exv10w23



 





Exhibit 10.23




Lease Agreement




By and Between




Harbor Investment Partners,

a California general partnership




as Landlord




and




NovaRay, Inc.,

a Delaware corporation




as Tenant




Dated July 1, 2005




 









 





Table of Contents




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Basic Lease Information	 	 	iv	 
	 
	 	 	 	 	 	 
	1.
	 	Demise	 	 	1	 
	 
	 	 	 	 	 	 
	2.
	 	Premises	 	 	1	 
	 
	 	 	 	 	 	 
	3.
	 	Term	 	 	2	 
	 
	 	 	 	 	 	 
	4.
	 	Rent	 	 	2	 
	 
	 	 	 	 	 	 
	5.
	 	Utility Expenses	 	 	8	 
	 
	 	 	 	 	 	 
	6.
	 	Late Charge	 	 	8	 
	 
	 	 	 	 	 	 
	7.
	 	Security Deposit	 	 	9	 
	 
	 	 	 	 	 	 
	8.
	 	Possession	 	 	11	 
	 
	 	 	 	 	 	 
	9.
	 	Use of Premises	 	 	11	 
	 
	 	 	 	 	 	 
	10.
	 	Acceptance of Premises	 	 	13	 
	 
	 	 	 	 	 	 
	11.
	 	Surrender	 	 	13	 
	 
	 	 	 	 	 	 
	12.
	 	Alterations and Additions	 	 	14	 
	 
	 	 	 	 	 	 
	13.
	 	Maintenance and Repairs of Premises	 	 	16	 
	 
	 	 	 	 	 	 
	14.
	 	Landlord’s Insurance	 	 	17	 
	 
	 	 	 	 	 	 
	15.
	 	Tenant’s Insurance	 	 	18	 
	 
	 	 	 	 	 	 
	16.
	 	Indemnification	 	 	19	 
	 
	 	 	 	 	 	 
	17.
	 	Subrogation	 	 	19	 
	 
	 	 	 	 	 	 
	18.
	 	Signs	 	 	20	 
	 
	 	 	 	 	 	 
	19.
	 	Free From Liens	 	 	20	 
	 
	 	 	 	 	 	 
	20.
	 	Entry By Landlord	 	 	20	 
	 
	 	 	 	 	 	 
	21.
	 	Destruction and Damage	 	 	21	 
	 
	 	 	 	 	 	 
	22.
	 	Condemnation	 	 	23	 






i









 






	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	23.
	 	Assignment and Subletting	 	 	24	 
	 
	 	 	 	 	 	 
	24.
	 	Tenant’s Default	 	 	28	 
	 
	 	 	 	 	 	 
	25.
	 	Landlord’s Remedies	 	 	30	 
	 
	 	 	 	 	 	 
	26.
	 	Landlord’s Right to Perform Tenant’s Obligations	 	 	33	 
	 
	 	 	 	 	 	 
	27.
	 	Attorneys’ Fees	 	 	33	 
	 
	 	 	 	 	 	 
	28.
	 	Taxes	 	 	34	 
	 
	 	 	 	 	 	 
	29.
	 	Effect of Conveyance	 	 	34	 
	 
	 	 	 	 	 	 
	30.
	 	Tenant’s Estoppel Certificate	 	 	34	 
	 
	 	 	 	 	 	 
	31.
	 	Subordination	 	 	34	 
	 
	 	 	 	 	 	 
	32.
	 	Environmental Covenants	 	 	35	 
	 
	 	 	 	 	 	 
	33.
	 	Notices	 	 	39	 
	 
	 	 	 	 	 	 
	34.
	 	Waiver	 	 	39	 
	 
	 	 	 	 	 	 
	35.
	 	Holding Over	 	 	40	 
	 
	 	 	 	 	 	 
	36.
	 	Successors and Assigns	 	 	40	 
	 
	 	 	 	 	 	 
	37.
	 	Time	 	 	40	 
	 
	 	 	 	 	 	 
	38.
	 	Brokers	 	 	40	 
	 
	 	 	 	 	 	 
	39.
	 	Limitation of Liability	 	 	40	 
	 
	 	 	 	 	 	 
	40.
	 	Financial Statements	 	 	41	 
	 
	 	 	 	 	 	 
	41.
	 	Rules and Regulations	 	 	41	 
	 
	 	 	 	 	 	 
	42.
	 	Mortgagee Protection	 	 	41	 
	 
	 	 	 	 	 	 
	43.
	 	Parking	 	 	42	 
	 
	 	 	 	 	 	 
	44.
	 	Entire Agreement	 	 	43	 
	 
	 	 	 	 	 	 
	45.
	 	Interest	 	 	43	 
	 
	 	 	 	 	 	 
	46.
	 	Construction	 	 	43	 
	 
	 	 	 	 	 	 
	47.
	 	Representations and Warranties of Tenant	 	 	44	 






ii









 






	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	48.
	 	Security	 	 	44	 
	 
	 	 	 	 	 	 
	49.
	 	Jury Trial Waiver	 	 	44	 
	 
	 	 	 	 	 	 
	50.
	 	Option to Renew	 	 	45	 
	 
	 	 	 	 	 	 
	51.
	 	Furniture	 	 	46	 






Exhibit





	A 	 	Diagram of the Premises
	 
	B 	 	Rules and Regulations
	 
	C 	 	Form of Tenant Estoppel Certificate
	 
	D 	 	Hazardous Materials Disclosure Certificate




iii









 











Lease Agreement




Basic Lease Information




	 	 	 
	Lease Date:
	 	July 1, 2005
	 
	 	 
	Landlord:
	 	Harbor Investment Partners,
	 
	 	a California general partnership
	 
	 	 
	Landlord’s Address:
	 	c/o UBS Realty Investors llc
	 
	 	455 Market Street, Suite 1540
	 
	 	San Francisco, California 94105
	 
	 	Attention: Asset Manager,
	 
	 	The Harbor Business Park

	 
	 	 
	 
	 	All notices sent to Landlord under this Lease shall be sent to the above address, with copies to:
	 
	 	 
	 
	 	          Insignia/ESG of California, Inc.
	 
	 	          160 West Santa Clara Street, Suite 1350
	 
	 	          San Jose, California 95113
	 
	 	          Attention: Property Manager,
	 
	 	          The Harbor Business Park

	 
	 	 
	Tenant:
	 	NovaRay, Inc.,
	 
	 	a Delaware corportation
	 
	 	 
	Tenant’s Contact Person:
	 	Marc Whyte
	 
	 	 
	Tenant’s Address and
	 	1850 Embarcadero Road
	Telephone Number:
	 	Palo Alto, California 94303
	 
	 	(650) ______________________
	 
	 	 
	Premises Square Footage:
	 	Approximately twelve thousand twenty-two (12,022) rentable square feet
	 
	 	 
	Premises Address:
	 	1850 Embarcadero Road
	 
	 	Palo Alto, California 94303
	 
	 	 
	Project:
	 	The Harbor Business Park, 1800–1858 Embarcadero Road and 2445—2465 Faber
Place, Palo Alto, California, together with the land on which the Project is
situated and all Common Areas
	 
	 	 
	Building (if not the same
	 	1850 Embarcadero Road
	as the Project):
	 	Palo Alto, California 94303






iv









 






	 	 	 
	Tenant’s Proportionate
	 	 
	Share of Project:
	 	4.64% 
	 
	 	 
	Tenant’s Proportionate
	 	 
	Share of Building:
	 	54.59% 
	 
	 	 
	Length of Term:
	 	Eighteen (18) months
	 
	 	 
	Commencement Date:
	 	August 1, 2005
	 
	 	 
	Expiration Date:
	 	January 31, 2007






	 	 	 	 	 	 	 	 	 	 	 
	Monthly Base Rent:
	 	Months	 	Sq. Ft.	 	Monthly Base Rate	 	Monthly Base Rent
	 
	 	1 — 12	 	12,022	 	× $1.00	 	 	=$12,022.00	 
	 
	 	13 — 18	 	12,022	 	× $1.03	 	 	=$12,382.66	 






	 	 	 
	Prepaid Base Rent:

	 	Twelve Thousand Twenty-Two Dollars ($12,022.00)
	 
	 	 
	Prepaid Additional Rent:

	 	Six Thousand Five Hundred Nineteen Dollars ($6,519.00)
	 
	 	 
	Month to which Prepaid
Base Rent and Additional
Rent will be Applied:

	 	First (1st) month of the Term
	 
	 	 
	Security Deposit:

	 	Thirty Seven Thousand One Hundred Forty Seven and 98/100 Dollars ($37,147.98)
	 
	 	 
	Permitted Use:

	 	General office use and research and development
	 
	 	 
	Unreserved Parking Spaces:

	 	Thirty-nine (39) nonexclusive and undesignated parking spaces
	 
	 	 
	Brokers:

	 	BT Commercial (Landlord’s Broker)
	 

	 	CPS (Tenant’s Broker)







v











 





Lease Agreement




     This Lease Agreement is made and entered into by and between Landlord and Tenant on
the Lease Date. The defined terms used in this Lease which are defined in the Basic Lease
Information attached to this Lease Agreement (“Basic Lease Information”) shall have the meaning and
definition given them in the Basic Lease Information. The Basic Lease Information, the exhibits,
the addendum or addenda described in the Basic Lease Information, and this Lease Agreement are and
shall be construed as a single instrument and are referred to herein as the “Lease”.



1. Demise




     In consideration for the rents and all other charges and payments payable by Tenant, and for
the agreements, terms and conditions to be performed by Tenant in this Lease, Landlord does
hereby lease to Tenant, and Tenant does hereby hire and take from Landlord, the Premises
described below (the “Premises”), upon the agreements, terms and conditions of this Lease for the
Term hereinafter stated.



2. Premises




     The Premises demised by this Lease is located in that certain building (the “Building”)
specified in the Basic Lease Information, which Building is located in that certain real estate
development (the “Project”) specified in the Basic Lease Information. The Premises has the address
and contains the square footage specified in the Basic Lease Information. The location and
dimensions of the Premises are depicted on Exhibit A, which is attached hereto and incorporated
herein by this reference; provided, however, that any statement of square footage set forth in this
Lease, or that may have been used in calculating any of the economic terms hereof, is an
approximation which Landlord and Tenant agree is reasonable and, except as expressly set forth in
Paragraph 4(d)(iii) below, no economic terms based thereon shall be subject to revision whether or
not the actual square footage is more or less. Tenant shall have the non-exclusive right (in
common with the other tenants, Landlord and any other person granted use by Landlord) to use the
Common Areas (as hereinafter defined), except that, with respect to the Project’s parking areas
(the “Parking Areas”), Tenant shall have only the rights, if any, set forth in Paragraph 43 below.
No easement for light or air is incorporated in the Premises. For purposes of this Lease, the term
“Common Areas” shall mean all areas and facilities outside the Premises and within the exterior
boundary line of the Project that are provided and designated by Landlord for the non-exclusive use
of Landlord, Tenant and other tenants of the Project and their respective employees, guests and
invitees. Tenant understands and agrees that the Premises shall be leased by Tenant in its as-is
condition without any improvements or alterations by Landlord.



     Landlord has the right, in its sole discretion, from time to time, to: (a) make changes to
the Common Areas, the Building and/or the Project, including, without limitation, changes in the
location, size, shape and number of driveways, entrances, parking spaces, Parking Areas, ingress,
egress, direction of driveways, entrances, hallways, corridors, lobby areas and walkways; (b) close
temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the
Premises remains available; (c) add additional buildings and improvements to the Common Areas or
remove existing buildings or improvements therefrom; (d) use the Common



1









 




Areas while engaged in making additional improvements, repairs or alterations to the Project
or any portion thereof; and (e) do and perform any other acts, alter or expand, or make any other
changes in, to or with respect to the Common Areas, the Building and/or the Project as Landlord
may, in its sole discretion, deem to be appropriate. Without limiting the foregoing, Landlord
reserves the right from time to time to install, use, maintain, repair, relocate and replace pipes,
ducts, conduits, wires, and appurtenant meters and equipment for service to the Premises or to
other parts of the Building which are above the ceiling surfaces, below the floor surfaces, within
the walls and in the central core areas of the Building which are located within the Premises or
located elsewhere in the Building. In connection with any of the foregoing activities of Landlord,
Landlord shall use reasonable efforts while conducting such activities to minimize any interference
with Tenant’s use of the Premises.




     No rights to any view or to light or air over any property, whether belonging to Landlord or
any other person, are granted to Tenant by this Lease. If at any time any windows of the Premises
are temporarily darkened or the light or view therefrom is obstructed, the same shall be without
liability to Landlord and without any reduction or diminution of Tenant’s obligations under this
Lease.



3. Term




     The term of this Lease (the “Term”) shall be for the period of months specified in the Basic
Lease Information, commencing on the Commencement Date and expiring on the Expiration Date, each as
specified in the Basic Lease Information.



4. Rent




     (a) Base Rent. Tenant shall pay to Landlord, in advance on the first day of each month,
without further notice or demand and without offset, rebate, credit or deduction for any reason
whatsoever, the monthly installments of rent specified in the Basic Lease Information (the “Base
Rent”).



     Upon execution of this Lease, Tenant shall pay to Landlord the Security Deposit, the Prepaid
Base Rent and first monthly installment of estimated Additional Rent (as hereinafter defined)
specified in the Basic Lease Information to be applied toward Base Rent and Additional Rent for the
month of the Term specified in the Basic Lease Information.



     (b) Additional Rent. This Lease is intended to be a triple-net Lease with respect to
Landlord; and subject to Paragraph 13(b) below, the Base Rent owing hereunder is (i) to be paid by
Tenant absolutely net of all costs and expenses relating to Landlord’s ownership and operation of
the Project and the Building, and (ii) not to be reduced, offset or diminished, directly or
indirectly, by any cost, charge or expense payable hereunder by Tenant or by others in connection
with the Premises, the Building and/or the Project or any part thereof. The provisions of this
Paragraph 4(b) for the payment of Tenant’s Proportionate Share(s) of Expenses (as hereinafter
defined) are intended to pass on to Tenant its share of all such costs and expenses. In addition
to the Base Rent, Tenant shall pay to Landlord, in accordance with this Paragraph 4, Tenant’s
Proportionate Share(s) of all costs and expenses paid or incurred by Landlord in connection with
the ownership, operation, maintenance, management and repair of the Premises,



2









 




the Building and/or the Project or any part thereof (collectively, the “Expenses”), including,
without limitation, all the following items (the “Additional Rent”):




          (i) Taxes and Assessments. All real estate taxes and assessments, which shall include any
form of tax, assessment, fee, license fee, business license fee, levy, penalty (if a result of
Tenant’s delinquency), or tax (other than net income, estate, succession, inheritance, transfer or
franchise taxes), imposed by any authority having the direct or indirect power to tax, or by any
city, county, state or federal government or any improvement or other district or division thereof,
whether such tax is: (A) determined by the area of the Premises, the Building and/or the Project
or any part thereof, or the Rent and other sums payable hereunder by Tenant or by other tenants,
including, but not limited to, any gross income or excise tax levied by any of the foregoing
authorities with respect to receipt of Rent and/or other sums due under this Lease; (B) upon any
legal or equitable interest of Landlord in the Premises, the Building and/or the Project or any
part thereof; (C) upon this transaction or any document to which Tenant is a party creating or
transferring any interest in the Premises, the Building and/or the Project; (D) levied or assessed
in lieu of, in substitution for, or in addition to, existing or additional taxes against the
Premises, the Building and/or the Project, whether or not now customary or within the contemplation
of the parties; or (E) surcharged against the Parking Areas. Tenant and Landlord acknowledge that
Proposition 13 was adopted by the voters of the State of California in the June, 1978 election and
that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such
purposes as fire protection, street, sidewalk, road, utility construction and maintenance, refuse
removal and for other governmental services which may formerly have been provided without charge to
property owners or occupants. It is the intention of the parties that all new and increased
assessments, taxes, fees, levies and charges due to any cause whatsoever are to be included within
the definition of real property taxes for purposes of this Lease. “Taxes and assessments” shall
also include legal and consultants’ fees, costs and disbursements incurred in connection with
proceedings to contest, determine or reduce taxes, Landlord specifically reserving the right, but
not the obligation, to contest by appropriate legal proceedings the amount or validity of any
taxes.




          (ii) Insurance. All insurance premiums for the Building and/or the Project or any part
thereof, including premiums for “all risk” fire and extended coverage insurance, commercial general
liability insurance, rent loss or abatement insurance, earthquake insurance, flood or surface water
coverage, and other insurance as Landlord deems necessary in its sole discretion, and any
deductibles paid under policies of any such insurance.




          (iii) Utilities. The cost of all Utilities (as hereinafter defined) serving the Premises, the
Building and the Project that are not separately metered to Tenant, any assessments or charges for
Utilities or similar purposes included within any tax bill for the Building or the Project,
including, without limitation, entitlement fees, allocation unit fees, and/or any similar fees or
charges and any penalties (if a result of Tenant’s delinquency) related thereto, and any amounts,
taxes, charges, surcharges, assessments or impositions levied, assessed or imposed upon the
Premises, the Building or the Project or any part thereof, or upon Tenant’s use and occupancy
thereof, as a result of any rationing of Utility services or restriction on Utility use affecting
the Premises, the Building and/or the Project, as contemplated in Paragraph 5 below (collectively,
“Utility Expenses”).




3









 








          (iv) Common Area Expenses. All costs to operate, maintain, repair, replace, supervise, insure
and administer the Common Areas, including supplies, materials, labor and equipment used in or
related to the operation and maintenance of the Common Areas, including Parking Areas (including,
without limitation, all costs of resurfacing and restriping Parking Areas), signs and directories
on the Building and/or the Project, landscaping (including maintenance contracts and fees payable
to landscaping consultants), amenities, sprinkler systems, sidewalks, walkways, driveways, curbs,
lighting systems and security services, if any, provided by Landlord for the Common Areas, and any
charges, assessments, costs or fees levied by any association or entity of which the Project or any
part thereof is a member or to which the Project or any part thereof is subject.




          (v) Parking Charges. Any parking charges or other costs levied, assessed or imposed by, or at
the direction of, or resulting from statutes or regulations, or interpretations thereof,
promulgated by any governmental authority or insurer in connection with the use or occupancy of the
Building or the Project.




          (vi) Maintenance and Repair Costs. Except for costs which are the responsibility of Landlord
pursuant to Paragraph 13(b) below, all costs to maintain, repair, and replace the Premises, the
Building and/or the Project or any part thereof, including, without limitation, (A) all costs paid
under maintenance, management and service agreements such as contracts for janitorial, security and
refuse removal, (B) all costs to maintain, repair and replace the roof coverings of the Building or
the Project or any part thereof, and (C) all costs to maintain, repair and replace the heating,
ventilating, air conditioning, plumbing, gas, sewer, drainage, electrical, fire protection and life
safety systems and other mechanical and electrical systems and equipment serving the Premises, the
Buildings and/or the Project or any part thereof (collectively, the “Systems”).




          (vii) Life Safety Costs. All costs to install, maintain, repair and replace all life safety
systems, including, without limitation, all fire alarm systems, serving the Premises, the Building
and/or the Project or any part thereof (including all maintenance contracts and fees payable to
life safety consultants) whether such systems are or shall be required by Landlord’s insurance
carriers, Laws (as hereinafter defined) or otherwise.




          (viii) Management and Administration. All costs for management and administration of the
Premises, the Building and/or the Project or any part thereof, including, without limitation, a
property management fee (the “Management Fee”), accounting, auditing, billing, postage, salaries
and benefits for clerical and supervisory employees, whether located on the Project or off-site,
payroll taxes and legal and accounting costs and fees for licenses and permits related to the
ownership and operation of the Project; provided, however, that the Management Fee shall not
exceed, on an annual basis, three percent (3%) of Base Rent collected by Landlord in connection
with to the ownership and operation of the Project during such period.




          Notwithstanding anything in this Paragraph 4(b) to the contrary, (i) with respect to all sums
payable by Tenant as Additional Rent under this Paragraph 4(b) for the replacement of any item or
the construction of any new item in connection with the physical operation of the Premises, the
Building or the Project (i.e., HVAC, roof membrane or coverings and Parking Areas) which is a
capital item the replacement of which would be capitalized under generally



4









 






accepted commercial real estate accounting practices then Tenant shall be required to pay only
the pro rata share of the cost of the item falling due within the Term (including any renewal term)
based upon the amortization of the same over the useful life of such item, under such generally
accepted commercial real estate accounting practices, and (ii) with respect to all sums payable by
Tenant as Additional Rent under this Paragraph 4(b) for earthquake insurance deductibles, to the
extent any such earthquake damage relates to items which are capital items (the normal replacement
of which would be capitalized under generally accepted commercial real estate accounting practices)
then such deductible shall be allocated among such capital and non-capital items and the pro rata
share of the deductible payable by Tenant shall limited to the costs of the damage which are
allocable to the remainder of the Term (including any renewal term) based upon the costs of the
non-capital items and the amortization of the capital items over their useful life, as determined
by generally accepted commercial real estate accounting practices.




