current calendar year

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## **4 7         ****Actual Statement.**  By May 1st of each calendar year during the Term of this Lease, Landlordwill also endeavor to deliver to Tenant a statement (“Actual Statement”) whichstates the Building’s Share of the actual Operating Expenses for the precedingcalendar year. If the Actual Statement reveals that the Building’s Share of theactual Operating Expenses is more than the total Additional Rent paid by Tenantfor Operating Expenses on account of the preceding calendar year,**Tenant agrees to pay Landlord the difference in a lump sumwithin thirty (30) days of receipt of the Actual Statement. If the ActualStatement reveals that the Building’s Share of the actual OperatingExpenses is less than the Additional Rent paid by Tenant for Operating Expenseson account of the preceding calendar year*,*Landlord willcredit any overpayment toward the next monthly Installment(s) of the Building’sShare of the Operating Expenses due under this Lease Such obligation will be acontinuing one which will survive the expiration or earlier termination of thisLease Prior to the expiration or sooner termination of the Lease Term andLandlord’s acceptance of Tenant’s surrender of the Premises, Landlord will havethe right to estimate the actual Operating Expenses for the then current LeaseYear and to collect from Tenant prior to Tenant’s surrender of the Premises,the Building’s Share of any excess of such actual Operating Expenses over theestimated Operating Expenses paid by Tenant in such Lease Year.

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## **4 8         ****Miscellaneous**.  Anydelay or failure by Landlord in delivering any Estimate Statement or ActualStatement pursuant to this Section 4 will not constitute a waiver of its rightto require an increase in additional rent for Operating Expenses nor will itrelieve Tenant of its obligations pursuant to this Section 4, except thatTenant will not be obligated to make any payments based on such EstimateStatement or Actual Statement until thirty (30) days after receipt of suchEstimate Statement or Actual Statement. If Tenant does not object to anyEstimate Statement or Actual Statement within ninety (90) days after Tenantreceives any such statement, such statement will be deemed final and binding onTenant Even though the Term has expired and Tenant has vacated the Premises,when the final determination is made of the Building’s Share of the actualOperating Expenses for the year in which this Lease terminates, Tenant agreesto promptly pay any increase due over the estimated expenses paid and,conversely, any overpayment made in the event said expenses decrease shallpromptly be rebated by Landlord to Tenant Such obligation will be a continuingone which will survive the expiration or termination of this Lease

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## **4 9         ****Books and Records.** Landlord shall maintain books and records in accordance with soundaccounting and management practices, reflecting the Operating Expenses IfTenant wishes to review or audit the amount of the Building’s Share ofOperating Expenses, Tenant must deliver to Landlord a written notice ofTenant’s desire to review or audit Landlord’s books and records (“Audit Notice”)within three (3) months following Tenant’s receipt of Landlord’s first annualreconciliation. Thereafter, if Tenant wishes to review or audit the Building’sShare of Operating Expenses as to any subsequent Lease Year, Tenant and itsduly authorized representatives (which representatives (including Tenant’sauditors, if any) shall be subject to Landlord’s approval) shall have the rightto do so with respect to any calendar year within six (6) months followingreceipt of the applicable Actual Statement for such calendar year, upon thirty(30) days’ prior delivery of an Audit Notice Such audit will be conducted (i)during normal business hours at Landlord’s California business offices or atthe management office of the Building, (ii) on consecutive business days untilcompleted, and (iii) in an expeditious manner so as to minimize interferencewith Landlord’s operations Landlord agrees that Tenant or its auditors shallhave the right to photocopy Landlord’s books and records at Tenant’s sole costand expense Tenant shall pay in a timely manner as required by this Lease anyamounts stated as due on the Actual Statement, provided that such payment shallnot waive any right to audit and/or dispute by Tenant as set forth herein In noevent will Landlord or its property manager be required to (i) photocopy anyaccounting records or other items or contracts (provided however, that Tenantor its auditors shall have the right to photocopy Landlord’s books and recordsat Tenant’s sole cost and expense as provided above), (ii) create any ledgersor schedules not already In existence, (iii) incur any costs or expensesrelative to such inspection, or (iv)

 

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## perform any other tasks other than makingavailable such accounting records as are described in this paragraph. Tenantagrees to deliver to Landlord the results of any such audit within thirty (30)days of completion of the audit. If Tenant does not deliver an Audit Notice asto any annual reconciliation within the time frames set forth hereinabove, thenTenant acknowledges and agrees that such annual reconciliation, and the ActualStatement and/or any Estimate Statement for such Lease Year, will beconclusively binding on Tenant

##  

If Tenant’saudit or review reveals that Landlord has overcharged Tenant and Landlordagrees with the results of such audit or the results of such audit areconfirmed in an arbitration between the parties pursuant to Section 34, thenwithin thirty (30) days after the results of such audit are made available toLandlord, Landlord agrees to reimburse Tenant the amount of such overchargeplus interest at the Interest Rate stated in Section 1 12 of the Summary If theaudit reveals that Tenant was undercharged, then within thirty (30) days afterthe results of the audit are made available to Tenant, Tenant agrees toreimburse Landlord the amount of such undercharge plus interest thereon at theInterest Rate stated in Section 1 12 of the Summary within thirty (30) days ofdemand by Landlord Tenant agrees to pay the cost of such audit, provided thatif the audit reveals that Landlord’s determination of the Building’s Share ofOperating Expenses as set forth in a certified statement sent to Tenant was inerror in Landlord’s favor by more than six percent (6%) of the amount paid byTenant prior to delivering the Audit Notice and Landlord agrees with theresults of such audit or the results of such audit are confirmed In anarbitration between the parties pursuant to Section 34, then Landlord agrees topay the reasonable, third-party cost of such audit incurred by Tenant withinthirty (30) days of demand by Tenant. To the extent Landlord must pay the costof such audit, such cost shall not exceed a reasonable hourly charge for areasonable amount of hours spent by such third-party in connection with theaudit Landlord shall not be liable for any contingency fee payments to anyauditors or consultants of Tenant Tenant agrees to keep the results of theaudit (and any settlement. if any, resulting therefrom) confidential and willcause its agents, employees and contractors to keep such results (and anysettlement, if any, resulting therefrom) confidential. If Landlord disputes theresults of Tenant’s audit of Operating Expenses, Landlord shall have the rightto initiate an arbitration of the dispute as provided In Section 34

 

# **5         Security Deposit**

#  

## **5 1         ****Delivery of Letter of Credit**.  On or before December 10, 1997, Tenant shall deliver to Landlordthe Security Deposit in the form of an unconditional, irrevocable and renewableletter of credit (“Letter of Credit”) In favor of Landlord in form and issuedby a bank with an office (capable of honoring a demand on the Letter of Credit)located in San Diego County, California, reasonably satisfactory to Landlord.In the initial principal amount specified in Section 1 9 of the Summary, assecurity for the faithful performance and observance by Tenant of the terms,provisions and conditions of this Lease The Letter of Credit shall state thatan authorized officer or other representative of Landlord may make demand onLandlord’s behalf for the amount owed by Tenant to Landlord, and that theissuing bank must immediately honor such demand, without qualification orsatisfaction of any conditions, except the proper identification of the partymaking such demand and a certification that Tenant is in default under thisLease, which default is continuing after notice and expiration of anyapplicable notice and cure period required by this Lease. In addition, theLetter of Credit shall indicate that it is transferable in its entirety by Landlordas beneficiary and that upon receiving written notice of transfer, and uponpresentation to the issuer of the original Letter of Credit, the issuer willreissue the Letter of Credit naming such transferee as the beneficiary. If theterm of the Letter of Credit held by Landlord will expire prior to thirty (30)days following the last day of the Term and It Is not extended, or a new litterof Credit for an extended period of time is not substituted, within thirty (30)days prior to the expiration of the Letter of Credit, then Landlord may deliverwritten notice of such fact to Tenant and if Tenant does not extend the Letterof Credit or substitute a new Letter of Credit within ten (10) business daysafter Tenant’s receipt of such notice from Landlord, Landlord shall be entitledto make demand for the principal amount of said Letter of Credit and,thereafter, to hold such funds in accordance with Section 5.3 below In theevent Tenant fails to deliver such**Letter ofCredit to Landlord on or before December 10, 1997 then Landlord, in addition toany of its other rights and remedies, shall have the right to immediatelyterminate this Lease or cause Tenant to cease construction of its TenantImprovements until such Letter of Credit is furnished to Landlord

 

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## **5 2         ****Principal Amount of Letter of Credit**.  The principal amount of the Letter of Creditshall be as follows

##  

| **Months of Tem** |   | **Required  Principal Amount**                                                                                 |
|-------------------|--------|----------------------------------------------------------------------------------------------------------------|
| 1.60              |   | $297,330 00                                                                                                    |
|              |   |                                                                                                           |
| 61-120            |   | To  be equal to the Monthly Rent due and payable by Tenant for the sixty-first  (61st) month of the Lease Term |

 

Notwithstanding the foregoing,if as of the applicable reduction date set forth above, (i) Tenant is indefault under this Lease, or (ii) circumstances exist that would, with noticeor lapse of time, or both, constitute a default, then the principal amountshall not be reduced, unless and until such default or circumstances shall havebeen fully cured, at which time the principal amount may be reduced ashereinabove described Further notwithstanding the foregoing, the reduction ofthe Security Deposit after the sixtieth (60th) month shall also be conditionedupon (i) Landlord’s not having given Tenant written notice of a failure to payRent pursuant to Section 22.1(b) more than three (3) times during the precedingsixty (60) month period and (ii) Tenant not exercising its Termination Option(as defined In Section 33 hereof)

 

## **5 3         ****Application of Letter of Credit.** The Letter of Credit shallbe held by Landlord as security for the faithful performance by Tenant of allof the terms, covenants and conditions of this Lease If Tenant commits adefault with respect to any provision of this Lease, Landlord may (but shallnot be required to) draw upon the Letter of Credit and use, apply or retain allor any part of the proceeds for the payment of any sum which is in default, orfor the payment of any other amount which Landlord may spend or becomeobligated to spend by reason of Tenants default or to compensate Landlord forany loss or damage which Landlord may suffer by reason of Tenant’s default. Ifany portion of the Letter of Credit is so used or applied, Tenant shall, withinten (10) business days after demand therefor, post an additional Letter ofCredit in an amount sufficient to restore the Letter of Credit to the principalamount required under Section 5 2 above Landlord shall not be required to keepany proceeds from the Letter of Credit separate from its general funds andTenant shall not be entitled to any interest on such proceeds Should Landlordsell its interest in the Premises during the Term and if Landlord deposits withthe purchaser thereof the Letter of Credit or any proceeds of the Letter ofCredit, thereupon Landlord shall be discharged from any further liability withrespect to the Letter of Credit and said proceeds

 

# **6         Use**

 

## **6 1         ****General.**  Tenantshall use the Premises solely for the Permitted Use specified in Section 1 10of the Summary, and shall not use or permit the Premises to be used for anyother use or purpose whatsoever Except for Landlord’s obligations under Section11 2 of this Lease, Tenant shall, at its sole cost and expense, observe andcomply with all requirements of any board of fire underwriters or similar bodyrelating to the Premises, and all laws, statutes, codes, rules and regulationsnow or hereafter in force relating to or affecting the use, occupancy,alteration or improvement (whether structural or non-structural, includingunforeseen and/or extraordinary alterations or Improvements, and regardless ofthe period of time remaining in the Term) of the Premises, including, withoutlimitation, the provisions of the Americans with Disabilities Act (“ADA”) as itpertains to Tenants use, occupancy, Improvement and alteration (whetherstructural or non-structural, including unforeseen and/or extraordinaryalterations or Improvements, and regardless of the period of time remaining inthe Term) of the Premises. Tenant shall not use or allow the Premises to beused (a) in violation of any recorded covenants, conditions and restrictionseffecting the Premises or of any law or governmental rule or regulation, or ofany certificate of occupancy issued for the Premises, or (b) for any improper,immoral, unlawful or reasonably objectionable purpose Tenant shall not cause,maintain or permit any nuisance in, on or about the Premises, nor commit orsuffer to be committed any waste in, on or about the Premises

 

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## **6 2         ****Signs, Awnings and Canopies.** Tenant shall have the right. atTenants sole cost and expense to install a sign on the Building constitutingthe Premises, provided Tenant complies with any covenants of record and obtainsapproval from all governmental authorities having jurisdiction over thePremises and from Landlord, which approval shall not be unreasonably withheldTo the extent Landlord installs a signage monument adjacent to the Premises,Tenant shall have the right, at Tenant’s sole cost and expense, to install itsname on such signage monument if and when such signage monument is installed byLandlord. The exact location, dimensions, color, illumination and otherfeatures of all of Tenant’s signage shall be subject to Landlord’s priorwritten approval and otherwise In accordance with the Project’s signageprogram. All of Tenant’s exterior sign rights are personal to the originalTenant executing this Lease, to any Affiliate of the original Tenant, and toany Special Transferee, only so long as the original Tenant and/or anyAffiliate of the original Tenant and/or any Special Transferee is occupying atleast seventy-five percent (75%) of the total rental square feet comprising thePremises. Tenant agrees, at Tenant’s sole cost and expense, to maintain anysuch sign, awning, canopy, decoration, lettering or advertising matter as maybe approved by Landlord in good condition and repair at all times At the expirationor earlier termination of this Lease, at landlord’s election, Tenant shallremove all signs, awnings, canopies, decorations, lettering and advertisinginstalled by or at the direction of Tenant and shall repair any damage to thePremises resulting therefrom all at Tenant’s sole cost and expense. If Tenantfalls to maintain any such approved sign, awning, decoration, lettering, oradvertising, Landlord may do so and Tenant shall reimburse Landlord for suchcost plus a twenty percent (20%) overhead fee If, without Landlord’s priorwritten consent, Tenant installs any sign, awning, decoration, lettering oradvertising, or fails to remove any such item(s) at the expiration or earliertermination of this Lease, Landlord may have such item(s) removed and storedand may repair any damage to the Premises at Tenants expense The removal,repair and/or storage costs shall bear interest until paid at the Interest Ratespecified in Section 1 12 of the Summary

