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other such elements In the Premises, other than those constructed by Lessee, shall be in goodoperating condition on said date, that the structural elements of the roof, bearing walls andfoundation of any buildings on the Premises (the “**Building**”) shall be free of material defects, andthat the Premises do not contain hazardous levels of any mold or fungi defined as toxic underapplicable state or federal law. If a non-compliance with said warranty exists as of the StartDate, or if one of such systems or elements should malfunction or fall within the appropriatewarranty period, Lessor shall, as Lessor’s sole obligation with respect to such matter, except asotherwise provided in this Lease, promptly after receipt of written notice from Lessee settingforth with specificity the nature and extent of such non-compliance, malfunction or failure,rectify same at Lessor’s expense. The warranty periods shall be as follows: (i) 8 months as tothe HVAC systems, and to the remaining systems and other elements of the Building.     **2.3 Compliance.**Lessor warrants that to the best of its knowledge the improvements on thePremises comply with the building codes, applicable laws, covenants or restrictions of record,regulations, and ordinances (“**Applicable Requirements**”) that were in effect at the time that eachImprovement, or portion thereof, was constructed. Said warranty does not apply to the use to whichLessee will put the Premises, modifications which may be required by the Americans withDisabilities Act or any similar laws as a result of Lessee’s use (see Paragraph 50), or to anyAlterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee.**NOTE: Lessee is responsible for determining whether or not the Applicable Requirements, andespecially the zoning, are appropriate for Lessee’s intended use, and acknowledges that past usesof the Premises may no longer be allowed.**If the Premises do not comply with said warranty, Lessorshall, except as otherwise provided, promptly after receipt of written notice from Lessee settingforth with specificity the nature and extent of such non-compliance, rectify the same at Lessor’sexpense. If Lessee does not give Lessor written notice of a non-compliance with this warrantywithin 6 months following the Start Date, correction of that non-compliance shall be the obligationof Lessee at Lessee’s sole cost and expense. If the Applicable Requirements are hereafter changedso as to require during the term of this Lease the construction of an addition to or an alterationof the Premises and/or Building or the reinforcement or other physical modification of the Unit,Premises and/or Building (“**Capital Expenditure**”), Lessor and Lessee shall allocate the cost of suchwork as follows:          **(a)**Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required as a resultof the specific and unique use of the Premises by Lessee as compared with uses by tenants ingeneral, Lessee shall be fully responsible for the cost thereof, provided, however that if suchCapital Expenditure is required during the last 2 years of this Lease and the cost thereof exceeds6 months’ Base Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, inwriting, within 10 days after receipt of Lessee’s termination notice that Lessor has elected to paythe difference between the actual cost thereof and an amount equal to 6 months’ Base Rent. IfLessee elects termination, Lessee shall immediately cease the use of the Premises which requiressuch Capital Expenditure and deliver to Lessor written notice specifying a termination date atleast 90 days thereafter. Such termination date shall, however, in no event be earlier than thelast day that Lessee could legally utilize the Premises without commencing such CapitalExpenditure.          **(b)**If such Capital Expenditure is not the result of the specific and unique use of thePremises by Lessee (such as, governmentally mandated seismic modifications), then Lessor shall payfor such Capital Expenditure and Lessee shall only be obligated to pay, each month during theremainder of the term of this Lease, on the date that on which the Base Rent is due, an amountequal to 144th of the portion of such costs reasonably attributable to the Premises. Lessee shallpay Interest on the balance but may prepay its obligation at any time. If, however, such CapitalExpenditure is required during the last 2 years of this Lease or if Lessor reasonably determinesthat it is not economically feasible to pay its share thereof, Lessor shall have the option toterminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, inwriting, within 10 days after receipt of Lessor’s termination notice that Lessee will pay for suchCapital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of anysuch Capital Expenditure, Lessee may advance such funds and deduct same, with Interest, from Rentuntil Lessor’s share of such costs have been fully paid. If Lessee Is unable to finance Lessor’sshare, or if the balance of the Rent due and payable for the remainder of this Lease is notsufficient to fully reimburse Lessee on an offset basis, Lessee shall have the right to terminatethis Lease upon 30 days written notice to Lessor.          **(c)**Notwithstanding the above, the provisions concerning Capital Expenditures are intended toapply only to non-voluntary, unexpected, and new Applicable Requirements. If the CapitalExpenditures are instead triggered by Lessee as a result of en actual or proposed change in use,change in intensity of use, or modification to the Premises then, and in that event, Lessee shalleither: (i) immediately cease such changed use or intensity of use and/or take such other steps asmay be necessary to eliminate the requirement for such Capital Expenditure, or (ii) complete suchCapital Expenditure at its own expense. Lessee shall not, however, have any right to terminate thisLease.     **2.4 Acknowledgements.**Lessee acknowledges that: (a) it has been advised by Lessor and/orBrokers to satisfy itself with respect to the condition of the Premises (including but not limitedto the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliancewith Applicable Requirements and the Americans with Disabilities Act), and their suitability forLessee’s intended use, (b) Lessee has made such investigation as it deems necessary with referenceto such matters and assumes all responsibility therefor as the same relate to its occupancy of thePremises, and (c) neither Lessor, Lessor’s agents, nor Brokers have made any oral or writtenrepresentations or warranties with respect to said matters other than as set forth In this Lease.In addition,
