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such notice to cure such non-payment once in each calendar year before assessing thelate charge in such calendar year pursuant to this Paragraph 3.A. All taxes, insurance premiums, reimbursable expenses and utilities, late charges, costsand expenses which Lessee is required to pay hereunder, together with all interest andpenalties that may accrue thereon in the event of Lessee’s failure to pay such amounts, andall reasonable damages, costs, and attorney’s fees and expenses which Lessor may incur byreason of any default of Lessee or failure on Lessee’s part to comply with the terms of thisLease, shall be deemed to be additional rent (hereinafter, “Additional Rent”), and, in theevent of non-payment by Lessee, Lessor shall have all of the rights and remedies withrespect thereto as Lessor has for the non-payment of monthly installment of rent.4. Option to Extend Term.     A. Lessee shall have the option to extend the term on all the provisions contained in thisLease for one (1) one (1) year period (“extended term”) at an adjusted rental calculated asprovided in Subparagraph B below on the condition that: (a) Lessee has given to Lessor written notice of exercise of that option (“optionnotice on or before May 31, 2008.  (b) Lessee is not in default in the performance of any of the terms and conditionsof the Lease on the date of giving the option notice, and Lessee is not in default onthe date that the extended term is to commence.B. The rent during the Extended Term shall be $1.50 per square foot.C. The option to extend shall be personal to Lessee, and shall not be transferable orassignable to any other person or entity other than  any transferee under an “exemptsublet”, as such term is defined in Article 21.F of this Lease. If Lessee has exercised itsoption to extend, the phrase “Lease term” as used in this Lease shall mean the initial termof the Lease and the extended term(s).5. Security Deposit. Upon Lessee’s execution of this Lease, Lessee shall deposit withLessor a Security Deposit in the sum of Twenty-Six Thousand Two Hundred Ten and 00/100Dollars ($26,210.00) to secure the full and faithful performance by Lessee of each term, covenant,and condition of this Lease. If Lessee shall at any time fail to make any payment or fail to keepor perform any term, covenant, or condition on its part to be made or performed or kept under thisLease, Lessor may, but shall not be obligated to and without waiving or releasing Lessee from anyobligation under this Lease, use, apply, or retain the whole or any part of said Security Deposit(a) to the extent of any sum due to Lessor; or (b) to compensate Lessor for any loss, damage,attorneys’ fees or expense sustained by Lessor due to Lessee’s default. In such event, Lesseeshall, within five (5) days of written demand by Lessor, remit to Lessor sufficient funds torestore the Security
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Deposit to its original sum. No interest shall accrue on the SecurityDeposit. Should Lessee comply with all the terms, covenants, and conditions of this Lease and, atthe end of the term of this Lease, leave the Premises in the condition required by this Lease, thensaid Security Deposit or any balance thereof, less any sums owing to Lessor, shall be returned toLessee within fifteen (15) days after the termination of this Lease and vacancy of the Premises byLessee. Lessor can maintain the Security Deposit separate and apart from Lessor’s general funds,or can co-mingle the Security Deposit with the Lessor’s general and other funds.     6. Use of the Premises. The Premises shall be used exclusively for the purpose ofgeneral office, administration, light manufacturing and assembly, testing, marketing, engineering,shipping and receiving and any other legal uses directly related to Lessee’s business and for noother purpose without Lessor’s prior written consent.     Lessee shall not use or permit the Premises, or any part thereof, to be used for any purposeor purposes other than the purpose for which the Premises are hereby leased; and no use shall bemade or permitted to be made of the Premises, nor acts done, which will increase the existing rateof insurance upon the building in which the Premises are located, or cause a cancellation of anyinsurance policy covering said building, or any part thereof, nor shall Lessee sell or permit to bekept, used, or sold, in or about the Premises, any article which may be prohibited by the standardform of fire insurance policies. Lessee shall not commit or suffer to be committed any waste uponthe Premises or any public or private nuisance or other act or thing which may disturb the quietenjoyment of any other tenant in the building in which the premises are located; nor, withoutlimiting the generality of the foregoing, shall Lessee allow the Premises to be used for anyimproper, immoral, unlawful, or objectionable purpose.     Lessee shall not place any harmful liquids in the drainagesystem of the Premises or of the building of which the Premises form a part. No waste materials orrefuse shall be dumped upon or permitted to remain upon any part of the Premises outside of thebuilding proper except in trash containers placed inside exterior enclosures designated for thatpurpose by Lessor, or inside the building proper where designated by Lessor. No materials,supplies, equipment, finished or semi-finished products, raw materials, or articles of any natureshall be stored upon or permitted to remain on any portion of the Premises outside of the buildingproper. Lessee shall comply with all the covenants, conditions, and/or restrictions (“C.C. &R.’s”) affecting the Premises.     Lessor represents and warrants to Lessee that to the best of its knowledge there are no Toxicor Hazardous materials present on, at or under the Premises, which shall be deemed to includeunderlying land and groundwater, at the time of Lessee’s occupancy and that, prior to theCommencement Date, Lessor has obtained any closure certificates for the Premises from theapplicable governmental authorities with respect to prior occupants of the Premises. Lessor shallindemnify, defend and hold harmless Lessee, its partners, directors, officers, employees, lenders,and successors against all claims, obligations, liabilities, demands, damages, judgments, andcosts, including reasonable attorneys’ fees arising from or in connection with any prior Toxic orHazardous materials that existed prior to Lessee’s occupancy of the Premises.     Lessee in turn represents to Lessor that it does not now and will not in the future permit theuse or storage on the Premises of Toxic or Hazardous materials, excluding, however basic