##  

## **6 3         ****Hazardous Materials**. Except for ordinary and general office supplies, such as copier toner,liquid paper, glue, ink and common household cleaning materials and, to theextent approved in writing by Landlord (which shall not be unreasonablywithheld), materials reasonably necessary for the conduct of Tenants businessthat are used and stored In compliance with all applicable laws (some or all ofwhich may constitute “Hazardous Materials” as defined in this Lease), Tenantagrees not to cause or permit any Hazardous Materials to be brought upon,stored, used, handled, generated, released or disposed of on, in, under orabout the Premises by Tenant, its agents, employees, subtenants, assignees,licensees, contractors or invitees (collectively, “Tenant’s Parties”), withoutthe prior written consent of Landlord, which consent Landlord may, except asotherwise expressly provided above (with respect to materials reasonablynecessary for the conduct of Tenant’s business that are used and stored incompliance with all applicable laws), withhold in its sole and absolutediscretion. Concurrently with the execution of this Lease, Tenant agrees tocomplete and deliver to Landlord an Environmental Questionnaire in the form of Exhibit“E” attached hereto Upon the expiration or earlier termination of thisLease, Tenant agrees to promptly remove from the Premises, at its sole cost andexpense, any and all Hazardous Materials, including any equipment or systemscontaining Hazardous Materials which are installed, brought upon, stored, used,generated or released upon, In, under or about the Premises by Tenant or any ofTenant’s Parties To the fullest extent permitted by law, Tenant agrees topromptly indemnify, protect, defend and hold harmless Landlord and Landlord’spartners, officers, directors, employees, agents, successors and assigns(collectively, “Landlord Indemnified Parties”) from and against any and allclaims, damages, judgments, suits, causes of action, losses, liabilities,penalties, fines, expenses and costs including, without limitation, clean-up,removal, remediation and restoration costs, sums paid in settlement of claims,attorneys’ fees, consultant fees and expert fees and court costs) which ariseor result from the presence of Hazardous Materials on, In, under or about thePremises and which are caused or permitted by Tenant or any of Tenant’s Panics.Tenant agrees to promptly notify Landlord of any release of Hazardous Materialswhich Tenant becomes aware of during the Term of this Lease, whether caused byTenant or any other persons or entities In the event of any release ofHazardous Materials caused or permitted by Tenant or any of Tenant’s Parties orany other persons or entitles, Landlord shall have the right, but not theobligation, to cause Tenant to immediately take all steps Landlord deemsnecessary or appropriate to remediate such release and prevent any similarfuture release to the satisfaction of Landlord and Landlord’s mortgagee(s) Atall times during the Term of this Lease and in accordance with Section 15hereof, Landlord will have the right, but not the obligation, to enter upon thePremises to inspect,

 

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## investigate, sample and/or monitor thePremises to determine if Tenant is in compliance with the terms of this Leaseregarding Hazardous Materials Tenant will, upon the reasonable request of Landlord(which request shall not, unless Tenant has failed to comply with the terms andprovisions of this Section 6 3 or except in cases of emergency, be made morethan once every six (6) months throughout the Term of this Lease, cause to beperformed an environmental audit of the Premises at Tenant’s expense by anenvironmental consulting firm reasonably acceptable to Landlord As used in thisLease, the term “Hazardous Materials” shall mean and include any hazardous ortoxic materials, substances or wastes as now or hereafter designated under anylaw, statute, ordinance, rule, regulation, order or ruling of any agency of theState, the United States Government or any local governmental authority,including, without limitation, asbestos, petroleum, petroleum hydrocarbons andpetroleum based products, was formaldehyde foam insulation, polychlorinatedbiphenyls (“PCBs”), freon and other chlorofluorocarbons, and any materialdefined as a “biohazardous waste” or “medical waste” or other waste underCalifornia Health and Safety Code, Division 20, Chapter 81 (Medical WasteManagement Act) The provisions of this Section 6 3 will survive the expirationor earlier termination of this Lease Tenant shall immediately advise Landlordin writing of, and provide Landlord a copy of:

##  

#### (1)          Anynotice of violation or potential or alleged violation of any law concerningHazardous Materials received by Tenant from any governmental agency, and

####  

#### (2)          Anyand all inquiry, investigation, enforcement, clean-up, removal or governmental orregulatory actions Instituted or threatened relating to the Premises.

####  

Landlord shallindemnify, defend and hold harmless Tenant from and against any and all claims,judgments, damages, penalties, fines, costs, liabilities and losses (including,without limitation, sums paid In settlement of claims and for reasonableattorneys’ fees, consultant fees and expert fees, (but specifically excludingspecial, indirect or consequential damages including but not limited to claimsfor loss of use, anticipated profit or business opportunity, market-basedstigma damages or business interruption, or mental or emotional distress orfear of injury or disease) to the extent arising as a result of any HazardousMaterials (1) located in, on or under the Building as of the commencement ofTenant’s occupancy of the Premises, or (2) hereafter caused to be located in,on or under the Building by Landlord and/or any of Landlord’s employees, agentsor representatives or any other persons or entitles (except Tenant or Tenant’sParties) This indemnification of Tenant by Landlord includes, withoutlimitation, costs incurred in connection with any investigation of siteconditions or any clean-up, remedial, removal or restoration work. Theprovisions of this paragraph shall survive the expiration of the Term orearlier termination of this Lease. Notwithstanding anything above to thecontrary, the foregoing indemnity shall not extend to Hazardous Materialscaused to be located in, on or under the Building by Tenant or any of Tenant’sParties

 

## **6 4         ****Refuse and Sewage.** Tenant agrees not to keep any trash,garbage, waste or other refuse on the Premises except in sanitary containersand agrees to regularly and frequently remove same from the Premises Tenantshall keep all containers or other equipment used for storage of such materialsin a clean and unitary condition. Tenant shall, at Tenant’s sole cost andexpense, properly dispose of all sanitary sewage and shall not use the sewagedisposal system for the disposal of anything except sanitary sewage Tenantshall keep the sewage disposal system free of all obstructions and in goodoperating condition. Tenant shall contract directly for all trash disposalservices at Tenant’s sole cost and expense

##  

## **6 5          Parking.**

##  

### (a)                                  Tenant’sParking Privileges. During the Term of this Lease, Landlord shall lease toTenant, and Tenant shall lease from Landlord, the number of parking privilegesspecified In Section 1.14 of the Summary hereof for use by Tenant’s employeesin the common parking areas for the Premises within the Project, as designatedby Landlord from time to time. Landlord shall at all times have the right toreasonably establish and modify the nature and extent of the parking areas forthe Premises and Project (including whether such areas shall be surface,underground and/or other structures) as long as Tenant is provided the numberof parking privileges designated in Section 1 14 of the Summary In

 

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### addition,Landlord may, in its sole discretion, assign any unreserved and unassignedparking privileges, and/or make all or a portion of such privileges reserved orunreserved so long as Tenant Is provided the total number of parking privilegesin Section 1 14 of the Summary

###  

### (b)                                 ParkingPrivileges. Loss of Privileges. Each of Tenant’s parking privileges setforth in Section 1 14 of the Summary hereof shall not be subject to anyadditional charge to Tenant. In addition to such parking privileges for use byTenant’s employees, Landlord shall permit access to the parking areas forTenant’s visitors, subject to availability of spaces

###  

### (c)                                  ParkingRules The use of the parking areas shall be subject to any reasonable,non-discriminatory rules and regulations adopted by Landlord and/or Landlord’sparking operators from time to time, including any system for controlledingress and egress and charging visitors and invitees, with appropriateprovision for validation of such charges Tenant shall not use more parkingprivileges than its allotment and shall not use any parking spaces specificallyassigned by Landlord to other tenants of the Project or for such other uses asvisitor parking Tenant’s parking privileges shall be used only for parking byvehicles no larger than normally sized passenger automobiles or pick-up trucksTenant shall not permit or allow any vehicles that belong to or are controlledby Tenant or Tenant’s employees, suppliers, shippers, customers or invitees tobe loaded, unloaded, or parked in areas other than those designated by Landlordfor such activities if Tenant permits or allows any of the prohibitedactivities described herein, then Landlord shall have the right, withoutnotice, in addition to such other rights and remedies that it may have, toremove or tow away the vehicle involved and charge the cost thereof to Tenant,which cost shall be immediately payable by Tenant upon demand by Landlord

###  

# **7        ****Payments and Notices.** All Rent andother sums payable by Tenant to Landlord hereunder shall be paid to Landlord atthe address designated in Section 1 1 of the Summary, or to such other personsand/or at such other places as Landlord may hereafter designate in writing. Anynotice required or permitted to be given hereunder must be in writing and maybe given by personal delivery (including delivery by nationally recognizedovernight courier or express mailing service), facsimile transmission, or byregistered or certified mail postage prepaid, return receipt requested,addressed to Tenant at the address(es) designated in Section 1 2 of theSummary, or to Landlord at the address(es) designated in Section 1 1 of theSummary Either party may, by written notice to the other, specify a differentaddress for notice purposes Any such notice shall be deemed duly served orgiven when actually (i) delivered or refused, if personally delivered or sentby registered or certified mail or (ii) recorded as transmitted, if byfacsimile transmission

#  

# **8        ****Brokers**. The parties recognize thatthe broker(s) who negotiated this Lease are stated in Section 1 11 of theSummary. Each party represents and warrants to the other, that, to itsknowledge, no other broker, agent or finder (a) negotiated or was Instrumentalin negotiating or consummating this Lease on its behalf, and (b) is or might heentitled to a commission or compensation in connection with this Lease. Anybroker, agent or finder of Tenant whom Tenant has failed to disclose hereinshall be paid by Tenant. Tenant shall Indemnify, protect, defend (by counselreasonably approved in writing by Landlord) and hold Landlord harmless from andagainst any and all claims, judgments, suits, causes of action, damages,losses, liabilities and expenses (including attorneys’ fees and court costs)resulting from any breach by Tenant of the foregoing representation, including,without limitation, any claims that may be asserted against Landlord by anybroker, agent or finder undisclosed by Tenant herein Landlord shall Indemnify,protect, defend (by counsel reasonably approved in writing by Tenant) and holdTenant harmless from and against any and all claims, judgments, suits, causes ofaction, damages, losses, liabilities and expenses (including attorneys’ feesand court costs) resulting from any breach by Landlord of the foregoingrepresentation, including, without limitation. any claims that may be assertedagainst Tenant by any broker, agent or finder undisclosed by Landlord herein.The foregoing indemnities shall survive the expiration or earlier terminationof this Lease

 

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# **9         Surrender: Holding Over**

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## **9 1         ****Surrender of Premises**. Upon the expiration or sooner termination of this Lease, Tenant shallsurrender all keys for the Premises to Landlord, and Tenant shall deliverexclusive possession of the Premises to Landlord broom clean and in first-classcondition and repair, reasonable wear and tear excepted (and casualty damageexcepted if this Lease is terminated as a result thereof pursuant to Section16), with all of Tenants personal property (and those items, if any, of Tenantimprovements and Tenant Changes identified by Landlord pursuant to Section 12 2below) removed therefrom and all damage caused by such removal repaired, asrequired pursuant to Sections 12 2 and 12 3 below If, for any reason, Tenantfails to surrender the Premises on the expiration or earlier termination ofthis Lease, with such removal and repair obligations completed, then, inaddition to the provisions of Section 9 3 below and Landlord’s rights andremedies under Section 12 4 and the other provisions of this Lease, Tenantshall indemnify, protect, defend (by counsel reasonably approved in writing byLandlord) and hold Landlord harmless from and against any and all claims,judgments, suits, causes of action, damages, losses, liabilities and expenses(including attorneys’ fees and court costs) resulting from such failure tosurrender, including, without limitation, any claim made by any succeedingtenant based thereon The foregoing indemnity shall survive the expiration orearlier termination of this Lease

##  

## **9 2         ****Holding Over.**  IfTenant holds over after the expiration or earlier termination of the LeaseTerm, then, without waiver of any right on the part of Landlord as a result ofTenants failure to timely surrender possession of the Premises to Landlord,Tenant shall become a tenant at sufferance only, upon the terms and conditionsset forth in this Lease so far as applicable (including Tenants obligation topay all costs, expenses and any other additional rent under this Lease), but ata Monthly Rent equal to one hundred fifty percent (150%) of the Monthly Rentapplicable to the Premises immediately prior to the date of such expiration orearlier termination. Acceptance by Landlord of rent after such expiration orearlier termination shall not constitute a consent to a hold over hereunder orresult in an extension of this Lease. Tenant shall pay an entire month’s MonthlyRent calculated in accordance with this Section 9 2 for any portion of a monthit holds over and remains in possession of the Premises pursuant to thisSection 9.2

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## **9 3         ****No Effect on Landlord’s Rights**. The foregoing provisions ofthis Section 9 are in addition to, and do not affect, Landlord’s right ofre-entry or any other rights of Landlord hereunder or otherwise provided at lawor in equity

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# **10       Taxes.**

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## **10 1       ****Real Property Taxes**. Tenant agrees to pay theBuilding’s Share of all general and special real property taxes, assessments(including, without limitation, change in ownership taxes or assessments),liens, bond obligations, license fees or taxes and any similar impositionsin-lieu of other impositions now or previously within the definition of realproperty taxes or assessments and any and all assessments under any covenants,conditions and restrictions affecting the Project (collectively “Real PropertyTaxes”) which may be now or hereafter levied or assessed against the Projectapplicable to the period from the Early Occupancy Date , until the expirationor sooner termination of this Lease Notwithstanding the foregoing provisions,if the Real Property Taxes are not levied and assessed against the entireProject by means of a single tax bill (i e , if the Project is separated intotwo (2) or more separate tax parcels for purposes of levying and assessing theReal Property Taxes), then, at Landlord’s option, Tenant shall pay Tenant’s prorata share of all Real Property Taxes which may be levied or assessed by anylawful authority against the land and improvements of the separate tax parcelon which the Premises are located Tenant’s pro rata share under suchcircumstances shall be apportioned according to the floor area of the Premisesas it relates to the total leasable floor area of all of the buildings(including the Premises) situated in the separate tax parcel In which thePremises is located Notwithstanding anything in this Section 10 1 to thecontrary, “Real Property Taxes” shall not include Landlord’s federal or stateincome, franchise, Inheritance or estate taxes Upon Tenant’s request, Landlordshall, at Tenant’s sole cost and expense, contest the amount of Real PropertyTaxes for the Project, which contest shall be undertaken in a manner to be reasonablydetermined by Landlord.