     (c) Exclusions from Expenses. Notwithstanding anything to the contrary contained in Paragraph
4(b) above, “Expenses” and “Additional Rent” shall not include the following (the “Expense
Exclusions”):



          (i) Leasing commissions, attorneys’ fees, costs, disbursements, and other expenses incurred in
connection with negotiations or disputes with tenants, or in connection with leasing, renovating,
or improving space for tenants or other occupants or prospective tenants or other occupants of the
Building or Project.




          (ii) The cost of any service sold to any tenant (including Tenant) or other occupant for which
Landlord is actually reimbursed as an additional charge or rental over and above the basic rent and
escalations payable under the lease with that tenant.




          (iii) Any depreciation on the Building or Project.




          (iv) Expenses in connection with services or other benefits of a type that are not provided to
Tenant but which are provided to and actually paid for by another tenant or occupant of the
Building or Project.




          (v) Costs incurred due to Landlord’s intentional violation of any terms or conditions of this
Lease or any other lease relating to the Building or Project.




          (vi) All interest, loan fees, and other carrying costs related to any mortgage or deed of
trust encumbering the Project, and all rental and other amounts payable due under any ground
affecting the Project.




          (vii) Any compensation paid to clerks, attendants, or other persons in commercial concessions
operated by Landlord.




          (viii) subject to the provisions of Paragraphs 21 and 22 below, any costs of maintenance or
repairs resulting from a casualty or condemnation (other than insurance deductibles which shall be
governed by Paragraph 4(b)(ii) above;




5









 








          (ix) Costs for sculpture, paintings, or other objects of art (nor insurance thereon or
extraordinary security in connection therewith).




          (x) Wages, salaries, or other compensation paid to any executive employees above the grade of
senior property manager.




          (xi) The cost of containing, removing, or otherwise remediating any contamination of the
Property (including the underlying land and ground water) by any toxic or hazardous materials
(including, without limitation, asbestos and “PCBs”) where such contamination existed prior to the
date of this Lease.




     (d) Payment of Additional Rent.



          (i) Upon commencement of this Lease, Landlord shall submit to Tenant an estimate of monthly
Additional Rent for the period between the Commencement Date and the following December 31 and
Tenant shall pay such estimated Additional Rent on a monthly basis, in advance, on the first day of
each month. Tenant shall continue to make said monthly payments until notified by Landlord of a
change therein. If at any time or times Landlord reasonably determines that the amounts payable
under Paragraph 4(b) for the current year will vary from Landlord’s estimate given to Tenant,
Landlord, by notice to Tenant, may revise the estimate for such year, and subsequent payments by
Tenant for such year shall be based upon such revised estimate. By April 1 of each calendar year,
Landlord shall endeavor to provide to Tenant a statement (an “Expense Statement”) showing the
actual Additional Rent due to Landlord for the prior calendar year, to be prorated during the first
year from the Commencement Date. If the total of the monthly payments of Additional Rent that
Tenant has made for the prior calendar year is less than the actual Additional Rent chargeable to
Tenant for such prior calendar year, then Tenant shall pay the difference in a lump sum within
thirty (30) days after receipt of such Expense Statement from Landlord. Any overpayment by Tenant
of Additional Rent for the prior calendar year shall be credited towards the Additional Rent next
due, or returned to Tenant within thirty (30) days if no further Additional Rent is due.




          (ii) Landlord’s then-current annual operating and capital budgets for the Building and the
Project or the pertinent part thereof shall be used for purposes of calculating Tenant’s monthly
payment of estimated Additional Rent for the current year, subject to adjustment as provided above.
Landlord shall make the final determination of Additional Rent for the year in which this Lease
terminates as soon as possible after termination of such year. Even though the Term has expired
and Tenant has vacated the Premises, Tenant shall remain liable for payment of any amount due to
Landlord in excess of the estimated Additional Rent previously paid by Tenant, and, conversely,
Landlord shall promptly return to Tenant any overpayment. Failure of Landlord to submit Expense
Statements as called for herein shall not be deemed a waiver of Tenant’s obligation to pay
Additional Rent as herein provided.




          (iii) With respect to Expenses which Landlord allocates to the Building, Tenant’s
“Proportionate Share” shall be the percentage set forth in the Basic Lease Information as Tenant’s
Proportionate Share of the Building, as adjusted by Landlord from time to time for a remeasurement
of or changes in the physical size of the Premises or the Building, whether such changes in size
are due to an addition to or a sale or conveyance of a portion of the Building or



6









 






otherwise. With respect to Expenses which Landlord allocates to the Project as a whole or to
only a portion of the Project, Tenant’s “Proportionate Share” shall be, with respect to Expenses
which Landlord allocates to the Project as a whole, the percentage set forth in the Basic Lease
Information as Tenant’s Proportionate Share of the Project and, with respect to Expenses which
Landlord allocates to only a portion of the Project, a percentage calculated by Landlord from time
to time in its reasonable discretion and furnished to Tenant in writing, in either case as adjusted
by Landlord from time to time for a remeasurement of or changes in the physical size of the
Premises or the Project, whether such changes in size are due to an addition to or a sale or
conveyance of a portion of the Project or otherwise. Notwithstanding the foregoing, Landlord may
equitably adjust Tenant’s Proportionate Share(s) for all or part of any item of expense or cost
reimbursable by Tenant that relates to a repair, replacement, or service that benefits only the
Premises or only a portion of the Building and/or the Project or that varies with the occupancy of
the Building and/or the Project. Without limiting the generality of the foregoing, Tenant
understands and agrees that Landlord shall have the right to adjust Tenant’s Proportionate Share(s)
of any Utility Expenses based upon Tenant’s use of the Utilities or similar services as reasonably
estimated and determined by Landlord based upon factors such as size of the Premises and intensity
of use of such Utilities by Tenant such that Tenant shall pay the portion of such charges
reasonably consistent with Tenant’s use of such Utilities and similar services. If Tenant disputes
any such estimate or determination of Utility Expenses, then Tenant shall either pay the estimated
amount or cause the Premises to be separately metered at Tenant’s sole expense.




     (e) Tenant’s Right to Audit Expenses. Provided that Tenant is not in Default under the terms
of this Lease (nor is any event occurring which, with the passage of time or the giving of notice,
or both, would constitute a Default hereunder), then Tenant shall have the right within ninety (90)
days after the delivery of the relevant Expense Statement to review and audit Landlord’s books and
records regarding such Expense Statement for the sole purpose of determining the accuracy of such
Expense Statement. Such review or audit shall be performed by a nationally recognized accounting
firm that calculates its fees with respect to hours actually worked and that does not discount its
time or rate (as opposed to a calculation based upon percentage of recoveries or other incentive
arrangement), shall take place during normal business hours in the office of Landlord or Landlord’s
property manager and shall be completed within three (3) business days after the commencement
thereof. If Tenant does not so review or audit Landlord’s books and records, Landlord’s Expense
Statement shall be final and binding upon Tenant. In the event that Tenant determines on the basis
of its review of Landlord’s books and records that the amount of Expenses paid by Tenant pursuant
to this Paragraph 4 for the period covered by such Expense Statement is less than or greater than
the actual amount properly payable by Tenant under the terms of this Lease, Tenant shall promptly
pay any deficiency to Landlord or, if Landlord concurs with the results of such audit in its
reasonable discretion, Landlord shall promptly refund any excess payment to Tenant, as the case may
be.



     (f) General Payment Terms. The Base Rent, Additional Rent and all other sums payable by
Tenant to Landlord hereunder, including, without limitation, any late charges assessed pursuant to
Paragraph 6 below and any interest assessed pursuant to Paragraph 45 below, are referred to as the
“Rent”. All Rent shall be paid in lawful money of the United States of America. Checks are to be
made payable to “Harbor Investment Partners” and shall be mailed to: The Harbor, 0391, P.O. Box
3900, Los Angeles, California 90084 or to such other person or



7









 




place as Landlord may, from time to time, designate to Tenant in writing. The Rent for any
fractional part of a calendar month at the commencement or termination of the Term shall be a
prorated amount of the Rent for a full calendar month based upon a thirty (30) day month.




5. Utility Expenses




     (a) Tenant shall pay the cost of all water, sewer use, sewer discharge fees and permit costs
and sewer connection fees, gas, heat, electricity, refuse pick-up, janitorial service, telephone
and all materials and services or other utilities (collectively, “Utilities”) billed or metered
separately to the Premises and/or Tenant, together with all taxes, assessments, charges and
penalties added to or included within such cost. Tenant shall be responsible for arranging for
janitorial service and all Utilities furnished to the Premises. Tenant acknowledges that the
Premises, the Building and/or the Project may become subject to the rationing of Utility services
or restrictions on Utility use as required by a public utility company, governmental agency or
other similar entity having jurisdiction thereof. Tenant acknowledges and agrees that its tenancy
and occupancy hereunder shall be subject to such rationing or restrictions as may be imposed upon
Landlord, Tenant, the Premises, the Building and/or the Project, and Tenant shall in no event be
excused or relieved from any covenant or obligation to be kept or performed by Tenant by reason of
any such rationing or restrictions. Tenant agrees to comply with energy conservation programs
implemented by Landlord consistent with such imposed rationing, restrictions or Laws.



     (b) Landlord shall not be liable for any loss, injury or damage to property caused by or
resulting from any variation, interruption, or failure of Utilities due to any cause whatsoever, or
from failure to make any repairs or perform any maintenance. No temporary interruption or failure
of such services incident to the making of repairs, alterations, improvements, or due to accident,
strike, or conditions or other events shall be deemed an eviction of Tenant or relieve Tenant from
any of its obligations hereunder. In no event shall Landlord be liable to Tenant for any damage to
the Premises or for any loss, damage or injury to any property therein or thereon occasioned by
bursting, rupture, leakage or overflow of any plumbing or other pipes (including, without
limitation, water, steam, and/or refrigerant lines), sprinklers, tanks, drains, drinking fountains
or washstands, or other similar cause in, above, upon or about the Premises, the Building, or the
Project.



6. Late Charge




     Notwithstanding any other provision of this Lease, Tenant hereby acknowledges that late
payment to Landlord of Rent, or other amounts due hereunder will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. If
any Rent or other sums due from Tenant are not received by Landlord or by Landlord’s designated
agent within five (5) days after their due date, then Tenant shall pay to Landlord a late charge
equal to five percent (5%) of such overdue amount, plus any costs and attorneys’ fees incurred by
Landlord by reason of Tenant’s failure to pay Rent and/or other charges when due hereunder;
provided, however, that Tenant shall be entitled to no more than three (3) notices of late payment
and a five (5) day cure period during the Term (not more than once in any twelve month period)
before any such late charge accrues. Landlord and Tenant hereby agree that such late charges
represent a fair and reasonable estimate of the cost that Landlord will incur by reason of Tenant’s
late payment and shall not be construed as a penalty.



8









 




Landlord’s acceptance of such late charges shall not constitute a waiver of Tenant’s default
with respect to such overdue amount or estop Landlord from exercising any of the other rights and
remedies granted under this Lease.




	 	 	 	 	 
	Initials:     	 	 	 	 
	 
	Landlord
	 	Tenant	 






7. Security Deposit




     (a) Cash Security



          (i) Concurrently with Tenant’s execution of this Lease, Tenant shall deposit with Landlord the
Security Deposit specified in the Basic Lease Information as security for the full and faithful
performance of each and every term, covenant and condition of this Lease. Landlord may use, apply
or retain the whole or any part of the Security Deposit as may be reasonably necessary (a) to
remedy Tenant’s default in the payment of any Rent, (b) to repair damage to the Premises caused by
Tenant, (c) to clean the Premises upon termination of this Lease, if Tenant fails to surrender the
Premises to Landlord in the condition required by this Lease, (d) to reimburse Landlord for the
payment of any amount which Landlord may reasonably spend or be required to spend by reason of
Tenant’s default, or (e) to compensate Landlord for any other loss or damage which Landlord may
suffer by reason of Tenant’s default. Should Tenant faithfully and fully comply with all of the
terms, covenants and conditions of this Lease, within thirty (30) days following the expiration of
the Term, the Security Deposit or any balance thereof shall be returned to Tenant or, at the option
of Landlord, to the last assignee of Tenant’s interest in this Lease. Landlord shall not be
required to keep the Security Deposit separate from its general funds and Tenant shall not be
entitled to any interest on such deposit. If Landlord so uses or applies all or any portion of
said deposit, within five (5) days after written demand therefor Tenant shall deposit cash with
Landlord in an amount sufficient to restore the Security Deposit to the full extent of the above
amount, and Tenant’s failure to do so shall be a Default under this Lease. In the event Landlord
transfers its interest in this Lease, Landlord shall transfer the then remaining amount of the
Security Deposit to Landlord’s successor in interest, and thereafter Landlord shall have no further
liability to Tenant with respect to such Security Deposit.




     (b) Letter of Credit.



          (i) In lieu of the cash security required pursuant to Paragraph 7(a) above, Tenant may deliver
to Landlord, at Tenant’s sole cost and expense, the Letter of Credit described below in the amount
of the Security Deposit specified in the Basic Lease Information (the “LC Face Amount”) as security
for Tenant’s performance of all of Tenant’s covenants and obligations under this Lease; provided,
however, that neither the Letter of Credit nor any Letter of Credit Proceeds (as defined below)
shall be deemed an advance rent deposit or an advance payment of any other kind, or a measure of
Landlord’s damages upon Tenant’s breach of or default under this Lease. The Letter of Credit shall
be maintained in effect from the date hereof through the date that is sixty (60) days after the
Expiration Date (the “LC Termination Date”). On the LC Termination Date, Landlord shall return to
Tenant the Letter of Credit and any Letter of Credit Proceeds then held by Landlord (other than
those Letter of Credit Proceeds Landlord is entitled to retain under the terms of this Paragraph
7(b)(i)); provided, however, that in no event



9









 






shall any such return be construed as an admission by Landlord that Tenant has performed all of its
obligations hereunder. Landlord shall not be required to segregate the Letter of Credit Proceeds
from its other funds and no interest shall accrue or be payable to Tenant with respect thereto.
Landlord may (but shall not be required to) draw upon the Letter of Credit and use the proceeds
thereof (the “Letter of Credit Proceeds”) or any portion thereof, to the extent reasonably required
(i) to remedy Tenant’s Default for non-payment of Rent and to cure any other Default under this
Lease, and in either case to compensate Landlord for any loss or damage Landlord incurs as a result
of such Default, (ii) to repair damage to the Premises caused by Tenant, (iii) to clean the
Premises upon termination of this Lease, if Tenant fails to surrender the Premises to Landlord in
the condition required by this Lease, and (iv) to reimburse Landlord for the payment of any amount
which Landlord may for any purpose spend or be required to spend by reason of Tenant’s Default, it
being understood that any use of the Letter of Credit Proceeds shall not constitute a bar or
defense to any of Landlord’s remedies set forth in Paragraph 25 below. Landlord shall have the
additional right to draw on the Letter of Credit in accordance with Paragraph 7(b)(ii) below. In
any such event and upon written notice from Landlord to Tenant specifying the amount of the Letter
of Credit Proceeds so utilized by Landlord and the particular purpose for which such amount was
applied, Tenant shall immediately deliver to Landlord an amendment to the Letter of Credit or a
replacement Letter of Credit in an amount equal to the full LC Face Amount. Tenant’s failure to
deliver such replacement Letter of Credit to Landlord within ten (10) days of Landlord’s notice
shall constitute an immediate Default hereunder. In the event Landlord transfers its interest in
this Lease, Landlord shall transfer the Letter of Credit and any Letter of Credit Proceeds then
held by Landlord to Landlord’s successor in interest, and thereafter Landlord shall have no further
liability to Tenant with respect to such Letter of Credit or Letter of Credit Proceeds.




          (ii) As used herein, Letter of Credit shall mean an unconditional and irrevocable standby
letter of credit (herein referred to as the “Letter of Credit”) issued by Silicon Valley Bank, or
another major national bank insured by the Federal Deposit Insurance Corporation, with assets of
not less than Fifty Billion Dollars ($50,000,000,000.00) and otherwise reasonably satisfactory to
Landlord (the “Bank”), naming Landlord as beneficiary, in the amount of the LC Face Amount, and
otherwise in form and substance reasonably satisfactory to Landlord. The Letter of Credit shall be
for an initial one-year term, shall automatically renew during the Term (without the necessity of
additional documentation or action on the part of any party), and shall provide: (i) that Landlord
may make partial and multiple draws thereunder, up to the full LC Face Amount, (ii) that Landlord
may draw upon the Letter of Credit up to the full amount thereof and the Bank will pay to Landlord
the amount of each such draw upon receipt by the Bank of a sight draft signed by Landlord and
accompanied by a written certification from Landlord to the Bank stating that Landlord is entitled
to draw on the Letter of Credit, and (iii) that the beneficial interest under the Letter of Credit
shall be freely transferable one or more times and, therefore, in the event of Landlord’s (or any
successor Landlord’s) assignment or other transfer of its interest in this Lease, the Letter of
Credit shall be freely transferable by Landlord (or any successor Landlord), without recourse and
without the payment of any fee or consideration, to the assignee or transferee of such interest and
the Bank shall confirm the same to Landlord (or such successor) and such assignee or transferee.
Any and all costs and fees associated with the set-up or general maintenance Letter of Credit shall
be at the sole cost of Tenant.




10









 








          (iii) In the event that the Bank shall at any time notify Landlord that the Letter of Credit
shall not be renewed beyond the next expiry date, then unless Tenant shall, not less than thirty
(30) days prior to such expiry date, deliver to Landlord a replacement Letter of Credit in the full
LC Face Amount and otherwise meeting the requirements set forth above, Landlord shall be entitled
to draw on the Letter of Credit and shall hold the proceeds of such draw as Letter of Credit
Proceeds pursuant to Paragraph 7(b)(i) above. The Letter of Credit shall expressly provide that,
to be effective, any notice on non-renewal given by the Bank must be provided by the Bank
concurrently to Landlord, Landlord’s property manager and Landlord’s counsel (at the address of
each such party specified in the Letter of Credit).




     (c) Tenant hereby waives any and all rights under and the benefits of Section 1950.7 of the
California Civil Code, and all other provisions of law now in force or that become in force after
the date of execution of this Lease, only to the extent that it provides that Landlord may claim
from a security deposit or Letter of Credit Proceeds only those sums reasonably necessary to remedy
defaults in the payment of rent, to repair damage caused by Tenant, or to clean the Premises upon
termination of this Lease, if Tenant fails to surrender the Premises to Landlord in the condition
required by this Lease. Landlord and Tenant agree that Landlord may, in addition, claim those sums
reasonably necessary to compensate Landlord for any other foreseeable or unforeseeable loss or
damage caused by the act or omission of Tenant or Tenant’s Agents.



8. Possession




     (a) Tenant’s Right of Possession. Subject to Paragraph 8(b), Tenant shall be entitled to
possession of the Premises upon commencement of the Term.



     (b) Early Occupancy. Notwithstanding anything to the contrary contained herein, Tenant shall
have the right to enter and occupy the Premises upon mutual execution hereof for the sole purpose
of installing phone, data, equipment and otherwise preparing the Premises for Tenant’s occupancy,
provided that such entry shall be subject to all of the terms and conditions of this Lease
including, without limitation, Tenant’s insurance and indemnity obligations contained herein,
excluding only the obligation to pay Base Rent and Additional Rent.



9. Use of Premises




     (a) Permitted Use. The use of the Premises by Tenant and Tenant’s agents, advisors,
employees, partners, shareholders, directors, invitees and independent contractors (collectively,
“Tenant’s Agents”) shall be solely for the Permitted Use specified in the Basic Lease Information
and for no other use. Tenant shall not permit any objectionable or unpleasant odor, smoke, dust,
gas, noise or vibration to emanate from or near the Premises. The Premises shall not be used to
create any nuisance or trespass, for any illegal purpose, for any purpose not permitted by Laws,
for any purpose that would invalidate the insurance or increase the premiums for insurance on the
Premises, the Building or the Project or for any purpose or in any manner that would interfere with
other tenants’ use or occupancy of the Project. If any of Tenant’s office machines or equipment
disturb any other tenant in the Building, then Tenant shall provide adequate insulation or take
such other action as may be necessary to eliminate the noise or disturbance. Tenant agrees to pay
to Landlord, as Additional Rent, any increases in premiums on policies resulting from Tenant’s
Permitted Use or any other use or action by Tenant or Tenant’s Agents which



11









 




increases Landlord’s premiums or requires additional coverage by Landlord to insure the
Premises. Tenant agrees not to overload the floor(s) of the Building.