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janitorial, maintenance and office supplies, and materials commonly used in connection withLessee’s business as described in paragraph 6 hereof, including, without limitation, solder andsmall quantities of solvents. For purposes of this paragraph 6 “Toxic or Hazardous Materials”shall mean any product, substance, chemical, material or waste whose presence, nature, qualityand/or intensity or existence, use, manufacture, disposal, transportation, spill, release oreffect, either by itself or in combination with other materials expected to be on the leasedpremises, is either (i) potentially injurious to the public health, safety or welfare, theenvironment, or the leased premises; (ii) regulated or monitored by any governmental authority; or(iii) a basis for potential liability of Lessee and Lessor to any governmental agency or thirdparty under any applicable statute or common law theory. “Toxic or Hazardous Materials” shallinclude, but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any products orby-products thereof.     Lessee hereunder shall be responsible for and indemnify, and hold Lessor and its partners,directors, officers, employees, lenders, successors and assigns harmless from all claims,obligations, liabilities, demands, damages, judgments and costs, including reasonable attorneys’fees arising at any time during or in connection with Lessee’s causing or permitting any materialsreferred to under any governmental provisions orregulatory scheme as “hazardous” or “toxic” or which contain petroleum, gasoline, or otherpetroleum product, to be brought upon, stored, manufactured, generated, handled, disposed, or usedon, under or about the Premises in violation of the provisions of this Article 6 and applicableenvironmental laws. Lessee’s and Lessor’s obligations hereunder shall survive the termination ofthis Lease.     If, at any time during the term of this Lease, Lessor suspects that toxic waste, spillage, orother contaminants may be present on the Premises, Lessor may order a soils report, or itsequivalent, at Lessor’s expense. Lessee shall pay the reasonable costs of such report withinfifteen (15) days from the date of the invoice by Lessor if it is determined that Lessee orLessee’s agents, employees, contractors or invitees released or caused Toxic or Hazardous materialson or about the Premises in violation of the provisions of this Article 6 and applicableenvironmental laws. If any such toxic waste, spillage, or other contaminants are found upon thePremises which were released by Lessee or Lessee’s agents, employees or invitees in violation ofthe provisions of this Article 6 and applicable environmental laws, Lessee shall deposit withLessor, within fifteen (15) days of notice from Lessor to Lessee to do so, the amount necessary toremove the substances and remedy the problem in accordance with applicable law.     Lessee shall abide by all laws, ordinances, and statutes, as they now exist or may hereafterbe enacted by legislative bodies having jurisdiction thereof, relating to its use and occupancy ofthe Premises. Notwithstanding anything to the contrary in this Lease, if, during the term of thisLease, any alteration, addition, or change of any sort through all or any portion of the Premisesor of the building of which the Premises form a part, is required by law, regulation, ordinance, ororder of any public agency (“Laws”), then, if such legal requirement is not imposed because ofLessee’s specific use of the Premises (other than for general office use) and is not “triggered” byLessee’s alterations or Lessee’s application for a building permit or any other governmentalapproval (in which instance Lessee shall be responsible for 100% of the cost of suchimprovement)(other than the Lessee Improvements), Lessor shall be responsible for constructing suchimprovement, and Lessee shall be responsible for its proportional share of the
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cost for saidimprovement, amortized over the useful life of such improvement that coincides with the remainingLease term including any extensions. Lessor represents and warrants that as of the date hereof ithas not received any notice that the Premises or the building of which the Premises form a part iscurrently in violation of any Laws or that any improvements are required by Laws.7. Improvements: Lessee shall take the Premises in “AS IS” condition.8. Taxes and Assessments.A. Lessee shall pay before delinquency any and all taxes, assessments, license fees, andpublic charges levied, assessed, or imposed upon or against Lessee’s fixtures, equipment,furnishings, furniture, appliances, and personal property installed or located on or withinthe Premises. Lessee shall cause said fixtures, equipment, furnishings, furniture,appliances, and personal property to be assessed and billed separately from the realproperty of Lessor. If any of Lessee’s said personal property shall be assessed withLessor’s real property, Lessee shall pay to Lessor the taxes attributable to Lessee withinten (10) business days after receipt of a written statement from Lessor setting forth thetaxes applicable to Lessee’s property.B. All property taxes or assessments levied or assessed by or hereafter levied or assessedby any governmental authority against the Premises or any portion of such taxes orassessments which becomes due or accrued during the term of this Lease shall be paid byLessor; provided, however, that Lessee shall not be required to pay any portion of any taxor assessment expense or any increase therein (a) levied on Lessor’s rental income, unlesssuch tax or assessment is imposed in lieu of real property taxes; (b) in excess of theamount which would be payable if such tax or assessment expense were paid in installmentsover the longest permitted term; or (c) attributable to Lessor’s net income, inheritance,gift, transfer, estate or state taxes. Lessee shall pay to Lessor Lessee’s proportionateshare of such taxes or assessments within fifteen (15) days of receipt of Lessor’s invoicedemanding such payment. Lessee’s liability hereunder shall be prorated to reflect thecommencement and termination dates of this Lease.9. Insurance.A. Indemnity. Lessee agrees to indemnify, defend and save Lessor against and holdLessor harmless from any and all demands, claims, causes of action, judgments, obligations,or liabilities, and all reasonable expenses incurred in investigating or resisting the same(including reasonable attorneys’ fees) on account of, or arising out of Lessee’s use, oroccupancy of the Premises. This Lease is made on the express condition that Lessor shallnot be liable for, or suffer loss by reason of, injury to person or property, from whatevercause, in any way connected with the condition, use, or occupancy of the Premises,specifically including, without limitation, any liability for injury to the person orproperty of Lessee, its agents, officers, employees, licensees, and invitees, except to theextent such loss, injury or damage was caused by Lessor’s negligence or willful misconduct.