##  

All RealProperty Taxes for the tax year in which the Early Occupancy Date occurs andfor the tax year In

 

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which thisLease terminates shall be apportioned and adjusted so that Tenant shall not beresponsible for any Real Property Taxes for a period of time occurring prior tothe Early Occupancy Date or subsequent to the expiration of the Lease term.

 

The amount tobe paid pursuant to the provisions of this Section 10.1 shall be paid monthlyin advance as part of Tenant’s Monthly Operating Expense Charge as estimated byLandlord based on the most recent tax bills and estimates of reappraised values(if reappraisal is to occur), commencing with the month (or partial month on aprorated basis If such be the case) that the Commencement Date occurs Theinitial estimated monthly charge for the Building’s Share of Real PropertyTaxes is included in the Monthly Operating Expense Charge as provided inSection 4

 

Notwithstandinganything in this Lease to the contrary, Tenant shall be solely responsible for,and shall pay directly to Landlord (in addition to Tenant’s Monthly OperatingExpense Charge pertaining to Real Property Taxes), any increase in RealProperty Taxes on account of any Improvements made to the Premises by Tenant including,but not limited to, the Tenant Improvements

 

If at any timeduring the Term under the laws of the United States, or the state, county,municipality, or any political subdivision thereof In which the Premises islocated, a tax or excise on rent or any other tax however described is leviedor assessed by any such political body against Landlord on account of rentpayable to Landlord hereunder or any tax based on or measured by expendituresmade by Tenant on behalf of landlord, such tax or excise shall be considered“Real Property Taxes” for purposes of this Section 10.1, and shall be payablein full by Tenant. Such taxes or excises shall be payable within thirty (30)days after Tenant’s receipt of the tax bill therefor from Landlord

 

## **10 2       ****Personal Property Taxes**. Tenant shall be liable for, and shall pay before delinquency, all taxesand assessments (real and personal) levied against (a) any personal property ortrade fixtures placed by Tenant in or about the Premises (including anyincrease in the assessed value of the Premises based upon the value of any suchpersonal property or trade fixtures); and (b) any Tenant Improvements oralterations in the Premises (whether installed and/or paid for by Landlord orTenant). If any such taxes or assessments are levied against Landlord orlandlord’s property, Landlord may, after written notice to Tenant (and underproper protest if requested by Tenant) pay such taxes and assessments, andTenant shad reimburse Landlord therefor within thirty (30) days after demand byLandlord; provided, however, Tenant, at Its sole cost and expense, shall havethe right, with Landlord’s cooperation, to bring suit in any court of competentjurisdiction to recover the amount *of*any suchtaxes and assessments so paid under protest

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# **11       Repairs**

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## **11 1       ****Tenant’s Repair Obligations.**  Except for Landlord’s obligations under Section 11 2 and exceptfor latent defects in the Premises not caused by Tenant or Tenant’simprovements to the Premises, Tenant shall at all times and at Tenant’s solecost and expense, keep, maintain, clean, repair, renovate, retrofit, replaceand preserve the Premises and all parts thereof, structural and non-structural,including, without limitation, utility meters, plumbing, pipes and conduits,all heating, ventilating and air conditioning systems located within thePremises, all fixtures, furniture and equipment. Tenant’s signs, if any, locks,closing devices, security devices, windows, window sashes, casements andframes, floors and floor coverings, shelving, restrooms, ceilings, interiorwalls, roof, skylights, interior and demising walls, doors, electrical andlighting equipment, sprinkler systems, walkways, loading dock areas and doors,rail spur areas, fences, signs, and any Tenant improvements, Tenant Changes orother alterations, additions and other property and/or fixtures located withinthe Premises in good condition and repair, reasonable wear and tear exceptedTenant shall at all times during the Term make all structural andnon-structural changes, repairs and improvements to the Premises of every kindand nature, whether ordinary or extraordinary, foreseen or unforeseen, whichmay be required by any Laws or for the safety of the Premises Tenant agrees toprocure and maintain maintenance contracts for all heating, ventilating and airconditioning systems with reputable contractors reasonably approved by LandlordTenant agrees, at Tenant’s sole cost and expense, to use contractors designatedor otherwise approved by Landlord for any repairs to, or that will adverselyaffect, the Building’s systems and equipment Such maintenance and repairs shallbe performed with due diligence, lien-free and in a good and workmanlikemanner, by

 

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## licensed contractor(s) which are selected byTenant and approved by Landlord, which approval Landlord shall not unreasonablywithhold or delay

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## **11 2       ****Landlord’s Repair Rights and Obligations**.  Except as provided in this Section 11 2,Landlord has no obligation whatsoever to alter, remodel, improve, repair,renovate, retrofit, replace, redecorate or paint all or any part of thePremises Tenant waives the right to make repairs at Landlord’s expense underany law, statute or ordinance now or**hereafter ineffect (including the provisions of California Civil Code Section 1942 and anysuccessive sections or statutes of a similar nature). If Tenant falls toperform Tenant’s obligations under Section 11 1 hereof, or under any otherprovision of this Lease, then Landlord shall have the option (but not theobligation) to enter upon the Premises after ten (10) days’ prior writtennotice to Tenant, or in the case of an emergency immediately without priornotice, to perform such obligations on Tenant’s behalf necessary to return thePremises to good order, condition and repair, whereupon the costs incurred byLandlord shall become due and payable to Landlord, upon demand. together with afee of ten percent (10%) of the costs of such work for Landlord’s managingagent In addition, Landlord shall, as part of Operating Expenses (but subject,to the extent applicable, Section 4 4(xii) hereof) for the Project, repair andmaintain the Building shell, exterior walls, foundations and structuralportions of the roof; provided, however, to the extent such maintenance orrepairs are required as a result of any act, neglect, fault or omission ofTenant or any of Tenant’s Parties or otherwise made necessary due to Tenant’suse or occupancy of the Premises, Tenant shall pay to Landlord upon demand, asadditional rent, the costs of such maintenance and repairs, together with a feeof ten percent (10%) of said costs

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## **11 3       ****AS-IS** Tenant acknowledges and agrees that, except to theextent specifically set forth in this Lease and except for latent defects inthe Premises not caused by Tenant or Tenant’s improvements to the Premises,Landlord has not made, does not make and specifically negates and disclaims anyrepresentations, warranties, promises, covenants, agreements or guarantees ofany kind or character whatsoever concerning or with respect to (a) the value,nature, quality or condition of the Premises, (b) the suitability of thePremises for any and all activities and uses which Tenant may conduct thereon;(c) tie compliance of the Premises with any laws, rules, ordinances orregulations of any applicable governmental authority or body, including,without limitation, environmental laws (collectively, “Laws”), (d) thehabitability, merchantability, marketability, profitability or fitness for aparticular purpose of the Premises, (e) the manner or quality of the constructionor materials incorporated into the Premises, (f) the manner, quality, state ofrepair or lack of repair of the Premises; or (g) any other matter with respectto the Premises Tenant further acknowledges and agrees that having been giventhe opportunity to inspect the Premises, Tenant is retying solely on its ownInvestigation of the Premises and not on any information provided or to beprovided by Landlord Tenant further acknowledges and agrees that anyinformation provided or to be provided by or on behalf of Landlord with respectto the Premises, was obtained from a variety of sources and that Landlord hasnot made any independent investigation or verification of such information andmakes no representations as to the accuracy or completeness of such informationTenant further acknowledges and agrees that, except to the extent specificallyset forth In this Lease, the leasing of the Premises as provided for herein ismade on an “AS-IS” condition and basis with all faults Except as otherwiseexpressly provided in this Lease, Landlord shall have no liability orresponsibility for any latent or patent defects in the Premises Tenant andanyone claiming by, through or under Tenant hereby fully and irrevocablyreleases Landlord from any and all claims that it may now have or hereafteracquire against Landlord for any cost, loss, liability, damage, expense,demand, action or cause of action arising from or related to any constructiondefects, errors, omissions or other conditions, including, but not limited to,environmental matters (but subject to Landlord’s indemnity set forth In Section6 3 hereof), now or hereafter affecting the Premises. This release Includesclaims of which Tenant Is presently unaware or which Tenant does not presentlysuspect to exist in its favor which, if known by Tenant, would materiallyaffect Tenant’s release of Landlord Tenant specifically waives the provision ofCalifornia Civil Code § 1542, which provides as follows: “A general releasedoes not extend to claims which the creditor does not know or suspect to existin his favor at the time of executing the release, which If known by him musthave materially affected his settlement with the debtor”

 

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**12       Alterations.**

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## **12 1        TenantChanges; Conditions**

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### (a)                                  Tenantshall not make any alterations, additions, improvements or decorations to thePremises (collectively, “Tenant Changes,” and individually, a “Tenant Change”)unless Tenant first obtains Landlord’s prior written approval thereof, whichapproval Landlord shall not unreasonably withhold or delay Notwithstanding theforegoing, Landlord’s prior approval shall not be required for any TenantChange which satisfies all of the following conditions (hereinafter a“Pre-Approved Change”): (i) the costs of such Tenant Change does not exceed Twenty-FiveThousand Dollars ($25,000 00) individually, (ii) the costs of such TenantChange when aggregated with the costs of all other Tenant Changes made byTenant do not exceed One Hundred Thousand Dollars ($100,000 00) In any one (1)year period, (iii) Tenant delivers to Landlord final plans, specifications andworking drawings for such Tenant Change at least ten (10) days prior tocommencement of the work thereof, (iv) Tenant and such Tenant Change otherwisesatisfy all other conditions set forth in this Section 12 1, and (v) the TenantChange does not affect the structural, mechanical, life-safety, the roof or theexterior of the Premises

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### (b)                                 AllTenant Changes shall be performed: (i) in accordance with the approved plans,specifications and working drawings; (ii) lien-free and In a good andworkmanlike manner, (iii) In compliance with all laws, rules and regulations ofall governmental agendas and authorities including, without limitation, theprovisions of Title Ill of the ADA, and (iv) at such times, In such manner andsubject to such rules and regulations as Landlord may from time to timereasonably designate

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### (c)                                  Throughoutthe performance of the Tenant Changes, Tenant shall obtain, or cause itscontractors to obtain, workers compensation insurance and commercial generalliability insurance in compliance with the provisions of Section 20 of thisLease

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## **12 2       ****Removal of Tenant Changes and Tenant Improvements**. AllTenant Changes and the initial Tenant Improvements in the Premises (whetherinstalled or paid for by Landlord or Tenant), shall become the property ofLandlord and shall remain upon and be surrendered with the Premises at the endof the Term of this Lease, provided, however, Landlord may, by written noticedelivered to Tenant on or before the expiration of the Lease Term (or upon anysooner termination of this Lease) identify those items of the Initial TenantImprovements and Tenant Changes which Landlord shall require Tenant to removeat the end of the Term of this Lease Landlord shall notify Tenant nine (9)months before the expiration of the Lease Term of any Tenant Changes and TenantImprovements that Landlord shall require Tenant to remove at the end of theTerm of this Lease If Landlord requires Tenant to remove any such items asdescribed above, Tenant shall, at its sole cost, remove the identified items onor before the expiration or sooner termination of this Lease and repair anydamage to the Premises caused by such removal (or, at Landlord’s option, shallpay to Landlord all of Landlord’s costs of such removal and repair).Notwithstanding anything above to the contrary, Tenant shall have the right, atTenant’s sole cost and expense, to remove any Tenant Improvements in thePremises that constitute Tenant’s biomedical manufacturing use improvements (asopposed to those Tenant Improvements that are general office type improvements)(the “Special Improvements”), which Special Improvements are more particularlydescribed on Exhibit “C-3” attached hereto, provided, however thatTenant shall remove such Special Improvements on or before the expiration orsooner termination of this Lease and repair any damage to the Premises causedby the removal of such Special Improvements (or, at Landlord’s option, shallpay to Landlord all of Landlord’s costs of such removal and repair)

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## **12 3       ****Removal of Personal Property**.  All articles of personal property owned by Tenant or installed byTenant at its expense in the Premises (including business and trade fixtures,furniture and movable partitions) shall be, and remain the property of Tenant,and shall be removed by Tenant from the Premises, at Tenant’s sole cost andexpense, on or before the expiration or sooner termination of this Lease Tenantshall repair any damage caused by such removal

 