     (b) Compliance with Governmental Regulations and Private Restrictions. Tenant and Tenant’s
Agents shall, at Tenant’s expense, faithfully observe and comply with (i) all municipal, state and
federal laws, statutes, codes, rules, regulations, ordinances, requirements, and orders
(collectively, “Laws”), now in force or which may hereafter be in force pertaining to the Premises
and such compliance is necessary due to Tenant’s specific use of the Premises, the Building or the
Project or any Alterations; provided, however, that except as provided in Paragraph 9(c) below,
Tenant shall not be required to make or, (subject to such limitations as provided in Paragraph 4
above) pay for, structural changes to the Premises or the Building not related to Tenant’s specific
use of the Premises unless the requirement for such changes is imposed as a result of any
improvements or additions made or proposed to be made at Tenant’s request; (ii) all recorded
covenants, conditions and restrictions affecting the Project (“Private Restrictions”) now in force
or which may hereafter be in force; and (iii) any and all rules and regulations set forth in
Exhibit B and any other rules and regulations now or hereafter promulgated by Landlord related to
parking or the operation of the Premises, the Building and/or the Project (collectively, the “Rules
and Regulations”). The judgment of any court of competent jurisdiction, or the admission of Tenant
in any action or proceeding against Tenant, whether Landlord be a party thereto or not, that Tenant
has violated any such Laws or Private Restrictions, shall be conclusive of that fact as between
Landlord and Tenant.



     (c) Compliance with Americans with Disabilities Act. Landlord and Tenant hereby agree and
acknowledge that the Premises, the Building and/or the Project may be subject to, among other Laws,
the requirements of the Americans with Disabilities Act, a federal law codified at 42 U.S.C. §
12101 et seq., including, but not limited to, Title III thereof, and all regulations and guidelines
related thereto, together with any and all laws, rules, regulations, ordinances, codes and statutes
now or hereafter enacted by local or state agencies having jurisdiction thereof, including all
requirements of Title 24 of the State of California, as the same may be in effect on the date of
this Lease and may be hereafter modified, amended or supplemented (collectively, the “ADA”).
Subject to reimbursement pursuant to Paragraph 4 above, if any barrier removal work or other work
is required to the Building, the Common Areas or the Project under the ADA, then such work shall be
the responsibility of Landlord; provided, however, that if such work is required under the ADA as a
result of Tenant’s particular use of the Premises or any work or Alteration (as hereinafter
defined) made to the Premises by or on behalf of Tenant, then such work shall be performed by
Landlord at the sole cost and expense of Tenant. Except as otherwise expressly provided in this
provision, Tenant shall be responsible at its sole cost and expense for fully and faithfully
complying with all applicable requirements of the ADA, including, without limitation, not
discriminating against any disabled persons in the operation of Tenant’s business in or about the
Premises, and offering or otherwise providing auxiliary aids and services as, and when, required by
the ADA. Within ten (10) days after receipt, Tenant shall advise Landlord in writing, and provide
Landlord with copies of (as applicable), any notices alleging violation of the ADA relating to any
portion of the Premises, the Building or the Project; any claims made or threatened orally or in
writing regarding noncompliance with the ADA and relating to any portion of the Premises, the
Building, or the Project; or any governmental or regulatory actions or investigations instituted or
threatened regarding noncompliance with the ADA and relating to any portion of the Premises, the
Building or the Project. Tenant shall and



12









 




hereby agrees to protect, defend (with counsel acceptable to Landlord) and hold Landlord and
Landlord’s agents, advisors, employees, partners, shareholders, directors, invitees or independent
contractors (collectively, “Landlord’s Agents”) harmless and indemnify Landlord and Landlord’s
Agents from and against all liabilities, damages, claims, losses, penalties, judgments, charges and
expenses (including attorneys’ fees, costs of court and expenses necessary in the prosecution or
defense of any litigation including the enforcement of this provision) arising from or in any way
related to, directly or indirectly, Tenant’s or Tenant’s Agents’ violation or alleged violation of
the ADA. Tenant agrees that the obligations of Tenant herein shall survive the expiration or
earlier termination of this Lease.




     (d) No Roof Access. At no time during the Term shall Tenant have access to the roof of the
Building or have the right to install, operate or maintain a satellite-earth communications station
(antenna and associated equipment), microwave equipment and/or an FM antenna on the Building or the
Project.



10. Acceptance of Premises




     (a) By its execution hereof, Tenant acknowledges that it had the opportunity to fully inspect
the Premises, including, but not limited to, conducting any desired testing. Tenant hereby
certifies to Landlord that neither Tenant nor any of its employees, agents, or contractors observed
or has any knowledge of any mold, mildew, Mold Conditions (as hereinafter defined) or moisture
within the Premises.



     (b) Subject to Paragraph 10(c) below, by entry hereunder, Tenant accepts the Premises as
suitable for Tenant’s intended use and as being in good and sanitary operating order, condition and
repair, as is, and without representation or warranty by Landlord as to the condition, use
or occupancy which may be made thereof. Any exceptions to the foregoing must be by written
agreement executed by Landlord and Tenant.



     (c) Landlord shall cause the mechanical, electrical, lighting, HVAC and plumbing systems
serving the Premises to be in good working order and the roof on the Building to be in good
condition on the Commencement Date. Any claims by Tenant under the preceding sentence shall be made
in writing not later than the tenth (10th) day after the Commencement Date. In the event Tenant
fails to deliver a written claim to Landlord on or before such tenth (10th) day, then Landlord
shall be conclusively deemed to have satisfied its obligations under this Paragraph 10(c).



11. Surrender




     Tenant agrees that on the last day of the Term, or on the sooner termination of this Lease,
Tenant shall surrender the Premises to Landlord (a) in good condition and repair (damage by acts of
God, fire, and other casualty, condemnation and normal wear and tear excepted), but with all
interior walls painted or cleaned so they appear painted, any carpets cleaned, all floors cleaned
and waxed, all non-working light bulbs and ballasts replaced and all roll-up doors and plumbing
fixtures in good condition and working order, and (b) otherwise in accordance with Paragraph 32(h).
Normal wear and tear shall not include any damage or deterioration to the floors of the Premises
arising from the use of forklifts in, on or about the Premises (including,



13









 




without limitation, any marks or stains on any portion of the floors), and any damage or deterioration
that would have been prevented by proper maintenance by Tenant, or Tenant otherwise performing all
of its obligations under this Lease. On or before the expiration or sooner termination of this
Lease, (i) Tenant shall remove all of Tenant’s Property (as hereinafter defined) and Tenant’s
signage from the Premises, the Building and the Project and repair any damage caused by such
removal, and (ii) Landlord may, by notice to Tenant given not later than ninety (90) days prior to
the Expiration Date (except in the event of a termination of this Lease prior to the scheduled
Expiration Date, in which event no advance notice shall be required), require Tenant at Tenant’s
expense to remove any or all Alterations, and to repair any damage caused by such removal. Any of
Tenant’s Property not so removed by Tenant as required herein shall be deemed abandoned and may be
stored, removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all claims
against Landlord for any damages resulting from Landlord’s retention and disposition of such
property; provided, however, that Tenant shall remain liable to Landlord for all costs incurred in
storing and disposing of such abandoned property of Tenant. All Alterations except those which
Landlord requires Tenant to remove (including those which Tenant is required to remove pursuant to
Paragraph 12(i) below) shall remain in the Premises as the property of Landlord. If the Premises
are not surrendered at the end of the Term or sooner termination of this Lease, and in accordance
with the provisions of this Paragraph 11 and Paragraph 32(h) below, Tenant shall continue to be
responsible for the payment of Rent (as the same may be increased pursuant to Paragraph 35 below)
until the Premises are so surrendered in accordance with said Paragraphs, and Tenant shall
indemnify, defend and hold Landlord harmless from and against any and all loss or liability
resulting from delay by Tenant in so surrendering the Premises including, without limitation, any
loss or liability resulting from any claim against Landlord made by any succeeding tenant or
prospective tenant founded on or resulting from such delay and losses to Landlord due to lost
opportunities to lease any portion of the Premises to any such succeeding tenant or prospective
tenant, together with, in each case, actual attorneys’ fees and costs.




12. Alterations and Additions




     (a) Tenant shall not make, or permit to be made, any alteration, addition or improvement
(hereinafter referred to individually as an “Alteration” and collectively as the “Alterations”) to
the Premises or any part thereof without the prior written consent of Landlord, which consent shall
not be unreasonably withheld; provided, however, that Landlord shall have the right in its sole and
absolute discretion to consent or to withhold its consent to any Alteration which affects the
structural portions of the Premises, the Building or the Project or the Systems serving the
Premises, the Building and/or the Project or any portion thereof.



     (b) Any Alteration to the Premises shall be at Tenant’s sole cost and expense, in compliance
with all applicable Laws and all requirements requested by Landlord, including, without limitation,
the requirements of any insurer providing coverage for the Premises or the Project or any part
thereof, and in accordance with plans and specifications approved in writing by Landlord, and shall
be constructed and installed by a contractor approved in writing by Landlord. As a further
condition to giving consent, Landlord may require Tenant to provide Landlord, at Tenant’s sole cost
and expense, a payment and performance bond in form acceptable to Landlord, in a principal amount
not less than one and one-half times the estimated costs of such Alterations, to ensure Landlord
against any liability for mechanics’ and



14









 




materialmen’s liens and to ensure completion of work. Before Alterations may begin, valid
building permits or other permits or licenses required must be furnished to Landlord, and, once the
Alterations begin, Tenant will diligently and continuously pursue their completion. Landlord may
monitor construction of the Alterations and Tenant shall reimburse Landlord for its costs
(including, without limitation, the costs of any construction manager retained by Landlord) in
reviewing plans and documents and in monitoring construction. Tenant shall maintain during the
course of construction, at its sole cost and expense, builders’ risk insurance for the amount of
the completed value of the Alterations on an all-risk non-reporting form covering all improvements
under construction, including building materials, and other insurance in amounts and against such
risks as Landlord shall reasonably require in connection with the Alterations. In addition to and
without limitation on the generality of the foregoing, Tenant shall ensure that its contractor(s)
procure and maintain in full force and effect during the course of construction a “broad form”
commercial general liability and property damage policy of insurance naming Landlord, Landlord’s
manager, UBS Realty Investors llc (“UBS”), Tenant and Landlord’s lenders as
additional insureds. The minimum limit of coverage of the aforesaid policy shall be in the amount
of not less than Three Million Dollars ($3,000,000.00) for injury or death of one person in any one
accident or occurrence and in the amount of not less than Three Million Dollars ($3,000,000.00) for
injury or death of more than one person in any one accident or occurrence, and shall contain a
severability of interest clause or a cross liability endorsement. Such insurance shall further
insure Landlord and Tenant against liability for property damage of at least One Million Dollars
($1,000,000.00).




     (c) All Alterations, including, but not limited to, heating, lighting, electrical, air
conditioning, fixed partitioning, drapery, wall covering and paneling, built-in cabinet work and
carpeting installations made by Tenant, together with all property that has become an integral part
of the Premises or the Building, shall at once be and become the property of Landlord, and shall
not be deemed trade fixtures or Tenant’s Property. If requested by Landlord, Tenant will pay,
prior to the commencement of construction, an amount determined by Landlord necessary to cover the
costs of demolishing such Alterations and/or the cost of returning the Premises and the Building to
its condition prior to such Alterations.



     (d) No private telephone systems and/or other related computer or telecommunications equipment
or lines may be installed without Landlord’s prior written consent. If Landlord gives such
consent, all equipment must be installed within the Premises and, at the request of Landlord made
at any time prior to the expiration of the Term, removed upon the expiration or sooner termination
of this Lease and the Premises restored to the same condition as before such installation.



     (e) Notwithstanding anything herein to the contrary, before installing any equipment or lights
which generate an undue amount of heat in the Premises, or if Tenant plans to use any high-power
usage equipment in the Premises, Tenant shall obtain the written permission of Landlord. Landlord
may refuse to grant such permission unless Tenant agrees to pay the costs to Landlord for
installation of supplementary air conditioning capacity or electrical systems necessitated by such
equipment.



     (f) Tenant agrees not to proceed to make any Alterations, notwithstanding consent from
Landlord to do so, until Tenant notifies Landlord in writing of the date Tenant desires to



15









 




commence construction or installation of such Alterations and Landlord has approved such date
in writing, in order that Landlord may post appropriate notices to avoid any liability to
contractors or material suppliers for payment for Tenant’s improvements. Tenant will at all times
permit such notices to be posted and to remain posted until the completion of work.




     (g) Tenant shall not, at any time prior to or during the Term, directly or indirectly employ,
or permit the employment of, any contractor, mechanic or laborer in the Premises, whether in
connection with any Alteration or otherwise, if it is reasonably foreseeable that such employment
will materially interfere or cause any material conflict with other contractors, mechanics, or
laborers engaged in the construction, maintenance or operation of the Project by Landlord, Tenant
or others. In the event of any such interference or conflict, Tenant, upon demand of Landlord,
shall cause all contractors, mechanics or laborers causing such interference or conflict to leave
the Project immediately.



     (h) Tenant shall not use or employ materials that are susceptible to the growth of mold,
particularly in areas where moisture accumulation is common.



     (i) Tenant has notified Landlord that Tenant desires to (i) make some electrical changes, and
(ii) install partitioned walls in the Premises (collectively, the “Initial Alterations”). Tenant
shall have the right to make the Initial Alterations to the premises, at Tenant’s sole cost and
expense, provided that Tenant fully complies with the terms and conditions of Paragraphs 12(a)
through 12(h) above, including, without limitation, the review and approval by Landlord of detailed
plans and specifications and the approval by Landlord of Tenant’s contractor. Notwithstanding
anything to the contrary contained in Paragraph 11 above, prior to the Expiration Date, Tenant
shall, at Tenant’s sole cost and expense, remove the Initial Alterations described in clauses (ii)
and (iii) above and restore the Premises to the condition existing prior to the construction and
installation of the same.



13. Maintenance and Repairs of Premises




     (a) Maintenance by Tenant. Throughout the Term, Tenant shall, at its sole expense, (i) keep
and maintain in good order and condition the Premises, and repair and replace every part thereof,
including glass, windows, window frames, window casements, skylights, interior (including the floor
and dropped ceiling, but excluding areas below the floor or above the dropped ceiling) and exterior
doors, door frames and door closers; interior lighting (including, without limitation, light bulbs
and ballasts), the plumbing and electrical systems exclusively serving the Premises, all
communications systems serving the Premises, Tenant’s signage, interior demising walls and
partitions, equipment, interior painting and interior walls and floors located in or on the
Premises (excepting only those portions of the Building or the Project to be maintained by
Landlord, as provided in Paragraph 13(b) below), (ii) furnish all expendables, including light
bulbs, paper goods and soaps, used in the Premises, and (iii) keep and maintain in good order and
condition, repair and replace all of Tenant’s security systems in or about or serving the Premises
and, except to the extent that Landlord notifies Tenant in writing of its intention to arrange for
such monitoring, cause the fire alarm systems serving the Premises to be monitored by a monitoring
or protective services firm approved by Landlord in writing. Tenant shall not do nor shall Tenant
allow Tenant’s Agents to do anything to cause any damage, deterioration or unsightliness to the
Premises, the Building or the Project.



16









 





     (b) Maintenance by Landlord. Subject to the provisions of Paragraphs 13(a), 21 and 22, and
further subject to Tenant’s obligation under Paragraph 4 to reimburse Landlord, in the form of
Additional Rent, for Tenant’s Proportionate Share(s) of the cost and expense of the following
items, Landlord agrees to repair and maintain the following items: the roof coverings (provided
that Tenant installs no additional air conditioning or other equipment on the roof that damages the
roof coverings, in which event Tenant shall pay all costs resulting from the presence of such
additional equipment); the Systems serving the Premises and the Building, excluding the plumbing
and electrical systems exclusively serving the Premises; and the Parking Areas, pavement,
landscaping, sprinkler systems, sidewalks, driveways, curbs, and lighting systems in the Common
Areas. Subject to the provisions of Paragraphs 13(a), 21 and 22, Landlord, at its own cost and
expense, agrees to repair and maintain the following items: the structural portions of the roof
(specifically excluding the roof coverings), the foundation, the footings, the floor slab, and the
load bearing walls and exterior walls of the Building (excluding any glass and any routine
maintenance, including, without limitation, any painting, sealing, patching and waterproofing of
such walls). Notwithstanding anything in this Paragraph 13 to the contrary, Landlord shall have
the right to either repair or to require Tenant to repair any damage to any portion of the
Premises, the Building and/or the Project caused by or created due to any act, omission, negligence
or willful misconduct of Tenant or Tenant’s Agents and to restore the Premises, the Building and/or
the Project, as applicable, to the condition existing prior to the occurrence of such damage;
provided, however, that in the event Landlord elects to perform such repair and restoration work,
Tenant shall reimburse Landlord upon demand for all costs and expenses incurred by Landlord in
connection therewith. Landlord’s obligation hereunder to repair and maintain is subject to the
condition precedent that Landlord shall have received written notice of the need for such repairs
and maintenance and a reasonable time to perform such repair and maintenance. Tenant shall
promptly report in writing to Landlord any defective condition known to it which Landlord is
required to repair.



     (c) Tenant’s Waiver of Rights. Tenant hereby expressly waives all rights to make repairs at
the expense of Landlord or to terminate this Lease, as provided for in California Civil Code
Sections 1941 and 1942, and 1932(1), respectively, and any similar or successor statute or law in
effect or any amendment thereof during the Term.



14. Landlord’s Insurance




     Landlord shall purchase and keep in force fire, extended coverage and “all risk” insurance
covering the Building and the Project. Tenant shall, at its sole cost and expense, comply with any
and all reasonable requirements pertaining to the Premises, the Building and the Project of any
insurer necessary for the maintenance of reasonable fire and commercial general liability
insurance, covering the Building and the Project. Landlord, as an Expense, may maintain “Loss of
Rents” insurance, insuring that the Rent will be paid in a timely manner to Landlord for a period
of at least twelve (12) months if the Premises, the Building or the Project or any portion thereof
are destroyed or rendered unusable or inaccessible by any cause insured against under this Lease.



17









 





15. Tenant’s Insurance




     (a) Commercial General Liability Insurance. Tenant shall, at Tenant’s expense, secure and
keep in force a “broad form” commercial general liability insurance and property damage policy
covering the Premises, insuring Tenant, and naming Landlord, Landlord’s investment advisors and
agents from time to time, including, without limitation, UBS and Landlord’s lenders (collectively,
“Landlord Parties”) as additional insureds, against any liability arising out of the ownership,
use, occupancy or maintenance of the Premises. The minimum limit of coverage of such policy shall
be in the amount of not less than Two Million Dollars ($2,000,000.00) for injury or death of one
person in any one accident or occurrence and in the amount of not less than Two Million Dollars
($2,000,000.00) for injury or death of more than one person in any one accident or occurrence,
shall include an extended liability endorsement providing contractual liability coverage (which
shall include coverage for Tenant’s indemnification obligations in this Lease), and shall contain a
severability of interest clause or a cross liability endorsement. Such insurance shall further
insure Landlord and Tenant against liability for property damage of at least Two Million Dollars
($2,000,000.00). Landlord may from time to time require reasonable increases in any such limits if
Landlord believes that additional coverage is necessary or desirable. The limit of any insurance
shall not limit the liability of Tenant hereunder. No policy maintained by Tenant under this
Paragraph 15(a) shall contain a deductible greater than Two Thousand Five Hundred Dollars
($2,500.00). No policy shall be cancelable or subject to reduction of coverage without thirty (30)
days’ prior written notice to Landlord, and loss payable clauses shall be subject to Landlord’s
approval. Such policies of insurance shall be issued as primary policies and not contributing with
or in excess of coverage that Landlord may carry, by an insurance company authorized to do business
in the State of California for the issuance of such type of insurance coverage and rated A-:XIII or
better in Best’s Key Rating Guide.



     (b) Personal Property Insurance. Tenant shall maintain in full force and effect on all of its
personal property, furniture, furnishings, trade or business fixtures and equipment (collectively,
“Tenant’s Property”) on the Premises, a policy or policies of fire and extended coverage insurance
with standard coverage endorsement to the extent of the full replacement cost thereof. No such
policy shall contain a deductible greater than Two Thousand Five Hundred Dollars ($2,500.00).
During the Term, the proceeds from any such policy or policies of insurance shall be used for the
repair or replacement of the fixtures and equipment so insured. Landlord shall have no interest in
the insurance upon Tenant’s equipment and fixtures and will sign all documents reasonably necessary
in connection with the settlement of any claim or loss by Tenant. Landlord will not carry
insurance on Tenant’s possessions.



     (c) Worker’s Compensation Insurance; Employer’s Liability Insurance. Tenant shall, at
Tenant’s expense, maintain in full force and effect worker’s compensation insurance with not less
than the minimum limits required by law, and employer’s liability insurance with a minimum limit of
coverage of One Million Dollars ($1,000,000.00).



     (d) Evidence of Coverage. Tenant shall deliver to Landlord certificates of insurance and true
and complete copies of any and all endorsements required herein for all insurance required to be
maintained by Tenant hereunder at the time of execution of this Lease by Tenant. Tenant shall, at
least thirty (30) days prior to expiration of each policy, furnish Landlord with certificates of
renewal or “binders” thereof. Each certificate shall expressly provide that such policies shall



18









 




not be cancelable or otherwise subject to modification except after thirty (30) days’ prior
written notice to Landlord and the other parties named as additional insureds as required in this
Lease (except for cancellation for nonpayment of premium, in which event cancellation shall not
take effect until at least ten (10) days’ notice has been given to Landlord).