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B. Liability Insurance. Lessee shall, at its expense, obtain and keep in forceduring the term of this Lease a policy of Commercial General Liability insurance insuringLessee, with cross-liability endorsements, against any liability arising out of thecondition, use, or occupancy of the Premises and all areas appurtenant thereto, includingparking areas and property insurance to cover Lessee’s personal property, equipment,inventory, fixtures and tenant improvements on the Premises. Lessor shall be named as anadditional insured onthe CGL policy. Such insurance shall be in an amount satisfactory to Lessor of not lessthan one million dollars ($1,000,000) for each occurrence for bodily injury and physicaldamage to the property and two million dollars ($2,000,000) general aggregate limit. Theinsurance shall be with companies approved by Lessor, which approval Lessor agrees not towithhold unreasonably. Prior to possession, Lessee shall deliver to Lessor a certificate ofinsurance and endorsement evidencing the existence of the policy which (1) as to the CGLpolicy names Lessor as an additional insured, (2) shall not be canceled or altered withoutthirty (30) days’ prior written notice to Lessor, (3) insures performance of the indemnityset forth in Section A of Paragraph 9, and (4) coverage is primary and any coverage byLessor is in excess thereto.C. Property Insurance. Lessor shall obtain and keep in force during the term ofthis Lease a policy or policies of insurance covering (a) loss or damage to the Premises(which may include earthquake and/or flood insurance), in the amount of the full replacementvalue thereof, and (b) Lessor’s liability insurance. Lessee shall pay to Lessor itspro-rata share of the cost of the premium of said insurance within fifteen (15) days ofLessee’s receipt of Lessor’s invoice demanding such payment. Lessee acknowledges that suchinsurance procured by Lessor, including, without limitation, any earthquake insurance, shallcontain a deductible (not to exceed $10,000.00 per occurrence) which reduces Lessee’s costfor such insurance, and, in the event of loss or damage, Lessee shall be required to pay toLessor Lessee’s pro-rata share of the amount of such deductible.D. Notwithstanding anything in this Lease to the contrary, Lessor and Lessee hereby releaseseach other and their respective agents, employees, successors, assignees and sublessees fromall liability for injury to any person or damage to any property that is caused by orresults from a risk which is actually insured against, which is required to be insuredagainst under this Lease, or which would normally be covered by “all risk” propertyinsurance, without regard to the negligence or misconduct of the person or entity soreleased. All of Lessor’s and Lessee’s repair and indemnity obligations under this Leaseshall be subject to the waiver and release contained in this paragraph. Each party shallcause each insurance policy it obtains to provide that the insurer thereunder waives allrecovery by way of subrogation as required herein in connection with any injury or damagecovered by such policy.10. Reimbursable Expenses and Utilities. Commencing on the Commencement Date andthereafter during the term of this Lease, Lessee shall pay its pro-rata share based on squarefootage of all water, gas, light, power, electricity, telephone, HVAC maintenance and repairs,
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trash removal, landscaping, tree trimming, sewer charges, and all other services, including normaland customary property management fees, supplied to or consumed on the Premises; provided, however,that Lessee shall in no event have any obligation to perform or to pay directly, or to reimburseLessor for, all or any portion of the following repairs, maintenance, improvements, replacements,premiums, claims, losses, fees, charges, costs and expenses (collectively, “Costs”): (a) Costsoccasioned by the act, omission or violation of any law by Lessor, or Lessor’s agents, employees orcontractors; (b) Costs to correct any construction defect in the Premises or to comply with anycovenant, condition, restriction, underwriter’s requirement or law applicable tothe Premises on the Commencement Date; (c) [intentionally omitted]; (d) interest, charges and feesincurred on debt; (f) expense reserves; (g) [intentionally omitted]; (h) Costs which could properlybe capitalized under generally accepted accounting principles, except as provided in Paragraph11.A. of this Lease; and (i) wages, compensation, and labor burden for any employee not stationedon the Project on a full-time basis (other than Lessor’s maintenance employee, who works on otherproperties in Lessor’s portfolio, and who is charged on an hourly basis to the applicable property)or any fee, profit or compensation retained by Lessor or its affiliates for management andadministration of the Project in excess of three percent (3%) of Monthly Rent. In the event thatany such services are billed directly to Lessor, then Lessee shall pay Lessor for such expenseswithin ten (10) days of Lessee’s receipt of Lessor’s invoice demanding payment.11. Repairs and Maintenance. A. Subject to provisions of paragraph 15 of this Lease, Lessor shall keep andmaintain in good order, condition and repair the structural elements of the Premisesincluding the roof, roof membrane, paving, floor slab, foundation, exterior walls,landscaping, and irrigation. Lessor shall make such repairs, replacements, alterationsor improvements as Lessor deems reasonably necessary with respect to such structuralelements and Lessee shall pay to Lessor, within ten (10) business days of Lessor’sinvoice to Lessee therefor, Lessee’s pro-rata share of such repairs, replacements,alterations or improvements. In the event that the cost of any replacement orimprovement exceeds $25,000 per occurrence, the amount in excess of $25,000 shall beamortized, on a straight line basis, over the useful life of such replacements orimprovements as reasonably determined by Lessor using manufacturers’ guidelines.Lessee shall be obligated to pay its pro-rata share of such excess on a monthly basis,as Additional Rent, for as long as the useful life coincides with the lease term.Notwithstanding the foregoing, but subject to the provisions of Paragraph 9.D of thisLease, if the reason for any repair, replacement, alteration or improvement is causedby Lessee or arises because of a breach of Lessee’s obligations under this Lease, thenLessee shall pay 100% of the costs or expense to remedy the same.  B.  Except as expressly provided in Subparagraph A above, Lessee shall, at its solecost, keep and maintain the entire Premises and every part thereof, including, withoutlimitation, the windows, window frames, plate glass, glazing, truck doors, doors, alldoor hardware, interior of the Premises, interior walls and partitions, and electrical,plumbing, and lighting, systems in good and sanitary order,