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## **12 4       ****Tenant’s Failure to Remove**. If Tenant falls to remove by the expiration or sooner termination ofthis Lease all of its personal property, or any Items of Tenant Improvements orTenant Changes identified by Landlord for removal pursuant to Section 12 2above, Landlord may, (without liability to Tenant for loss thereof), atTenant’s sole cost and in addition to Landlord’s other rights and remediesunder this Lease, at law or in equity (a) remove and store such items inaccordance with applicable law, and/or (b) upon ten (10) days’ prior notice toTenant sell all or any such items at private or public sale for such price asLandlord may obtain as permitted under applicable law Landlord shall apply theproceeds of any such sale to any amounts due to Landlord under this Lease fromTenant (including Landlord’s attorneys’ fees**and othercosts incurred in the removal, storage and/or sale of such items), with anyremainder to be paid to Tenant

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# **13      ****Liens**.  Tenant shall not permit any mechanic’s, materialmen’s or otherliens to be filed against all or any part of the Premises, nor against Tenant’sleasehold interest in the Premises, by reason of or in connection with anyrepairs, alterations, improvements or other work contracted for or undertakenby Tenant or any other act or omission of Tenant or Tenant’s agents, employees,contractors, licensees or Invitees. Tenant shall, at Landlord’s request,provide Landlord with enforceable, conditional and final lien releases (andother reasonable evidence reasonably requested by Landlord to demonstrateprotection from liens) from all persons furnishing labor and/or materials withrespect to the Premises Landlord shall have the right at all reasonable timesto post on the Premises and record any notices of non-responsibility which itdeems necessary for protection from such liens If any such liens are filed,Tenant shall, at its sole cost, immediately cause such lien to be released ofrecord or bonded so that it no longer affects title to the Premises If Tenantfalls to cause such lien to be so released or bonded within thirty (30) daysafter filing thereof, Landlord may, without waiving its rights and remediesbased on such breach, and without releasing Tenant from any of its obligations,cause such lien to be released by any means it shall deem proper, includingpayment in satisfaction of the claim giving rise to such lien Tenant shall payto Landlord within thirty (30) days alter receipt of invoice from Landlord, anysum paid by Landlord to remove such liens, together with interest at the InterestRate from the date of such payment by Landlord

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# **14       Assignment and Subletting.**

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## **14 1       ****Restriction on Transfer.** Tenant will not assign or encumber this Lease in whole or in part, norsublet all or any part of the Premises, without the prior mitten consent ofLandlord, which consent Landlord will not unreasonably withhold, except asprovided in this Section 14 The consent by Landlord to any assignment,encumbrance or subletting shall not constitute a waiver of the necessity forsuch consent to any subsequent assignment or subletting This prohibitionagainst assigning or subletting shall be construed to include a prohibitionagainst any assignment or subletting by operation of law If this Lease isassigned by Tenant, or it the Premises or any part thereof are sublet oroccupied by any person or entity other than Tenant, Landlord may collect rentfrom the assignee, subtenant or occupant, and apply the net amount collected tothe rent herein reserved, but no such assignment, subletting, occupancy orcollection shall be deemed a waiver on the part of Landlord, or the acceptanceof the assignee, subtenant or occupant as Tenant, or a release of Tenant fromthe further performance by Tenant of covenants on the pan of Tenant hereincontained unless expressly made in writing by Landlord irrespective of anyassignment or sublease, Tenant shall remain fully liable under this Lease andshall not be released from performing any of the terms, covenants andconditions of this Lease. Without limiting In any way Landlord’s right towithhold its consent on any reasonable grounds, it is agreed that Landlord willnot be acting unreasonably in refusing to consent to an assignment or subleaseif, in Landlord’s opinion, (i) the net worth or financial capabilities of suchassignee is *less*than that of Tenant at the datehereof, (ii) the proposed assignee or subtenant does not have the financialcapability to fulfill the obligations imposed by the assignment, (iii) theproposed assignment or sublease involves a change of use of the Premises fromthat specified herein, or (iv) the proposed assignee or subtenant is not, inLandlord’s reasonable opinion, of reputable or good character Any proposedassignee or subtenant which Landlord does not disapprove shall be deemed a“Permitted Business.” Except with respect to a transfer of stock of Tenant ifTenant is a publicly-held corporation and such stock is transferred publicly orthrough a recognized security exchange or over-the-counter market, if Tenant isa corporation, or is an unincorporated association or partnership, thetransfer, assignment or hypothecation of any stock or interest in suchcorporation,

 

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## association or partnership in the aggregatein excess of forty-nine percent (49%) shall be deemed an assignment within themeaning and provisions of this Section 14 1

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## **14 2       ****Transfer Notice**.  IfTenant desires to effect an assignment, encumbrance or subletting (a“Transfer”), then at least thirty (30) days prior to the date when Tenantdesires the Transfer to be effective (the “Transfer Date”), Tenant agrees togive Landlord a notice (the “Transfer Notice”), stating the name, address andbusiness of the proposed assignee, sublessee or other transferee (sometimesreferred to hereinafter as “Transferee”), reasonable information (includingreferences) concerning the character, ownership, and financial condition of theproposed Transferee, the Transfer Date, any ownership or commercialrelationship between Tenant and the proposed Transferee, and the considerationand all other material terms and conditions of the proposed Transfer, all insuch detail as Landlord may reasonably require

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## **14 3       ****Landlord’s Options**. Within fifteen (15) days of Landlord’s receipt of any Transfer Notice,and any additional information requested by Landlord concerning the proposedTransferee’s financial responsibility, Landlord will notify Tenant of Itselection to do one of the following (i) consent to the proposed Transfersubject to such reasonable conditions as Landlord may impose in providing suchconsent; or (ii) refuse such consent, which refusal shall be on reasonablegrounds, or (iii) with respect to a Transfer (but not including a Transfer toan Affiliate or to a Special Transferee) of more than fifty-one percent (51%)of the Premises, terminate this Lease as to all of the Premises or, inLandlord’s sole and absolute discretion, such portion of the Premises which isproposed to be sublet or assigned and recapture all or such portion of thePremises for reletting by Landlord

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## **14 4       ****Additional Conditions**. A condition to Landlord’s consent to any Transfer of this Lease will bethe delivery to Landlord of a true copy of the fully executed instrument ofassignment, sublease, transfer or hypothecation, in form and substancereasonably satisfactory to Landlord Tenant agrees to pay to Landlord, asadditional rent, fifty percent (50%) of all sums and other considerationpayable to and for the benefit of Tenant by the assignee or sublessee in excessof the rent payable under this Lease for the same period and portion of thePremises In calculating excess rent or other consideration which may be payableto Landlord under this Section, Tenant will be entitled to deduct commerciallyreasonable third party brokerage commissions and attorneys’ fees and otheramounts reasonably and actually expended by Tenant in connection with suchassignment or subletting if acceptable written evidence of such expenditures isprovided to Landlord No Transfer will release Tenant of Tenant’s obligationsunder this Lease or alter the primary liability of Tenant to pay the Rent andto perform all other obligations to be performed by Tenant hereunder landlordmay require that any Transferee remit directly to Landlord on a monthly basis,all monies due Tenant by said Transferee, and each sublease shall provide thatif Landlord gives said sublessee written notice that Tenant is in default underthis Lease, said sublessee will thereafter make all payments due under thesublease directly to or as directed by Landlord, which payments will becredited against any payments due under this Lease. Tenant hereby irrevocablyand unconditionally assigns to Landlord all rents and other sums payable underany sublease of the Premises, provided, however, that Landlord hereby grantsTenant a license to collect all such rents and other sums so long as Tenant isnot In default under this Lease Tenant shall, within ten (10) days after theexecution and delivery of any assignment or sublease, deliver a duplicateoriginal copy thereof to Landlord. Consent by Landlord to one Transfer will notbe deemed consent to any subsequent Transfer. In the event of default by anyTransferee of Tenant or any successor of Tenant in the performance of any ofthe terms hereof, Landlord may proceed directly against Tenant without thenecessity of exhausting remedies against such Transferee or successor If Tenanteffects a Transfer or requests the consent of Landlord to any Transfer (whetheror not such Transfer is consummated), then, upon demand, and as a conditionprecedent to Landlord’s consideration of the proposed assignment or sublease,Tenant agrees to pay Landlord a non-refundable administrative fee of FiveHundred Dollars ($500.00), plus Landlord’s reasonable attorneys’ fees and costsand other costs incurred by Landlord in reviewing such proposed assignment orsublease Notwithstanding any contrary provision cleft Lease, if Tenant or anyproposed Transferee claims that Landlord has unreasonably withheld or delayedits consent to a proposed Transfer or otherwise has breathed its obligationsunder this Section 14, Tenants and such Transferee’s only remedy shall be toseek a declaratory judgment and/or injunctive relief, and Tenant, on behalf ofitself and, to the extent permitted by law, such proposed Transferee waives,unless Landlord’s consent was

 

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## withheld in bad faith, all other remediesagainst Landlord, including without limitation, the right to seek monetarydamages or to terminate this Lease

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## **14 5       ****Permitted Transfers.** Notwithstanding anything to the contrary contained in this Article 14,Landlord consents to the Transfer of the Premises to an adequately capitalizedentity which is controlled by, controls, or is under common control with,Tenant (an “Affiliate”), provided that Tenant notifies Landlord of any suchTransfer prior to the effective date thereof and promptly supplies Landlordwith any documents or information requested by Landlord regarding such Transferor such Affiliate (Including an assumption of Tenant’s obligations under thisLease), and further provided that such Transfer is not a subterfuge by Tenantto avoid its obligations under this Lease. “Control,” as used in this Section14 5, shall mean the ownership, directly or indirectly, of greater than fiftypercent (50%) of the voting interest in an entity

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# **15      ****Entry by Landlord**. Landlord and itsemployees and agents shall at all reasonable times following prior notice toTenant (which notice, except in the case of emergencies and except with**respect to ordinary services to beprovided by Landlord within the Premises, shall be no less than twenty-four(24) hours prior notice), have the right to enter the Premises to inspect thesame, to exhibit the Premises to prospective lenders or purchasers (or duringthe last twelve (12) months of the Term, to prospective tenants), to postnotices of non-responsibility, and/or to alter, improve or repair the Premisesas contemplated by Section 11 2 In the event Tenant fails to perform itsobligations under Section 11 1, all without being deemed guilty of or liablefor any breach of Landlord’s covenant of quiet enjoyment or any eviction ofTenant, and without abatement of rent. In exercising such entry rights,Landlord shall endeavor to minimize, as reasonably practicable, theinterference with Tenant’s business, and shall provide Tenant with reasonableadvance written notice of such entry (except In emergency situations) Landlordshall have the means which Landlord may deem proper to open Tenant’s doors inan emergency in order to obtain entry to the Premises. Any such entry (in accordancewith the terms hereof) to the Premises obtained by Landlord by any of saidmeans or otherwise shall not under any circumstances be construed or deemed tobe a forcible or unlawful entry into, or a detainer of, the Premises, or aneviction of Tenant from the Premises or any portion thereof, or grounds for anyabatement or reduction of Rent and Landlord shall not have any liability toTenant for any damages or losses on account of any such entry by Landlordexcept, subject to the provisions of Sections 21.1 and 23, to the extent ofLandlord’s gross negligence or willful misconduct Except for services (if any)required to be provided by Landlord to the Premises under this Lease and exceptin the case of emergencies, Landlord’s entry rights are conditioned upon arepresentative of Tenant (but only to the extent a representative is available)accompanying Landlord during any other entry into the Premises

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# **16      ****Utilities and Services**.  Except for Landlord’s Work (assuch term is defined in Exhibit “C”), Tenant shall be solely responsiblefor obtaining and shall promptly pay all charges for heat, air conditioning,water, gas, electricity or any other utility used, consumed or provided in,furnished to or attributable to the Premises directly to the supplying utilitycompanies Tenant shall reimburse Landlord within thirty (30) days of billingfor fixture charges and/or water tariffs, if applicable, which are charged toLandlord by utility companies Landlord will notify Tenant of this charge assoon as it becomes known This charge will increase or decrease with currentcharges being levied against Landlord or the Premises by the local utilitycompany, and will be due as additional rent In no event shall Rent abate orshall Landlord be liable for any interruption or failure in the supply of anysuch utility services to Tenant.  Tenantacknowledges and agrees that Tenant shall be solely responsible for providingsecurity for the Premises and that Landlord shall not be liable for, andLandlord is hereby released from any responsibility for, any damage either topersons or property sustained by Tenant or any Tenant Parties on account of anyacts of third parties Tenant may, at its own expense, install its own securitysystem (“Tenant’s Security System”) in the Premises, provided, however, thatTenant shall coordinate the installation and operation of Tenant’s SecuritySystem with Landlord to assure that Tenant’s Security System is compatible withthe Building’s systems and equipment and to the extent that Tenant’s Security Systemis not compatible with the Building’s systems and equipment. Tenant shall notbe entitled to install or operate it. Tenant shall  be solelyresponsible, at Tenant’s sole cost and expense, for the monitoring, operationand removal of Tenant’s Security System

 

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# **17       Indemnification and Exculpation**

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## **17 1       ****Tenants Assumption of Risk and Waiver**.  Except to the extent such matter is notcovered by the insurance required to be maintained by Tenant under this Leaseand such matter is attributable to the gross negligence or willful misconductof Landlord or Landlord’s agent(s), Landlord shall not be liable to Tenant.Tenant’s employees, agents or Invitees for (i) any damage to property ofTenant, or of others, located in, on or about the Premises, (ii) the loss of ordamage to any property of Tenant or of others by theft or otherwise, (iii) anyinjury or damage to persons or properly resulting from fire, explosion, fallingplaster, steam, gas, electricity, water, rain or leaks from any part of thePremises or from the pipes, appliance of plumbing works or from the roof,street or subsurface or from any other places or by dampness or by any othercause of whatsoever nature, or (iv) any such damage caused by other persons inthe Premises, occupants of adjacent property, or the public, or caused byoperations in construction of any private, public or quasi-public work Landlordshall in no event be liable for any consequential damages or loss of businessor profits and Tenant hereby waives any and all claims for any**such damages All property of Tenant kept or stored on thePremises shall be so kept or stored at the sole risk of Tenant and Tenant shallhold Landlord harmless from any claims arising out of damage to the same,including subrogation claims by Tenant’s insurance carriers, unless such damageshall be caused by the gross negligence or willful misconduct of Landlord orLandlord’s agent(s) Landlord or its agents shall not be liable for interferencewith the light or other intangible rights.