16. Indemnification




     (a) Of Landlord. Tenant shall defend, protect, indemnify and hold harmless Landlord and
Landlord’s Agents against and from any and all claims, suits, liabilities, judgments, costs,
demands, causes of action and expenses (including, without limitation, reasonable attorneys’ fees,
costs and disbursements) arising from (i) the use of the Premises, the Building or the Project by
Tenant or Tenant’s Agents, or from any activity done, permitted or suffered by Tenant or Tenant’s
Agents in or about the Premises, the Building or the Project, including any mold or Mold
Conditions, and (ii) any act, neglect, fault, willful misconduct or omission of Tenant or Tenant’s
Agents, or from any breach or default in the terms of this Lease by Tenant or Tenant’s Agents, and
(iii) any action or proceeding brought on account of any matter in items (i) or (ii). If any
action or proceeding is brought against Landlord by reason of any such claim, upon notice from
Landlord, Tenant shall defend the same at Tenant’s expense by counsel reasonably satisfactory to
Landlord. As a material part of the consideration to Landlord, Tenant hereby releases Landlord and
Landlord’s Agents from responsibility for, waives its entire claim of recovery for and assumes all
risk of (A) damage to property or injury to persons in or about the Premises, the Building or the
Project from any cause whatsoever (except that which is caused by the gross negligence or willful
misconduct of Landlord or Landlord’s Agents or by the failure of Landlord to observe any of the
terms and conditions of this Lease, if such failure has persisted for an unreasonable period of
time after written notice of such failure), or (B) loss resulting from business interruption or
loss of income at the Premises. The obligations of Tenant under this Paragraph 16 shall survive
any termination of this Lease.



     (b) Of Tenant. Landlord shall indemnify and hold harmless Tenant against and from any and all
claims, liabilities, judgments, costs, demands, causes of action and expenses (including, without
limitation, reasonable attorneys’ fees) arising from (i) the gross negligence of Landlord or from
any breach or default in the terms of this Lease by Landlord (if such breach or default has
persisted for an unreasonable period of time after written notice of such failure), and (ii) any
action or proceeding brought on account of any matter in item (i). If any action or proceeding is
brought against Tenant by reason of any such claim, upon notice from Tenant, Landlord shall defend
the same at Landlord’s expense by counsel reasonably satisfactory to Tenant. The obligations of
Landlord under this Paragraph 16(b) shall survive any termination of this Lease.



     (c) No Impairment of Insurance. The foregoing indemnities shall not relieve any insurance
carrier of its obligations under any policies required to be carried by either party pursuant to
this Lease, to the extent that such policies cover the peril or occurrence that results in the
claim that is subject to the foregoing indemnity.



17. Subrogation




     Landlord and Tenant hereby mutually waive any claim against the other and its Agents for any
loss or damage to any of their property located on or about the Premises, the Building or the



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Project that is caused by or results from perils covered by property insurance carried by the
respective parties, to the extent of the proceeds of such insurance actually received with respect
to such loss or damage, whether or not due to the negligence of the other party or its Agents.
Because the foregoing waivers will preclude the assignment of any claim by way of subrogation to an
insurance company or any other person, each party now agrees to immediately give to its insurer
written notice of the terms of these mutual waivers and shall have their insurance policies
endorsed to prevent the invalidation of the insurance coverage because of these waivers. Nothing
in this Paragraph 17 shall relieve a party of liability to the other for failure to carry insurance
required by this Lease.




18. Signs




     Tenant shall not place or permit to be placed in, upon, or about the Premises, the Building or
the Project any exterior lights, decorations, balloons, flags, pennants, banners, advertisements or
notices, or erect or install any signs, windows or door lettering, placards, decorations, or
advertising media of any type which can be viewed from the exterior the Premises without obtaining
Landlord’s prior written consent or without complying with Landlord’s signage criteria, as the same
may be modified by Landlord from time to time, and with all applicable Laws, and will not conduct,
or permit to be conducted, any sale by auction on the Premises or otherwise on the Project. Tenant
shall remove any sign, advertisement or notice placed on the Premises, the Building or the Project
by Tenant upon the expiration of the Term or sooner termination of this Lease, and Tenant shall
repair any damage or injury to the Premises, the Building or the Project caused thereby, all at
Tenant’s expense. If any signs are not removed, or necessary repairs not made, Landlord shall have
the right to remove the signs and repair any damage or injury to the Premises, the Building or the
Project at Tenant’s sole cost and expense.



19. Free From Liens




     Tenant shall keep the Premises, the Building and the Project free from any liens arising out
of any work performed, material furnished or obligations incurred by or for Tenant. In the event
that Tenant shall not, within twenty (20) days following the imposition of any such lien, cause the
lien to be released of record by payment or posting of a proper bond, Landlord shall have in
addition to all other remedies provided herein and by law the right but not the obligation to cause
same to be released by such means as it shall deem proper, including payment of the claim giving
rise to such lien. All such sums paid by Landlord and all expenses incurred by it in connection
therewith (including, without limitation, attorneys’ fees) shall be payable to Landlord by Tenant
upon demand. Landlord shall have the right at all times to post and keep posted on the Premises
any notices permitted or required by law or that Landlord shall deem proper for the protection of
Landlord, the Premises, the Building and the Project, from mechanics’ and materialmen’s liens.
Tenant shall give to Landlord at least five (5) business days’ prior written notice of commencement
of any repair or construction on the Premises.



20. Entry By Landlord




     Tenant shall permit Landlord and Landlord’s Agents to enter into and upon the Premises at all
reasonable times, upon reasonable notice (except in the case of an emergency, for which no notice
shall be required), and subject to Tenant’s reasonable security arrangements, for the



20









 




purpose of inspecting the same or showing the Premises to prospective purchasers, lenders or
tenants or to alter, improve, maintain and repair the Premises or the Building as required or
permitted by Landlord under the terms hereof, or for any other business purpose, without any rebate
of Rent and without any liability to Tenant for any loss of occupation or quiet enjoyment of the
Premises thereby occasioned (except for actual damages resulting from the gross negligence or
willful misconduct of Landlord); and Tenant shall permit Landlord to post notices of
non-responsibility and ordinary “for sale” or “for lease” signs. No such entry shall be construed
to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant
from the Premises. Landlord may temporarily close entrances, doors, corridors, elevators or other
facilities without liability to Tenant by reason of such closure in the case of an emergency and
when Landlord otherwise deems such closure necessary.




21. Destruction and Damage




     (a) If the Premises are damaged by fire or other perils covered by extended coverage
insurance, Landlord shall, at Landlord’s option:



          (i) In the event of total destruction (which shall mean destruction or damage in excess of
twenty-five percent (25%) of the full insurable value thereof) of the Premises, elect either to
commence promptly to repair and restore the Premises and prosecute the same diligently to
completion, in which event this Lease shall remain in full force and effect; or not to repair or
restore the Premises, in which event this Lease shall terminate. Landlord shall give Tenant
written notice of its intention within sixty (60) days after the date (the “Casualty Discovery
Date”) Landlord obtains actual knowledge of such destruction. If Landlord elects not to restore
the Premises, this Lease shall be deemed to have terminated as of the date of such total
destruction.




          (ii) In the event of a partial destruction (which shall mean destruction or damage to an
extent not exceeding twenty-five percent (25%) of the full insurable value thereof) of the Premises
for which Landlord will receive insurance proceeds sufficient to cover the cost to repair and
restore such partial destruction and, if the damage thereto is such that the Premises may be
substantially repaired or restored to its condition existing immediately prior to such damage or
destruction within one hundred eighty (180) days from the Casualty Discovery Date, Landlord shall
commence and proceed diligently with the work of repair and restoration, in which event this Lease
shall continue in full force and effect. If such repair and restoration requires longer than one
hundred eighty (180) days or if the insurance proceeds therefor (plus any amounts Tenant may elect
or is obligated to contribute) are not sufficient to cover the cost of such repair and restoration,
Landlord may elect either to so repair and restore, in which event this Lease shall continue in
full force and effect, or not to repair or restore, in which event this Lease shall terminate. In
either case, Landlord shall give written notice to Tenant of its intention within sixty (60) days
after the Casualty Discovery Date. If Landlord elects not to restore the Premises, this Lease
shall be deemed to have terminated as of the date of such partial destruction.




          (iii) Notwithstanding anything to the contrary contained in this Paragraph, in the event of
damage to the Premises occurring during the last twelve (12) months of the Term, Landlord or Tenant
may elect to terminate this Lease by written notice of such election given to the other within
thirty (30) days after the Casualty Discovery Date.




21









 








     (b) If the Premises are damaged by any peril not covered by extended coverage insurance, and
the cost to repair such damage exceeds any amount Tenant may agree to contribute, Landlord may
elect either to commence promptly to repair and restore the Premises and prosecute the same
diligently to completion, in which event this Lease shall remain in full force and effect; or not
to repair or restore the Premises, in which event this Lease shall terminate. Landlord shall give
Tenant written notice of its intention within sixty (60) days after the Casualty Discovery Date.
If Landlord elects not to restore the Premises, this Lease shall be deemed to have terminated as of
the date on which Tenant surrenders possession of the Premises to Landlord, except that if the
damage to the Premises materially impairs Tenant’s ability to continue its business operations in
the Premises, then this Lease shall be deemed to have terminated as of the date such damage
occurred.



     (c) Notwithstanding anything to the contrary in this Paragraph 21, Landlord shall have the
option to terminate this Lease, exercisable by notice to Tenant within sixty (60) days after the
Casualty Discovery Date, in each of the following instances:



          (i) If more than twenty-five percent (25%) of the full insurable value of the Building or the
Project is damaged or destroyed, regardless of whether or not the Premises are destroyed.




          (ii) If the Building or the Project or any portion thereof is damaged or destroyed and the
repair and restoration of such damage requires longer than one hundred eighty (180) days from the
Casualty Discovery Date.




          (iii) If the Building or the Project or any portion thereof is damaged or destroyed and the
insurance proceeds therefor are not sufficient to cover the costs of repair and restoration.




          (iv) If the Building or the Project or any portion thereof is damaged or destroyed during the
last twelve (12) months of the Term.




     (d) In the event of repair and restoration as herein provided, the monthly installments of
Base Rent shall be abated proportionately in the ratio which Tenant’s use of the Premises is
impaired during the period of such repair or restoration; provided, however, that Tenant shall not
be entitled to such abatement to the extent that such damage or destruction resulted from the
criminal acts or willful misconduct of Tenant or Tenant’s Agents. Except as expressly provided in
the immediately preceding sentence with respect to abatement of Base Rent, Tenant shall have no
claim against Landlord for, and hereby releases Landlord and Landlord’s Agents from responsibility
for and waives its entire claim of recovery for any cost, loss or expense suffered or incurred by
Tenant as a result of any damage to or destruction of the Premises, the Building or the Project or
the repair or restoration thereof, including, without limitation, any cost, loss or expense
resulting from any loss of use of the whole or any part of the Premises, the Building or the
Project and/or any inconvenience or annoyance occasioned by such damage, repair or restoration.



     (e) If Landlord is obligated to or elects to repair or restore as herein provided, Landlord
shall repair or restore only the initial tenant improvements, if any, constructed by Landlord in
the Premises pursuant to the terms of this Lease, substantially to their condition existing
immediately



22









 




prior to the occurrence of the damage or destruction; and Tenant shall promptly repair and
restore, at Tenant’s expense, Tenant’s Alterations which were not constructed by Landlord.




     (f) Tenant hereby waives the provisions of California Civil Code Section 1932(2) and Section
1933(4) which permit termination of a lease upon destruction of the leased premises, and the
provisions of any similar law now or hereinafter in effect, and the provisions of this Paragraph 21
shall govern exclusively in case of such destruction.



22. Condemnation




     (a) If twenty-five percent (25%) or more of either the Premises, the Building or the Project
or the Parking Areas is taken for any public or quasi-public purpose by any lawful governmental
power or authority, by exercise of the right of appropriation, inverse condemnation, condemnation
or eminent domain, or sold to prevent such taking (each such event being referred to as a
“Condemnation”), Landlord may, at its option, terminate this Lease as of the date title vests in
the condemning party. If twenty-five percent (25%) or more of the Premises is taken and if the
Premises remaining after such Condemnation and any repairs by Landlord would be untenantable for
the conduct of Tenant’s business operations, Tenant shall have the right to terminate this Lease as
of the date title vests in the condemning party. If either party elects to terminate this Lease as
provided herein, such election shall be made by written notice to the other party given within
thirty (30) days after the nature and extent of such Condemnation have been finally determined. If
neither Landlord nor Tenant elects to terminate this Lease to the extent permitted above, Landlord
shall promptly proceed to restore the Premises, to the extent of any Condemnation award received by
Landlord, to substantially the same condition as existed prior to such Condemnation, allowing for
the reasonable effects of such Condemnation, and a proportionate abatement shall be made to the
Base Rent corresponding to the time during which, and to the portion of the floor area of the
Premises (adjusted for any increase thereto resulting from any reconstruction) of which, Tenant is
deprived on account of such Condemnation and restoration, as reasonably determined by Landlord.
Except as expressly provided in the immediately preceding sentence with respect to abatement of
Base Rent, Tenant shall have no claim against Landlord for, and hereby releases Landlord and
Landlord’s Agents from responsibility for and waives its entire claim of recovery for any cost,
loss or expense suffered or incurred by Tenant as a result of any Condemnation or the repair or
restoration of the Premises, the Building or the Project or the Parking Areas following such
Condemnation, including, without limitation, any cost, loss or expense resulting from any loss of
use of the whole or any part of the Premises, the Building, the Project or the Parking Areas and/or
any inconvenience or annoyance occasioned by such Condemnation, repair or restoration. The
provisions of California Code of Civil Procedure Section 1265.130, which allows either party to
petition the Superior Court to terminate this Lease in the event of a partial taking of the
Premises, the Building or the Project or the Parking Areas, and any other applicable law now or
hereafter enacted, are hereby waived by Tenant.



     (b) Landlord shall be entitled to any and all compensation, damages, income, rent, awards, or
any interest therein whatsoever which may be paid or made in connection with any Condemnation, and
Tenant shall have no claim against Landlord for the value of any unexpired Term of this Lease or
otherwise; provided, however, that Tenant shall be entitled to receive any award separately
allocated by the condemning authority to Tenant for Tenant’s relocation



23









 




expenses or the value of Tenant’s Property (specifically excluding fixtures, Alterations and
other components of the Premises which under this Lease or by law are or at the expiration of the
Term will become the property of Landlord), provided that such award does not reduce any award
otherwise allocable or payable to Landlord.




23. Assignment and Subletting




     (a) Tenant shall not voluntarily or by operation of law, (i) mortgage, pledge, hypothecate or
encumber this Lease or any interest herein, (ii) assign or transfer this Lease or any interest
herein, sublease the Premises or any part thereof, or any right or privilege appurtenant thereto,
or allow any other person (the employees and invitees of Tenant excepted) to occupy or use the
Premises, or any portion thereof, without first obtaining the written consent of Landlord, which
consent shall not be unreasonably withheld; provided, however, that (A) Tenant is not then in
Default under this Lease nor is any event then occurring which with the giving of notice or the
passage of time, or both, would constitute a Default hereunder, and (B) the proposed transfer is
not an assignment or a sublease under a previous assignment or an existing sublease. Any Sale
Transaction (as hereinafter defined) shall be deemed to be an assignment under this Lease. When
Tenant requests Landlord’s consent to such assignment or subletting, it shall notify Landlord in
writing of the name and address of the proposed assignee or subtenant and the nature and character
of the business of the proposed assignee or subtenant and shall provide (1) a fully completed
Hazardous Materials Disclosure Certificate for such assignee or subtenant in the form of Exhibit D
hereto, and (2) current and prior financial statements for the proposed assignee or subtenant,
which financial statements shall be audited to the extent available and shall in any event be
prepared in accordance with generally accepted accounting principles. Tenant shall also provide
Landlord with a copy of the proposed sublease or assignment agreement, including all material terms
and conditions thereof. Landlord shall have the option, to be exercised within thirty (30) days of
receipt of the foregoing, to (w) terminate this Lease as of the commencement date stated in the
proposed sublease or assignment, (x) sublease or take an assignment, as the case may be, from
Tenant of the interest, or any portion thereof, in this Lease and/or the Premises that Tenant
proposes to assign or sublease, on the same terms and conditions as stated in the proposed sublet
or assignment agreement, (y) consent to the proposed assignment or sublease, or (z) refuse its
consent to the proposed assignment or sublease, provided that such consent shall not be
unreasonably withheld so long as Tenant is not then in Default under this Lease nor is any event
then occurring which with the giving of notice or the passage of time, or both, would constitute a
Default hereunder. In the event Landlord elects to terminate this Lease or sublease or take an
assignment from Tenant of the interest, or portion thereof, in this Lease and/or the Premises that
Tenant proposes to assign or sublease as provided in the foregoing clauses (w) and (x),
respectively, then Landlord shall have the additional right to negotiate directly with Tenant’s
proposed assignee or subtenant and to enter into a direct lease or occupancy agreement with such
party on such terms as shall be acceptable to Landlord in its sole and absolute discretion, and
Tenant hereby waives any claims against Landlord related thereto, including, without limitation,
any claims for any compensation or profit related to such lease or occupancy agreement. For
purposes of this Lease, the following terms shall have the meanings set forth below:



          (i) “Capital Stock” means, with respect to any Person, any and all shares, interests,
participations, rights in, or other equivalents (however designated and whether voting or non-



24









 






voting) of, such Person’s capital stock and any and all rights, warrants or options
exchangeable for or convertible into such capital stock (but excluding any debt security whether or
not it is exchangeable for or convertible into such capital stock).




          (ii) “Person” means any individual, firm, corporation, partnership, limited liability company,
trust, incorporated or unincorporated association, joint venture, joint stock company, governmental
body or other entity of any kind.




          (iii) “Sale Transaction” shall mean: (A) (1) the merger or consolidation of Tenant into or
with one or more Persons, (2) the merger or consolidation of one or more Persons into or with
Tenant or (3) a tender offer or other business combination, if, in the case of clause (1), (2) or
(3) the stockholders of Tenant prior to such merger or consolidation do not retain at least a
majority of the voting power of the surviving Person; or (B) the voluntary sale, conveyance,
exchange or transfer to another Person, in one transaction or a series of transactions, of (1) the
voting Capital Stock of Tenant if, after such sale, conveyance, exchange or transfer, the
stockholders of Tenant prior to such sale, conveyance, exchange or transfer do not retain at least
a majority of the voting power of Tenant or (2) all or substantially all of the assets of Tenant.




     (b) Notwithstanding anything in Paragraph 23(a) above to the contrary, Tenant may, without
obtaining the prior consent of Landlord, without Landlord’s having any rights pursuant to clause
(w) or (x) of Paragraph 23(a) above, and without the payment of any amounts pursuant to Paragraph
23(d) below, assign, transfer or sublease this Lease or the whole or any part of the Premises to
any corporation or other entity which (a) controls, is controlled by, or is under common control
with Tenant, (b) acquires all or substantially all of Tenant’s assets or stock, or (c) results from
the merger or consolidation of Tenant with another entity (each, a “Permitted Transferee”);
provided that (i) Tenant shall give not less than ten (10) days’ prior written notice thereof to
Landlord (to the extent such notice is permitted by applicable Law), (ii) Tenant shall continue to
be fully obligated under this Lease, (iii) any such assignee or sublessee shall expressly assume
and agree to perform all the terms and conditions of this Lease to be performed by Tenant (but with
respect to a sublease, only with respect to that portion of the Premises that is the subject of the
sublease and excluding all rental obligations of Tenant hereunder), and (iv) the assignee or
sublessee shall have a tangible net worth, determined in accordance with generally accepted
accounting principles consistently applied (“Net Worth”), at least equal to Tenant’s Net Worth as
of the date of this Lease. In addition, (1) in no event shall an initial public offering by Tenant
be deemed to be constitute a Sale Transaction or other transfer requiring Landlord’s consent under
this Lease, (2) in no event shall any transfer of the Capital Stock of Tenant (whether voting or
otherwise) be deemed to constitute a Sale Transaction or other transfer requiring Landlord’s
consent under this Lease at any time during which Tenant is a publicly held entity, and (3) in no
event shall the merger or consolidation of one or more Persons into or with Tenant be deemed to
constitute a Sale Transaction or other transfer requiring Landlord’s consent under this Lease
provided that Tenant is the surviving entity and the Net Worth of Tenant immediately following such
merger or consolidation is equal to or greater than the Net Worth of Tenant immediately prior to
such merger or consolidation.