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Lessor acknowledges that: (i) Brokers have made no representations, promises or warrantiesconcerning Lessee’s ability to honor the Lease or suitability to occupy the Premises, and (ii) itis Lessor’s sole responsibility to Investigate the financial capability and/or suitability of allproposed tenants.     **2.5 Lessee as Prior Owner/Occupant.**The warranties made by Lessor in Paragraph 2 shall be ofno force or effect if Immediately prior to the Start Date Lessee was the owner or occupant of thePremises. In such event, Lessee shall be responsible for any necessary corrective work.**3. Term.**     **3.1 Term.**The Commencement Date, Expiration Date and Original Term of this Lease are asspecified in Paragraph 1.3.     **3.2 Early Possession.**If Lessee totally or partially occupies the Premises prior to theCommencement Date, the obligation to pay Base Rent shall be abated for the period of such earlypossession. All other terms of this Lease (including but not limited to the obligations to pay RealProperty Taxes and insurance premiums and to maintain the Premises) shall be in effect during suchperiod. Any such early possession shall not affect the Expiration Date.     **3.3 Delay In Possession.**Lessor agrees to use its best commercially reasonable efforts todeliver possession of the Premises to Lessee by the Commencement Date. If, despite said efforts,Lessor is unable to deliver possession by such date, Lessor shall not be subject to any liabilitytherefor, nor shall such failure affect the validity of this Lease. Lessee shall not, however, beobligated to pay Rent or perform its other obligations until Lessor delivers possession of thePremises and any period of rent abatement that Lessee would otherwise have enjoyed shall run fromthe date of delivery of possession and continue for a period equal to what Lessee would otherwisehave enjoyed under the terms hereof, but minus any days of delay caused by the acts or omissions ofLessee. If such written notice is not received by Lessor within said 10 day period, Lessee’s rightto cancel shall terminate. If possession of the Premises is not delivered within 120 days after theCommencement Date, this Lease shall terminate unless other agreements are reached between Lessorand Lessee, in writing. Lessee’s right to cancel as set forth in this paragraph shall expire if notexercised within thirty (30) days following the expiration of sixty (60) day period in which Lessorhas failed to deliver the Premises following the Commencement Date (See Addendum, Paragraph 56).     **3.4 Lessee Compliance.**Lessor shall not be required to deliver possession of the Premises toLessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5).Pending delivery of such evidence, Lessee shall be required to perform all of its obligations underthis Lease from and after the Start Date, including the payment of Rent, notwithstanding Lessor’selection to withhold possession pending receipt of such evidence of insurance. Further, if Lesseeis required to perform any other conditions prior to or concurrent with the Start Date, the StartDate shall occur but Lessor may elect to withhold possession until such conditions are satisfied.**4. Rent.**     **4.1 Rent Defined.**All monetary obligations of Lessee to Lessor under the terms of this Lease(except for the Security Deposit) are deemed to be rent (“**Rent**”).     **4.2 Payment.**Lessee shall cause payment of Rent to be received by Lessor in lawful money ofthe United States, without offset or deduction (except as specifically permitted In this Lease), onor before the day on which it is due. All monetary amounts shall be rounded to the nearest wholedollar. In the event that any invoice prepared by Lessor is inaccurate such inaccuracy shall notconstitute a waiver and Lessee shall be obligated to pay the amount set forth in this Lease. Rentfor any period during the term hereof which is for less than one full calendar month shall beprorated based upon the actual number of days of said month. Payment of Rent shall be made toLessor at its address stated herein or to such other persons or place as Lessor may from time totime designate in writing. Acceptance of a payment which is less than the amount then due shall notbe a waiver of Lessor’s rights to the balance of such Rent, regardless of Lessor’s endorsement ofany check so stating. In the event that any check, draft, or other instrument of payment given byLessee to Lessor is dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 inaddition to any Late Charge and Lessor, at its option, may require all future Rent be paid bycashiers check. Payments will be applied first to accrued late charges and attorney’s fees, secondto accrued interest, then to Base Rent and Common Area Operating Expenses, and any remaining amountto any other outstanding charges or costs.**5. Security Deposit.**Lessee shall deposit with Lessor upon execution hereof the Security Deposit assecurity for Lessee’s faithful performance of its obligations under this Lease. If Lessee falls topay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or anyportion of said Security Deposit for the payment of any amount due already due Lessor, for Rentswhich will be due in the future, and/ or to reimburse or compensate Lessor for any liability,expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses orapplies all or any portion of the Security Deposit, Lessee shall within 10 days after writtenrequest therefor deposit monies with Lessor sufficient to restore said Security Deposit to the fullamount required by this Lease. If the Base Rent increases during the term of this Lease, Lesseeshall, upon written request from Lessor, deposit additional monies with Lessor so that the totalamount of the Security Deposit shall at all times bear the same proportion to the increased BaseRent as the initial Security Deposit bore to the initial Base Rent. Should the Agreed Use beamended to accommodate a material change in the business of Lessee or to accommodate a sublessee orassignee, Lessor shall have the right to increase the Security Deposit to the extent necessary, inLessor’s
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reasonable judgment, to account for any increased wear and tear that the Premises may suffer as aresult thereof. If a change in control of Lessee occurs during this Lease and following such changethe financial condition of Lessee is, in Lessor’s reasonable judgment, significantly reduced,Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause theSecurity Deposit to be at a commercially reasonable level based on such change in financialcondition. Lessor shall not be required to keep the Security Deposit separate from its generalaccounts. Within 90 days after the expiration or termination of this Lease, Lessor shall returnthat portion of the Security Deposit not used or applied by Lessor. No part of the Security Depositshall be considered to be held in trust, to bear interest or to be prepayment for any monies to bepaid by Lessee under this Lease.**6. Use.**     **6.1 Use.**Lessee shall use and occupy the Premises only for the Agreed Use, or any other legaluse which is reasonably comparable thereto, and for no other purpose. Lessee shall not use orpermit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance,or that disturbs occupants of or causes damage to neighboring premises or properties. Other thanguide, signal and seeing eye dogs, Lessee shall not keep or allow in the Premises any pets,animals, birds, fish, or reptiles. Lessor shall not unreasonably withhold or delay its consent toany written request for a modification of the Agreed Use, so long as the same will not impair thestructural integrity of the improvements on the Premises or the mechanical or electrical systemstherein, and/or is not significantly more burdensome to the Premises. If Lessor elects to withholdconsent, Lessor shall within 7 days after such request give written notification of same, whichnotice shall include an explanation of Lessor’s objections to the change in the Agreed Use.     **6.2 Hazardous Substances.**          **(a) Reportable Uses Require Consent.**The term “**Hazardous Substance**” as used in this Leaseshall mean any product, substance, or waste whose presence, use, manufacture, disposal,transportation, or release, either by itself or in combination with other materials expected to beon the Premises, is either: (i) potentially injurious to the public health, safety or welfare, theenvironment or the Premises, (ii) regulated or monitored by any governmental authority, or (iii) abasis for potential liability of Lessor to any governmental agency or third party under anyapplicable statute or common law theory. Hazardous Substances shall include, but not be limited to,hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or fractionsthereof. Lessee shall not engage in any activity in or on the Premises which constitutes aReportable Use of Hazardous Substances without the express prior written consent of Lessor andtimely compliance (at Lessee’s expense) with all Applicable Requirements. “**Reportable Use**” shallmean (i) the installation or use of any above or below ground storage tank, (ii) the generation,possession, storage, use, transportation, or disposal of a Hazardous Substance that requires apermit from, or with respect to which a report, notice, registration or business plan is requiredto be filed with, any governmental authority, and/or (iii) the presence at the Premises of aHazardous Substance with respect to which any Applicable Requirements requires that a notice begiven to persons entering or occupying the Premises or neighboring properties. Notwithstanding theforegoing, Lessee may use any ordinary and customary materials reasonably required to be used inthe normal course of the Agreed Use, ordinary office supplies (copier toner, liquid paper, glue,etc.) and common household cleaning materials, so long as such use is in compliance with allApplicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboringproperty to any meaningful risk of contamination or damage or expose Lessor to any liabilitytherefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving suchadditional assurances as Lessor reasonably deems necessary to protect itself, the public, thePremises and/or the environment against damage, contamination, injury and/or liability, including,but not limited to, the installation (and removal on or before Lease expiration or termination) ofprotective modifications (such as concrete encasements) and/or increasing the Security Deposit.          **(b) Duty to Inform Lessor.**If Lessee knows, or has reasonable cause to believe, that aHazardous Substance has come to be located in, on, under or about the Premises, other than aspreviously consented to by Lessor, Lessee shall immediately give written notice of such fact toLessor, and provide Lessor with a copy of any report, notice, claim or other documentation which ithas concerning the presence of such Hazardous Substance. Lessor acknowledges that Lessee hasdisclosed its intentions to use lead solder paste, solder flux, and isopropyl alchohol in theordinary course of its occupancy of the premises. Tenant’s disclosure of such intent does notmodify or excuse any obligation of Lessee to indemnify Lessor that otherwise exists.          **(c) Lessee Remediation.**Lessee shall not cause or permit any Hazardous Substance to be spilledor released in, on, under, or about the Premises (including through the plumbing or sanitary sewersystem) and shall promptly, at Lessee’s expense, comply with all Applicable Requirements and takeall investigatory and/or remedial action reasonably recommended, whether or not formally ordered orrequired, for the cleanup of any contamination of, and for the maintenance, security and/ormonitoring of the Premises or neighboring properties, that was caused or materially contributed toby Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises duringthe term of this Lease, by or for Lessee, or any third party.          **(d) Lessee Indemnification.**Lessee shall indemnify, defend and hold Lessor, its agents,employees, lenders and ground lessor, if any, harmless from and against any and all loss of rentsand/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys’ andconsultants’ fees arising out of or involving any Hazardous Substance brought onto the Premises byor for Lessee, or any third party (provided, however, that Lessee shall have no liability underthis Lease with respect to underground migration of any Hazardous Substance under the Premises fromadjacent properties not caused or contributed to by Lessee). Lessee’s obligations shall
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include, but not be limited to, the effects of any contamination or Injury to person, propertyor the environment created or suffered by Lessee, and the cost of investigation, removal,remediation, restoration and/or abatement, and shall survive the expiration or termination of thisLease. **No termination, cancellation or release agreement entered into by Lessor and Lessee shallrelease Lessee from its obligations under this Lease with respect to Hazardous Substances, unlessspecifically so agreed by Lessor in writing at the time of such agreement.**          **(e) Lessor Indemnification.**Lessor and its successors and assigns shall indemnify, defend,reimburse and hold Lessee, its employees and lenders, harmless from and against any and allenvironmental damages, including the cost of remediation, which result from Hazardous Substanceswhich existed on the Premises prior to Lessee’s occupancy or which are caused by the grossnegligence or willful misconduct of Lessor, its agents or employees. Lessor’s obligations, as andwhen required by the Applicable Requirements, shall include, but not be limited to, the cost ofinvestigation, removal, remediation, restoration and/or abatement, and shall survive the expirationor termination of this Lease. Notwithstanding anything to the contrary herein, Lessor has noobligation to indemnify, defend, reimburse, and hold harmless Lessee, its employees, lenders, andsureties from and against any and all environmental damages, including the cost of remediation,which result from Hazardous Substances which migrate onto or under the Premises during Lessee’soccupancy thereof, where such migration arises from the acts or omissions of Lessee, its employees,agents, contractors, subcontractors, suppliers, vendors or invitees.          **(f) Investigations and Remediations.**Lessor shall retain the responsibility and pay for anyinvestigations or remediation measures required by governmental entities having jurisdiction withrespect to the existence of Hazardous Substances on the Premises prior to Lessee’s occupancy,unless such remediation measure is required as a result of Lessee’s use (including “**Alterations**”,as defined in paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsiblefor such payment. Lessee shall cooperate fully in any such activities at the request of Lessor,including allowing Lessor and Lessor’s agents to have reasonable access to the Premises atreasonable times in order to carry out Lessor’s investigative and remedial responsibilities.          **(g) Lessor Termination Option.**If a Hazardous Substance Condition (see Paragraph 9.1(e))occurs during the term of this Lease, unless Lessee caused the condition (in which case Lesseeshall make the investigation and remediation thereof required by the Applicable Requirements andthis Lease shall continue in full force and effect, but subject to Lessor’s rights under Paragraph62(d) and Paragraph 13), Lessor may, at Lessor’s option, either (i) investigate and remediate suchHazardous Substance Condition, if required, as soon as reasonably possible at Lessor’s expense, inwhich event this Lease shall continue in full force and effect, or (ii) if the estimated cost toremediate such condition exceeds 12 times the then monthly Base Rent or $100,000, whichever isgreater, give written notice to Lessee, within 30 days after receipt by Lessor of knowledge of theoccurrence of such Hazardous Substance Condition, of Lessor’s desire to terminate this Lease as ofthe date 60 days following the date of such notice. In the event Lessor elects to give atermination notice, Lessee may, within 10 days thereafter, give written notice to Lessor ofLessee’s commitment to pay the amount by which the cost of the remediation of such HazardousSubstance Condition exceeds an amount equal to 12 times the then monthly Base Rent or $100,000,whichever is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereofwithin 30 days following such commitment. In such event, this Lease shall continue in full forceand effect, and Lessor shall proceed to make such remediation as soon as reasonably possible afterthe required funds are available. If Lessee does not give such notice and provide the requiredfunds or assurance thereof within the time provided, this Lease shall terminate as of the datespecified in Lessor’s notice of termination.     **6.3 Lessee’s Compliance with Applicable Requirements.**Except as otherwise provided in thisLease, Lessee shall, at Lessee’s sole expense, fully, diligently and in a timely manner, materiallycomply with all Applicable Requirements, the requirements of any applicable fire insuranceunderwriter or rating bureau, and the recommendations of Lessor’s engineers and/or consultantswhich relate in any manner to the such Requirements, without regard to whether such Requirementsare now in effect or become effective after the Start Date. Lessee shall, within 10 days afterreceipt of Lessor’s written request, provide Lessor with copies of all permits and other documents,and other information evidencing Lessee’s compliance with any Applicable Requirements specified byLessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documentsinvolved) of any threatened or actual claim, notice, citation, warning, complaint or reportpertaining to or involving the failure of Lessee or the Premises to comply with any ApplicableRequirements. Likewise, Lessee shall Immediately give written notice to Lessor of: (i) any waterdamage to the Premises and any suspected seepage, pooling, dampness or other condition conducive tothe production of mold; or (ii) any mustiness or other odors that might indicate the presence ofmold in the Premises.     **6.4 Inspection; Compliance.**Lessor and Lessor’s **“Lender”**(as defined in Paragraph 30) andconsultants shall have the right to enter into Premises at any time, in the case of an emergency,and otherwise at reasonable times after reasonable notice, for the purpose of inspecting thecondition of the Premises and for verifying compliance by Lessee with this Lease. The cost of anysuch inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or aHazardous Substance Condition (see paragraph 9.1) is found to exist or be imminent, or theinspection is requested or ordered by a governmental authority. In such case, Lessee shall uponrequest reimburse Lessor for the cost of such inspection, so long as such inspection is reasonablyrelated to the violation or contamination. In addition, Lessee shall provide copies of all relevantmaterial safety data sheets (**MSDS**) to Lessor within 10 days of the receipt of a written requesttherefor.
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**7. Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations.**     **7.1 Lessee’s Obligations.**          **(a) In General.**Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3(Lessee’s Compliance with Applicable Requirements), 7.2 (Lessor’s Obligations), 9 (Damage orDestruction), and 14 (Condemnation), Lessee shall, at Lessee’s sole expense, keep the Premises,Utility Installations (intended for Lessee’s exclusive use, no matter where located), andAlterations in good order, condition and repair (whether or not the portion of the Premisesrequiring repairs, or the means of repairing the same, are reasonably or readily accessible toLessee, and whether or not the need for such repairs occurs as a result of Lessee’s use, any prioruse, the elements or the age of such portion of the Premises), including, but not limited to, allequipment or facilities, such as plumbing, HVAC equipment, electrical, lighting facilities,boilers, pressure vessels, fire protection system, fixtures, walls (interior and exterior),foundations, ceilings, roofs, roof drainage systems, floors, windows, doors, plate glass, andskylights, located in, on, or adjacent to the Premises. Lessee, in keeping the Premises in goodorder, condition and repair, shall exercise and perform good maintenance practices, specificallyincluding the procurement and maintenance of the service contracts required by Paragraph 7.1(b)below. Lessee’s obligations shall include restorations, replacements or renewals when necessary tokeep the Premises and all Improvements thereon or a part thereof in good order, condition and stateof repair. Lessee shall, during the term of this Lease, keep the exterior appearance of theBuilding in a first-class condition (including, e.g. graffiti removal) consistent with the exteriorappearance of other similar facilities of comparable age and size In the vicinity, including, whennecessary, the exterior repainting of the Building. Lessee shall he responsible for the legaldisposal or remediation of any Lessee Owned Alterations and Utility Installations, Trade Fixturesand any personal property of any kind remaining on the premises following the lease expiration, anyoption periods, or holdover periods, that are contaminated with Hazardous Substances.          **(b) Service Contracts.**Lessee shall, at Lessee’s sole expense, procure and maintain contracts,with copies to Lessor, in customary form and substance for, and with contractors specializing andexperienced in the maintenance of the following equipment and Improvements, if any, if and wheninstalled on the Premises: (i) HVAC equipment, (ii) boiler, and pressure vessels, (iii) fireextinguishing systems, Including fire alarm and/or smoke detection, (iv) landscaping and Irrigationsystems, (v) roof covering and drains, and (vi) clarifiers. However, Lessor reserves the right,upon notice to Lessee, to procure and maintain any or all of such service contracts, and Lesseeshall reimburse Lessor, upon demand, for the cost thereof.          **(c) Failure to Perform.