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## **17 2       ****Indemnification**. Tenant shall be liable for, and shall indemnify, defend, protect andhold Landlord and Landlord’s partners, officers, directors, employees, agents,successors and assigns (collectively, “Landlord indemnified Parties”) harmlessfrom and against, any and all claims, damages, judgments, suits, causes ofaction, losses, liabilities and expenses, including attorneys’ fees and courtcosts (collectively, “Indemnified Claims”), arising or resulting from (a) anyad or omission of Tenant or any of Tenant’s agents, employees, contractors,subtenants, assignees, licensees or Tenant’s invitees (collectively, “TenantParties”), (b) the use of the Premises and conduct of Tenant’s business byTenant or any Tenant Parties, or any other activity, work or thing done, permittedor suffered by Tenant or any Tenant Parties, in or about the Premises, and/or(c) any default by Tenant of any obligations on Tenant’s part to be performedunder the terms of this Lease In case any action or proceeding is broughtagainst Landlord or any Landlord Indemnified Parties by reason of any suchIndemnified Claims, Tenant, upon notice from Landlord, shall defend the same atTenant’s expense by counsel approved in writing by Landlord, which approvalshall not be unreasonably withheld.

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## **17 3       ****Landlord’s Indemnification of Tenant**.  Notwithstanding anything to the contrarycontained In Section 17 2 above, subject to the limitation on Landlord’sliability contained in Section 30 below and the mutual waivers contained inSection 21 1 below, Landlord will be liable for, and agrees to indemnify,protect, defend and hold harmless Tenant and Tenant’s agents, successors andassigns (collectively, “Tenant Indemnified Parties”), from and against, anyIndemnified Claims (as defined in Section 17 2 above) (but not for injury to,or interference with, Tenant’s or any Tenant Indemnified Parties’ business orfor consequential damages), to the extent any such Indemnified Claim arises orresults from (a) any negligent or willful act or omission of Landlord, (b) anydefault by Landlord of any obligations on Landlord’s part to be performed underthe terms of this Lease; and (c) to the extent covered by the insurancerequired to be maintained by Landlord under this Lease (or which would havebeen covered if Landlord had carried such required insurance), any acts oromissions of any third parties occurring in the Common Areas other than thegross negligence or willful misconduct of Tenant or any Tenant’s Parties,provided, however, that Landlord’s indemnity shall not apply or extend to anysuch damage or injury which occurs within the Premises which is covered by anyinsurance maintained by Tenant or any Tenant indemnified Parties (or whichwould have been covered had Tenant obtained the Insurance required under thisLease) In case any action or proceeding Is brought against Tenant or any Tenantindemnified Parties by reason of any such injury or damage indemnified byLandlord as set forth hereinabove, Landlord, upon notice from Tenant, agrees todefend the same at Landlord’s expense by counsel approved in writing by Tenant,which approval Tenant will not unreasonably withhold.

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## **17 4       ****Survival; No Release of Insurers.** Tenant’s indemnificationobligation under Section 17 2, shall survive the expiration or earliertermination of this Lease Tenant’s covenants, agreements and

 

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## indemnification in Sections 17.1 and 17.2above, are not intended to and shall not relieve any insurance carrier of Itsobligations under policies required to be carried by Tenant, pursuant to theprovisions of this Lease

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# **18       Damage or Destruction.**

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## **18 1       ****Landlord’s Rights and Obligations**.  In the event the Premises are damaged by fire or other casualtyto an extent not exceeding forty percent (40%) of the full replacement costthereof, and Landlord’s contractor estimates in a writing delivered to theparties that the damage thereto is such that the Premises may be repaired,reconstructed or restored to substantially its condition immediately prior tosuch damage within two hundred ten (210) days from the date of such casualty,an Landlord will receive insurance proceeds sufficient to cover the costs ofsuch repairs, reconstruction and restoration (including proceeds from Tenantand/or Tenant’s Insurance which Tenant is required to deliver to Landlordpursuant to Section 18 2 below), then Landlord shall commence and proceeddiligently with the work of repair, reconstruction and restoration and thisLease shall continue in full force and effect If, however, the Premises aredamaged to an extent exceeding forty percent (40%) of the full replacement costthereof, or Landlord’s contractor estimates that such work of repair,reconstruction and restoration will require longer than two hundred ten (210)days to complete, or Landlord will not receive insurance proceeds (and/orproceeds from Tenant, as applicable) sufficient to cover the costs of suchrepairs, reconstruction and restoration, then Landlord may elect to either

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### (a)                                  repair,reconstruct and restore the portion of the Premises damaged by such casualty(including the Tenant Improvements and Tenant Changes to the extent ofinsurance proceeds received from Tenant) to substantially the same condition asexisted before the damage or destruction, except for modifications required bybuilding codes and other laws and except for any reasonable modifications tothe common areas, in which case this Lease shall continue In full force andeffect, or

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### (b)                                 terminatethis Lease effective as of the date which is thirty (30) days after Tenant’sreceipt of Landlord’s election to so terminate.

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Under any ofthe conditions of this Section 18 1, Landlord shall give written notice(“Election Notice”) to Tenant of its intention to repair or terminate withinthe later of sixty (80) days Martha occurrence of such casualty, or fifteen(I5) days after Landlord’s receipt of the estimate from Landlord’s contractorNotwithstanding anything above to the contrary, in the event of a damage ordestruction of the Premises where Landlord has made the election In Section 181(a) above, Tenant shall have the right to elect to perform the reconstructionand restoration of the Tenant Improvements, which reconstruction andrestoration shall be performed In a diligent manner and In accordance with theWork Letter Agreement attached hereto and otherwise In accordance with Section12 hereof

 

## **18 2       ****Tenant’s Costs and Insurance Proceeds**.  In the event of any damage or destruction ofall or any part of the Premises, Tenant shall immediately: (a) notify Landlordthereof; and (b) deliver to Landlord all insurance proceeds received by Tenantwith respect to the Tenant Improvements and Tenant Changes in the Premises(excluding proceeds for Tenants furniture and other personal property), whetheror not this Lease is terminated as permitted in this Section 18, and Tenanthereby assigns to Landlord all rights to receive such insurance proceeds. Inthe event Tenant has elected to reconstruct and restore the Tenant Improvementspursuant to Section 18 1 above, than Landlord shall disburse such insuranceproceeds to Tenant on a progress payment basis during Tenant’s reconstructionand restoration of the Tenant Improvements. If, for any reason (includingTenant’s failure to obtain Insurance for the full replacement cost of anyTenant Changes which Tenant is required to insure pursuant to Sections 12.1and/or 20 1(a) hereof). Tenant fails to receive insurance proceeds covering thefull replacement cost of such Tenant Improvements and Tenant Changes which aredamaged, Tenant shall be deemed to have self-Insured the replacement cost ofsuch Tenant Improvements and Tenant Changes, and upon any damage or destructionthereto, Tenant shall immediately pay to Landlord the full replacement cost ofsuch Items, less any insurance proceeds actually received by Landlord fromLandlord’s or Tenant’s insurance with respect to such items.

 

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## **18 3       ****Abatement of Rent**. In the event that as a result of any such damage, repair, reconstructionand/or restoration of the Premises, Tenant is prevented from using, and doesnot use, the Premises or any portion thereof, than the rent shell be abated orreduced, as the case may be, during the period that Tenant continues to be soprevented from using and does not use the Premises or portion thereof, in theproportion that the rentable square feet**of the portionof the Premises that Tenant is prevented from using, and does not use, bears tothe total rentable square feet of the Premises. Notwithstanding the foregoingto the contrary, if the damage is due to the negligence or willful misconductof Tenant or any Tenant Parties, there shall be no abatement of rent. Exceptfor abatement of rent as provided hereinabove, Tenant shall not be entitled toany compensation or damages for loss of, or Interference with, Tenant’sbusiness or use or access of all or any part of the Premises resulting from anysuch damage, repair, reconstruction or restoration.

##  

## **18 4       ****Inability to Complete.** Notwithstanding anything to thecontrary contained in this Section 18, If Landlord is obligated or elects torepair, reconstruct and/or restore the damaged portion of the Premises pursuantto Section 18.1 above, but is delayed from completing such repair,reconstruction and/or restoration beyond the date which is two hundred ten(210) days after the date of the damage or destruction or the date specified inLandlord’s Election Notice, whichever is later, then any party who has notcaused such delay may elect to terminate this Lease upon thirty (30) days’prior written notice sent to the other, provided, however, if Tenant terminatesthis Lease, Landlord may rescind such termination by completing such workwithin twenty (20) days following Landlord’s receipt of Tenants written noticeto terminate. In no event will Tenant have the right to terminate this Leasepursuant to this Section 18 4 to the extent Tenant has elected to perform thereconstruction and restoration of the Tenant Improvements pursuant to Section18 1 above

##  

## **18 5       ****Damage to the Project.** If there is a total destruction of the Project or a partial destructionof the Project, the cost of restoration of which would exceed one-third (1/3)of the then replacement value of the Project, by any cause whatsoever, whetheror not insured against and whether or not the Premises are partially or totallydestroyed, Landlord may within a period of one hundred eighty (180) days afterthe occurrence of such destruction, notify Tenant in writing that it elects notto so reconstruct or restore the Project, in which event this Lease shall ceaseand terminate as of the date of such destruction

##  

## **18 6       ****Damage Near End of Term. **Inaddition to its termination rights in Sections 18.1 and 18.4 above, Landlordshall have the right to terminate this Lease if any damage to the Premisesoccurs during the last twelve (12) months of the Term of this Lease andLandlord’s contractor estimates in a writing delivered to the parties that therepair, reconstruction or restoration of such damage cannot be completed withinthe earlier of (a) the scheduled expiration date of the Lease Term, or (b)sixty (60) days after the date of such casualty

##  

## **18 7       ****Waiver of Termination Right.**  This Lease sets forth the terms and conditions upon which thisLease may terminate In the event of any damage or destruction Accordingly, theparties hereby waive the provisions of California Civil Code Section 1932,Subsection 2, and Section 1933, Subsection 4 (and any successor statutesthereof permitting the parties to terminate this Lease as a result of anydamage or destruction)

##  

# **19       Eminent Domain**

#  

## **19 1       ****Total or Partial Taking**. In case all of the Premises, orsuch part thereof as shall materially and substantially interfere with Tenant’sability to conduct its business upon the Premises, shall be taken for anypublic or quasi-public purpose by any lawful power or authority by exercise ofthe right of appropriation, condemnation or eminent domain, or sold to preventsuch taking, Tenant shall have the right to terminate this Lease effective asof the date possession is required to be surrendered to said authority Tenantshall not assert any claim against Landlord or the taking authority for anycompensation because of such taking, and Landlord shall be entitled to receivethe entire amount of any award without deduction for any estate or interest ofTenant, provided, however, in the event *of*such ataking, Tenant shall be entitled to such portion of the award as shall beattributable to the loss of the unamortized cost of the Improvements to thePremises made and paid for by Tenant pursuant to Exhibit “C” (such

 

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## amortization being the same as that used byTenant for federal income tax purposes), goodwill and for damage to, or thecost of removal of, Tenant’s personal property In the event the amount ofproperty or the type of**estate takenshall not materially and substantially interfere with the ability of Tenant toconduct its business upon the Promises, Landlord shall be entitled to theentire amount of the award without deduction for any estate or interest ofTenant, Landlord shall restore the Premises to substantially their samecondition prior to such partial taking to the extent of any award proceedsreceived by Landlord, and a fair and equitable abatement shall be made toTenant for the Annual Rent corresponding to the time during which, and to thepart of the Premises of which, Tenant shall be so deprived on account of suchtaking and restoration if**the awardproceeds from the taking are insufficient to restore the Premises as requiredby the preceding sentence and Landlord does not provide its own funds to sorestore the Premises, and if as a result thereof Tenant’s ability to use thePremises as contemplated by this Lease is materially and substantiallyImpaired, then Tenant may elect to terminate this Lease by giving Landlordwritten notice thereof; provided. however, Landlord may rescind such terminationby giving Tenant written notice within ten (10) business days followingLandlord’s receipt of such termination notice from Tenant that Landlord willprovide the necessary funds to so restore the Premises Notwithstanding anythingabove to the contrary, if**any part ofthe Project shall be taken (whether or not such taking substantially Interfereswith Tenant’s use of the Premises), Landlord may terminate this Lease uponthirty (30) days’ prior written notice to Tenant as long as Landlord alsoterminates leases of all other tenants leasing comparably sized space withinthe Project for comparable lease terms

##  

## **19 2       ****Temporary Taking**.  Inthe event of taking of the Premises or any part thereof for temporary use, (i)this Lease shall be and remain unaffected thereby and Rent shall not abate, and(ii) Tenant shall be entitled to receive for itself such portion or portions ofany award made for such use with respect to the period of the taking which iswithin the Lease Term For purposes of this Section 19 2, a temporary takingshall be defined as a taking for a period of one (1) year or less

##  

## **19 3       ****Waiver of Termination.** Tenant and Landlord waive any rightto terminate this Lease under Section 1265 130 of the California Code of CivilProcedure, or any similar statute or law now or hereafter in force.

