**Exhibit10.21**

**COMPROMISEAGREEMENT**

This Compromise Agreement(“Agreement”) is entered into by and between OAKPORT ASSOCIATES, a Californialimited partnership (“Lessor”), and WORLD HEART, INC., a Delaware corporation (“Lessee”),as of July 20, 2007 (the “Effective Date”), and is based on the followingfacts.  Defined terms used herein but nototherwise defined herein shall have the meaning given those terms in the 2002Lease (as defined below).

**RECITALS**

A.            On or aboutMay 1, 2002, Lessor and Lessee entered into that certain StandardIndustrial/Commercial Single-Tenant Lease – Net dated for reference purposesMay 1, 2002 (the “2002 Lease”), pertaining to premises located at 7755 and7799 Pardee Lane, Oakland, California (“Premises”).  The term of the 2002 Lease was fromMay 1, 2002 through April 30, 2007. The 2002 Lease has expired and Lessee is presently occupying thePremises as a holdover tenant pursuant to Paragraph 26 of the 2002 Lease.

B             The 2002 Leaseimposes upon Lessee, prior to the expiration of the term of the 2002 Lease, theobligation to restore Lessor’s improvements to the Premises to the samecondition as existed prior to the destruction or removal of such improvements,as more particularly set forth in the 2002 Lease and defined therein as the “BaxterRestoration Work.”  Lessee has failed totimely perform that obligation.

C.            Lessee acknowledgesthat such obligation to restore the premises extends to both the 7755 and7799 Pardee Lane buildings.

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

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

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

G.            Lessee has expressed adesire to enter into a new lease with Lessor for the premises located at7799 Pardee Lane.  Lessor is willingto enter into a new lease under certain terms and conditions including theexecution of this Agreement and performance of the obligations set forth in it.

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**AGREEMENT**

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

**1.****             Month to MonthExtension of the 2002 Lease**.

(a)            Commencing onMay 1, 2007, the 2002 Lease shall be extended on a month-to-month basisuntil the earlier of:  January 30, 2008,or the date upon which the Baxter Restoration Work for the 7755 PardeeLane building (“7755 Restoration Work”) has been Completed, subject to Force Majeure (as hereinafterdefined).  The Term “Completed” (or “Complete” or “Completion”) shall mean thedate upon which all of the following items have been delivered orsatisfied:  (i) a certificate ofcompletion of the 7755 Restoration Work executed by Lessee’s architect,certifying that, except for minor punchlist items identified by Lessor andLessee, during a mutual walkthrough, the 7755 Restoration Work has beencompleted in compliance with the plans and specifications approved by theLessor; (ii) a final inspection of the 7755 Restoration Work signed andapproved in all respects by the City of Oakland and any other governmentalagencies with jurisdiction over the Premises or Lessee’s operations at thePremises, as required by applicable law; and (iii) a copy of an unconditionalwaiver and release upon final payment, in the form prescribed in Section 3262of the California Civil Code, from the general contractor and allsubcontractors (including architects and engineers) hired in connection withthe 7755 Restoration Work, and any lien or stop notice delivered in connectionwith the 7755 Restoration Work has been cleared to Lessor’s satisfaction.

(b)           As used herein, “ForceMajeure” shall mean any delay caused by reason of any prevention, delay,stoppage due to strikes, lockouts, acts of God, Lessor delay, permitting orinspection delay of the City of Oakland or other governmental agency beyond thestandard and ordinary response time, and any other similar cause beyond thereasonable control of Lessee, and Lessee’s obligations with respect to the 7755Restoration Work shall be suspended by any such Force Majeure event during theduration thereof; provided that Lessee shall give prompt notice to Lessor (notmore than 10 business days) after determining that such Force Majeure eventshall affect or hinder Lessee’s performance hereunder.  Lessee shall have an affirmative duty todiligently pursue resolution of the Force Majeure event to the extent suchresolution is possible.  Under nocircumstances shall a Force Majeure event excuse Lessee from its obligation topay Rent under the 2002 Lease.