     (c) Without otherwise limiting the criteria upon which Landlord may withhold its consent under
Paragraph 23(a) above, Landlord shall be entitled to consider all reasonable criteria including,
but not limited to, the following: (i) whether or not the proposed subtenant or



25









 




assignee is engaged in a business which, and the use of the Premises will be in an manner
which, is in keeping with the then character and nature of all other tenancies in the Project; (ii)
whether the use to be made of the Premises by the proposed subtenant or assignee will conflict with
any so-called “exclusive” use then in favor of any other tenant of the Building or the Project, and
whether such use would be prohibited by any other portion of this Lease, including, but not limited
to, any rules and regulations then in effect, or under applicable Laws, and whether such use
imposes a greater load upon the Premises and the Building and the Project services then imposed by
Tenant; (iii) the business reputation of the proposed individuals who will be managing and
operating the business operations of the assignee or subtenant, and the long-term financial and
competitive business prospects of the proposed assignee or subtenant; and (iv) the creditworthiness
and financial stability of the proposed assignee or subtenant in light of the responsibilities
involved. In any event, Landlord may withhold its consent to any assignment or sublease, if (A)
the actual use proposed to be conducted in the Premises or portion thereof conflicts with the
provisions of Paragraph 9(a) or (b) above or with any other lease which restricts the use to which
any space in the Building or the Project may be put, or (B) the proposed assignment or sublease
requires alterations, improvements or additions to the Premises or portions thereof.




     (d) If Landlord approves an assignment or subletting as herein provided, Tenant shall pay to
Landlord, as Additional Rent, fifty percent (50%) of the difference, if any, between (i) the Base
Rent plus Additional Rent allocable to that part of the Premises affected by such assignment or
sublease pursuant to the provisions of this Lease, and (ii) the rent and any additional rent
payable by the assignee or sublessee to Tenant, less reasonable and customary market-based leasing
commissions, if any, incurred by Tenant in connection with such assignment or sublease, which
commissions shall, for purposes of the aforesaid calculation, be amortized on a straight-line basis
over the term of such assignment or sublease. In any subletting undertaken by Tenant, Tenant shall
list or offer the sublease premises at a rental rate not less than Landlord’s then current
asking-rate for similarly situated space in the Project (the “Asking Rate”) and shall diligently
seek to obtain not less than the Asking Rate for the space so sublet. In any assignment of this
Lease in whole or in part, Tenant shall list or offer the premises subject to such assignment at a
rate not less than the Asking Rate and shall diligently seek to obtain from the assignee
consideration reflecting a value of not less than the Asking Rate for the space subject to such
assignment. The assignment or sublease agreement, as the case may be, after approval by Landlord,
shall not be amended without Landlord’s prior written consent, and shall contain a provision
directing the assignee or subtenant to pay the rent and other sums due thereunder directly to
Landlord upon receiving written notice from Landlord that Tenant is in default under this Lease
with respect to the payment of Rent. In the event that, notwithstanding the giving of such notice,
Tenant collects any rent or other sums from the assignee or subtenant, then Tenant shall hold such
sums in trust for the benefit of Landlord and shall immediately forward the same to Landlord.
Landlord’s collection of such rent and other sums shall not constitute an acceptance by Landlord of
attornment by such assignee or subtenant. A consent to one assignment, subletting, occupation or
use shall not be deemed to be a consent to any other or subsequent assignment, subletting,
occupation or use, and consent to any assignment or subletting shall in no way relieve Tenant of
any liability under this Lease. Any assignment or subletting without Landlord’s consent shall be
void, and shall, at the option of Landlord, constitute a Default under this Lease.



26









 





     (e) Notwithstanding any assignment or subletting, Tenant and any guarantor or surety of
Tenant’s obligations under this Lease shall at all times remain fully responsible and liable for
the payment of the Rent and for compliance with all of Tenant’s other obligations under this Lease
(regardless of whether Landlord’s approval has been obtained for any such assignment or
subletting).



     (f) Tenant shall pay Landlord’s reasonable fees (including, without limitation, the fees of
Landlord’s counsel), incurred in connection with Landlord’s review and processing of documents
regarding any proposed assignment or sublease.



     (g) Notwithstanding anything in this Lease to the contrary, in the event Landlord consents to
an assignment or subletting by Tenant in accordance with the terms of this Paragraph 23, Tenant’s
assignee or subtenant shall have no right to further assign this Lease or any interest therein or
thereunder or to further sublease all or any portion of the Premises. In furtherance of the
foregoing, Tenant acknowledges and agrees on behalf of itself and any assignee or subtenant
claiming under it (and any such assignee or subtenant by accepting such assignment or sublease
shall be deemed to acknowledge and agree) that no sub-subleases or further assignments of this
Lease shall be permitted at any time.



     (h) Any Person who enters into an assignment or sublease under this Lease (a “Transferee”)
shall be deemed to have agreed to the provisions of clauses (i) through (iv) below:



          (i) Notwithstanding anything to the contrary contained in this Lease or in any document,
instrument or agreement entered into by Tenant and any Transferee in connection with any assignment
or sublease (a “Transfer”), if for any reason whatsoever this Lease shall terminate prior to the
scheduled expiration of the Transfer (e.g., the sublease) (including, without limitation, a
termination of this Lease upon a default by Tenant hereunder, a rejection and termination of this
Lease by Tenant in bankruptcy or insolvency proceedings, or a consensual termination of this Lease
by Landlord and Tenant), Landlord shall have the election, exercisable in its sole and absolute
discretion, to (A) allow the Transfer to terminate as provided in clauses (ii) and (iii) below, or
(B) maintain the Transfer in full force and effect, in which event the assignee or sublessee (the
“Transferee”) shall attorn to Landlord on the terms set forth in this Paragraph 23(h).




          (ii) Within thirty (30) days after the termination of this Lease (such 30-day period being
herein referred to as the “Effective Period”), Landlord shall inform the Transferee in writing of
Landlord’s election to (A) allow the Transfer to terminate (such a notice, if given, being herein
referred to as a “Termination Notice”), or (B) maintain the Transfer in full force and effect (such
a notice, if given, being herein referred to as an “Attornment Notice”). Pending the receipt by
the Transferee of either such notice or, if neither notice is given, the expiration of the
Effective Period, the Transferee shall remain in possession of the premises demised under the
Transfer (the “Transfer Premises”) and shall continue to perform, for the benefit of Landlord, all
of the obligations of the Transferee under the Transfer, including, without limitation, the payment
directly to Landlord of all rent and other amounts coming due under the Transfer during the
Effective Period. Landlord shall not be deemed to have assumed or agreed to perform any
obligations of Tenant under the Transfer unless and until Landlord delivers an Attornment Notice to
the Transferee.




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          (iii) In the event that Landlord provides a Termination Notice to the Transferee during the
Effective Period or, if Landlord otherwise fails to deliver an Attornment Notice to the Transferee
within such Effective Period, then the Transfer shall automatically terminate effective as of the
delivery of the Termination Notice or, if no such Termination Notice is given, as of the end of the
Effective Period. If Landlord delivers an Attornment Notice to the Transferee within the Effective
Period, (A) the Transfer shall continue with the same force and effect as if Landlord and the
Transferee had entered into a lease on the same provisions as those contained in the Transfer,
excepting only that any unexercised renewal option or expansion option contained in the Transfer
shall lapse and shall no longer be exercisable by the Transferee, and (B) the Transferee shall
attorn to Landlord and perform all of the Transferee’s obligations under the Transfer directly to
Landlord as if Landlord were the landlord under the Transfer, and, provided that the Transferee is
not then in default, Landlord shall continue to recognize the estate of the Transferee created
under the Transfer and shall perform Tenant’s obligations thereunder arising from and after the
date of such termination of this Lease. The above provisions of this clause (iii) shall be
self-operative without the need for any additional documentation; however, upon the request of
Landlord, Tenant shall enter into a lease agreement or other document prepared by Landlord
memorializing the terms of Tenant’s attornment and continued occupancy of the Transfer Premises.




          (iv) The Transferee shall be entitled to rely on any Attornment Notice received from Landlord
without the obligation to determine the validity thereof.




     (i) Tenant acknowledges and agrees that the restrictions, conditions and limitations imposed
by this Paragraph 23 on Tenant’s ability to assign or transfer this Lease or any interest herein,
to sublet the Premises or any part thereof, to transfer or assign any right or privilege
appurtenant to the Premises, or to allow any other person to occupy or use the Premises or any
portion thereof, are, for the purposes of California Civil Code Section 1951.4, as amended from
time to time, and for all other purposes, reasonable at the time that this Lease was entered into,
and shall be deemed to be reasonable at the time that Tenant seeks to assign or transfer this Lease
or any interest herein, to sublet the Premises or any part thereof, to transfer or assign any right
or privilege appurtenant to the Premises, or to allow any other person to occupy or use the
Premises or any portion thereof.



24. Tenant’s Default




     The occurrence of any one of the following events shall constitute an event of default on the
part of Tenant (“Default”):



     (a) The abandonment of the Premises by Tenant for a period of ten (10) consecutive days or any
vacation or abandonment of the Premises by Tenant which would cause any insurance policy to be
invalidated or otherwise lapse, or the failure of Tenant to continuously operate Tenant’s business
in the Premises, in each of the foregoing cases irrespective of whether or not Tenant is then in
monetary default under this Lease. Tenant agrees to notice and service of notice as provided for
in this Lease and waives any right to any other or further notice or service of notice which Tenant
may have under any statute or law now or hereafter in effect;



28









 





     (b) Failure to pay any installment of Rent or any other monies due and payable hereunder, said
failure continuing for a period of three (3) days after the same is due; provided, however, that
Tenant shall be entitled to one notice of late payment and a five (5) day cure period in each
twelve (12) month period;



     (c) A general assignment by Tenant or any guarantor or surety of Tenant’s obligations
hereunder (collectively, “Guarantor”) for the benefit of creditors;



     (d) The filing of a voluntary petition in bankruptcy by Tenant or any Guarantor, the filing by
Tenant or any Guarantor of a voluntary petition for an arrangement, the filing by or against Tenant
or any Guarantor of a petition, voluntary or involuntary, for reorganization, or the filing of an
involuntary petition by the creditors of Tenant or any Guarantor, said involuntary petition
remaining undischarged for a period of sixty (60) days;



     (e) Receivership, attachment, or other judicial seizure of substantially all of Tenant’s
assets on the Premises, such attachment or other seizure remaining undismissed or undischarged for
a period of sixty (60) days after the levy thereof;



     (f) Death or disability of Tenant or any Guarantor, if Tenant or such Guarantor is a natural
person, or the failure by Tenant or any Guarantor to maintain its legal existence, if Tenant or
such Guarantor is a corporation, partnership, limited liability company, trust or other legal
entity;



     (g) Failure of Tenant to execute and deliver to Landlord any estoppel certificate,
subordination agreement, or lease amendment within the time periods and in the manner required by
Paragraphs 30 or 31 or 42, and/or failure by Tenant to deliver to Landlord any financial statement
within the time period and in the manner required by Paragraph 40, and such failure continues for
five (5) days after written notice that the same are past due;



     (h) An assignment or sublease, or attempted assignment or sublease, of this Lease or the
Premises by Tenant contrary to the provision of Paragraph 23, unless such assignment or sublease is
expressly conditioned upon Tenant having received Landlord’s consent thereto;



     (i) Failure of Tenant to restore the Security Deposit to the amount and within the time period
provided in Paragraph 7 above;



     (j) Failure in the performance of any of Tenant’s covenants, agreements or obligations
hereunder (except those failures specified as events of Default in any other subparagraphs of this
Paragraph 24, which shall be governed by such other Paragraphs), which failure continues for twenty
(20) days after written notice thereof from Landlord to Tenant, provided that, if Tenant has
exercised reasonable diligence to cure such failure and such failure cannot be cured within such
twenty (20) day period despite reasonable diligence, Tenant shall not be in default under this
subparagraph so long as Tenant thereafter diligently and continuously prosecutes the cure to
completion and actually completes such cure within sixty (60) days after the giving of the
aforesaid written notice;



     (k) Chronic delinquency by Tenant in the payment of Rent, or any other periodic payments
required to be paid by Tenant under this Lease. “Chronic delinquency” shall mean failure by Tenant
to pay Rent, or any other payments required to be paid by Tenant under this Lease within



29









 




three (3) days after written notice thereof for any three (3) months (consecutive or
nonconsecutive) during any period of twelve (12) months. In the event of a Chronic delinquency, in
addition to Landlord’s other remedies for Default provided in this Lease, at Landlord’s option,
Landlord shall have the right to require that Rent be paid by Tenant quarterly, in advance;




     (l) Chronic overuse by Tenant or Tenant’s Agents of the number of undesignated parking spaces
set forth in the Basic Lease Information. “Chronic overuse” shall mean use by Tenant or Tenant’s
Agents of a number of parking spaces greater than the number of parking spaces set forth in the
Basic Lease Information more than three (3) times during the Term after written notice by Landlord;



     (m) Any insurance required to be maintained by Tenant pursuant to this Lease shall be canceled
or terminated or shall expire or be reduced or materially changed, except as permitted in this
Lease;



     (n) Any failure by Tenant to discharge any lien or encumbrance placed on the Project or any
part thereof in violation of this Lease within twenty (20) days after the date such lien or
encumbrance is filed or recorded against the Project or any part thereof;



     (o) Any failure by Tenant to immediately remove, abate or remedy any Hazardous Materials
located in, on or about the Premises or the Building in connection with any failure by Tenant to
comply with Tenant’s obligations under Paragraph 32;



     (p) Tenant’s failure to commence business operations in the Premises within ninety (90) days
following the Commencement Date, subject to delays beyond Tenant’s reasonable control (other than
financial difficulty); and



     (q) Any representation of Tenant herein or in any financial statement or other materials
provided by Tenant or any guarantor of Tenant’s obligations under this Lease shall prove to be
untrue or inaccurate in any material respect, or any such financial statements or other materials
shall have omitted any material fact.



     Tenant agrees that any notice given by Landlord pursuant to Paragraph 24(j), (k) or (l) above
shall satisfy the requirements for notice under California Code of Civil Procedure Section 1161,
and Landlord shall not be required to give any additional notice in order to be entitled to
commence an unlawful detainer proceeding.



25. Landlord’s Remedies




     (a) Termination. In the event of any Default by Tenant, then in addition to any other
remedies available to Landlord at law or in equity and under this Lease, Landlord shall have the
immediate option to terminate this Lease and all rights of Tenant hereunder by giving written
notice of such intention to terminate. In the event that Landlord shall elect to so terminate this
Lease then Landlord may recover from Tenant:



          (i) the worth at the time of award of any unpaid Rent and any other sums due and payable which
have been earned at the time of such termination; plus




30









 








          (ii) the worth at the time of award of the amount by which the unpaid Rent and any other sums
due and payable which would have been earned after termination until the time of award exceeds the
amount of such rental loss Tenant proves could have been reasonably avoided; plus




          (iii) the worth at the time of award of the amount by which the unpaid Rent and any other sums
due and payable for the balance of the Term after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided; plus




          (iv) any other amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary
course would be likely to result therefrom, including, without limitation, (A) any costs or
expenses incurred by Landlord (1) in retaking possession of the Premises; (2) in maintaining,
repairing, preserving, restoring, replacing, cleaning, altering, remodeling or rehabilitating the
Premises or any affected portions of the Building or the Project, including such actions undertaken
in connection with the reletting or attempted reletting of the Premises to a new tenant or tenants;
(3) for leasing commissions, advertising costs and other expenses of reletting the Premises; or (4)
in carrying the Premises, including taxes, insurance premiums, utilities and security precautions;
plus




          (v) such reasonable attorneys’ fees incurred by Landlord as a result of a Default, and costs
in the event suit is filed by Landlord to enforce such remedy; and plus




          (vi) at Landlord’s election, such other amounts in addition to or in lieu of the foregoing as
may be permitted from time to time by applicable law.



As used in subparagraphs (i) and (ii) above, the “worth at the time of award” is computed by
allowing interest at an annual rate equal to twelve percent (12%) per annum or the maximum rate
permitted by law, whichever is less. As used in subparagraph (iii) above, the “worth at the time
of award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank
of San Francisco at the time of award, plus one percent (1%). Tenant waives redemption or relief
from forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or under any other
pertinent present or future law, in the event Tenant is evicted or Landlord takes possession of the
Premises by reason of any Default of Tenant hereunder.




     (b) Continuation of Lease. In the event of any Default by Tenant, then in addition to any
other remedies available to Landlord at law or in equity and under this Lease, Landlord shall have
the remedy described in California Civil Code Section 1951.4 (Landlord may continue this Lease in
effect after Tenant’s Default and abandonment and recover Rent as it becomes due, provided that
Tenant has the right to sublet or assign, subject only to reasonable limitations). In addition,
Landlord shall not be liable in any way whatsoever for its failure or refusal to relet the
Premises. For purposes of this Paragraph 25(b), the following acts by Landlord will not constitute
the termination of Tenant’s right to possession of the Premises:



          (i) Acts of maintenance or preservation or efforts to relet the Premises, including, but not
limited to, alterations, remodeling, redecorating, repairs, replacements and/or painting as
Landlord shall consider advisable for the purpose of reletting the Premises or any part thereof; or




31









 








          (ii) The appointment of a receiver upon the initiative of Landlord to protect Landlord’s
interest under this Lease or in the Premises.




     (c) Re-entry. In the event of any Default by Tenant, Landlord shall also have the right, with
or without terminating this Lease, in compliance with applicable law, to re-enter the Premises and
remove all persons and property from the Premises; such property may be removed and stored in a
public warehouse or elsewhere at the cost of and for the account of Tenant.



     (d) Reletting. In the event of the abandonment of the Premises by Tenant or in the event that
Landlord shall elect to re-enter as provided in Paragraph 25(c) or shall take possession of the
Premises pursuant to legal proceeding or pursuant to any notice provided by law, then if Landlord
does not elect to terminate this Lease as provided in Paragraph 25(a), Landlord may from time to
time, without terminating this Lease, relet the Premises or any part thereof for such term or terms
and at such rental or rentals and upon such other terms and conditions as Landlord in its sole
discretion may deem advisable with the right to make alterations and repairs to the Premises in
Landlord’s sole discretion. In the event that Landlord shall elect to so relet, then rentals
received by Landlord from such reletting shall be applied in the following order: (i) to
reasonable attorneys’ fees incurred by Landlord as a result of a Default and costs in the event
suit is filed by Landlord to enforce such remedies; (ii) to the payment of any indebtedness other
than Rent due hereunder from Tenant to Landlord; (iii) to the payment of any costs of such
reletting; (iv) to the payment of the costs of any alterations and repairs to the Premises; (v) to
the payment of Rent due and unpaid hereunder; and (vi) the residue, if any, shall be held by
Landlord and applied in payment of future Rent and other sums payable by Tenant hereunder as the
same may become due and payable hereunder. Should that portion of such rentals received from such
reletting during any month, which is applied to the payment of Rent hereunder, be less than the
Rent payable during the month by Tenant hereunder, then Tenant shall pay such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in such reletting or
in making such alterations and repairs not covered by the rentals received from such reletting.



     (e) Termination. No re-entry or taking of possession of the Premises by Landlord pursuant to
this Paragraph 25 shall be construed as an election to terminate this Lease unless a written notice
of such intention is given to Tenant or unless the termination thereof is decreed by a court of
competent jurisdiction. Notwithstanding any reletting without termination by Landlord because of
any Default by Tenant, Landlord may at any time after such reletting elect to terminate this Lease
for any such Default.



     (f) Cumulative Remedies. The remedies herein provided are not exclusive and Landlord shall
have any and all other remedies provided herein or by law or in equity.



     (g) No Surrender. No act or conduct of Landlord, whether consisting of the acceptance of the
keys to the Premises, or otherwise, shall be deemed to be or constitute an acceptance of the
surrender of the Premises by Tenant prior to the expiration of the Term, and such acceptance by
Landlord of surrender by Tenant shall only flow from and must be evidenced by a written
acknowledgment of acceptance of surrender signed by Landlord. The surrender of this Lease by
Tenant, voluntarily or otherwise, shall not work a merger unless Landlord elects in writing that
such merger take place, but shall operate as an assignment to Landlord of any and all existing



32









 




subleases, or Landlord may, at its option, elect in writing to treat such surrender as a
merger terminating Tenant’s estate under this Lease, and thereupon Landlord may terminate any or
all such subleases by notifying the sublessee of its election so to do within five (5) days after
such surrender.




26. Landlord’s Right to Perform Tenant’s Obligations




     (a) Without limiting the rights and remedies of Landlord contained in Paragraph 25 above, if
Tenant shall be in Default in the performance of any of the terms, provisions, covenants or
conditions to be performed or complied with by Tenant pursuant to this Lease, then Landlord may at
Landlord’s option, without any obligation to do so, and without notice to Tenant perform any such
term, provision, covenant, or condition, or make any such payment and Landlord by reason of so
doing shall not be liable or responsible for any loss or damage thereby sustained by Tenant or
anyone holding under or through Tenant or any of Tenant’s Agents.