**If Lessee fails to perform Lessee’s obligations under this Paragraph7.1, Lessor may enter upon the Premises after 10 days’ prior written notice to Lessee (except inthe case of an emergency, in which case no notice shall be required), perform such obligations onLessee’s behalf, and put the Premises in good order, condition and repair, and Lessee shallpromptly pay to Lessor a sum equal to 115% of the cost thereof.          **(d) Replacement.**Subject to Lessee’s indemnification of Lessor as set forth in Paragraph 8.7below, and without relieving Lessee of liability resulting from Lessee’s failure to exercise andperform good maintenance practices, if an item described in Paragraph 7.1(b) cannot be repairedother than at a cost which is in excess of 50% of the cost of replacing such item, then such itemshall be replaced by Lessor, and the cost thereof shall be prorated between the Parties and Lesseeshall only be obligated to pay, each month during the remainder of the term of this Lease, on thedate on which Base Rent is due, an amount equal to the product of multiplying the cost of suchreplacement by a fraction, the numerator of which is one, and the denominator of which is 144 (ie.1/144th of the cost per month). Lessee shall pay interest on the unamortized balance but may prepayits obligation at any time.     **7.2 Lessor’s Obligations.**Subject to the provisions of Paragraphs 2.2 (Condition), 2.3(Compliance), 9 (Damage or Destruction) and 14 (Condemnation), it is intended by the Parties heretothat Lessor shall have the obligation, to repair and maintain the common areas of the Premisesincluding the landscaping, driveways, parking lots, signs, and sidewalks. It is the intention ofthe Parties that the terms of this Lease govern the respective obligations of the Parties as tomaintenance and repair of the Premises, and they expressly waive the benefit of any statute now orhereafter in effect to the extent it is inconsistent with the terms of this Lease.     **7.3 Utility Installations; Trade Fixtures; Alterations.**          **(a) Definitions.**The term “**Utility Installations**” refers to all floor and window coverings,air and/or vacuum lines, power panels, electrical distribution, security and fire protectionsystems, communication cabling, lighting fixtures, HVAC equipment, plumbing, and fencing in or onthe Premises. The term “**Trade Fixtures**” shall mean Lessee’s machinery and equipment that can beremoved without doing material damage to the Premises. The term “**Alterations**” shall mean anymodification of the improvements, other than Utility Installations or Trade Fixtures, whether byaddition or deletion. “**Lessee Owned Alterations and/or Utility Installations**” are defined asAlterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuantto Paragraph 7.4(a).          **(b) Consent.**Lessee shall not make any Alterations or Utility Installations to the Premiseswithout Lessor’s prior written consent. Lessee may, however, make non-structural UtilityInstallations to the Interior of the Premises (excluding the roof) without such consent but uponnotice to Lessor, as long as they are not visible from the outside, do not involve puncturing,relocating or removing the roof or any existing walls, will not affect the electrical, plumbing,HVAC, and/or life safety systems, and the cumulative cost thereof during this Lease as extendeddoes not exceed a sum equal to 3 month’s Base Rent in the aggregate or a sum equal to one month’sBase Rent in any one year. Notwithstanding the foregoing, Lessee shall not make or permit any roofpenetrations and/or install anything on the roof
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without the prior written approval of Lessor. Lessor may, as a precondition to granting suchapproval, require Lessee to utilize a contractor chosen and/or approved by Lessor. Any Alterationsor Utility Installations that Lessee shall desire to make and which require the consent of theLessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemedconditioned upon Lessee’s: (i) acquiring all applicable governmental permits, (ii) furnishingLessor with copies of both the permits and the plans and specifications prior to commencement ofthe work, and (iii) compliance with all conditions of said permits and other ApplicableRequirements In a prompt and expeditious manner. Any Alterations or Utility Installations shall beperformed in a workmanlike manner with good and sufficient materials. Lessee shall promptly uponcompletion furnish Lessor with as-built plans and specifications. For work which costs an amount inexcess of one month’s Base Rent, Lessor may condition its consent upon Lessee providing a lien andcompletion bond in an amount equal to 150% of the estimated cost of such Alteration or UtilityInstallation and/or upon Lessee’s posting an additional Security Deposit with Lessor.          **(c) Liens; Bonds.**Lessee shall pay, when due, all claims for labor or materials furnished oralleged to have been furnished to or for Lessee at or for use on the Premises, which claims are ormay be secured by any mechanic’s or materialmen’s lien against the Premises or any interesttherein. Lessee shall give Lessor not less than 10 days notice prior to the commencement of anywork in, on or about the Premises, and Lessor shall have the right to post notices ofnon-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, thenLessee shall, at its sole expense defend and protect itself, Lessor and the Premises against thesame and shall pay and satisfy any such adverse judgment that may be rendered thereon before theenforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equalto 100% of the amount of such contested lien, claim or demand, indemnifying Lessor againstliability for the same. If Lessor elects to participate In any such action, Lessee shall payLessor’s attorneys’ fees and costs.     **7.4 Ownership; Removal; Surrender; and Restoration.**          **(a) Ownership.**Subject to Lessor’s rights to require removal or elect ownership as hereinafterprovided, all Alterations and Utility Installations made by Lessee shall be the property of Lessee,but considered a part of the Premises. Lessor may, with sixty (60) days Notice of Election to electin writing to become the owner of specified parts of the Lessee Owned Alterations and UtilityInstallations, to be effective at the end of the sixty (60) day period, or some other such timeperiod as the parties may negotiate. Unless otherwise instructed per paragraph 7.4(b) hereof, allLessee Owned Alterations and Utility Installations shall become the property of Lessor at theexpiration or termination of this lease.          **(b) Removal.**By delivery to Lessee of written notice from Lessor not earlier than 90 and notlater than 30 days prior to the end of the term of this Lease, Lessor may require that any or allLessee Owned Alterations or Utility Installations be removed by the expiration or termination ofthis Lease. Lessor may require the removal at any time of all or any part of any Lessee OwnedAlterations or Utility Installations made without the required consent.          **(c) Surrender; Restoration.