(c)           In connection with the7755 Restoration Work, Lessee shall obtain, or cause its contractor to obtainfor the benefit of Lessee, a payment and completion bond from anationally-recognized surety in the amount of one hundred and ten percent(110%) of the estimated budget for the 7755 Restoration Work and shall submitthe plans and specification therefor to Lessor for approval (which approvalshall not be unreasonable withheld) prior to submission of such plans andspecification to the City of Oakland.

(d)           In the event thatLessee has not completed the 7755 Renovation Work by January 30, 2008, theterms and conditions of Section 7.4 of the 2002 Lease Addendum shall apply andLessee shall be deemed a holdover Lessee and holdover rent shall be applicablecommencing on February 1, 2008.  Nothingin this Section 1(d) shall be deemed Lessor’s consent to any holdoveroccupancy.

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

## (f)            Except as extended, and except for theexpress terms and conditions of this Agreement, the terms of the 2002 Leaseremain in full force and effect, including without limitation, Lessee’sobligation to complete the 7755 Restoration Work.

# **2.****             Letterof Credit**.  Upon execution ofthis Agreement, Lessor will draw upon the Letter of Credit described above andreceive the $750,000 proceeds thereof (“Proceeds”).  Upon such draw, the Proceeds shall become thesole and exclusive property of Lessor and Lessee shall retain no interest insuch funds.  Upon Lessor’s receipt of theProceeds of the Letter of Credit, Lessee shall be released from Lessee’sobligation to perform the Baxter Restoration Work for 7799 Pardee Lane (“7799Restoration Work”).  Lessor agrees toconfirm such release in writing promptly following Lessor’s receipt of theProceeds, in the form of the acknowledgment and release attached hereto as ExhibitA.

# **3.****             NewLease**.  The parties have enteredinto that AIR Commercial Real Estate Association Standard Industrial/CommercialSingle-Tenant Lease — Net dated as of even date herewith for the 7799 PardeeLane building (“New Lease”).  The NewLease shall be effective upon execution and shall be an executory agreementbetween the parties however, the parties’ performance of their covenants andpromises thereunder shall not begin until the Commencement Date of the NewLease has occurred, if it shall occur.  The “Commencement Date” of the New Lease shall occur upon the full andcomplete satisfaction of all of the following conditions:  (i) the 7755 Restoration Work has beenCompleted no later than January 30, 2008 (subject to Force Majeure as providedherein); (ii) no voluntary or involuntary petition under any applicablebankruptcy law has been filed by or against Lessee; no trustee, receiver orconservator has been appointed with respect to all or any substantial part ofthe Lessee’s assets; and no general assignment for the benefit of creditors orany other similar action for the protection or benefit of creditors has beenmade by Lessee; and (iii) no claim has been made by Lessee or other party, inbankruptcy or otherwise, seeking Lessor’s disgorgement of the Letter of Creditproceeds.  Until the Commencement Date ofNew Lease occurs, Lessee shall be a holdover tenant under the 2002 Lease,except as provided in Section 1(e) above with respect to holdover rent.  If the Commencement Date of the New Lease hasnot occurred by February 1, 2008, Lessor may terminate the New Lease at anytime thereafter by written notice to Lessee.

# **4.****             CashCollateral**. Guarantor agrees that Lessor is presently entitled to applythe Cash Collateral to obligations owed by Lessee to Lessor including theobligation which Lessee has failed to perform the timely restoration of7755 Pardee Lane, Oakland, California. As of the commencement date of the term of the New Lease, if it shouldoccur, Lessor agrees to attribute $100,000 of the Cash Collateral depositedwith Lessor under the Guaranty to the security deposit required under the NewLease and promptly return the remainder of the Cash Collateral (currently,approximately $64,000) to the Guarantor.