     (b) Without limiting the rights of Landlord under Paragraph 26(a) above, Landlord shall have
the right at Landlord’s option, without any obligation to do so, to perform any of Tenant’s
covenants or obligations under this Lease without notice to Tenant in the case of an emergency, as
determined by Landlord in its sole and absolute judgment, or if Landlord otherwise determines in
its sole discretion that such performance is necessary or desirable for the proper management and
operation of the Building or the Project or for the preservation of the rights and interests or
safety of other tenants of the Building or the Project.



     (c) If Landlord performs any of Tenant’s obligations hereunder in accordance with this
Paragraph 26, the full amount of the cost and expense incurred or the payment so made or the amount
of the loss so sustained shall immediately be owing by Tenant to Landlord, and Tenant shall
promptly pay to Landlord upon demand, as Additional Rent, the full amount thereof with interest
thereon from the date of payment by Landlord at the lower of (i) ten percent (10%) per annum, or
(ii) the highest rate permitted by applicable law.



27. Attorneys’ Fees




     (a) If either party hereto fails to perform any of its obligations under this Lease or if any
dispute arises between the parties hereto concerning the meaning or interpretation of any provision
of this Lease, then the defaulting party or the party not prevailing in such dispute, as the case
may be, shall pay any and all costs and expenses incurred by the other party on account of such
default and/or in enforcing or establishing its rights hereunder, including, without limitation,
court costs and reasonable attorneys’ fees and disbursements. Any such attorneys’ fees and other
expenses incurred by either party in enforcing a judgment in its favor under this Lease shall be
recoverable separately from and in addition to any other amount included in such judgment, and such
attorneys’ fees obligation is intended to be severable from the other provisions of this Lease and
to survive and not be merged into any such judgment.



     (b) Without limiting the generality of Paragraph 27(a) above, if Landlord utilizes the
services of an attorney for the purpose of collecting any Rent due and unpaid by Tenant or in
connection with any other breach of this Lease by Tenant, Tenant agrees to pay Landlord



33









 




reasonable attorneys’ fees actually incurred by Landlord for such services, regardless of the
fact that no legal action may be commenced or filed by Landlord.




28. Taxes




     Tenant shall be liable for and shall pay, prior to delinquency, all taxes levied against
Tenant’s Property. If any Alteration installed by Tenant or any of Tenant’s Property is assessed
and taxed with the Project or the Building, Tenant shall pay such taxes to Landlord within ten (10)
days after delivery to Tenant of a statement therefor.



29. Effect of Conveyance




     The term “Landlord” as used in this Lease means, from time to time, the then current owner of
the Building or the Project containing the Premises, so that, in the event of any sale of the
Building or the Project, Landlord shall be and hereby is entirely freed and relieved of all
covenants and obligations of Landlord hereunder to the extent the purchaser assumes in writing all
of Landlord’s obligations under this Lease, and it shall be deemed and construed, without further
agreement between the parties and the purchaser at any such sale, that the purchaser of the
Building or the Project has assumed and agreed to carry out any and all covenants and obligations
of Landlord hereunder.



30. Tenant’s Estoppel Certificate




     From time to time, upon written request of Landlord, Tenant shall execute, acknowledge and
deliver to Landlord or its designee, an Estoppel Certificate in substantially the form attached
hereto as Exhibit C and with any other statements reasonably requested by Landlord or its designee.
Any such Estoppel Certificate delivered pursuant to this Paragraph 30 may be relied upon by a
prospective purchaser of Landlord’s interest or a mortgagee of Landlord’s interest or assignee of
any mortgage upon Landlord’s interest in the Premises. If Tenant shall fail to provide such
certificate within ten (10) business days of receipt by Tenant of a written request by Landlord as
herein provided, such failure shall, at Landlord’s election, constitute a Default under this Lease,
and Tenant shall be deemed to have given such certificate as above provided without modification
and shall be deemed to have admitted the accuracy of any information supplied by Landlord to a
prospective purchaser or mortgagee.



31. Subordination




     This Lease, and all rights of Tenant hereunder, are and shall be subject and subordinate to
all ground leases, overriding leases and underlying leases affecting the Building or the Project
now or hereafter existing and each of the terms, covenants and conditions thereto (the “Superior
Lease(s)”), and to all mortgages which may now or hereafter affect the Building, the Project or any
of such leases and each of the terms, covenants and conditions thereto (the “Superior
Mortgage(s)”), whether or not such mortgages shall also cover other lands, buildings or leases, to
each and every advance made or hereafter to be made under such mortgages, and to all renewals,
modifications, replacements and extensions of such leases and such mortgages and spreaders and
consolidations of such mortgages. This Paragraph shall be self-operative and no further instrument
of subordination shall be required. Tenant shall promptly execute, acknowledge and deliver any
reasonable instrument that Landlord, the lessor under any such lease or the holder of



34









 




any such mortgage or any of their respective successors in interest may reasonably request to
evidence such subordination; if Tenant fails to execute, acknowledge and deliver any such
instrument within ten (10) business days after request therefor, Tenant hereby irrevocably
constitutes and appoints Landlord as Tenant’s attorney-in-fact, coupled with an interest, to
execute and deliver any such instrument for and on behalf of Tenant. Without limiting the
foregoing, Tenant’s failure to execute, acknowledge and deliver such instrument within the
aforesaid time period shall constitute a Default hereunder. As used herein the lessor of a
Superior Lease or its successor in interest is herein called “Superior Lessor”; and the holder of a
Superior Mortgage is herein called “Superior Mortgagee”.




     Notwithstanding the foregoing terms of this Paragraph 31, if a Superior Lease or Superior
Mortgage is hereafter placed against or affecting any or all of the Building or the Premises or any
or all of the Building and improvements now or at any time hereafter constituting a part of or
adjoining the Building, Landlord shall use commercially reasonable efforts to obtain an agreement
from the holder thereof in recordable form and otherwise in form and substance reasonably
acceptable to Tenant, whereby the holder of such Superior Lease or Superior Mortgage agrees that
Tenant, upon paying the Base Rent and all of the Additional Rent and other charges herein provided
for, and observing and complying with the covenants, agreements and conditions of this Lease on its
part to be observed and complied with, shall lawfully and quietly hold, occupy and enjoy the
Premises during the Term (including any exercised renewal term), without hindrance or interference
from anyone claiming by or through said Superior Mortgagee or Superior Lessor and that said
Superior Mortgagee or Superior Lessor shall respect Tenant’s rights under this Lease and, upon
succeeding to Landlord’s interest in the Building and Lease, shall observe and comply with all of
Landlord’s duties under this Lease.



     If any Superior Lessor or Superior Mortgagee shall succeed to the rights of Landlord under
this Lease, whether through possession or foreclosure action or delivery of a new lease or deed
(such party so succeeding to Landlord’s rights herein called “Successor Landlord”), then Tenant
shall attorn to and recognize such Successor Landlord as Tenant’s landlord under this Lease
(without the need for further agreement) and shall promptly execute and deliver any reasonable
instrument that such Successor Landlord may reasonably request to evidence such attornment. This
Lease shall continue in full force and effect as a direct lease between the Successor Landlord and
Tenant upon all of the terms, conditions and covenants as are set forth in this Lease, except that
the Successor Landlord shall not (a) be liable for any previous act or omission of Landlord under
this Lease, except to the extent such act or omission shall constitute a continuing Landlord
default hereunder; (b) be subject to any offset, not expressly provided for in this Lease; or (c)
be bound by any previous modification of this Lease or by any previous prepayment of more than one
month’s Base Rent, unless such modification or prepayment shall have been expressly approved in
writing by the Successor Landlord (or its predecessor in interest).



32. Environmental Covenants




     (a) Prior to executing this Lease, Tenant has completed, executed and delivered to Landlord a
Hazardous Materials Disclosure Certificate (“Initial Disclosure Certificate”), a fully completed
copy of which is attached hereto as Exhibit D and incorporated herein by this reference. Tenant
covenants, represents and warrants to Landlord that the information on the



35









 




Initial Disclosure Certificate is true and correct and accurately describes the Hazardous
Materials which will be manufactured, treated, used or stored on or about the Premises by Tenant or
Tenant’s Agents. Tenant shall, on each anniversary of the Commencement Date and at such other
times as Tenant desires to manufacture, treat, use or store on or about the Premises new or
additional Hazardous Materials which were not listed on the Initial Disclosure Certificate,
complete, execute and deliver to Landlord an updated Disclosure Certificate (each, an “Updated
Disclosure Certificate”) describing Tenant’s then current and proposed future uses of Hazardous
Materials on or about the Premises, which Updated Disclosure Certificates shall be in the same
format as that which is set forth in Exhibit D or in such updated format as Landlord may require
from time to time. Tenant shall deliver an Updated Disclosure Certificate to Landlord not less
than thirty (30) days prior to the date Tenant intends to commence the manufacture, treatment, use
or storage of new or additional Hazardous Materials on or about the Premises, and Landlord shall
have the right to approve or disapprove such new or additional Hazardous Materials in its sole and
absolute discretion. Tenant shall make no use of Hazardous Materials on or about the Premises
except as described in the Initial Disclosure Certificate or as otherwise approved by Landlord in
writing in accordance with this Paragraph 32(a).




     (b) As used in this Lease, the term “Hazardous Materials” means (i) any substance or material
that is included within the definitions of “hazardous substances,” “hazardous materials,” “toxic
substances,” “pollutant,” “contaminant,” “hazardous waste,” or “solid waste” in any Environmental
Law (as defined in Paragraph 32(c) below); (ii) petroleum or petroleum derivatives, including crude
oil or any fraction thereof, all forms of natural gas, and petroleum products or by-products or
waste; (iii) polychlorinated biphenyls (PCBs); (iv) asbestos and asbestos containing materials
(whether friable or non-friable); (v) lead and lead-based paint or other lead containing materials
(whether friable or non-friable); (vi) urea formaldehyde; (vii) microbiological pollutants; (viii)
batteries or liquid solvents or similar chemicals; (ix) radon gas; and (x) mildew, fungus, mold,
bacteria and/or other organic spore material, whether or not airborne, colonizing, amplifying or
otherwise.



     (c) As used in this Lease, the term “Environmental Laws” means all statutes, terms,
conditions, limitations, restrictions, standards, prohibitions, obligations, schedules, plans and
timetables that are contained in or promulgated pursuant to any federal, state or local laws
(including rules, regulations, ordinances, codes, judgments, orders, decrees, contracts, permits,
stipulations, injunctions, the common law, court opinions, and demand or notice letters issued,
entered, promulgated or approved thereunder), relating to pollution or the protection of the
environment, including laws relating to emissions, discharges, releases or threatened releases of
Hazardous Materials into ambient air, surface water, ground water or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials including, but not limited to, the: Comprehensive Environmental Response
Compensation and Liability Act of 1980 (CERCLA), as amended by the Superfund Amendments and
Reauthorization Act of 1986 (SARA), 42 U.S.C. 9601 et seq.; Solid Waste Disposal Act, as amended by
the Resource Conservation and Recovery Act of 1976 (RCRA), 42 U.S.C. 6901 et seq.; Federal Water
Pollution Control Act, 33 U.S.C. 1251 et seq.; Toxic Substances Control Act, 15 U.S.C. 2601 et
seq.; Clean Air Act, 42 U.S.C. 7401 et seq.; and the Safe Drinking Water Act, 42 U.S.C. § 300f et
seq. “Environmental Laws” shall include any statutory or common law that has developed or develops
in the future regarding mold, fungus, microbiological pollutants, mildew, bacteria and/or other
organic spore material.




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“Environmental Laws” shall not include laws relating to industrial hygiene or worker safety,
except to the extent that such laws address asbestos and asbestos containing materials (whether
friable or non-friable) or lead and lead-based paint or other lead containing materials.



     (d) Tenant agrees that during its use and occupancy of the Premises it will: (i) not (A)
permit Hazardous Materials to be present on or about the Premises except in a manner and quantity
necessary for the ordinary performance of Tenant’s business or (B) release, discharge or dispose of
any Hazardous Materials on, in, at, under, or emanating from, the Premises, the Building or the
Project; (ii) comply with all Environmental Laws relating to the Premises and the use of Hazardous
Materials on or about the Premises and not engage in or permit others to engage in any activity at
the Premises in violation of any Environmental Laws; and (iii) immediately notify Landlord of (A)
any inquiry, test, investigation or enforcement proceeding by any governmental agency or authority
against Tenant, Landlord or the Premises, the Building or the Project relating to any Hazardous
Materials or under any Environmental Laws or (B) the occurrence of any event or existence of any
condition that would cause a breach of any of the covenants set forth in this Paragraph 32.



     (e) If Tenant’s use of Hazardous Materials on or about the Premises results in a release,
discharge or disposal of Hazardous Materials on, in, at, under, or emanating from, the Premises,
the Building or the Project, Tenant agrees to investigate, clean up, remove or remediate such
Hazardous Materials in full compliance with: (i) the requirements of (A) all Environmental Laws
and (B) any governmental agency or authority responsible for the enforcement of any Environmental
Laws; and (ii) any additional requirements of Landlord that are reasonably necessary to protect the
value of the Premises, the Building or the Project.



     (f) Upon reasonable notice to Tenant, Landlord may inspect the Premises and surrounding areas
for the purpose of determining whether there exists on or about the Premises any Hazardous Material
or other condition or activity that is in violation of the requirements of this Lease or of any
Environmental Laws. Such inspections may include, but are not limited to, entering the Premises or
adjacent property with drill rigs or other machinery for the purpose of obtaining laboratory
samples. Landlord shall not be limited in the number of such inspections during the Term. In the
event (i) such inspections reveal the presence of any such Hazardous Material or other condition or
activity in violation of the requirements of this Lease or of any Environmental Laws, or (ii)
Tenant or Tenant’s Agents contribute or knowingly consent to the presence of any Hazardous
Materials in, on, under, through or about the Premises, the Building or the Project or exacerbate
the condition of or the conditions caused by any Hazardous Materials in, on, under, through or
about the Premises, the Building or the Project, Tenant shall reimburse Landlord for the cost of
such inspections within ten (10) days of receipt of a written statement therefor. Tenant will
supply to Landlord such historical and operational information regarding the Premises and
surrounding areas as may be reasonably requested to facilitate any such inspection and will make
available for meetings appropriate personnel having knowledge of such matters. Tenant agrees to
give Landlord at least sixty (60) days’ prior notice of its intention to vacate the Premises so
that Landlord will have an opportunity to perform such an inspection prior to such vacation. The
right granted to Landlord herein to perform inspections shall not create a duty on Landlord’s part
to inspect the Premises, or liability on the part of Landlord for Tenant’s use, storage, treatment
or disposal of Hazardous Materials, it being understood that Tenant shall be solely responsible for
all liability in connection therewith.



37









 





     (g) Landlord shall have the right, but not the obligation, prior or subsequent to a Default,
without in any way limiting Landlord’s other rights and remedies under this Lease, to enter upon
the Premises, or to take such other actions as it deems necessary or advisable, to investigate,
clean up, remove or remediate any Hazardous Materials or contamination by Hazardous Materials
present on, in, at, under, or emanating from, the Premises, the Building or the Project in
violation of Tenant’s obligations under this Lease or under any Environmental Laws.
Notwithstanding any other provision of this Lease, Landlord shall also have the right, at its
election, in its own name or as Tenant’s agent, to negotiate, defend, approve and appeal, at
Tenant’s expense, any action taken or order issued by any governmental agency or authority with
regard to any such Hazardous Materials or contamination by Hazardous Materials caused by Tenant or
its Agents. All costs and expenses paid or incurred by Landlord in the exercise of the rights set
forth in this Paragraph 32 shall be payable by Tenant upon demand.



     (h) Tenant shall surrender the Premises to Landlord upon the expiration or earlier termination
of this Lease free of (i) mold, Mold Conditions, debris, waste, and (ii) Hazardous Materials placed
on, about or near the Premises by Tenant or Tenant’s Agents, and in a condition which complies with
all Environmental Laws and any additional requirements of Landlord that are reasonably necessary to
protect the value of the Premises, the Building or the Project, including, without limitation, the
obtaining of any closure permits or other governmental permits or approvals related to Tenant’s use
of Hazardous Materials in or about the Premises. Tenant’s obligations and liabilities pursuant to
the provisions of this Paragraph 32 shall survive the expiration or earlier termination of this
Lease.



     (i) Tenant shall indemnify and hold harmless Landlord from and against any and all claims,
damages, fines, judgments, penalties, costs, losses (including, without limitation, loss in value
of the Premises or the property in which the Premises is located, damages due to loss or
restriction of rentable or usable space, and damages due to any adverse impact on marketing of the
space and any and all sums paid for settlement of claims), liabilities and expenses (including,
without limitation, attorneys’, consultants’, and experts’ fees) incurred by Landlord during or
after the term of this Lease and attributable to (i) any Hazardous Materials placed on or about the
Premises, the Building or the Project by Tenant or Tenant’s Agents, or (ii) Tenant’s breach of any
provision of this Paragraph 32. This indemnification includes, without limitation, any and all
costs incurred by Landlord due to any investigation of the site or any cleanup, removal or
restoration mandated by a federal, state or local agency or political subdivision.



     (j) Because mold spores are present essentially everywhere and mold can grow in almost any
moist location, Tenant acknowledges the necessity of adopting and enforcing good housekeeping
practices, ventilation and vigilant moisture control within the Premises (particularly in kitchen
areas, janitorial closets, bathrooms, in and around water fountains and other plumbing facilities
and fixtures, break rooms, in and around outside walls, and in and around HVAC systems and
associated drains) for the prevention of mold (such measures, “Mold Prevention Practices”). Tenant
will, at its sole cost and expense keep and maintain the Premises in good order and condition in
accordance with the Mold Prevention Practices and acknowledges that the control of moisture, and
prevention of mold within the Premises, are integral to its obligations under this Lease.



38









 





     (k) Tenant, at its sole cost and expense, shall:



          (i) Regularly monitor the Premises for the presence of mold and any conditions that reasonably
can be expected to give rise or be attributed to mold or fungus including, but not limited to,
observed or suspected instances of water damage, condensation, seepage, leaks or any other water
penetration (from any source, internal or external), mold growth, mildew, repeated complaints of
respiratory ailments or eye irritation by Tenant’s employees or any other occupants of the
Premises, or any notice from a governmental agency of complaints regarding the indoor air quality
at the Premises (the “Mold Conditions”); and




          (ii) Immediately notify Landlord in writing if it observes, suspects, has reason to believe
mold or Mold Conditions exist at the Premises.




     (l) In the event of suspected mold or Mold Conditions at the Premises, Landlord may cause an
inspection of the Premises to be conducted, during such time as Landlord may designate, to
determine if mold or Mold Conditions are present at the Premises.



     (m) Tenant hereby releases and relieves Landlord from any and all liability for bodily injury
or damage to property and hereby waives any and all claims against Landlord related to or allegedly
caused by or associated with any mold and Mold Conditions in or on the Premises.



     (n) The provisions of this Paragraph 32 shall survive the expiration or earlier termination of
this Lease.



33. Notices




     All notices and demands which are required or may be permitted to be given to either party by
the other hereunder shall be in writing and shall be sent by United States mail, postage prepaid,
certified, or by personal delivery or overnight courier, addressed to the addressee at Tenant’s
Address or Landlord’s Address as specified in the Basic Lease Information, or to such other place
as either party may from time to time designate in a notice to the other party given as provided
herein. Copies of all notices and demands given to Landlord shall additionally be sent to
Landlord’s property manager at the address specified in the Basic Lease Information or at such
other address as Landlord may specify in writing from time to time. Notice shall be deemed given
upon actual receipt (or attempted delivery if delivery is refused), if personally delivered, or one
(1) business day following deposit with a reputable overnight courier that provides a receipt, or
on the third (3rd) day following deposit in the United States mail in the manner described above.



34. Waiver




     The waiver of any breach of any term, covenant or condition of this Lease shall not be deemed
to be a waiver of such term, covenant or condition or of any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance of Rent by Landlord
shall not be deemed to be a waiver of any preceding breach by Tenant, other than the failure of
Tenant to pay the particular rental so accepted, regardless of Landlord’s knowledge of such
preceding breach at the time of acceptance of such Rent. No delay or omission in the exercise of
any right or remedy of Landlord in regard to any Default by Tenant



39









 




shall impair such a right or remedy or be construed as a waiver. Any waiver by Landlord of
any Default must be in writing and shall not be a waiver of any other Default concerning the same
or any other provisions of this Lease.




35. Holding Over




     Any holding over after the expiration of the Term, without the express written consent of
Landlord, shall constitute a Default and, without limiting Landlord’s remedies provided in this
Lease, such holding over shall be construed to be a tenancy at sufferance, at a rental rate equal
to the greater of one hundred fifty percent (150%) of the Base Rent last due in this Lease or one
hundred percent (100%) of the fair market rental value for the Premises as determined by Landlord,
plus Additional Rent, and shall otherwise be on the terms and conditions herein specified, so far
as applicable; provided, however, that in no event shall any renewal or expansion option or other
similar right or option contained in this Lease be deemed applicable to any such tenancy at
sufferance.