**Lessee shall surrender the Premises by the Expiration Date or anyearlier termination date, with all of the improvements, parts and surfaces thereof broom clean andfree of debris, and in good operating order, condition and state of repair, ordinary wear and tearexcepted. “Ordinary wear and tear” shall not include any damage or deterioration that would havebeen prevented by good maintenance practice. Notwithstanding the foregoing, if this Lease is for 12months or less, then Lessee shall surrender the Premises in the same condition as delivered toLessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair anydamage occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee ownedAlterations and/or Utility Installations, furnishings, and equipment as well as the removal of anystorage tank installed by or for Lessee. Lessee shall completely remove from the Premises any andall Hazardous Substances brought onto the Premises by or for Lessee, or any third party (exceptHazardous Substances which were deposited via underground migration from areas outside of thePremises, or if applicable, the Premises) even if such removal would require Lessee to perform orpay for work that exceeds statutory requirements. Trade Fixtures shall remain Ere property ofLessee and shall be removed by Lessee. Any personal property of Lessee not removed on or before theExpiration Date or any earlier termination date shall be deemed to have been abandoned by Lesseeand may be disposed of or retained by Lessor as Lessor may desire. The failure by Lessee to timelyvacate the Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessorshall constitute a holdover under the provisions of Paragraph 26 below.**8. Insurance; Indemnity.**     **8.1 Payment For Insurance.**Sec Addendum, Paragraph 62.     **8.2 Liability Insurance.**See Addendum, Paragraph 62.     **8.3 Lessee’s Property; Business Interruption Insurance.**          **(a) Property Damage.**Lessee shall obtain and maintain insurance coverage on all of Lessee’spersonal property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Suchinsurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 peroccurrence. The proceeds from any such Insurance shall be used by Lessee for the replacement ofpersonal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lesseeshall provide Lessor with written evidence that such insurance is in force.
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          **(b) Business Interruption.**Lessee shall obtain and maintain loss of income and extra expenseinsurance in amounts as will reimburse Lessee for direct or Indirect loss of earnings attributableto all perils commonly insured against by prudent lessees in the business of Lessee or attributableto prevention of access to the Premises as a result of such perils.          **(c) No Representation of Adequate Coverage.**Lessor makes no representation that the limits orforms of coverage of insurance specified herein are adequate to cover Lessee’s property, businessoperations or obligations under this Lease.     **8.4 Insurance Policies.**Insurance required herein shall be by companies duly licensed oradmitted to transact business in the state where the Premises are located, and maintaining duringthe policy term a “General Policyholders Rating” of at least A-, VI, as set forth in the mostcurrent issue of ‘Best’s Insurance Guide”, or such other rating as may be required by a Lender.Lessee shall not do or permit to be done anything which invalidates the required insurancepolicies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of policies ofsuch insurance or certificates evidencing the existence and amounts of the required insurance. Nosuch policy shall be cancelable or subject to modification except after 30 days prior writtennotice to Lessor. Lessee shall, at least 10 days prior to the expiration of such policies, furnishLessor with evidence of renewals or “insurance binders” evidencing renewal thereof, or Lessor mayorder such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lesseeto Lessor upon demand. Such policies shall be for a term of at least one year, or the length of theremaining term of this Lease, whichever is less. If either Party shall fail to procure and maintainthe Insurance required to be carried by it, the other Party may, but shall not be required to,procure and maintain the same.     **8.5 Waiver of Subrogation.**Without affecting any other rights or remedies, Lessee and Lessoreach hereby release and relieve the other, and waive their entire right to recover damages againstthe other, for loss of or damage to its property arising out of or incident to the perils requiredto be insured against herein. The effect of such releases and waivers is not limited by the amountof insurance carried or required, or by any deductibles applicable hereto. The Parties agree tohave their respective property damage insurance carriers waive any right to subrogation that suchcompanies may have against Lessor or Lessee, as the case may be, so long as the insurance is notinvalidated thereby.     **8.6 Indemnity.**See Addendum     **8.7 Exemption of Lessor and its Agents from Liability.**Notwithstanding the negligence orbreach of this Lease by Lessor or Its agents, neither Lessor nor its agents shall be liable underany circumstances for. (i) injury or damage to the person or goods, wares, merchandise or otherproperty of Lessee, Lessee’s employees, contractors, invitees, customers, or any other person in orabout the Premises, whether such damage or injury is caused by or results from fire, steam,electricity, gas, water or rain, indoor air quality, the presence of mold or from the breakage,leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVACor lighting fixtures, or from any other cause, whether the said injury or damage results fromconditions arising upon the Premises or upon other portions of the building of which the Premisesare a part, or from other sources or places, (ii) any damages arising from any act or neglect ofany other tenant of Lessor or from the failure of Lessor or its agents to enforce the provisions ofany other lease in the Project, or (iii) injury to Lessee’s business or for any loss of Income orprofit therefrom. Instead, It Is intended that Lessee’s sole recourse in the event of such damagesor injury be to file a claim on the insurance policy(ies) that Lessee is required to maintainpursuant to the provisions of paragraph 8.     **8.8 Failure to Provide Insurance.**Lessee acknowledges that any failure on its part to obtainor maintain the insurance required herein will expose Lessor to risks and potentially cause Lessorto incur costs not contemplated by this Lease, the extent of which will be extremely difficult toascertain. Accordingly, for any month or portion thereof that Lessee does not maintain the requiredinsurance and/or does not provide Lessor with the required binders or certificates evidencing theexistence of the required insurance, the Base Rent shall be automatically increased, without anyrequirement for notice to Lessee, by an amount equal to 10% of the then existing Base Rent or $100,whichever Is greater. The parties agree that such increase in Base Rent represents fair andreasonable compensation for the additional risk/costs that Lessor will incur by reason of Lessee’sfailure to maintain the required insurance. Such increase in Base Rent shall in no event constitutea waiver of Lessee’s Default or Breach with respect to the failure to maintain such insurance,prevent the exercise of any of the other rights and remedies granted hereunder, nor relieve Lesseeof Its obligation to maintain the insurance specified in this Lease.