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# **20       Insurance.**

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## **20 1       ****Types of Tenant’s Insurance**.  On or before the earlier of the Early Occupancy Date or the dateTenant commences or causes to be commenced any work of any type in or on anyportion of the Premises, and continuing during the entire Term, Tenant shallobtain and keep In full force and effect respecting the Premises, the followinginsurance

##  

### (a)                                  AllRisk insurance. including fire and extended coverage, sprinkler leakage(including earthquake sprinkler leakage), vandalism and malicious mischief uponproperty of every description and kind located on the premises, including,without limitation, furniture, equipment and any other personal property, anyTenant Changes and the Tenant Improvements (but excluding any improvementspreviously existing in the Premises) in an amount not less then the fullreplacement cost thereof. In the event that there shall be a dispute as to theamount which comprises full replacement cost, the decision of Landlord or themortgagees of Landlord shall be presumptive

###  

### (b)                                 Commercialgeneral liability insurance coverage, including personal injury, bodily injury(including wrongful death), broad form property damage, operations hazard,owner’s protective coverage, contractual liability, liquor liability (if Tenantserves or stores alcohol on the Premises), products and completed operationsliability, and owned/non-owned auto liability, with a general aggregate of notless than Two Million Dollars ($2,000,000 00) The general aggregate amount ofsuch commercial general liability insurance shall be increased every three (3)years during the Term of this Lease to an amount reasonably required byLandlord but only to the extent such increase is required of tenants comparableto Tenant by landlords of buildings comparable to the Building

 

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### (c)                                  Workerscompensation and employer’s liability insurance, in statutory amounts andlimits, covering all persons employed in connection with any work done in, onor about the Premises for which claims for death or bodily injury could beasserted against Landlord, Tenant or the Premises.

###  

### (d)                                 Anyother form or forms of Insurance as Tenant or Landlord or the mortgagees ofLandlord may reasonably require from time to time, in form, amounts and forInsurance risks against which a prudent tenant would protect itself, but onlyto the extent such risks and amounts are available in the Insurance market atcommercially reasonable costs and Is required of tenants comparable to Tenantby landlords of buildings comparable to the Building.

###  

## **20 2       ****Requirements**.  Eachpolicy required to be obtained by Tenant hereunder shall. (a) beissued by insurers authorized to do business in the state in which**the Premises is located and rated not less than financialclass VII, and not less than policyholder rating A- in the most recent versionof Best’s Key Rating Guide (provided that, in any event, the same insurancecompany shall provide the coverages described in Section 20.1(a) above), (b) bein form reasonably satisfactory from time to time to Landlord, (c) name Tenantas named insured thereunder and shall name Landlord and, at Landlord’s request,Landlord’s mortgagees and ground lessors of which Tenant has been informed inwriting, as additional insureds (and with respect to the insurance described inSection 20 1(a) above, as loss-payees) thereunder, all as their respectiveinterests may appear, (d) shall not have a property insurance deductible amountexceeding Twenty-Five Thousand Dollars ($25,000.00), (e) specifically providethat the insurance afforded by such policy for the benefit of Landlord andLandlord’s mortgagees and ground lessors shall be primary, and any insurancecarried by Landlord or Landlord’s mortgagees and ground lessors shall be excessand non-contributing, (i) except for worker’s compensation insurance, containan endorsement that the insurer waives its right to subrogation as described inSection 22 below, and (g) contain an undertaking by the Insurer to notifyLandlord (and the mortgagees and ground lessors of Landlord who are named asadditional Insureds) in writing not less than thirty (30) days prior to anychange, reduction in coverage, cancellation or other termination thereof Tenantagrees to deliver to Landlord, as soon as practicable after the placing of therequired insurance, but in no event later than ten (10) days after the dataTenant takes possession of all or any part of the Premises, certificates fromthe insurance company evidencing the existence of such Insurance and Tenant’scompliance with the foregoing provisions of this Section 20) Tenant shall causereplacement certificates to be delivered to Landlord not less than thirty (30)days prior to the expiration of any such policy or policies If any such Initialor replacement certificates are not furnished within the times) specifiedherein, Tenant shall be deemed to be In material default under this Leasewithout the benefit of any additional notice or cure period provided in Section22 1 below, and Landlord shall have the right, but not the obligation, toprocure such policies and certificates at Tenant’s expense

##  

## **20 3       ****Effect on Insurance**. Tenant shall not do or permit to bedone anything which (a) will violate or invalidate any insurance policymaintained by Tenant or Landlord hereunder or (b) increase the costs of anyinsurance policy maintained by Landlord pursuant to Section 20.4 below. IfTenant’s occupancy or conduct of its business in or on the Premises results Inany increase in premiums for any insurance carried by Landlord with respect tothe Building and/or the Project, Tenant shall pay such increase as additionalrent within thirty (30) days after being billed therefor by Landlord. If anyinsurance coverage canted by Landlord shall be cancelled or reduced (orcancellation or reduction thereof shall be threatened) by reason of the use oroccupancy of the Premises by Tenant or by anyone permitted by Tenant to be uponthe Premises, and if Tenant fails to remedy such condition within five (5)business days after notice thereof, Tenant shall be deemed to be in defaultunder this Lease, without the benefit of any additional notice or cure periodspecified In Section 22 1 below, and Landlord shall have all remedies providedin this Lease, at law or in equity, including, without limitation, the right(but not the obligation) to enter upon the Premises and attempt to remedy suchcondition at Tenant’s cost.

##  

## **20 4       ****Landlord’s Insurance**. During the Term, Landlord shall insure the Common Area Improvements andthe Premises (excluding, however, Tenant’s furniture, equipment, personalproperty, the Tenant Improvements and Tenant Changes) against damage by fireand standard extended coverage perils and

 

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## with vandalism and malicious mischiefendorsements, rental loss coverage, at Landlord’s option, earthquake damagecoverage, and such additional coverage as Landlord deems appropriate Landlordshall also carry commercial general liability Insurance, in such reasonableamounts and with such reasonable deductibles as would be carried by a prudentowner of a similar building in the state in which the Bulking is located. AtLandlord’s option, all such insurance may be carried under any blanket orumbrella policies which Landlord has in force for other buildings and projectsIn addition, at Landlord’s option, Landlord may elect to self-insure all or anypart of such required Insurance coverage. Landlord may, but shall not beobligated to, carry any other form or foam of insurance as Landlord or themortgagees or ground lessors of Landlord may reasonably determine is advisableThe cost of Insurance obtained by Landlord pursuant to this Section 20 4(Including self-insured amounts and deductibles) shall be included in OperatingExpenses

##  

# **21       Waiver of Subrogation**

#  

## **21 1       ****Waiver.**  Tenant andLandlord hereby waive their rights against each other with respect to anyclaims or damages or losses which are caused by or result from (a) damageinsured against under any insurance policy carried by Tenant or Landlord (asthe case may be) pursuant to the provisions of this Lease and enforceable atthe time of such damage or loss, or (b) damage which would have been coveredunder any insurance required to be obtained and maintained by Tenant orLandlord (as the case may be) under Section 20 of this Lease had such insurancebeen obtained and maintained as required therein The foregoing waiver shall bein addition to, and not a limitation of, any other waivers or releasescontained in this Lease

##  

## **21 2       ****Waiver of Insurers.** Tenant shall cause each insurance policy required to be obtainedby it pursuant to Section 20 to provide that the insurer waives all rights ofrecovery by way of subrogation against Landlord in connection with any claims,losses and damages covered by such policy. If Tenant fails to maintain propertyinsurance required hereunder, such insurance shall be deemed to be self-Insuredwith a deemed full waiver of subrogation as set forth in the immediatelypreceding sentence

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# **22       Tenant’s Default and Landlord’sRemedies**

#  

## **22 1       ****Tenants Default**.  Theoccurrence of any one or more of the following events shall constitute adefault under this Lease by Tenant

##  

### (a)                                  thevacation or abandonment of the Premises by Tenant.  “Abandonment” is herein defined to include, but is not limitedto, any absence by Tenant from the Premises for eight (8) business days orlonger while in default in the payment of Rent “Vacation” shall mean vacatingthe Premises without providing a reasonable level of security to minimize thepotential for vandalism, or where the coverage of the property Insurance underSection 20.1(a) is jeopardized as a result thereof,

###  

### (b)                                 thefailure by Tenant to make any payment of Rent or any other payment required tobe made by Tenant hereunder, within ten (10) days of written notice fromLandlord that such payment was not received;

###  

### (c)                                  thefailure by Tenant to observe or perform any of the express or Implied covenantsor provisions of this Lease to be observed or performed by Tenant, other thanas specified in Sections 22 1(a) or (b) above, where such failure shallcontinue for a period of thirty (30) days alter written notice thereof fromLandlord to Tenant, provided, however, that if the nature of Tenant’s defaultis such that more than thirty (30) days are reasonably required for its cure,then Tenant shall not be deemed to be In default if Tenant shall commence suchcure within said thirty (30) day period and thereafter diligently prosecutesuch cure to completion, and

###  

### (d)                                 (i)the making by Tenant of any general assignment for the benefit of creditors,(ii) the

 

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### filing by oragainst Tenant of a petition to have Tenant adjudged a bankrupt or a petitionfor reorganization or arrangement under any law relating to bankruptcy (unless,In the case of a petition filed against the Tenant, the same is dismissedwithin sixty (60) days), (iii) the appointment of a trustee or receiver to takepossession of substantially all of Tenants assets located at the Premises or ofTenants Interest in this Lease, where possession is not restored to Tenantwithin sixty (60) days, or (iv) the attachment, execution or other judicialseizure of substantially all of Tenants assets located at the Premises or ofTenants interest In this Lease where such seizure is not discharged withinsixty (60) days

###  

### (e)                                  Anynotice given under this Section 22 1 shall be in lieu of, and not In additionto, any notice required under California Code of Civil Procedure, Section 1181

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## **22 2       ****Landlord’s Remedies; Termination.**  In the event of any such default by Tenant, in addition to anyother remedies available to Landlord under this Lease, at law or in equity,Landlord shall have the immediate option to terminate this Lease and any rightsof Tenant hereunder. In the event that Landlord shall elect to so terminatethis Lease, then Landlord may recover from Tenant

##  

### (a)                                  theworth at the time of award of any unpaid rent which had been earned at the timeof such termination, plus

###  

### (b)                                 theworth at the time of the award of the amount by which the unpaid rent whichwould have been earned after termination until the time of award exceeds theamount of such rental loss that Tenant proves could have been reasonablyavoided; plus

###  

### (c)                                  theworth at the time of award of the amount by which the unpaid rent for thebalance of the term after the time of award exceeds the amount of such rentalloss that Tenant proves could be reasonably avoided; plus

###  

### (d)                                 anyother amount necessary to compensate landlord for all the detriment proximatelycaused by Tenant’s failure to perform Its obligations under this Lease orwhich, in the ordinary course of things, would be likely to result therefromincluding, but not limited to: unamortized Tenant Improvement costs; attorneys’fees, unamortized brokers’ commissions; the costs of refurbishment,alterations, renovation and repair of the Premises; and removal (including therepair of any damage caused by such removal) and storage (or disposal) ofTenant’s personal property, equipment, fixtures, Tenant Changes, TenantImprovements and any other items which Tenant is required under this Lease toremove but does not remove.

###  

As used inSections 22 2(a) and 22 2(b) above, the “worth at the time of award” Iscomputed by allowing interest at the Interest Rate set forth in Section 1 12 ofthe Summary As used in Section 22 2(c) above, the “worth at the time of award” iscomputed by discounting such amount at the discount rate of the Federal ReserveBank of San Francisco at the time of award plus one percent (1%)

 

## **22 3       ****Landlord’s Remedies; Re-Entry Rights.** In the event of anysuch default by Tenant (with all applicable notice and cure periods havingexpired), in addition to any other remedies available to Landlord under thisLease, at law or In equity, Landlord shall also have the right as permitted byapplicable law, with or without terminating this Lease, to re-enter thePremises and remove all persons and property from the Premises; such propertymay be removed, stored and/or disposed of pursuant to Section 12.4 of thisLease or any other procedures permitted by applicable law. No re-entry ortaking possession of the Premises by Landlord pursuant to this Section 22 3,and no acceptance of surrender of the Premises or other action on Landlord’spart, shall be construed as an election to terminate this Lease unless awritten notice of such intention be given to Tenant or unless the terminationthereof be decreed by a court of competent jurisdiction

 

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## **22 4       ****Landlord’s Remedies; Continuation of Lease.**  In the event of any such default by Tenant,in addition to any other remedies available to Landlord under this Lease, at lawor in equity, Landlord shall have the right to continue this Lease in fullforce and effect, whether or not Tenant shall have abandoned the Premises. Theforegoing remedy shall also be available to Landlord pursuant to CaliforniaCivil Code Section 1951 4 and any successor statute thereof in the event Tenanthas abandoned the Premises. In the event Landlord elects to continue this Leasein full force and effect pursuant to this Section 22.4, then Landlord shall beentitled to enforce all of its rights and remedies under this Lease, includingthe right to recover rent as it becomes due Landlord’s election not toterminate this Lease pursuant to this Section 22 4 or pursuant to any otherprovision of this Lease, at law or in equity, shall not preclude Landlord fromsubsequently electing to terminate this Lease or pursuing any of its otherremedies