36. Successors and Assigns




     The terms, covenants and conditions of this Lease shall, subject to the provisions as to
assignment, apply to and bind the heirs, successors, executors, administrators and assigns of all
of the parties hereto. If Tenant shall consist of more than one entity or person, the obligations
of Tenant under this Lease shall be joint and several.



37. Time




     Time is of the essence of this Lease and each and every term, condition and provision herein.



38. Brokers




     Landlord and Tenant each represents and warrants to the other that neither it nor its officers
or agents nor anyone acting on its behalf has dealt with any real estate broker except the Brokers
specified in the Basic Lease Information in the negotiating or making of this Lease, and each party
agrees to indemnify and hold harmless the other from any claim or claims, and costs and expenses,
including attorneys’ fees, incurred by the indemnified party in conjunction with any such claim or
claims of any other broker or brokers to a commission in connection with this Lease as a result of
the actions of the indemnifying party.



39. Limitation of Liability




     Tenant agrees that, in the event of any default or breach by Landlord under this Lease or
arising in connection herewith or with Landlord’s operation, management, leasing, repair,
renovation, alteration or any other matter relating to the Project or the Premises, Tenant’s
remedies shall be limited solely and exclusively to an amount which is equal to the lesser of (a)
the interest in the Buildings of the then current Landlord or (b) the equity interest Landlord
would have in the Buildings if the Buildings were encumbered by third party debt in an amount equal
to eighty percent (80%) of the value of the Buildings (as such value is determined by Landlord),
provided that in no event shall such liability extend to any sales or insurance proceeds



40









 




received by Landlord or the “Landlord Parties” in connection with the Project, any Building or
the Premises. For purposes of this Lease, “Landlord Parties” shall mean, collectively Landlord,
its partners, shareholders, officers, directors, employees, investment advisors, or any successor
in interest of any of them. Neither Landlord, nor any of the Landlord Parties shall have any
personal liability therefor, and Tenant hereby expressly waives and releases such personal
liability on behalf of itself and all persons claiming by, through or under Tenant. The
limitations of liability contained in this Paragraph 39 shall inure to the benefit of Landlord’s
and the Landlord Parties’ present and future partners, beneficiaries, officers, directors,
trustees, shareholders, agents and employees, and their respective partners, heirs, successors and
assigns. Under no circumstances shall any present or future partner of Landlord (if Landlord is a
partnership), future member in Landlord (if Landlord is a limited liability company) or trustee or
beneficiary (if Landlord or any partner or member of Landlord is a trust), have any liability for
the performance of Landlord’s obligations under this Lease. Notwithstanding any contrary provision
herein, neither Landlord nor the Landlord Parties shall be liable under any circumstances for
injury or damage to, or interference with Tenant’s business, including, but not limited to, loss or
profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of
use, in each case, however occurring. The provisions of this Paragraph shall apply only to
Landlord and the parties herein described, and shall not be for the benefit of any insurer nor any
other third party.




40. Financial Statements




     Within ten (10) business days after Landlord’s request, Tenant shall deliver to Landlord the
then current financial statements of Tenant (including interim periods following the end of the
last fiscal year for which annual statements are available), prepared or compiled by a certified
public accountant, including a balance sheet and profit and loss statement for the most recent
prior year, all prepared in accordance with generally accepted accounting principles consistently
applied. Tenant shall not be required to deliver such financial statements more frequently than
every six (6) months.



41. Rules and Regulations




     Tenant agrees to comply with such reasonable rules and regulations as Landlord may adopt from
time to time for the orderly and proper operation of the Building and the Project. Such rules may
include but shall not be limited to the following: (a) restriction of employee parking to a
limited, designated area or areas; and (b) regulation of the removal, storage and disposal of
Tenant’s refuse and other rubbish at the sole cost and expense of Tenant. The then current rules
and regulations shall be binding upon Tenant upon delivery of a copy of them to Tenant. Landlord
shall not be responsible to Tenant for the failure of any other person to observe and abide by any
of said rules and regulations. Landlord’s current rules and regulations are attached to this Lease
as Exhibit B.



42. Mortgagee Protection




     (a) Modifications for Lender. If, in connection with obtaining financing for the Project or
any portion thereof, Landlord’s lender shall request reasonable modifications to this Lease as a
condition to such financing, Tenant shall not unreasonably withhold, delay or defer its consent to



41









 




such modifications, provided that such modifications do not materially adversely affect
Tenant’s rights or increase Tenant’s obligations under this Lease.




     (b) Rights to Cure. Tenant agrees to give to any trust deed or mortgage holder (“Holder”), by
registered mail, at the same time as it is given to Landlord, a copy of any notice of default given
to Landlord, provided that, prior to such notice, Tenant has been notified in writing (by way of
notice of assignment of rents and leases, or otherwise) of the address of such Holder. Tenant
further agrees that if Landlord shall have failed to cure such default within the time provided for
in this Lease, then the Holder shall have an additional twenty (20) days after expiration of such
period, or after receipt of such notice from Tenant (if such notice to the Holder is required by
this Paragraph 42(b)), whichever shall last occur within which to cure such default or if such
default cannot be cured within that time, then such additional time as may be necessary if within
such twenty (20) days, any Holder has commenced and is diligently pursuing the remedies necessary
to cure such default (including, but not limited to, commencement of foreclosure proceedings, if
necessary to effect such cure), in which event this Lease shall not be terminated.



43. Parking




     (a) Provided that Tenant shall not then be in Default under the terms and conditions of this
Lease; and provided, further, that Tenant shall comply with and abide by Landlord’s parking rules
and regulations from time to time in effect, Tenant shall have a license to use for the parking of
standard-size passenger automobiles the number of exclusive and designated and non-exclusive and
undesignated parking spaces, if any, set forth in the Basic Lease Information in the Parking Areas;
provided, however, that Landlord shall not be required to enforce Tenant’s right to use such
parking spaces; and provided, further, that the number of parking spaces allocated to Tenant
hereunder shall be reduced on a proportionate basis in the event any of the parking spaces in the
Parking Areas are taken or otherwise eliminated as a result of any Condemnation or casualty event
affecting such Parking Areas or any modifications made by Landlord to such Parking Areas. All
unreserved parking spaces will be on a first-come, first-served basis in common with other tenants
of and visitors to the Project in parking spaces provided by Landlord from time to time in the
Project’s Parking Areas. Tenant’s license to use the parking spaces provided for herein shall be
subject to such terms, conditions, rules and regulations as Landlord or the operator of the Parking
Areas may impose from time to time.



     (b) Each automobile shall, at Landlord’s option to be exercised from time to time, bear a
permanently affixed and visible identification sticker to be provided by Landlord. Tenant shall
not and shall not permit Tenant’s Agents to park any vehicles in locations other than those
specifically designated by Landlord as being for Tenant’s use. The license granted hereunder is
for self-service parking only and does not include additional rights or services. Neither Landlord
nor Landlord’s Agents shall be liable for: (i) loss or damage to any vehicle or other personal
property parked or located upon or within such parking spaces or any Parking Areas whether pursuant
to this license or otherwise and whether caused by fire, theft, explosion, strikes, riots or any
other cause whatsoever; or (ii) injury to or death of any person in, about or around such parking
spaces or any Parking Areas or any vehicles parking therein or in proximity thereto whether caused
by fire, theft, assault, explosion, riot or any other cause whatsoever; and Tenant hereby waives
any claim for or in respect to the above and against all claims or liabilities arising



42









 




out of loss or damage to property or injury to or death of persons, or both, relating to any
of the foregoing. Tenant shall not assign any of its rights hereunder and, in the event an
attempted assignment is made, it shall be void.




     (c) Tenant recognizes and agrees that visitors, clients and/or customers (collectively, the
“Visitors”) to the Project and the Premises must park automobiles or other vehicles only in areas
designated by Landlord from time to time as being for the use of such Visitors, and Tenant hereby
agrees to ask its Visitors to park only in the areas designated by Landlord from time to time for
the use of Tenant’s Visitors. Tenant hereby covenants and agrees to cause its Visitors to comply
with and abide by Landlord’s or Landlord’s parking operator’s rules and regulations governing the
use of such Visitors’ parking as may be in existence from time to time.



     (d) In the event any tax, surcharge or regulatory fee is at any time imposed by any
governmental authority upon or with respect to parking or vehicles parking in the parking spaces
referred to herein, Tenant shall pay such tax, surcharge or regulatory fee as Additional Rent under
this Lease, such payments to be made in advance and from time to time as required by Landlord
(except that they shall be paid monthly with Base Rent payments if permitted by the governmental
authority).



44. Entire Agreement




     This Lease, including the Exhibits and any Addenda attached hereto, which are hereby
incorporated herein by this reference, contains the entire agreement of the parties hereto, and no
representations, inducements, promises or agreements, oral or otherwise, between the parties, not
embodied herein or therein, shall be of any force and effect.



45. Interest




     Any installment of Rent and any other sum due from Tenant under this Lease which is not
received by Landlord within ten (10) days from when the same is due shall bear interest from the
date such payment was originally due under this Lease until paid at an annual rate equal to the
maximum rate of interest permitted by law. Payment of such interest shall not excuse or cure any
Default by Tenant. In addition, Tenant shall pay all costs and attorneys’ fees incurred by
Landlord in collection of such amounts.



46. Construction



     This Lease shall be construed and interpreted in accordance with the laws of the State of
California. The parties acknowledge and agree that no rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall be employed in the interpretation
of this Lease, including the Exhibits and any Addenda attached hereto. All captions in this Lease
are for reference only and shall not be used in the interpretation of this Lease. Whenever
required by the context of this Lease, the singular shall include the plural, the masculine shall
include the feminine, and vice versa. If any provision of this Lease shall be determined to be
illegal or unenforceable, such determination shall not affect any other provision of this Lease and
all such other provisions shall remain in full force and effect.



43









 





47. Representations and Warranties of Tenant




     Tenant hereby makes the following representations and warranties, each of which is material
and being relied upon by Landlord, is true in all respects as of the date of this Lease, and shall
survive the expiration or termination of this Lease.



     (a) If Tenant is an entity, Tenant is duly organized, validly existing and in good standing
under the laws of the state of its organization and the persons executing this Lease on behalf of
Tenant have the full right and authority to execute this Lease on behalf of Tenant and to bind
Tenant without the consent or approval of any other person or entity. Tenant has full power,
capacity, authority and legal right to execute and deliver this Lease and to perform all of its
obligations hereunder. This Lease is a legal, valid and binding obligation of Tenant, enforceable
in accordance with its terms.



     (b) Tenant has not (i) made a general assignment for the benefit of creditors, (ii) filed any
voluntary petition in bankruptcy or suffered the filing of an involuntary petition by any
creditors, (iii) suffered the appointment of a receiver to take possession of all or substantially
all of its assets, (iv) suffered the attachment or other judicial seizure of all or substantially
all of its assets, (v) admitted in writing its inability to pay its debts as they come due, or (vi)
made an offer of settlement, extension or composition to its creditors generally.



48. Security




     (a) Tenant acknowledges and agrees that, while Landlord may engage security personnel to
patrol the Building or the Project, Landlord is not providing any security services with respect to
the Premises, the Building or the Project and that Landlord shall not be liable to Tenant for, and
Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage
suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any
other breach of security with respect to the Premises, the Building or the Project.



     (b) Tenant hereby agrees to the exercise by Landlord and Landlord’s Agents, within their sole
discretion, of such security measures as, but not limited to, the evacuation of the Premises, the
Building or the Project for cause, suspected cause or for drill purposes, the denial of any access
to the Premises, the Building or the Project and other similarly related actions that it deems
necessary to prevent any threat of property damage or bodily injury. The exercise of such security
measures by Landlord and Landlord’s Agents, and the resulting interruption of service and cessation
of Tenant’s business, if any, shall not be deemed an eviction or disturbance of Tenant’s use and
possession of the Premises, or any part thereof, or render Landlord or Landlord’s Agents liable to
Tenant for any resulting damages or relieve Tenant from Tenant’s obligations under this Lease.



49. Jury Trial Waiver




     Tenant hereby waives any right to trial by jury with respect to any action or proceeding (a)
brought by Landlord, Tenant or any other party, relating to (i) this Lease and/or any
understandings or prior dealings between the parties hereto, or (ii) the Premises, the Building or
the Project or any part thereof, or (b) to which Landlord is a party. Tenant hereby agrees that
this Lease constitutes a written consent to waiver of trial by jury pursuant to the provisions of



44









 




California Code of Civil Procedure Section 631, and Tenant does hereby constitute and appoint
Landlord its true and lawful attorney-in-fact, which appointment is coupled with an interest, and
Tenant does hereby authorize and empower Landlord, in the name, place and stead of Tenant, to file
this Lease with the clerk or judge of any court of competent jurisdiction as a statutory written
consent to waiver of trial by jury.




50. Option to Renew




     (a) Tenant shall have one (1) option (the “Renewal Option”) to extend the Term for a period of
two (2) years beyond the Expiration Date (the “Renewal Term”). The Renewal Option is personal to
Tenant and any Permitted Transferee and may not be exercised by any other sublessee or assignee, or
by any other successor or assign of Tenant. The Renewal Option shall be effective only if Tenant
is not in Default under this Lease, nor has any event occurred which with the giving of notice or
the passage of time, or both, would constitute a Default hereunder, either at the time of exercise
of the Renewal Option or the time of commencement of the Renewal Term. The Renewal Option must be
exercised, if at all, by written notice (“Election Notice”) from Tenant to Landlord given not more
than twelve (12) months nor less than six (6) months prior to the expiration of the Term. Any such
notice given by Tenant to Landlord shall be irrevocable. If Tenant fails to exercise the Renewal
Option in a timely manner as provided for above, the Renewal Option shall be void. The Renewal
Term shall be upon the same terms and conditions as the initial Term, except that (i) no further
Renewal Option shall be available to Tenant at the expiration of the Renewal Term, and (ii) the
Base Rent during the Renewal Term (the “Renewal Rate”) shall be equal to the “prevailing market
rate” for space in similarly situated buildings in the vicinity of the Project comparable to the
Building in location, condition, quality and type at the commencement of the Renewal Term (the
“Prevailing Rate”). The term “Prevailing Rate” shall mean the base rental for such comparable
space, taking into account any additional rental and all other payments and escalations payable
hereunder and by tenants under leases of such comparable space. The Prevailing Rate shall be
determined in accordance with Paragraph 50(b) below.



     (b) Within thirty (30) days after Landlord’s receipt of the Election Notice or as soon
thereafter as is reasonably practicable, Landlord shall notify Tenant in writing (the “Renewal Rate
Notice”) of the Renewal Rate. Tenant shall have twenty (20) days (the “Response Period”) after
receipt of the Renewal Rate Notice to advise Landlord whether or not Tenant agrees with Landlord’s
determination of the Renewal Rate. If Tenant does not respond to Landlord in writing within the
Response Period, then Tenant shall be deemed to have accepted the Renewal Rate specified by
Landlord in the Renewal Rate Notice. If Tenant agrees or is deemed to have agreed with Landlord’s
determination of the Renewal Rate, then such determination shall be final and binding on the
parties. If Tenant notifies Landlord in writing during the Response Period that Tenant disagrees
with Landlord’s determination of the Renewal Rate, then within twenty (20) days after Landlord’s
receipt of Tenant’s written notice, Landlord and Tenant shall each retain a licensed commercial
real estate broker with at least five (5) years’ experience negotiating commercial lease
transactions in the City of Palo Alto, California. If only one broker is appointed by the parties
during such twenty (20) day period, then such broker shall, within twenty (20) days after his or
her appointment, determine the Prevailing Rate, and such rate shall be the Renewal Rate for all
purposes of this Lease. If Landlord and Tenant each appoint a broker during such twenty (20) day
period as contemplated hereunder, then the brokers shall



45









 




meet at least two (2) times during the thirty (30) day period commencing on the date on which
the last of the brokers has been appointed (the “Broker Negotiation Period”) to attempt to mutually
agree upon the Prevailing Rate. If the brokers agree upon the Prevailing Rate on or before the
expiration of the Broker Negotiation Period, then the rate so determined by the brokers shall be
the “Renewal Rate” for all purposes of this Lease. If the brokers cannot agree upon the Prevailing
Rate at the expiration of the Broker Negotiation Period, but if the determinations of such brokers
differ by less than five percent (5%) of the higher of the two, the Renewal Rate shall be the
average of the two determinations. In the event such determinations differ by more than five
percent (5%) of the higher of the two, then such appraisers shall within twenty (20) days designate
a third broker, who shall have the same qualifications required for the initial two brokers. If
the two brokers fail to agree upon and appoint a third broker, then the third broker shall be
appointed by J.A.M.S./ENDISPUTE. The third broker shall, within twenty (20) days after his or her
appointment, make a determination of the Prevailing Rate. The determinations of Prevailing Rate
prepared by all three (3) brokers shall be compared and the Renewal Rate shall be the average of
the two closest determinations. Such determination shall be final and binding upon the parties.
Landlord and Tenant shall each bear the expense of the broker selected by it and shall share
equally the expense of the third broker, if any. Promptly following the determination of the
Renewal Rate pursuant to this Paragraph 50(b), the parties shall execute an amendment to this Lease
memorializing such Renewal Rate.




51. Furniture




     During the term of this Lease, Tenant shall have the right to use the modular work stations
and furniture currently located in the Premises (the “Furniture”). Tenant shall accept such
Furniture in its “as-is” condition without any representation or warranty by Landlord. Tenant’s
insurance as required under this Lease shall include an all risk property insurance policy for the
Furniture for its full replacement value, and Tenant shall maintain the Furniture in good condition
during the term hereof. At the expiration or earlier termination of this Lease, Tenant shall at
Landlord’s option (i) return the Furniture to Landlord in the same condition received, ordinary
wear and tear excepted, or (ii) remove the Furniture from the Premises, in which case Landlord
shall transfer title thereto to Tenant.



46









 





     Landlord and Tenant have executed and delivered this Lease as of the Lease Date specified in
the Basic Lease Information.



	 	 	 	 	 	 	 	 	 
	Landlord:

	 	Harbor Investment Partners,

a California general partnership
	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	Embarcadero Road Investors LLC,

a Delaware limited liability company,

General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	UBS Realty Investors llc,

a Massachusetts limited liability company	 	 
	 

	 	 	 	its Manager	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Timothy J. Cahill	 
	 

	 	 	 	Name:	 	Timothy J. Cahill	 	 
	 

	 	 	 	Title:	 	Director - Asset Management	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	Tenant:

	 	NovaRay, Inc.,

a Delaware Corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Marc C. Whyte	 	 
	 

	 	 	 	Name:	 	Marc C. Whyte	 	 
	 

	 	 	 	Title:	 	CEO	 	 	 






47









 






Exhibit A




Diagram of the Premises




A-1









 





Exhibit B




Rules and Regulations





     This exhibit, entitled “Rules and Regulations,” is and shall constitute Exhibit B to the Lease
Agreement, dated as of the Lease Date, by and between Landlord and Tenant for the Premises. The
terms and conditions of this Exhibit B are hereby incorporated into and are made a part of the
Lease. Capitalized terms used, but not otherwise defined, in this Exhibit B have the meanings
ascribed to such terms in the Lease.



     1. Tenant shall not use any method of heating or air conditioning other than that supplied by
Landlord without the consent of Landlord.



     2. All window coverings installed by Tenant and visible from the outside of the building
require the prior written approval of Landlord.



     3. Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or
substance or any flammable or combustible materials on or around the Premises, except to the extent
that Tenant is permitted to use the same under the terms of Paragraph 32 of the Lease.



     4. Tenant shall not alter any lock or install any new locks or bolts on any door at the
Premises without the prior consent of Landlord.



     5. Tenant shall not make any duplicate keys without the prior consent of Landlord.



     6. Tenant shall park motor vehicles in Parking Areas designated by Landlord except for loading
and unloading. During those periods of loading and unloading, Tenant shall not unreasonably
interfere with traffic flow around the Building or the Project and loading and unloading areas of
other tenants. Tenant shall not park motor vehicles in designated Parking Areas after the
conclusion of normal daily business activity.



     7. Tenant shall not disturb, solicit or canvas any tenant or other occupant of the Building or
the Project and shall cooperate to prevent same.



     8. No person shall go on the roof without Landlord’s permission.



     9. Business machines and mechanical equipment belonging to Tenant which cause noise or
vibration that may be transmitted to the structure of the Building, to such a degree as to be
objectionable to Landlord or other tenants, shall be placed and maintained by Tenant, at Tenant’s
expense, on vibration eliminators or in noise-dampening housing or other devices sufficient to
eliminate noise or vibration.



     10. All goods, including material used to store goods, delivered to the Premises of Tenant
shall be immediately moved into the Premises and shall not be left in parking or receiving areas
overnight.