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condition, and repair.Lessor shall maintain a service contract for the maintenance of all heating, airconditioning, and ventilation equipment with a licensed and insuranced contractor.Lessee shall reimburse Lessor pursuant to Paragraph 10 above for the cost of saidmaintenance contract.     Should Lessee fail to maintain the Premises or make repairs required of Lesseehereunder forthwith upon notice from Lessor, Lessor, in addition to all otherremedies available hereunder or by law, and without waiving any alternativeremedies, may make the same, and in that event, Lessee shall reimburse Lessor asadditional rent for the cost of such maintenance or repairs on the later of: (a) thenext date upon which rent becomes due; or (b) within ten (10) business daysfollowing receipt of Lessor’s invoice.     Lessee hereby expressly waives the provision of Subsection 1 of Section 1932,and Sections 1941 and 1942 of the Civil Code of California and all rights to makerepairs at the expense of Lessor, as provided in Section 1942 of said Civil Code.12. Alterations and Additions. Lessee shall not make, or suffer to be made, anyalterations, improvements, or additions in, on, or about, or to the Premises or any part thereof,without prior written consent of Lessor, which consent Lessor shall not unreasonably withhold, andwithout a valid building permit issued by the appropriate governmental authority. Lessor retains,at his sole option, the right to retain a General Contractor of his own choosing to perform allrepairs, alterations, improvements, or additions in, on, about, or to said Premises or any partthereof that Lessor is required to perform under this Lease. As a condition to giving suchconsent, Lessor may require that Lessee agree to remove any such alterations, improvements, oradditions at the termination of this Lease, and to restore the Premises to their prior condition;provided, however, that Lessor shall have no right to require Lessee to remove any alterationsunless it notifies Lessee at the time it consents to such alteration that it shall require suchalteration to be removed**.**Notwithstanding anything to the contrary in this Section 12, Lessee mayconstruct non-structural alterations, additions and improvements that do not affect the mechanical,plumbing, electrical, or HVAC systems (“Alterations”) in the Premises without Lessor’s priorapproval but with prior written notification of the work, if the cost of any such project does notexceed Ten Thousand Dollars ($10,000); provided, however, that in no event shall Lessee perform anyAlterations on the roof of the building without first obtaining Lessor’s consent, and, as acondition to granting such consent, Lessor may require Lessee to take such steps as are reasonablynecessary to prevent any warranty applicable to the roof from being voided. Any alteration,addition, or improvement to the Premises, shall become the property of Lessor upon installation,and shall remain upon and be surrendered with the Premises at the termination of this Lease.Alterations and additions which are not to be deemed as trade fixtures include heating, lighting,electrical systems, air conditioning (other than supplemental HVAC units installed by Lessee),partitioning, electrical signs, carpeting, or any other installation which has become an integralpart of the Premises. In the event that Lessor consents to Lessee’s making any alterations,improvements, or additions, Lessee shall be responsible for the timely posting of notices ofnon-responsibility on Lessor’s behalf, which shall remain posted until completion of thealterations, additions, or improvements. Lessee’s failure to post notices of non-responsibility
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asrequired hereunder shall be a breach of this Lease.     Notwithstanding anything to the contrary in this Lease, if, during the term of this Lease, anyalteration, addition, or change of any sort through all or any portion of the Premises or of thebuilding of which the Premises form a part, is required by any Laws, then, if such legalrequirement is not imposed because of Lessee’s specific use of the Premises (other than for generaloffice use) and is not “triggered” by Lessee’s alterations or Lessee’s application for abuilding permit or any other governmental approval (in which instance Lessee shall be responsiblefor 100% of the cost of such improvement)(other than the Lessee Improvements), Lessor shall beresponsible for constructing such improvement, and Lessee shall be responsible for its proportionalshare of the cost for said improvement, amortized over the useful life of such improvement thatcoincides with the remaining Lease term including any extensions. Lessor represents and warrantsthat as of the date hereof it has not received any notice that the Premises or the building ofwhich the Premises form a part is currently in violation of any Laws or that any improvements arerequired by Laws.13. Acceptance of the Premises and Covenant to Surrender. By entry and taking possessionof the Premises pursuant to this Lease, Lessee accepts the Premises as being in good and sanitaryorder, condition, and repair, and accepts the Premises in their condition existing as of date ofsuch entry. Lessor represents that as of the Lease Commencement, the roof, walls and structuralcomponents of the building, HVAC system, electrical, plumbing and lighting shall be in good workingorder. Lessor shall assign to Lessee any and all existing warranties for the building.     Lessee agrees on the last day of the term hereof, or on sooner termination of this Lease, tosurrender the Premises, together with all alterations, additions, and improvements which may havebeen made in, to, or on the Premises by Lessor or Lessee, unto Lessor in good and sanitary order,condition, and repair, excepting for such wear and tear as would be normal for the period of theLessee’s occupancy and damage by Casualty or Condemnation. Lessee, on or before the end of theterm or sooner termination of this Lease, shall remove all its personal property, trade fixtures,equipment, and data and phone cabling from the Premises, and all property not so removed shall bedeemed abandoned by Lessee. Lessee further agrees that at the end of the term or soonertermination of this Lease, Lessee shall restore the Premises to its original condition (exceptingany restoration requirements waived in Section 12 of this Lease), normal wear and tear excepted.In no event shall Lessee be required to remove the Lessee Improvements and restore the Premises toits condition existing prior to the installation of the Lessee Improvements.     If the Premises are not surrendered at the end of the term or sooner termination of thisLease, Lessee shall indemnify Lessor against loss or liability resulting from delay by Lessee in sosurrendering the Premises, including, without limitation, any claims made by any succeeding tenantfounded on such delay.14. Default.A. Events of Default. The occurrence of any of the following shall constitute a defaultof this Lease by Lessee:
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(i) Any failure by Lessee to pay any Rent or any other charge required to be paidunder this Lease, or anypart thereof, within five (5) days after such payment is due; or(ii) Any failure by Lessee to observe or perform any other provision, covenant orcondition of this Lease to be observed or performed by Lessee where such failurecontinues for thirty (30) days after written notice thereof from Lessor to Lessee;provided however, that any such notice shall be in lieu of, and not in addition to,any notice required under California Code of Civil Procedure Section 1161 or anysimilar or successor law; and provided further that if the nature of such default issuch that the same cannot reasonably be cured within a thirty (30) day period,Lessee shall not be deemed to be in default if it diligently commences such curewithin such period and thereafter diligently proceeds to rectify and cure saiddefault as soon as possible; or(iii) Abandonment of the Premises by Lessee. Abandonment is herein defined toinclude, but is not limited to, any absence by Lessee from the Premises for three(3) business days or longer while in default of any provision of this Lease.B. Remedies Upon Default. Upon the occurrence of any event of default by Lessee, Lessorshall have, in addition to any other remedies available to Lessor at law or in equity, theoption to pursue any one or more of the following remedies, each and all of which shall becumulative and nonexclusive, without any notice or demand whatsoever.(i) Terminate this Lease, in which event Lessee shall immediately surrender thePremises to Lessor, and if Lessee fails to do so, Lessor may, without prejudice toany other remedy which it may have for possession or arrearages in rent, enter uponand take possession of the Premises and expel or remove Lessee and any other personwho may be occupying the Premises or any part thereof, without being liable forprosecution or any claim or damages therefor; and Lessor may recover from Lessee thefollowing:(1) The worth at the time of award of any unpaid rent which has been earnedat the time of such termination; plus(2) The worth at the time of award of the amount by which the unpaid rentwhich would have been earned after termination until the time of awardexceeds the amount of such rental loss that Lessee proves could have beenreasonably avoided; plus(3) The worth at the time of award of the amount by which the unpaid rentfor the balance of the Lease Term after the time of award exceeds the amountof such rental loss that Lessee proves could have been reasonably avoided;plus(4) Any other amount necessary to compensate Lessor for all the detrimentproximately caused by Lessee’s failure to perform its
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obligations under thisLease or which in the ordinary course of things would be likely to resulttherefrom, specifically including but not limited to, brokerage commissionsand advertising expenses incurred, expenses of remodeling the Premises orany portion thereof for a new lessee, whether for the same or a differentuse, and any special concessions made to obtain a new lessee; and(5) At Lessor’s election, such other amounts in addition to or in lieu ofthe foregoing as may be permitted from time to time by applicable law.The term “rent” as used in this Section 14 B. shall be deemed to be and to meanthose sums as described in Section 3.A. above to be paid by Lessee. As used inParagraphs 14 B.(i)(1) and (2), above, the “worth at the time of award” shall becomputed by allowing interest at the rate of six percent (6%) per annum, but in nocase greater than the maximum amount of such interest permitted by law. As used inParagraph 14.B.(i)(3) above, the “worth at the time of award” shall be computed bydiscounting such amount at the discount rate of the Federal Reserve Bank of SanFrancisco at the time of award plus one percent (1%).(ii) Lessor shall have the remedy described in California Civil Code Section 1951.4(lessor may continue lease in effect after lessee’s breach and abandonment andrecover rent as it becomes due, if lessee has the right to sublet or assign, subjectonly to reasonable limitations). Accordingly, if Lessor does not elect to terminatethis Lease on account of any default by Lessee, Lessor may, from time to time,without terminating this Lease, enforce all of its rights and remedies under thisLease, including the right to recover all rent as it becomes due.(iii) Waiver of Default. No waiver by Lessor or Lessee of any violation orbreach of any of the terms, provisions and covenants herein contained shall bedeemed or construed to constitute a waiver of any other or later violation or breachof the same or any other of the terms, provisions, and covenants herein contained.Forbearance by Lessor in enforcement of one or more of the remedies herein providedupon an eventof default shall not be deemed or construed to constitute a waiver of such default.The acceptance of any Rent hereunder by Lessor following the occurrence of anydefault, whether or not known to Lessor, shall not be deemed a waiver of any suchdefault, except only a default in the payment of the Rent so accepted.(iv) Efforts to Relet. For the purposes of this Section 14, Lessee’s rightto possession shall not be deemed to have been terminated by efforts of Lessor torelet the Premises, by its acts of maintenance or preservation with respect to thePremises, or by appointment of a receiver to protect Lessor’s interests hereunder.The foregoing enumeration is not exhaustive, but merely illustrative of acts whichmay be performed by Lessor without terminating Lessee’s right to possession.