**9. Damage or Destruction.**     **9.1 Definitions.**          **(a) “Promises Partial Damage”**shall mean damage or destruction to the Improvements on thePremises, other than Lessee Owned Alterations and Utility Installations, which can reasonably berepaired in B months or less from the date of the damage or destruction. Lessor shall notify Lesseein writing within 30 days from the date of the damage or destruction as to whether or not thedamage is Partial or Total. Notwithstanding the foregoing, Premises Partial Damage shall notinclude damage to windows, doors, and/or other similar items which Lessee has the responsibility torepair or replace pursuant to the provisions of Paragraph 7.1.          **(b) “Premises Total Destruction”**shall mean damage or destruction to the Premises, other thanLessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably berepaired In 6 months or less from the date of the
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damage or destruction. Lessor shall notify Lessee In writing within 30 days from the date ofthe damage or destruction as to whether or not the damage Is Partial or Total.          **(c) “Insured Loss”**shall mean damage or destruction to Improvements on the Premises, otherthan Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by anevent required to be covered by the insurance described in Paragraph 8.3(a), irrespective of anydeductible amounts or coverage limits involved.          **(d) “Replacement Cost”**shall mean the cost to repair or rebuild the improvements owned byLessor at the time of the occurrence to their condition existing immediately prior thereto,including demolition, debris removal and upgrading required by the operation of ApplicableRequirements, and without deduction for depreciation.          **(e) “Hazardous Substance Condition”**shall mean the occurrence or discovery of a conditioninvolving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph6.2(a), in, on, or under the Premises which requires repair, remediation, or restoration.     **9.2 Partial Damage — Insured Loss.**If a Premises Partial Damage that is an Insured Lossoccurs, then Lessor shall, at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixturesor Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and thisLease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor’selection, make the repair of any damage or destruction the total cost to repair of which is $10,000or less, and, in such event, Lessor shall make any applicable insurance proceeds available toLessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the requiredinsurance was not in force or the insurance proceeds are not sufficient to effect such repair, theInsuring Party shall promptly contribute the shortage In proceeds (except as to the deductiblewhich is Lessee’s responsibility) as and when required to complete said repairs. In the event,however, such shortage was due to the fact that, by reason of the unique nature of theimprovements, full replacement cost insurance coverage was not commercially reasonable andavailable, Lessor shall have no obligation to pay for the shortage in insurance proceeds or tofully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds tocover same, or adequate assurance thereof, within 10 days following receipt of written notice ofsuch shortage and request therefor. If Lessor receives said funds or adequate assurance thereofwithin said 10 day period, the party responsible for making the repairs shall complete them as soonas reasonably possible and this Lease shall remain in full force and effect. If such funds orassurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10days thereafter to: (i) make such restoration and repair as Is commercially reasonable with Lessorpaying any shortage in proceeds, in which case this Lease shall remain In full force and effect, or(ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement ofany funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damagedue to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that them may be someinsurance coverage, but the net proceeds of any such insurance shall be made available for therepairs if made by either Party.     **9.3 Partial Damage — Uninsured Loss.**If a Premises Partial Damage that is not an Insured Lossoccurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make therepairs at Lessee’s expense), Lessor may either: (i) repair such damage as soon as reasonablypossible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or(ii) terminate this Lease by giving written notice to Lessee within 30 days after receipt by Lessorof knowledge of the occurrence of such damage. Such termination shall be effective 60 daysfollowing the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shallhave the right within 10 days after receipt of the termination notice to give written notice toLessor of Lessee’s commitment to pay for the repair of such damage without reimbursement fromLessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30days after making such commitment. In such event this Lease shall continue in full force andeffect, and Lessor shall proceed to make such repairs as soon as reasonably possible after therequired funds are available. If Lessee does not make the required commitment, this Lease shallterminate as of the date specified in the termination notice.     **9.4 Total Destruction.**Notwithstanding any other provision hereof, if a Premises TotalDestruction occurs, this Lease shall terminate 60 days following such Destruction. If the damage ordestruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall havethe right to recover Lessor’s damages from Lessee, except as provided In Paragraph 8.6.     **9.5 Damage Near End of Term.**If at any time during the last 6 months of this Lease there isdamage for which the cost to repair exceeds one month’s Base Rent, whether or not an Insured Loss,Lessor may terminate this Lease effective 60 days following the date of occur a of such damage bygiving a written termination notice to Lessee within 30 days after the date of occurrence of suchdamage. Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extendthis Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising suchoption and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurancethereof) needed to make the repairs on or before the earlier of (i) the date which is 10 days afterLessee’s receipt of Lessor’s written notice purporting to terminate this Lease, or (ii) the dayprior to the date upon which such option expires. If Lessee duly exercises such option during suchperiod and provides Lessor with funds (or adequate assurance thereof) to cover any shortage inInsurance proceeds, Lessor shall, at Lessor’s commercially reasonable expense, repair such damageas soon as reasonably possible and this Lease shall continue in full force and effect. If Lesseefails to exercise such option and provide such funds or assurance during such period, then thisLease shall terminate on the date specified in the termination notice and Lessee’s option shall beextinguished.