     11. Tractor trailers which must be unhooked or parked with dolly wheels beyond the concrete
loading areas must use steel plates or wood blocks under the dolly wheels to prevent



B-1









 




damage to the asphalt paving surfaces. No parking or storing of such trailers will be
permitted in the Parking Areas or on streets adjacent thereto.




     12. Forklifts which operate on asphalt paving areas shall not have solid rubber tires and
shall only use tires that do not damage the asphalt.



     13. Tenant is responsible for the storage and removal of all trash and refuse. All such trash
and refuse shall be contained in suitable receptacles stored behind screened enclosures at
locations approved by Landlord.



     14. Tenant shall not store or permit the storage or placement of goods or merchandise in or
around the common areas surrounding the Premises. No displays or sales of merchandise shall be
allowed in the parking lots or other common areas.



     15. Tenant shall not permit any animals, including, but not limited to, any household pets, to
be brought or kept in or about the Premises, the Building, the Project or any of the common areas.




B-2













 





Exhibit C




Form of Tenant Estoppel Certificate




     _________, a _________ (“Tenant”) hereby certifies to
_________ and its successors and assigns that Tenant leases from
_________, a _________ (“Landlord”) approximately ___square feet of
space (the “Premises”) in _________ pursuant to that certain Lease Agreement dated ______,
______ by and between Landlord and Tenant, as amended by ____________ (collectively,
the “Lease”), a true and correct copy of which is attached hereto as Exhibit A. Tenant hereby
certifies to ____________, that as of the date hereof:



     1. The Lease is in full force and effect and has not been modified, supplemented or amended,
except as set forth in the introductory paragraph hereof.



     2. Tenant is in actual occupancy of the Premises under the Lease and Tenant has accepted the
same. Landlord has performed all obligations under the Lease to be performed by Landlord,
including, without limitation, completion of all tenant work required under the Lease and the
making of any required payments or contributions therefor. Tenant is not entitled to any further
payment or credit for tenant work.



     3. The initial term of the lease commenced ______, ______ and shall expire ______,
______. Tenant has the following rights to renew or extend the Term or to expand the Premises:
_______________.



     4. Tenant has not paid any rentals or other payments more than one (1) month in advance except
as follows: __________________.



     5. Base Rent payable under the Lease is _________ Dollars ($_________). Base Rent and
additional Rent have been paid through ______, ______. There currently exists no claims,
defenses, rights of set-off or abatement to or against the obligations of Tenant to pay Base Rent
or Additional Rent or relating to any other term, covenant or condition under the Lease.



     6. There are no concessions, bonuses, free months’ rent, rebates or other matters affecting
the rentals except as follows: __________________.



     7. No security or other deposit has been paid with respect to the Lease except as follows:
_____________________.



     8. Landlord is not currently in default under the Lease and there are no events or conditions
existing which, with or without notice or the lapse of time, or both, could constitute a default of
Landlord under the Lease or entitle Tenant to offsets or defenses against the prompt payment of
rent except as follows: _____________________. Tenant is not in default under any of the terms
and conditions of the lease nor is there now any fact or condition which, with notice or lapse of
time or both, will become such a default.



C-1









 





     9. Tenant has not assigned, transferred, mortgaged or otherwise encumbered its interest under
the lease, nor subleased any of the Premises nor permitted any person or entity to use the Premises
except as follows: _____________________.



     10. Tenant has no rights of first refusal or options to purchase the property of which the
Premises is a part.



     11. The Lease represents the entire agreement between the parties with respect to Tenant’s
right to use and occupy the Premises.



     Tenant acknowledges that the parties to whom this certificate is addressed will be relying
upon the accuracy of this certificate in connection with their acquisition and/or financing of the
Premises.



     In Witness Whereof, Tenant has caused this certificate to be executed this _________ day
of ______, ______.



	 	 	 	 	 
	Tenant:  	NovaRay, Inc.,

a Delaware Corporation

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



C-2









 






	 	 	 	 	 



Exhibit D




Hazardous Materials Disclosure Certificate





     Your cooperation in this matter is appreciated. Initially, the information provided by you in
this Hazardous Materials Disclosure Certificate is necessary for Landlord to evaluate your proposed
uses of the premises (the “Premises”) and to determine whether to enter into a lease agreement with
you as tenant. If a lease agreement is signed by you and Landlord (the “Lease Agreement”), on an
annual basis in accordance with the provisions of Paragraph 32 of the Lease Agreement, you are to
provide an update to the information initially provided by you in this certificate. Any questions
regarding this certificate should be directed to, and when completed, the certificate should be
delivered to:



	 	 	 	 	 
	 

	 	Landlord:
	 	Harbor Investment Partners
	 

	 	 	 	c/o UBS Realty Investors llc
	 

	 	 	 	455 Market Street, Suite 1540
	 

	 	 	 	San Francisco, California 94105
	 

	 	 	 	Attention: Asset Manager, Harbor Business Park
	 

	 	 	 	Phone: (415) 538-4800
	 
	 	 	 	 
	 	 	Name of (Prospective) Tenant: 
	 	 	  

	 	 	Mailing Address:
	 	 	  

	 
	 	 	 	 
	 	 	 

	 
	 	 	 	 
	 	 	Contact Person, Title and Telephone Number(s):
	 	 

	 
	 	 	 	 
	 	 	Contact Person for Hazardous Waste Materials Management and Manifests and Telephone Number(s):
	 	 	  

	 
	 	 	 	 
	 	 	 

	 
	 	 	 	 
	 	 	Address of (Prospective) Premises:
	 	 	  

	 
	 	 	 	 
	 	 	Length of (Prospective) initial Term:
	 	 	  

	 
	 	 	 	 
	 	 	 








	1.	 	GENERAL INFORMATION:
	 
	 	 	     Describe the proposed operations to take place in, on, or about the Premises,
including, without limitation, principal products processed, manufactured or assembled, and
services and activities to be provided or otherwise conducted. Existing tenants should
describe any proposed changes to on-going operations.
	 
	 	 	 

	 
	 	 	 





D-1









 












	2.	 	USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS






	 	2.1	 	Will any Hazardous Materials (as hereinafter defined) be used, generated,
treated, stored or disposed of in, on or about the Premises? Existing tenants should
describe any Hazardous Materials which continue to be used, generated, treated, stored
or disposed of in, on or about the Premises.
	 
	 		 	Wastes                                Yes  ̈           No  ̈
	 
	 	 	 	Chemical Products             Yes  ̈           No  ̈
	 
	 	 	 	Other                                   Yes  ̈           No  ̈
	 
	 	 	 	If Yes is marked, please explain:
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	2.2	 	If Yes is marked in Section 2.1, attach a list of any Hazardous Materials to be
used, generated, treated, stored or disposed of in, on or about the Premises, including
the applicable hazard class and an estimate of the quantities of such Hazardous
Materials to be present on or about the Premises at any given time; estimated annual
throughput; the proposed location(s) and method of storage (excluding nominal amounts
of ordinary household cleaners and janitorial supplies which are not regulated by any
Environmental Laws, as hereinafter defined); and the proposed location(s) and method(s)
of treatment or disposal for each Hazardous Material, including the estimated
frequency, and the proposed contractors or subcontractors. Existing tenants should
attach a list setting forth the information requested above and such list should
include actual data from on-going operations and the identification of any variations
in such information from the prior year’s certificate.






	3.	 	STORAGE TANKS AND SUMPS






	 	3.1	 	Is any above or below ground storage or treatment of gasoline, diesel,
petroleum, or other Hazardous Materials in tanks or sumps proposed in, on or about the
Premises? Existing tenants should describe any such actual or proposed activities.
	 
	 	 	 	Yes  ̈           No  ̈
	 
	 	 	 	If yes, please explain:
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 





D-2









 












	4.	 	WASTE MANAGEMENT






	 	4.1	 	Has your company been issued an EPA Hazardous Waste Generator I.D. Number?
Existing tenants should describe any additional identification numbers issued since the
previous certificate.
	 
	 	 	 	Yes  ̈           No  ̈
	 
	 	4.2	 	Has your company filed a biennial or quarterly reports as a hazardous waste
generator? Existing tenants should describe any new reports filed.
	 
	 	 	 	Yes  ̈           No  ̈
	 
	 	 	 	If yes, attach a copy of the most recent report filed.






	5.	 	WASTEWATER TREATMENT AND DISCHARGE






	 	5.1	 	Will your company discharge wastewater or other wastes to:
	 
	 	 	 	______ storm drain?                ______ sewer?
	 
	 	 	 	______ surface water?            ______ no wastewater or other wastes discharged.
	 
	 	 	 	Existing tenants should indicate any actual discharges. If so, describe the nature
of any proposed or actual discharge(s).
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	5.2	 	Will any such wastewater or waste be treated before discharge?
	 
	 	 	 	Yes  ̈           No  ̈
	 
	 	 	 	If yes, describe the type of treatment proposed to be conducted. Existing tenants
should describe the actual treatment conducted.
	 
	 	 	 	 

	 
	 	 	 	 





D-3









 












	6.	 	AIR DISCHARGES






	 	6.1	 	Do you plan for any air filtration systems or stacks to be used in your
company’s operations in, on or about the Premises that will discharge into the air; and
will such air emissions be monitored? Existing tenants should indicate whether or not
there are any such air filtration systems or stacks in use in, on or about the Premises
which discharge into the air and whether such air emissions are being monitored.
	 
	 	 	 	Yes  ̈           No  ̈
	 
	 	 	 	If yes, please describe:
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	6.2	 	Do you propose to operate any of the following types of equipment, or any other
equipment requiring an air emissions permit? Existing tenants should specify any such
equipment being operated in, on or about the Premises.
	 
	 	 	 	______ Spray booth(s)                 ______ Incinerator(s)
	 
	 	 	 	______ Dip tank(s)                      ______ Other (Please describe)
	 
	 	 	 	______ Drying
oven(s)                ______
No Equipment Requiring Air Permits
	 
	 	 	 	If yes, please describe:
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	6.3	 	Please describe (and submit copies of with this Hazardous Materials Disclosure
Certificate) any reports you have filed in the past thirty-six months with any
governmental or quasi-governmental agencies or authorities related to air discharges or
clean air requirements and any such reports which have been issued during such period
by any such agencies or authorities with respect to you or your business operations.




D-4









 











7. HAZARDOUS MATERIALS DISCLOSURES





	 	7.1	 	Has your company prepared or will it be required to prepare a Hazardous
Materials management plan (“Management Plan”) or Hazardous Materials Business Plan and
Inventory (“Business Plan”) pursuant to Fire Department or other governmental or
regulatory agencies’ requirements? Existing tenants should indicate whether or not a
Management Plan is required and has been prepared.
	 
	 	 	 	Yes  ̈          No  ̈
	 
	 	 	 	If yes, attach a copy of the Management Plan or Business Plan. Existing tenants
should attach a copy of any required updates to the Management Plan or Business
Plan.
	 
	 	7.2	 	Are any of the Hazardous Materials, and in particular chemicals, proposed to be
used in your operations in, on or about the Premises listed or regulated under
Proposition 65? Existing tenants should indicate whether or not there are any new
Hazardous Materials being so used which are listed or regulated under Proposition 65.
	 
	 	 	 	Yes  ̈          No  ̈
	 
	 	 	 	If yes, please explain:
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 






8. ENFORCEMENT ACTIONS AND COMPLAINTS





	 	8.1	 	With respect to Hazardous Materials or Environmental Laws, has your company
ever been subject to any agency enforcement actions, administrative orders, or consent
decrees or has your company received requests for information, notice or demand
letters, or any other inquiries regarding its operations? Existing tenants should
indicate whether or not any such actions, orders or decrees have been, or are in the
process of being, undertaken or if any such requests have been received.
	 
	 	 	 	Yes  ̈          No  ̈
	 
	 	 	 	If yes, describe the actions, orders or decrees and any continuing compliance
obligations imposed as a result of these actions, orders or decrees and also
describe any requests, notices or demands, and attach a copy of all such documents.
Existing tenants should describe and attach a copy of any new actions, orders,
decrees, requests, notices or demands not already delivered to Landlord pursuant to
the provisions of Paragraph 32 of the Lease Agreement.
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 





D-5









 












	 	8.2	 	Have there ever been, or are there now pending, any lawsuits against your
company regarding any environmental or health and safety concerns?
	 
	 	 	 	Yes  ̈          No  ̈
	 
	 	 	 	If yes, describe any such lawsuits and attach copies of the complaint(s),
cross-complaint(s), pleadings and other documents related thereto as requested by
Landlord. Existing tenants should describe and attach a copy of any new
complaint(s), cross-complaint(s), pleadings and other related documents not already
delivered to Landlord pursuant to the provisions of Paragraph 32 of the Lease
Agreement.
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	8.3	 	Have there been any problems or complaints from adjacent tenants, owners or
other neighbors at your company’s current facility with regard to environmental or
health and safety concerns? Existing tenants should indicate whether or not there have
been any such problems or complaints from adjacent tenants, owners or other neighbors
at, about or near the Premises and the current status of any such problems or
complaints.
	 
	 	 	 	Yes  ̈          No  ̈
	 
	 	 	 	If yes, please describe. Existing tenants should describe any such problems or
complaints not already disclosed to Landlord under the provisions of the signed
Lease Agreement and the current status of any such problems or complaints.
	 
	 	 	 	 

	 
	 	 	 	 

	 
	 	 	 	 







	9.	 	PERMITS AND LICENSES






	 	9.1	 	Attach copies of all permits and licenses issued to your company with respect
to its proposed operations in, on or about the Premises, including, without limitation,
any Hazardous Materials permits, wastewater discharge permits, air emissions permits,
and use permits or approvals. Existing tenants should attach copies of any new permits
and licenses as well as any renewals of permits or licenses previously issued.





     As used herein, “Hazardous Materials” shall mean and include any substance that is or contains
(a) any “hazardous substance” as now or hereafter defined in § 101(14) of the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”) (42 U.S.C. §
9601 et seq.) or any regulations promulgated under CERCLA; (b) any “hazardous waste” as now or
hereafter defined in the Resource Conservation and Recovery Act, as amended (“RCRA”) (42 U.S.C. §
6901 et seq.) or any regulations promulgated under RCRA;



D-6









 




(c) any substance now or hereafter regulated by the Toxic Substances Control Act, as amended
(“TSCA”) (15 U.S.C. § 2601 et seq.) or any regulations promulgated under TSCA; (d) petroleum,
petroleum by-products, gasoline, diesel fuel, or other petroleum hydrocarbons; (e) asbestos and
asbestos-containing material, in any form, whether friable or non-friable; (f) polychlorinated
biphenyls; (g) lead and lead-containing materials; or (h) any additional substance, material or
waste (i) the presence of which on or about the Premises (A) requires reporting, investigation or
remediation under any Environmental Laws (as hereinafter defined), (B) causes or threatens to cause
a nuisance on the Premises or any adjacent property or poses or threatens to pose a hazard to the
health or safety of persons on the Premises or any adjacent property, or (C) which, if it emanated
or migrated from the Premises, could constitute a trespass, or (ii) which is now or is hereafter
classified or considered to be hazardous or toxic under any Environmental Laws; and “Environmental
Laws” shall mean and include (a) CERCLA, RCRA and TSCA; and (b) any other federal, state or local
laws, ordinances, statutes, codes, rules, regulations, orders or decrees now or hereinafter in
effect relating to (i) pollution, (ii) the protection or regulation of human health, natural
resources or the environment, (iii) the treatment, storage or disposal of Hazardous Materials, or
(iv) the emission, discharge, release or threatened release of Hazardous Materials into the
environment.




D-7









 








     The undersigned hereby acknowledges and agrees that this Hazardous Materials Disclosure
Certificate is being delivered to Landlord in connection with the evaluation of a Lease Agreement
and, if such Lease Agreement is executed, will be attached thereto as an exhibit. The undersigned
further acknowledges and agrees that if such Lease Agreement is executed, this Hazardous Materials
Disclosure Certificate will be updated from time to time in accordance with Paragraph 32 of the
Lease Agreement. The undersigned further acknowledges and agrees that Landlord and its partners,
lenders and representatives may, and will, rely upon the statements, representations, warranties,
and certifications made herein and the truthfulness thereof in entering into the Lease Agreement
and the continuance thereof throughout the Term, and any renewals thereof, of the Lease Agreement.
I [print name] ____________, acting with full authority to bind the (proposed) Tenant and on
behalf of the (proposed) Tenant, certify, represent and warrant that the information contained in
this certificate is true and correct.



	 	 	 	 	 	 	 
	 	(Prospective) Tenant:



NovaRay, Inc.,

a Delaware Corporation

 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	Date: 	 
	 
	 	 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	Date: 	 
	 




D-8











 





First Amendment to Lease




     This
First Amendment To Lease (this “Amendment”)
is entered into as of January __,
2007 by and between Harbor Investment Partners, a California general partnership
(“Landlord”), and NovaRay, Inc., a Delaware corporation (“Tenant”).



Recitals




     A. Tenant
and Landlord entered into that certain Lease Agreement, dated as of
July 1, 2005 (the “Lease”), which Lease covers certain premises consisting of approximately
twelve thousand twenty-two (12,022) rentable square feet located at 1850 Embarcadero Road, Palo Alto, California 94303. Capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Lease.



     B. Landlord and Tenant now desire to amend the Lease to extend the Term, subject to
each of the terms, conditions, and provisions set forth herein.



Agreement




     Now Therefore, in consideration of the agreements of Landlord and Tenant herein
contained and other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:



1. Lease Term




     The Lease Term is hereby extended for a period of twelve (12) months commencing February
1, 2007 (the “Effective Date”) and ending on
January 31, 2008 (the “Extended Term”).



2. Monthly Base Rent




     Commencing on the Effective Date and continuing through the end of the Extended Term, the
Monthly Base Rent payable by Tenant to Landlord shall be Fifteen Thousand Six Hundred Twenty-Eight
and 60/100 Dollars ($15,628.60).



3. Option to Renew




     Paragraph 50 of the Lease is hereby deleted and Tenant acknowledges that it has no right to
further extend the Term of the Lease.



4. General Provisions




     (a) Ratification and Entire Agreement. Except as expressly amended by this Amendment, the
Lease shall remain unmodified and in full force and effect. As modified by this Amendment, the
Lease is hereby ratified and confirmed in all respects. In the event of any inconsistencies
between the terms of this Amendment and the Lease, the terms of this Amendment shall prevail. The
Lease as amended by this Amendment constitutes the entire understanding and agreement of Landlord
and Tenant with respect to the subject matter hereof, and all prior agreements, representations,
and understandings between Landlord and Tenant with




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respect to the subject matter hereof, whether oral or written, are or should be deemed to be null
and void, all of the foregoing having been merged into this Amendment, Landlord and Tenant do each
hereby acknowledge that it and/or its counsel have reviewed and revised this Amendment, and agree
that no rule of construction to the effect that any ambiguities are to be resolved against the
drafting party shall be employed in the interpretation of this Amendment. This Amendment may be
amended or modified only by an instrument in writing signed by each of the Landlord and Tenant.




     (b) Brokerage. Tenant hereby represents and warrants to Landlord that Tenant has not retained
the services of any real estate broker, finder or any other person whose services would form the
basis for any claim for any commission or fee in connection with, this Amendment or the
transactions contemplated hereby. Tenant hereby agrees to save, defend, indemnify and hold Landlord
free and harmless from all losses, liabilities, damages, and costs and expenses arising from any
breach of its warranty and representation as set forth in the preceding sentence, including
Landlord’s reasonable attorneys’ fees.



     (c) Authority; Applicable Law; Successors Bound. Landlord and Tenant do each hereby
represent and warrant to the other that this Amendment has been duly authorized by all necessary
action on the part of such party and that such party has full power and authority to execute,
deliver and perform its obligations under this Amendment. This Amendment shall be governed by and
construed under the laws of the State of California, without giving effect to any principles of
conflicts of law that would result in the application of the laws of any other jurisdiction. This
Amendment shall inure to the benefit of and be binding upon Landlord and Tenant and their
respective successors and permitted assigns with respect to the Lease.



     (d) Counterparts. This Amendment may be executed in counterparts each of which shall be deemed
an original but all of which taken together shall constitute one and the same instrument.



[Signature Page Follows]




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     In Witness Whereof, Landlord and Tenant have executed this Amendment as of the date
first above written.



	 	 	 	 	 
	 Landlord:     	 Harbor Investment Partners,

a California general partnership
 	 
	 	By:  	 Embarcadero Road Investors LLC,

 a Delaware limited liability company,
 General Partner
 	 
	 	By:  	 UBS Realty Investors LLC,

a Massachusetts limited liability
 company, its
Manager

 	 
	 	By:  	/s/  Timothy J. Cahill
 	 
	 	 	Name:  	Timothy J. Cahill 	 
	 	 	Title:  	Director - Asset Management 	 



	 	 	 	 	 
	 Tenant:      	NovaRay, Inc.,

a Delaware corporation

 	 
	 	By:  	/s/ Marc Whyte
 	 
	 	 	Name:  	Marc Whyte 	 
	 	 	Title:  	CEO 	 




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