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(v) Application of Funds. If Lessor elects to relet the Premises asprovided in this Paragraph, rent that Lessor receives from reletting shall beapplied to the payment of: (1.) any indebtedness from Lessee to Lessor other thanrent due from Lessee; (2.) all costs, including for maintenance, incurred by Lessorin reletting; (3.) rent due and unpaid under this Lease. After deducting thepayments referred to in this Paragraph, any sum remaining from the rent Lessorreceives from reletting shall be held by Lessor and applied in payment of futurerent as rent becomes due under this Lease. In no event shall Lessee be entitled toany excess rent received by Lessor. If, on the date rent is due under this Lease,the rent received from reletting is less than the rent due on that date, Lesseeshall pay to Lessor, in addition to the remaining rent due, all costs, including formaintenance, Lessor incurred in reletting that remain after applying the rentreceived from the reletting, as provided in this Paragraph.(vi) Lessor’s Right to Cure Default. Lessor, at any time after Lesseecommits a default, can cure the default at Lessee’s cost. If Lessor at any time, byreason of Lessee’s default, pays any sum or does any act that requires the paymentof any sum, the sum paid by Lessor shall be due immediately from Lessee to Lessor atthe time the sum is paid, and if paid at a later date shall bear interest at themaximum rate an individual is permitted by law to charge from the date the sum ispaid by Lessor until Lessor is reimbursed by Lessee. The sum, together withinterest on it, shall be additional rent.     Rent not paid when due shall bear interest at the maximum rate an individual ispermitted by law to charge from the date due until paid.15. Destruction. In the event the Premises are destroyed in whole or in part from anycause, Lessor may, at its option, (1.) rebuild or restore the Premises to their condition prior tothe damage or destruction or (2.) terminate the Lease.     If Lessor does not give Lessee notice in writing within thirty (30) days after the date onwhich occurred the destruction of the Premises of its election either to rebuild and restore thePremises, or to terminate this Lease, Lessor shall be deemed to have elected to rebuild or restorethem, in which event Lessor agrees, at its expense, promptly to rebuild or restore the Premises toits condition prior to the damage or destruction. If Lessor does not complete the rebuilding orrestoration within one hundred eighty (180) days following the date of destruction (such period oftime to be extended for delays caused by the fault or neglect of Lessee of because of acts of God,acts of public agencies, labor disputes, strikes, fires, freight embargoes, rainy or stormyweather, inability to obtain materials, supplies or fuels, acts of contractors or subcontractors,or delay of the contractors or subcontractors due to such causes or other contingencies beyondcontrol of Lessor), then Lessee shall have the right to terminate this Lease by giving fifteen (15)days prior written notice to Lessor. Lessor’s obligation to rebuild or restore shall not includerestoration of Lessee’s trade fixtures, equipment, merchandise, or any improvements, alterations,or additions made by Lessee to the Premises.     Unless this Lease is terminated pursuant to the foregoing provisions, this Lease shall
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remainin full force and effect. Lessee hereby expressly waives the provisions of Section 1932,Subdivision 2, and Section 1933, Subdivision 4, of the California Civil Code.     Notwithstanding anything to the contrary in this Article 15: (i) if the Premises are damagedby any peril and Lessor does not terminate the Lease, then Lessee shall have the option toterminate the Lease if the Premises cannot be, or are not in fact, fully restored by Lessor totheir prior condition for any reason whatsoever within one hundred eighty (180) days after thedamage, and (ii) if the Premises are damaged by any peril during the last twelve (12) months of theLease term, Lessee shall have the option to terminate this Lease by giving written notice to Lessorwithin thirty (30) days after the date of the damage estimate, and this Lease shall terminate as ofthe date specified by Lessee in its termination notice, which date shall not be before the date ofsuch notice or more than ninety (90) days after the date of such notice. During any period of timefollowing a casualty where all or any portion of the Premises is not suitable for Lessee’s use, asreasonably determined byLessee, than all rent due under this Lease shall be equitably abated during such period based onthe extent to which Lessee’s use and enjoyment of the Premises is diminished.16. Condemnation. If any part of the Premises shall be taken for any public orquasi-public use, under any statute of by right of eminent domain, or private purchase in lieuthereof, and a part thereof remains, which is susceptible of occupation hereunder, this Leaseshall, as to the part so taken, terminate as of the date title shall vest in the condemnor orpurchaser, and the rent payable hereunder shall be adjusted so that the Lessee shall be required topay for the remainder of the term only such portion of such rent as the value of the part remainingafter taking such bears to the value of the entire Premises prior to such taking. Lessor shallhave the option to terminate this Lease in the event that such taking causes a reduction in rentpayable hereunder by fifty percent (50%) or more. If all of the Premises or such part thereof betaken so that there does not remain a portion susceptible for occupation hereunder, as reasonablynecessary for Lessee’s conduct of its business as contemplated in this Lease, this Lease shallthereupon terminate. If a part or all of the Premises be taken, all compensation awardedupon such taking shall go to the Lessor, and the Lessee shall have no claim thereto, and the Lesseehereby irrevocably assigns and transfers to the Lessor any right to compensation or damages towhich the Lessee may become entitled during the term hereof by reason of the purchase orcondemnation of all or a part of the Premises, except that Lessee shall have the right to recoverits share of any award or consideration for (1.) moving expenses; (2.) loss or damage to Lessee’strade fixtures, furnishings, equipment, and other personal property; and (3.) business goodwill.17. Free from Liens. Lessee shall (1.) pay for all labor and services performed ormaterials used by or furnished to Lessee at Lessee’s request, or any contractor employed by Lesseewith respect to the Premises, and (2.) indemnify, defend, and hold Lessor and the Premises harmlessand free from any liens, claims, demands, encumbrances, or judgments created or suffered by reasonof any labor or services performed or materials used by or furnished to Lessee or any contractoremployed by Lessee with respect to the Premises, and (3.) give notice to Lessor in writing five (5)days prior to employing any laborer or contractor to perform services related, or receivingmaterials for use upon the Premises, and (4.) shall post, on behalf of Lessor, a notice ofnon-responsibility in accordance with the statutory requirements of the California Civil Code,Section 3094, or any amendment thereof. In the event an improvement bond with a public