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     **9.6 Abatement of Rent; Lessee’s Remedies.**          **(a) Abatement.**In the event of Premises Partial Damage or Premises Total Destruction or aHazardous Substance Condition for which Lessee is not responsible under this Lease, the Rentpayable by Lessee for the period required for the repair, remediation or restoration of such damageshall be abated in proportion to the degree to which Lessee’s use of the Premises is impaired, butnot to exceed the proceeds received from the Rental Value insurance. All other obligations ofLessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any suchdamage, destruction, remediation, repair or restoration except as provided herein.          **(b) Remedies.**If Lessor is obligated to repair or restore the Premises and does not commence,in a substantial and meaningful way, such repair or restoration within 90 days after suchobligation shall accrue, Lessee may, at any time prior to the commencement of such repair orrestoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, ofLessee’s election to terminate this Lease on a date not less than 60 days following the giving ofsuch notice. If Lessee gives such notice and such repair or restoration is not commenced within 30days thereafter, this Lease shall terminate as of the date specified in said notice. If the repairor restoration is commenced within such 30 days, this Lease shall continue in full force andeffect. “Commence” shall mean either the unconditional authorization of the preparation of therequired plans, or the beginning of the actual work on the Premises, whichever first occurs.     **9.7 Termination; Advance Payments.**Upon termination of this Lease pursuant to Paragraph 6.2(g)or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any otheradvance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much ofLessee’s Security Deposit as has not been, or is not then required to be, used by Lessor.**10. Real Property Taxes.**     **10.1 Definition.**As used herein, the term “Real Property Taxes” shall Include any form ofassessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (otherthan inheritance, personal income or estate taxes); improvement bond; and/or license fee imposedupon or levied against any legal or equitable interest of Lessor in the Premises or the Project,Lessor’s right to other Income therefrom, and/or Lessor’s business of leasing, by any authorityhaving the direct or indirect power to tax and where the funds are generated with reference to theBuilding address and where the proceeds so generated are to be applied by the city, county or otherlocal taxing authority of a jurisdiction within which the Premises are located. Real Property Taxesshall also include any tax, fee, levy, assessment or charge, or any increase therein: (i) imposedby reason of events occurring during the term of this Lease, including but not limited to, a changein the ownership of the Premises, and (ii) levied or assessed on machinery or equipment provided byLessor to Lessee pursuant to this Lease.     **10.2 Payment of Taxes.**In addition to Base Rent, Lessee shall pay to Lessor an amount equal tothe Real Property Tax installment due at least 20 days prior to the applicable delinquency date. Ifany such installment shall cover any period of time prior to or after the expiration or terminationof this Lease, Lessee’s share of such installment shall be prorated. In the event Lessee incurs alate charge on any Rent payment, Lessor may estimate the current Real Property Taxes, and requirethat such taxes be paid in advance to Lessor by Lessee monthly in advance with the payment of theBase Rent. Such monthly payments shall be an amount equal to the amount of the estimatedinstallment of taxes divided by the number of months remaining before the month in which saidinstallment becomes delinquent. When the actual amount of the applicable tax bill is known, theamount of such equal monthly advance payments shall be adjusted as required to provide the fundsneeded to pay the applicable taxes. If the amount collected by Lessor is insufficient to pay suchReal Property Taxes when due, Lessee shall pay Lessor, upon demand, such additional sum as isnecessary. Advance payments may be intermingled with other moneys of Lessor and shall not bearinterest. In the event of a Breach by Lessee in the performance of its obligations under thisLease, then arty such advance payments may be treated by Lessor as an additional Security Deposit.     **10.3 Joint Assessment.**If the Premises are not separately assessed, Lessee’s liability shallbe an equitable proportion of the Real Property Taxes for all of the land and improvements includedwithin the tax parcel assessed, such proportion to be conclusively determined by Lessor from therespective valuations assigned in the assessor’s work sheets or such other information as may bereasonably available.     **10.4 Personal Property Taxes.**Lessee shall pay, prior to delinquency, all taxes assessedagainst and levied upon Lessee Owned Alterations, Utility Installations, Trade Fixtures,furnishings, equipment and all personal property of Lessee. When possible, Lessee shall cause itsLessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and allother personal property to be assessed and billed separately from the real property of Lessor. Ifany of Lessee’s said property shall be assessed with Lessor’s real property, Lessee shall payLessor the taxes attributable to Lessee’s property within 10 days after receipt of a writtenstatement setting forth the taxes applicable to Lessee’s property. Lessee shall remain responsiblefor all such personal property taxes until the date on which Lessor has accepted in writing aconveyance of such property. The parties shall pro-rate any personal property taxes to the date ofsuch written acceptance by Lessor.**11. Utilities and Services.**Lessee shall pay for all water, gas, heat, light, power, telephone,trash disposal and other utilities and services supplied to the Premises, together with any taxesthereon. If any such services are not separately metered or billed to Lessee,
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Lessee shall pay a reasonable proportion, to be determined by Lessor, of all charges jointlymetered or billed. There shall be no abatement of rent and Lessor shall net be Sable in any respectwhatsoever for the inadequacy, stoppage, interruption or discontinuance of any utility or servicedue to riot, strike, labor dispute, breakdown, accident, repair or other cause beyond Lessor’sreasonable control or in cooperation with governmental request or directions.