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

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# Release.  The parties acknowledge that this Releaseincludes all claims, injuries or damages whatsoever known or unknown, foreseenor unforeseen, including indemnity claims and that each party has been advisedby legal counsel about and are familiar with and understand the provisions ofCalifornia Civil Code Section 1542 which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THECREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OFEXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLYAFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR

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

# **6.****             Alterations Due toParcel Map**.  Lessor has advisedLessee that Lessor is in the process of preparing a parcel map which shalldivide the real property upon which the Premises and the 7777 Pardee Lanebuilding are located into three separate legal parcels. In the event that theCity of Oakland requires the installation of fire-resistant windows in the 7755Pardee Building, Lessor will undertake to make such alterations at Lessor’ssole cost and expense.  In addition, ifthe City requires any other any alterations or modifications to the 7755 PardeeBuilding due to the creation of the separate parcels, Lessor agrees, at Lessor’soption, either (a) to undertake such alterations or modifications at Lessor’ssole cost and expense, or (b) to reimburse Lessee for all of Lessee’s costs inmaking such alterations or modifications. Lessee agrees to obtain at least two bids for any such alterations ormodifications to be undertaken by Lessee including one from a contractorselected by Lessor.  The delay, if any,caused by the need to install fire-resistant windows or to make any otheralterations or modifications due to the creation of separate parcels shall beconsidered Force Majeure.

# **7.****             Miscellaneous**.

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

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

## (c)           This Agreement and each provision hereofshall be interpreted in accordance with its fair meaning and not against or infavor of any party.

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

(Signatures onfollowing page)

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 IN WITNESS WHEREOF, the parties have executedthis Agreement as of the date first set forth above.
|        | LESSOR: OAKPORT  ASSOCIATES, a  California limited partnership |
|--------|----------------------------------------------------------------|
|   |                                                           |   |
|   | By:                                                            |   /s/  Michael S. Kuhn |
|   |                                                           |   Michael  S. Kuhn, General Partner |
|   |                                                           |   |
|   |                                                           |   |
|   | LESSEE: WORLD  HEART INC., a Delaware  corporation             |
|   |                                                           |   |
|   | By:                                                            |   /s/  Jal S. Jassawalla |
|   |                                                           |   |
|   | Name:                                                          | Jal S.  Jassawalla |
|   |                                                           |   |
|   | Title:                                                         | President and  Chief Executive Officer |
|        |                                                                |  |  |  |

 

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**EXHIBIT A**

Form of Acknowledgment and Release

ACKNOWLEDGEMENTAND RELEASE

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

Lessor and Lessee enteredinto that certain Standard Industrial/Commercial Single-Tenant Lease – Netdated for reference purposes May 1, 2002 (the “2002 Lease”), pertaining topremises located at 7755 and 7799 Pardee Lane, Oakland, California (“Premises”).  As more fully set forth in the 2002 Lease,Lessee was obligated to restore Lessor’s improvements to the Premises to thesame condition as existed prior to the destruction or removal of suchimprovements.  Said obligations aredefined herein and in the 2002 Lease as the “Baxter Restoration Work.”  Pursuant to the terms of the CompromiseAgreement, Lessor and Lessee agreed that Lessee will satisfy the BaxterRestoration Work obligation for the Premises located 7799 Pardee Lane (“7799Restoration Work”) via the payment of $750,000 through Lessor’s draw on theLetter of Credit.

# Lessor herebyacknowledges that it has received the Proceeds of the Letter of Credit andhereby on its own behalf and on behalf of its successors, heirs and assigns,does hereby fully finally and forever release and discharge Lessee and all ofits present and former affiliates, sister corporations, and businesses, parentand subsidiary corporations, and their respective officers, directors,shareholders, employees, agents, members, sureties, attorneys, representativesand any and all other persons from and against all claims, demands, causes ofaction, rights, debts, controversies, damages, costs, losses and expenses ofevery kind, nature, description or character arising out of or relating to theobligation to undertake and complete the 7799 Restoration Work.  Lessor acknowledges that this Releaseincludes all claims, injuries or damages whatsoever known or unknown, foreseenor unforeseen, including indemnity claims relating to the 7799 Pardee RestorationWork and that Lessor has been advised by legal counsel about and is familiarwith and understands the provisions of California Civil Code Section 1542 whichprovides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THECREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OFEXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLYAFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR

This Release does notaffect nor modify the covenants, terms and conditions set forth in the 2002Lease (including without limitation the Baxter Restoration Work for the 7755Pardee Lane Premises), the Compromise Agreement nor the New Lease, except ineach case with respect to the subject matter of this Release.