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agency inconnection with the above is required to be posted, Lessee agrees to include Lessor as anadditional obligee.18. Compliance with Laws. Subject to the last grammatical paragraph in Section 12 of thisLease, Lessee shall, at its own cost, comply with and observe all requirements of all municipal,county, state, and federal authority now in force, or which may hereafter be in force, pertainingto the use and occupancy of the Premises.19. Subordination. Lessee agrees that this Lease shall, at the option of Lessor, besubjected and subordinated to any mortgage, deed of trust, or other instrument of security, whichhas been or shall be placed on the land and building, or land or building of which the Premisesform a part, and this subordination is hereby made effective without any further act of Lessee orLessor. The Lessee shall, at any time hereinafter, on demand, execute any commercially reasonableinstruments, releases, or other documents that may be required by any mortgagee, mortgagor,trustor, or beneficiary under any deed of trust, for the purpose of subjecting or subordinatingthis Lease to the lien of any such mortgage, deed of trust, or other instrument of security. IfLessee fails to execute and deliver any such documents or instruments, Lessee irrevocablyconstitutes and appoints Lessor as Lessee’s special attorney-in-fact to execute and deliver anysuch documents or instruments. Lessor shall use commercially reasonable efforts to obtain, as soonas possible following the mutual execution and delivery of this Lease, from any lenders or groundlessors of the Premises a written agreement in form reasonably satisfactory to Lessee providing forrecognition of Lessee’s interests under the Lease in the event of a foreclosure of the lender’ssecurity interest or termination of the ground lease. The failure of Lessor to obtain from anysuch lenders or ground lessors such a non-disturbance agreement shall not constitute a defaulthereunder by Lessor, it being understood that Lessor’s sole obligation is to use commerciallyreasonable efforts to obtain the execution and delivery of such a non-disturbance agreement.20. Abandonment. Lessee shall not abandon the Premises at any time during the term; and ifLessee shall abandon, or surrender said Premises, or be dispossessed by process of law, orotherwise, any personal property belonging to Lessee and left on the Premises shall be deemed to beabandoned, at the option of Lessor, except such property as may be mortgaged to Lessor; provided,however, that Lessee shall not be deemed to have abandoned or vacated the Premises so long asLessee continues to pay all rents as and when due, and otherwise performs pursuant to the terms andconditions of this Lease.21. Assignment and Subletting.A. Definitions. For purposes of this Paragraph 21, the following terms shall bedefined as follows: (i) Sublet. The term “Sublet” shall mean any transfer, sublet, assignment,license or concession agreement, change of ownership, mortgage, or hypothecation ofthis Lease or the Lessee’s interest in the Lease or in and to all or a portion of thePremises.  (ii) Subrent. The term “Subrent” shall mean any consideration of any kind
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   received, or to be received, by Lessee from a Sublessee if such sums are related toLessee’s interest in this Lease or in the Premises, including, but not limited to,bonus money and payments (in excess of book value) for Lessee’s assets including itstrade fixtures, and equipment and other personal property.  (iii) Sublessee. The term “Sublessee” shall mean the person or entity withwhom a Sublet agreement is proposed to be or is made.B. Lessor’s Consent. Lessee shall not enter into a Sublet without Lessor’s priorwritten consent, which consent shall not be unreasonably withheld. Any attempted orpurported Sublet without Lessor’s prior written consent shall be void and confer no rightsupon any third person. In determining whether or not to consent to a proposed Sublet,Lessor may consider the following factors, among others, all of which shall be deemedreasonable; (i) whether the proposed Sublessee has the financial wherewithal to pay the rentas established in the sublease as reasonably determined by Lessor at the time Lessor’sConsent is requested; (ii) whether the proposed use of the Premises by the proposedSublessee is consistent with the permitted use for the Premises set forth in Paragraph 6 ofthis Lease; (iii) whether the experience and business reputation of the proposed Sublesseeis equal to or greater than that of Lessee; (iv) whether the rent payable by the Sublesseeunder the proposed Sublet is set below the current fair market sublease rent for thesubleased Premises as a subterfuge to avoid paying to Lessor its share of the profit on suchtransaction; and (v) whether Lessor’s consent will result in a breach of any other leaseor agreement to which Lessor is a party affecting the Building. Each Sublessee shall agreein writing, for the benefit of Lessor, to assume, to be bound by, and to perform the termsand conditions and covenants of this Lease to be performed by Lessee. Notwithstandinganything contained herein, Lessee shall not be released from liability for the performanceof each term, condition and covenant of this Lease by reason of Lessor’s consent to a Subletunless Lessor specifically grants such release in writing. Consent by Lessor to any Subletshall not be deemed a consent to any subsequent Sublet. Lessee shall reimburse Lessor forall reasonable costs and attorneys’ fees incurred by Lessor in connection with theevaluation, processing and/or documentation of any requested Sublet, whether or not Lessor’sconsent is granted, in an amount not to exceed One Thousand Dollars ($1,000.00) per request.Lessor’s reasonable costs shall include the cost of any review or investigation by Lessorof any hazardous or toxic materials which may be used, stored, or disposed of at thePremises by the Sublessee, including fees paid to consultants hired to perform such reviewor investigation.C. Information to be Furnished. If Lessee desires at any time to Sublet thePremises or any portion thereof, it shall first notify Lessor of its desire to do so andshall submit in writing to Lessor: (i) the name and legal composition of the proposedSublessee, (ii) the nature of the proposed Sublessee’s business to be carried on in thePremises; (iii) the terms and provisions of the proposed Sublet and a copy of the proposedSublet form containing a description of the subject premises; (iv) a statement of allconsideration to be paid by the Sublessee in connection with the Sublet; (v) a currentfinancial statement of Lessee; and (vi) such financial information, including financialstatements, as Lessor