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## **22 5       ****Landlord’s Right to Perform**.  Except as specifically provided otherwise to this Lease, allcovenants and agreements by Tenant under this Lease shall be performed byTenant at Tenants sole cost and expense and without any abatement or offset ofrent If Tenant shall fail to pay any sum of money (other than Annual Rent) orperform any other act on its part to be paid or performed hereunder and suchfailure shall continue for ten (10) days with respect to monetary obligations(or thirty (30) days with respect to non-monetary obligations) after Tenant’sreceipt of written notice thereof from Landlord, Landlord may, without waivingor releasing Tenant from any of Tenant’s obligations, make such payment orperform such other act on behalf of Tenant All sums so paid by Landlord and allnecessary incidental costs incurred by Landlord in performing such other actsshall be payable by Tenant to Landlord within five (5) days after demandtherefor as additional rent

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## **22 6       ****Interest**.  If anymonthly installment of Annual Rent, or any other amount payable by Tenanthereunder is not received by Landlord by the date which is ten (10) days fromthe date when due, it shall bear interest at the interest Rate set forth inSection 1 12 of the Summary from the date due until paid All interest, and anylate charges Imposed pursuant to Section 22 7 below, shall be consideredadditional rent due from Tenant to Landlord under the terms of this Lease

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## **22 7       ****Late Charges**.  Tenantacknowledges that, in addition to interest costs, the late payments by Tenantto Landlord of any Annual Rent or other sums due under this Lease will causeLandlord to incur costs not contemplated by this Lease, the exact amount ofsuch costs being extremely difficult and impractical to fix Such other costsinclude, without limitation, processing, administrative and accounting chargesand late charges that may be imposed on Landlord by the terms of any mortgage,deed of trust or related loan documents encumbering the Premises Accordingly,if any monthly Installment of Annual Rent or any other amount payable by Tenanthereunder is not received by Landlord by that date which is ten (10) days fromthe due date thereof, Tenant shall pay to Landlord an additional sum of sixpercent (6%) of the overdue amount as a late charge, but in no event more thanthe maximum late charge allowed by law The parties agree that such late chargerepresents a fair and reasonable estimate of the costs that Landlord will incurby reason of any late payment as hereinabove referred to by Tenant, and thepayment or late charges and interest are distinct and separate in that thepayment of interest is to compensate Landlord for the use of Landlord’s moneyby Tenant, while the payment of late charges is to compensate Landlord forLandlord’s processing, administrative and other costs incurred by Landlord as aresult of Tenant’s delinquent payments Acceptance of a late charge or interestshall not constitute a waiver of Tenant’s default with respect to the overdueamount or prevent Landlord from exercising any of the other rights and remediesavailable to Landlord under this Lease or at law or in equity now or hereafterin effect

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## **22 8        [IntentionallyDeleted].**

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## **22 9       ****Rights and Remedies Cumulative**.  All rights, options and remedies of landlord contained in thisSection 22 and elsewhere in this Lease shall be construed and held to becumulative, and no one of them shall be exclusive of the other, and Landlord shallhave the right to pursue any one or all of such remedies or any other remedy orrelief which may be provided by law or in equity, whether or not stated in thisLease Nothing in this Section 22 shall be deemed to limit or otherwise affectTenant’s indemnification of Landlord pursuant to any provision of this Lease

 

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# **23      ****Landlord’s Default**.  Landlord shall not be in default In theperformance of any obligation required to be performed by Landlord under thisLease unless Landlord has failed to perform such obligation within thirty (30)days after the receipt of written notice from Tenant specifying in detailLandlord’s failure to perform; provided however, that if the nature ofLandlord’s obligation is such that more than thirty (30) days are required forits performance, then Landlord shall not be deemed in default if it commencessuch performance within such thirty (30) day period and thereafter diligentlypursues the same to completion. Upon any such uncured default by Landlord,Tenant may exercise any of its rights provided in law or at equity, provided,however (a) Tenant shall have no right to offset or abate Rent in the event ofany default by Landlord under this Lease; and (b) Tenant’s rights and remedieshereunder shall be limited to the extent (i) Tenant has expressly waived Inthis Lease any of such rights or remedies, and/or (ii) this Lease otherwiseexpressly limits Tenant’s rights or remedies, including the limitation onLandlord’s liability contained in Section 30 hereof

#  

# **24      ****Subordination**.  Without the necessity of any additionaldocument being executed by Tenant for the purpose of effecting a subordination,this Lease shall be subject and subordinate at all times to (a) all groundleases or underlying leases which may now exist or hereafter be executedaffecting the Premises and/or the land upon which the Premises and Project aresituated, or both and (b) any mortgage or deed of trust which may now exist orbe placed upon the Building, the Project and/or the land upon which thePremises or the Project are situated and (c) any ground lease or underlyingleases, or Landlord’s interest or estate in any of said items, which isspecified as security Notwithstanding the foregoing, Landlord shall have theright to subordinate or cause to be subordinated any such ground leases orunderlying leases or any such liens to this Lease. In the event that any groundlease or underlying lease terminates for any reason, or any mortgage or deed oftrust is foreclosed or a conveyance in lieu of foreclosure is made for anyreason, Tenant shall, notwithstanding any subordination, attorn and become theTenant of the successor in interest to Landlord and Tenant shall not bedisturbed in its possession under this Lease by such successor in interest solong as Tenant is not In default under this Lease. Within ten (10) days afterrequest by Landlord, Tenant shall execute and deliver any additional documentsevidencing Tenant’s attornment or the subordination of this Lease with respectto any such ground leases or underlying leases or any such mortgage or deed oftrust, in the form requested by Landlord or by any ground landlord, mortgagee,or beneficiary under a deed of trust, subject to such nondisturbancerequirement Notwithstanding anything above to the contrary, any subordinationof this Lease to any such future mortgage, ground lease or deed of trust isconditioned upon any such future mortgagee, lessor or beneficiary providingTenant with a commercially reasonable form of non-disturbance agreement Tenanthereby waives its rights under any current or future law which gives orpurports to give Tenant any right to terminate or otherwise adversely affectthis Lease and the obligations of Tenant hereunder in the event of any suchforeclosure proceeding or sale. Should Tenant fail to sign and return any suchadditional documents within the ten (10) day period referred to above, Tenantshall be in default hereunder without the benefit of any additional notice orcure periods specified in Section 22 1 above Landlord agrees to cause themortgagees existing as of the date hereof to provide Tenant with a commerciallyreasonable non-disturbance agreement within a commercially reasonable period oftime after Tenant’s request therefor

#  

# **25       Estoppel Certificate.**

#  

## **25 1       ****Tenant’s Obligations**. Within ten (10) business days following Landlord’s written request,Tenant shall execute and deliver to Landlord an estoppel certificate, in a formsubstantially similar to the form of Exhibit “F” attached hereto,certifying (a) the Commencement Dale of this Lease, (b) that this Lease isunmodified and in full force and effect (or, if modified, that this Lease Is infull force and effect as modified, and stating the data and nature of suchmodifications), (c) the date to which the Rent and other sums payable underthis Lease have been paid; (d) that there are not, to the best of Tenant’sknowledge, any defaults under this Lease by either landlord or Tenant, exceptas specified In such certificate, and (e) such other matters as are set forthto Exhibit “F” or are reasonably requested by Landlord. Any suchestoppel certificate delivered pursuant to this Section 25 1 may be relied uponby any mortgagee, beneficiary, purchaser or prospective purchaser of anyportion of the Premises, as well as their assignees

 

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## **25 2       ****Tenant’s Failure to Deliver**.  Tenant’s failure to deliver such estoppel certificate within suchtime shall constitute a default hereunder without the applicability of noticeand cure periods specified in Section 22 1 above and shall be  conclusive upon Tenant that (a) this Leaseis in full force and effect without modification, except as may be representedby Landlord, (b) there are no uncured defaults in Landlord’s or Tenant’sperformance (other than Tenant’s failure to deliver the estoppel certificate);and (c) not more than one (1) month’s rental has been paid in advance

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# **26       Intentionally Omitted.**

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# **27       Modification and Cure Rights ofLandlord’s Mortgagees and Lessors.**

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## **27 1       ****Modifications**.  If,in connection with Landlord’s obtaining or entering into any financing orground lease for any portion of the Premises, the lender or ground lessor shallrequest modifications to this Lease, Tenant shall, within ten (10) days afterrequest therefor, execute an amendment to this Lease including such modifications,provided such modifications are reasonable, do not increase the obligations of**Tenant hereunder, or adversely affect the leasehold estatecreated hereby or Tenant’s rights hereunder

##  

## **27 2       ****Cure Rights**.   In theevent of any default on the part of Landlord, Tenant will give notice byregistered or certified mail to any beneficiary of a deed of trust or mortgageecovering the Premises or ground lessor of Landlord whose address shall havebeen furnished to Tenant, and shall offer such beneficiary, mortgagee or groundlessor a reasonable opportunity to cure the default (including with rasped toany such beneficiary or mortgagee, time to obtain possession of the Premises,subject to this Lease and Tenant’s rights hereunder, by power of**sale or judicial foreclosure, if such should provenecessary to effect a cure).

##  

# **28      ****Quiet Enjoyment**.  Landlord covenants and agrees with Tenantthat, upon Tenant performing all of the covenants and provisions on Tenant’spart to be observed and performed under this Lease (including payment of renthereunder), Tenant shall and may peaceably and quietly have, hold and enjoy thePremises in accordance with and subject to the terms and conditions of thisLease as against all persons claiming by, through or under Landlord.

#  

# **29      ****Transfer of Landlord’s Interest.**  The term “Landlord” as used in this Lease,so far as covenants or obligations on the part of the Landlord are concerned,shall be limited to mean and include only the owner or owners, at the time Inquestion, of the fee title to, or a lessee’s interest in a ground lease of, thePremises. In the event of any transfer or conveyance of any such title orinterest (other than a transfer for security purposes only), the transferorshall be automatically relieved of all covenants and obligations on the part ofLandlord contained in this Lease accruing after the date or such transfer orconveyance Landlord and Landlord’s transferees and assignees shall have theabsolute right to transfer all or any portion of their respective title and interestin the Premises and/or this Lease without the consent of Tenant, and suchtransfer or subsequent transfer shall not be deemed a violation on Landlord’spart of any of the terms and conditions of this Lease

#  

# **30      ****Limitation on Landlord’s Liability**.  Notwithstanding anything contained in thisLease to the contrary, the obligations of**Landlordunder this Lease (including any actual or alleged breach or default byLandlord) do not constitute personal obligations of the individual partners,directors, officers or shareholders of Landlord or Landlord’s partners, andTenant shall not seek recourse against the individual partners, directors,officers or shareholders of Landlord or Landlord’s partners, or any of theirpersonal assets for satisfaction of any liability with respect to this Lease Inaddition, in consideration of the benefits accruing hereunder to Tenant andnotwithstanding anything contained In this Lease to the contrary, Tenant herebycovenants and agrees for itself and all of its successors and assigns that theliability of Landlord for Its obligations under this Lease (including anyliability as a result of any actual or alleged failure, breach or defaulthereunder by Landlord), shall be limited solely to, and Tenant’s and itssuccessors’ and assigns’ sole and exclusive remedy shall be against, Landlord’sinterest in the Premises, and no other assets of landlord.

 

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# **31       Miscellaneous**

#  

## **31 1       ****Governing Law**.  ThisLease shall be governed by, and construed pursuant to, the laws of the state inwhich the Premises is located

##  

## **31 2       ****Successors and Assigns**. Subject to the provisions of Section 29 above, and except as otherwiseprovided in this Lease, all of the covenants, conditions and provisions of thisLease shall be binding upon, and shall inure to the benefit of, the partieshereto and their respective heirs, personal representatives and permittedsuccessors and assigns, provided, however, no rights shall inure to the benefitof any Transferee of Tenant unless the Transfer to such Transferee is made In compliancewith the provisions of Section 14, and no options or other rights which areexpressly made personal to the original Tenant or an Affiliate of Tenant or inany rider attached hereto shall be assignable to or exercisable by anyone otherthan the original Tenant or an Affiliate of Tenant

##  

## **31 3       ****No Merger**. The voluntary or other surrender of this Lease byTenant or a mutual termination thereof shall not work as a merger and shall, atthe option of Landlord, either (a) terminate all or any existing subleases, or(b) operate as an assignment to Landlord of Tenant’s Interest under any or allsuch subleases

##  

## **31 4       ****Professional Fees.** If either Landlord or Tenant should bring suit against the other withrespect to this Lease, including for unlawful detainer or any other reliefagainst the other hereunder, then all costs and expenses incurred by theprevailing party therein (including, without limitation, its actualappraisers’, accountants’, attorneys’ and other professional fees, expenses andcourt costs), shall be paid by the other party

##  

## **31 5       ****Waiver.**  The waiverby either party of any breach by the other party of any term, covenant orcondition herein contained shall not be deemed to be a waiver of any subsequentbreach of the same or any other term, covenant and condition herein contained,nor shall any custom or practice which may become established between theparties in the administration of the terms hereof be deemed a waiver of, or inany way affect, the right of any party to insist upon the performance by theother in strict accordance with said terms. No waiver of any default of eitherparty hereunder shall be Implied from any acceptance by Landlord or delivery byTenant (as the case may be) of any rent or other payments due hereunder or anyomission by the non-defaulting party to take any action on account of suchdefault if such default persists or is repeated, and no express waiver shallaffect defaults other than as specified in said waiver The subsequentacceptance of real hereunder by Landlord shall not be deemed to be a waiver ofany preceding breath by Tenant of any term, covenant or condition of this Leaseother than the failure of Tenant to pay the particular rent so accepted,regardless of Landlord’s knowledge of such preceding breech at the time ofacceptance of such rent

##  

## **31 6       ****Terms and Headings; Interpretation**.  The words “Landlord” and “Tenant” as usedherein shall include the plural as well as the singular. Words used in anygender include other genders. The Section headings of this Lease are not a partof this Lease and shall have no effect upon the construction or Interpretationof any part hereof Any deletion of language from this Lease prior to itsexecution by Landlord and Tenant shall not be construed to raise anypresumption. canon of constriction or implication, including, withoutlimitation, any implication that the parties intended thereby to state theconverse of the deleted language.