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may reasonably request concerning the proposed Sublessee, providedthat, if requested by Lessee, Lessor shall execute a commercially reasonable form ofnon-disclosure agreement with respect to such statements.D. Lessor’s Alternatives. At any time within fifteen (15) days after the Lessor’sreceipt of the information specified in Paragraph 21.C., Lessor may, by written notice toLessee, elect: (i) to consent to the Sublet by Lessee; (ii) to reasonably refuse its consentto the Sublet, or (iii) elect to terminate this Lease, or in the case of a partial Sublet,terminate this Lease as to the portion of the Premises proposed to be Sublet. If Lessorconsents to the Sublet, Lessee may thereafter enter into a valid Sublet of the Premises orportion thereof, upon the terms and conditions and with the proposed Sublessee set forth inthe information furnished by Lessee to Lessor pursuant to Paragraph 21.B., subject, however,at Lessor’s election, to the condition that fifty percent (50%) of any excess of the Subrentover the Rent required to be paid by Lessee under this Lease shall be paid to Lessor butonly if any such excess remains after Lessee has first deducted its attorneys’ feesassociated with the Sublet, the costs of any improvements or improvement allowance relatingto the Sublet, and any broker commissions associated with the Sublet.E. [Intentionally Omitted.]F. Exempt Sublets. Notwithstanding the above, Lessor’s prior written consent shallnot be required for an assignment of this Lease to an entity which controls, is controlledby or under common control with, Lessee, to a corporation into which Lessee merges orconsolidates, to a successor entity related to Lessee by non-bankruptcy reorganization, orgovernment action, or to a purchaser of substantially all of Lessee’s assets located in thePremises provided that (i) Lessee gives Lessor prior written notice of the name any suchassignee, (ii) at the time of such assignment, the assignee has net worth that is equal toor greater than the net worth of Lessee immediately prior to such assignment; and (iii) theassignee assumes, in writing, for the benefit of Lessor, all of Lessee’s obligations underthe Lease. In addition, and notwithstanding anything to the contrary in this Paragraph 21,neither (i) the sale, transfer or public offering of Lessee’s capital stock, (ii) theinstitutional, venture or other private financing by Lessee to raise additional capital, nor(iii) any change of control of Lessee resulting from (i) or (ii) shall be deemed anassignment of the Lease or a subletting of the Premises, and Lessor’s consent shall not berequired for any of the foregoing transactions. Lessor acknowledges that Lessee intends tosublease a portion of the Premises to Gamespan (the “Gamespan Sublease”). Lessor herebyconsents to the Gamespan Sublease and agrees that the existence of the Gamespan Subleaseshall not affect Lessee’s right to extend the term of this Lease as set forth in Section 4of this Lease. Lessor acknowledges and agrees that Lessee may allow the subtenant under theGamespan Sublease to extend the term of such sublease if Lessee exercises the right toextend the term of this Lease as provided in Section 4 above. However, in the event thatthe Master Lease between Stratalight and Los Gatos Business terminates for any reasonwhatsoever, the sublease shall terminate concurrently. Lessee shall not be obligated to payLessor any consent or review fee or any attorneys’ fees or other fees in connection withLessor’s consent to the Gamespan Sublease.
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22. Parking Charges. Lessee agrees to pay upon demand, based on its percent of occupancyof the entire Premises, its pro-rata share of any parking charges, surcharges, or any other costhereafter levied or assessed by local, state, or federal governmental agencies in connection withthe use of the parking facilities serving the Premises, including, without limitation, parkingsurcharge imposed by or under the authority of the Federal Environmental Protection Agency.Notwithstanding the foregoing, Lessee shall not be charged for the use of parking provided underthis Lease unless the applicable local, state or federal governmental agency imposes on tax, fee,levy, or other charge on parking at similar buildings in Los Gatos.23. Insolvency or Bankruptcy. Either (1.) the appointment of a receiver to take possessionof all or substantially all of the assets of Lessee, or (2.) a general assignment by Lessee for thebenefit of creditors, or (3.) any action taken or suffered by Lessee under any insolvency orbankruptcy act shall constitute a breach of this Lease by Lessee. Upon the happening of any suchevent, this Lease shall terminate ten (10) days after written notice of termination from Lessor toLessee. This section is to be applied consistent with the applicable state and federal law ineffect at the time such event occurs.24. Lessor Loan or Sale. Lessee agrees promptly following request by Lessor to (1.)execute and deliver to Lessor any commercially reasonable documents, including estoppelcertificates presented to Lessee by Lessor, (a.) certifying that this Lease is unmodified and infull force and effect, or, if modified, stating the nature of such modification and certifying thatthis Lease, as so modified, is in full force and effect and the date to which the rent and othercharges are paid in advance, if any, and (b.) acknowledging that there are not, to Lessee’sknowledge, any uncured defaults on the part of Lessor hereunder, and (c.) evidencing the status ofthe Lease as may be required either by a lender making a loan to Lessor, to be secured by deed oftrust or mortgage covering the Premises, or a purchaser of the Premises from Lessor, and (2.) todeliver to Lessor the current financial statements of Lessee, including a balance sheet and profitand loss statement, for the current fiscal year and the two immediately prior fiscal years, ifavailable. Lessee’s failure to deliver an estoppel certificate within ten (10) days following suchrequest shall constitute a default under this Lease and shall be conclusive upon Lessee that thisLease is in full force and effect and has not been modified except as may be represented by Lessor.25. Surrender of Lease. The voluntary or other surrender of this Lease by Lessee, or amutual cancellation thereof, shall not work a merger nor relieve Lessee of any of Lessee’sobligations under this Lease, and shall, at the option of Lessor, terminate all or any existingSubleases or Subtenancies, or may, at the option of Lessor, operate as an assignment to Lessor ofany or all such Subleases or Subtenancies.26. Attorneys’ Fees. If, for any reason, any suit be initiated to enforce any provision ofthis Lease, the prevailing party shall be entitled to legal costs, expert witness expenses, andreasonable attorneys’ fees, as fixed by the court.27. Notices. All notices to be given to Lessee may be given in writing, personally, or bydepositing the same in the United States mail, postage prepaid, and addressed to Lessee at the saidPremises, whether or not Lessee has departed from, abandoned, or vacated the Premises. Any noticeor document required or permitted by this Lease to be given Lessor shall be
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addressed to Lessor atthe address set forth below, or at such other address as it may have theretofore specified bynotice delivered in accordance herewith: LESSOR:   Los Gatos Business Park