##  

## **31 7       ****Time**.   Time is ofthe essence with respect to performance of every provision of this Lease Inwhich time or performance is a factor All references in this Lease to “days”shall mean calendar days unless specifically modified herein to be “business”days.

##  

## **31 8       ****Prior Agreements; Amendments**.  This Lease, including the Summary and all Exhibits and Ridersattached hereto contains all of the covenants, provisions, agreements,conditions and understandings between Landlord and Tenant concerning thePremises and any other matter covered or mentioned in this tease, and no prioragreement or understanding, oral or written, express or implied, pertaining tothe Premises or any such other matter shall be effective for any purpose Noprovision of this Lease may be amended or added to except by an agreement inwriting signed by the parties hereto or their respective successors Ininterest. The parties acknowledge that all prior agreements,

 

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## representations and negotiations are deemedsuperseded by the execution of this Lease to the extent they are not expresslyIncorporated herein.

##  

## **31 9       ****Separability**.  Theinvalidity or unenforceability of any provision of this Lease (except forTenant’s obligation to pay Rent) shall in no way affect, impair or invalidateany other provision hereof, and such other provisions shall remain valid and infull forth and effect to the fullest extent permitted by law.

##  

## **31 10     ****Recording**.  NeitherLandlord nor Tenant shall record this Lease. In addition, neither party shallrecord a short form memorandum of this *Lease*withoutthe prior written consent (and signature on the memorandum) *of the*other, and provided that prior to recordation Tenantexecutes and delivers to Landlord, in recordable form, a properly acknowledgedquitclaim deed or other instrument extinguishing all of the Tenant’s rights andinterest in and to the Premises, and designating Landlord as the transferee,which deed or other instrument shall be held by Landlord and may be recorded byLandlord once this Lease terminates or expires (but not prior thereto). If suchshort form memorandum is recorded In accordance with the foregoing, the partyrequesting the recording shall pay for all costs of or related to suchrecording, including, but not limited to, recording charges and documentarytransfer taxes

##  

## **31 11     ****Exhibits and Riders.** All Exhibits attached to this Lease are hereby incorporated in thisLease for all purposes as though set forth at length herein.

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## **31 12     ****Auctions.**  Tenantshall have no right to conduct any auction in, on or about the Premises

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## **31 13     ****Accord and Satisfaction.**   Nopayment by Tenant or receipt by Landlord of a lesser amount than the rent paymentherein stipulated shall be deemed to be other than on account of the rent, norshall any endorsement or statement on any check or any letter accompanying anycheck or payment as rent be deemed an accord and satisfaction, end Landlord mayaccept such check or payment without prejudice to Landlord’s right to recoverthe balance of such rent or pursue any other remedy provided In this Lease.Tenant agrees that each of the foregoing covenants and agreements shall beapplicable to any covenant or agreement either expressly contained in thisLease or imposed by any statute or at common law.

##  

## **31 14     ****Financial Statements**. Upon ten (10) days prior written request from Landlord (which Landlordmay make at any time during the Term but no more often than once In anycalendar year), Tenant shall deliver to Landlord a current 10-Q quarterlyreport and/or 10-K annual report (“Statements” of Tenant and any guarantor ofthis Lease Such Statements shall be prepared in accordance with generallyacceptable accounting principles and certified as true in all material respectsby Tenant (if Tenant is an Individual) or by an authorized officer or generalpartner of Tenant (if Tenant is a corporation or partnership, respectively)

##  

## **31 15     ****No Partnership**.  Landlord does not, In any way or for any purpose, become a partner ofTenant in the conduct of its business, or otherwise, or joint venturer or amember of a joint enterprise with Tenant by reason of this Lease

##  

## **31 16     ****Force Majeure**. In the event that either party hereto shallbe delayed or hindered in or prevented from the performance of any act requiredhereunder by reason of strikes, lock-outs, labor troubles, inability to procurematerials, failure of power, governmental moratorium or other governmentalaction or inaction (including failure, refusal or delay in Issuing permits,approvals and/or authorizations), Injunction or court order, riots,insurrection, war, fire, earthquake, flood or other natural disaster or otherreason of a like nature not the fault of the party delaying in performing workor doing acts required under the terms of this Lease (but excluding delays dueto financial Inability) (herein collectively, “Force Majeure Delays”, thenperformance of such act shall be excused for the period of the delay and theperiod for the performance of any such act shall be extended for a periodequivalent to the period of such delay The provisions of this Section 31 18shall not apply to nor operate to excuse Tenant from the payment of Rentstrictly in accordance with the terms of this Lease

 

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## **31 17     ****Counterparts**. This Lease may be executed in one or morecounterparts, each of which shall constitute an original and all of which shallbe one and the same agreement

##  

## **31 18     ****Nondisclosure of Lease Terms**. Tenant acknowledges and agreesthat the terms of this Lease are confidential and constitute proprietaryinformation of Landlord Disclosure of the terms could adversely affect theability of Landlord to negotiate other leases and impair Landlord’srelationship with other tenants Accordingly, Tenant agrees that it, and itspartners, officers, directors, employees, agents and attorneys, shall notintentionally and voluntarily disclose the terms and conditions of this Leaseto any newspaper or other publication or any other tenant or apparentprospective tenant of the Building or other portion of the Premises, or realestate agent, either directly or indirectly, without the prior written consentof Landlord, provided, however, that Tenant may disclose the terms toprospective subtenants or assignees under this Lease

##  

## **31 19     ****Non-Discrimination.** Tenant acknowledges and agrees that there shall be no discriminationagainst, or segregation of, any person, group of persons, or entity on thebasis of race, color, creed, religion, age, sex, marital status, nationalorigin, or ancestry In the leasing, subleasing, transferring, assignment,occupancy, tenure, use, or enjoyment of the Premises, or any portion thereof

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# **32       Lease Execution.**

#  

## **32 1       ****Tenant’s Authority**. If Tenant executes this Lease as a partnership or corporation, thenTenant and the persons and/or entities executing this Lease on behalf of Tenantrepresent and warrant that: (a) Tenant is a duly authorized and existingpartnership or corporation, as the case may be, and is qualified to do businessin the state In which the Premises are located; (b) such persons and/orentities executing this Lease are duly authorized to execute and deliver thisLease on Tenant’s behalf in accordance with the Tenants partnership agreement(if Tenant is a partnership), or a duly adopted resolution of Tenant’s board ofdirectors and the Tenant’s by-laws (if Tenant is a corporation), and (c) thisLease Is binding upon Tenant in accordance with its terms.

##  

## **32 2       ****Joint and Several Liability**.   If more than one person or entity executes this Lease as Tenant(a) each of them is and shall be jointly and severally liable for thecovenants, conditions, provisions and agreements of this Lease to be kept, observedand performed by Tenant; and (b) the act or signature of, or notice iron or to,any one or more of them with reaped to this Lease shall be binding upon eachand all of the persons and entitles executing this Lease as Tenant with thesame force and effect as if each and all of them had so acted or signed, orgiven or received such notice

##  

## **32 3       ****No Option**.  Thesubmission of this Lease for examination or execution by Tenant does notconstitute a reservation of or option for the Premises and this Lease shall notbecome effective as a Lease until It has been executed by Landlord anddelivered to Tenant.

##  

# **33          ****Cancellation Option**.  Provided Tenant fully and completelysatisfies each of the conditions set forth in this Section 33, Tenant shallhave a one-time option (“Cancellation Option”) to terminate this Leaseeffective between the period (“Cancellation Period”) commencing on January 1,2003 to March 31, 2003, with the exact cancellation date (“Cancellation Date”)to be the date within the Cancellation Period specified by Tenant in Tenant’sCancellation Notice (as defined below) but in no event earlier than nine (9)months after the date of Tenant’s Cancellation Notice. In older to exercise theCancellation Option, Tenant must fully and completely satisfy each and everyone of the following conditions (a) Tenant must give Landlord written notice(“Cancellation Notice”) of its intention to terminate this Lease, whichCancellation Notice must be delivered to Landlord at least nine (9) monthsprior to the expiration of the Cancellation Period, (b) at the time of theCancellation Notice, Tenant shall not be in material default under this Leaseafter expiration of applicable notice and cure periods, (c) concurrently withTenant’s delivery of the Cancellation Notice to Landlord, Tenant shall pay toLandlord a cancellation fee (“Cancellation Fee”) equal to the sum of (i) theunamortized balance, as of the Cancellation Data, of the brokerage commissionspaid by Landlord in connection with this Lease, plus (ii) an amount equal tofour (4) months’ Monthly Rent calculated at the rate payable at thetime of the Cancellation Date and (d) Tenant shall have satisfied all ofTenant’s surrender obligations under Section 9 1 of the Lease. On the

 

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# Cancellation Data, the parties shall berelieved of any further obligations under this Lease except for thoseobligations in the Lease which survive the termination or expiration thereofAmortization pursuant to this Section 33 shall be calculated on a ten (10) yearamortization schedule commencing as of the Commencement Date based upon equalmonthly payments of principal and interest, with interest imputed on theoutstanding principal balance at the rate of ten percent (10%) per annum

#  

# **34      ****Arbitration.**  In the eventof any dispute by Landlord of Tenant’s audit of the Building’s Shareof Operating Expenses as set forth in Section 4 9, such dispute shall beresolved through binding arbitration pursuant to this Section 34. if demand forarbitration is timely made as provided in Subsection (a) below, such arbitrationshall be conducted in accordance with Title 9 of the California Code of CivilProcedure, Section 1280, et seq„ unless otherwise specified herein Thearbitrator shall be selected from the Commercial Arbitration panel of theAmerican Arbitration Association and shall have commercial real estate leasingand, with respect to a dispute under Section 4 9 hereof, accounting expertiseAny such arbitration shall be held and conducted, within thirty (30) days afterthe selection of an arbitrator, in San Diego County, California. The provisionsof the Commercial Arbitration Rules of the American Arbitration Associationshall apply and govern such arbitration, subject, however, to the following

#  

### (a)                                  Anydemand for arbitration shall be in writing and must be made and served onTenant within a reasonable time after the claim, dispute or other matter inquestions has arisen and in no event shall the demand for arbitration be madeafter the date that institution of legal or equitable proceedings based on suchclaim, dispute, or other matter would be barred by the applicable statute orlimitations

###  

### (b)                                 Allproceedings Involving the parties shall be reported by a certified shorthandcourt reporter and written transcripts of the proceedings shall be prepared andmade available to the parties

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### (c)                                  Aparty can require the arbitrator to make specific rulings on specific Items orquestions of fact The arbitrator shall be bound by the provisions of thisLease, and shall not add to, subtract from or otherwise modify such provisions

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### (d)                                 Finaldecision by the arbitrator must be provided to the parties within thirty (30)days from the date on which the matter is submitted to the arbitrator

###  

### (e)                                  Theprevailing party (as defined below) shall be awarded reasonable attorneys’fees, expert and nonexpert witness costs and expenses (including withoutlimitation the fees and costs of the court reporter described in Subsection (c)above), and other costs and expenses incurred in connection with thearbitration, unless the arbitrator for good cause determines otherwise

###  

### (f)                                    Asused herein, the term “prevailing party” shall mean the party, if any, that thearbitrator determines is “clearly the prevailing party”

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### (g)                                 Costsand fees of the arbitrator shall be borne by the nonprevailng party, unless thearbitrator for good cause determines otherwise. If there is no prevailingparty, the parties shall bear their own fees and costs and split the fees andcosts of the arbitrator and court reporter.

###  

### (h)                                 Theaward or decision of the arbitrator, which may include equitable relief, shallbe final and judgment may be entered on it in accordance with applicable law inany court having jurisdiction over the matter. The provisions of this Section34 are not intended to alter the applicable provisions of law which provide thegrounds on which a court may vacate an arbitration award

###  

### (i)                                     Theprovisions of this Section 34 are not intended to require (1) Landlord toarbitrate any

 

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mattersrelating to any monetary default by Tenant under this Lease, which matters shall,at the election of landlord, be governed by the applicable provisions of thisLease and/or applicable law, or (2) either party to arbitrate any mattersarising under this Lease which are not described in the first sentence of thisSection 34

 

IN WITNESSWHEREOF, the parties have executed this Lease as of the day and year firstabove written.

 
| “TENANT”   | ALLIANCE PHARMACEUTICAL CORP.                   |
|----------------------|-------------------------------------------------|
|                 | a New York corporation                          |
|                 |                                            |
|                 | By:                                             |   |   |
|                 |                                            | Name: |   |   |
|                 |                                            | Title: |   |   |
|                 |                                            |
|                 | By:                                             |   |   |
|                 |                                            | Name: |   |   |
|                 |                                            | Title: |   |   |
|                 |                                            |
|                 |                                            |
| “LANDLORD” | WHAMC REAL ESTATE LIMITED  PARTNERSHIP,         |
|                 | a Delaware limited partnership                  |
|                 |                                            |
|                 | By: WHAMC Gen-Par, Inc., a Delaware corporation |
|                 |                                            |
|                 | By:                                             |   |   |
|                 |                                            | Brad E. Baker |
|                 |                                            | Its:  Senor Vice  President-Southern California |
|                      |                                                 |  |  |  |  |  |  |  |  |  |  |  |

 

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