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

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##  

|        | LESSOR:                                                |
|--------|--------------------------------------------------------|
|   |                                                   |   |
|   | OAKPORT ASSOCIATES, a California   limited partnership |
|   |                                                   |   |
|   | By:                                                    |   |   |
|   |                                                   |    Michael S. Kuhn, General Partner |

 

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**AIRCOMMERCIAL REAL ESTATE ASSOCIATION STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE — NET**

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

**1.****      ****Basic Provisions (“BasicProvisions”).**

1.1       **Parties:** This Lease (“**Lease**”),dated for reference purposes only July 20, 2007, is made by and between OAKPORT ASSOCIATES, a California limitedpartnership (“**Lessor**”) and WORLD HEART, INC., a Delawarecorporation (“**Lessee**”),(collectively the “**Parties**,” orindividually a “**Party**”).

1.2       **Premises:** That certain real property, including all improvements therein or to beprovided by Lessor under the terms of this Lease, and commonly known as 7799Pardee Lane, located in the County of Alameda, State of California, andgenerally described as (describe briefly the nature of the property and, ifapplicable, the “**Project**”, if theproperty is located within a Project) one single story concrete building (“Building”) containing approximately19,200 square feet which is part of a three building project (“Project”). (“**Premises**”).(See also Paragraph 2)

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

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

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

xIf this box is checked, there are provisions in this Lease for the Base Rent tobe adjusted. See Addendum Section 1.5

1.6       **Base Rent and Other Monies Paid Upon Execution:**

(a)       **Base Rent:** $20,000.00 for the period SeeAddendum.

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

(c)       **Association Fees:** $                  forthe period                                             

(d)       **Other:** $                  for                                                  .

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

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

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

1.9       **Real Estate Brokers:**(See also Paragraph 15)

(a)**Representation:** The following realestate brokers (the “**Brokers**”) andbrokerage relationships exist in this transaction (check applicable boxes):

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

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

o(not applicable) represents both Lessor and Lessee (“**Dual Agency**”).

(b)**Payment to Brokers:** Upon executionand delivery of this Lease by both Parties, Lessor shall pay to the Broker thefee agreed to                     
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in their separate writtenagreement (or if there is no such agreement, the sum of                            or none % of the total Base Rent) for the brokerage services rendered by theBrokers.

1.10     **Guarantor.** The obligations of the Lessee under this Lease are to be guaranteed byN/A (“**Guarantor**”). (See alsoParagraph 37)

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

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

x a plot plan depicting the Premises; asExhibit A

o a current set of the Rules and Regulations;

o a Work Letter;

o other (specify):                                                                                                      .

**2.****        Premises.**

2.1       **Letting.** Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor,the Premises, for the term, at the rental, and upon all of the terms, covenantsand conditions set forth in this Lease. Unless otherwise provided herein, anystatement of size set forth in this Lease, or that may have been used incalculating Rent, is an approximation which the Parties agree is reasonable andany payments based thereon are not subject to revision whether or not theactual size is more or less. **Note: Lessee isadvised to verify the actual size prior to executing this Lease.**

2.2       **Condition.** Lessor shall deliver the Premises to Lessee broom clean and free ofdebris on the Commencement Date or the Early Possession Date, whichever firstoccurs (“**Start Date**”), and, solong as the required service contracts described in Paragraph 7.1(b) below areobtained by Lessee and in effect within thirty days following the Start Date,warrants that the existing electrical, plumbing, fire sprinkler, lighting,heating, ventilating and air conditioning systems (“**HVAC**”), loading doors, sump pumps, if any, and all other suchelements in the Premises, other than those constructed by Lessee, shall be ingood operating condition on said date, that the structural elements of theroof, bearing walls and foundation of any buildings on the Premises (the “**Building**”) shall be free of materialdefects, and that the Premises do not contain hazardous levels of any mold orfungi defined as toxic under applicable state or federal law. If anon-compliance with said warranty exists as of the Start Date, or if one ofsuch systems or elements should malfunction or fail within the appropriatewarranty period, Lessor shall, as Lessor’s sole obligation with respect to suchmatter, except as otherwise provided in this Lease, promptly after receipt ofwritten notice from Lessee setting forth with specificity the nature and extentof such non-compliance, malfunction or failure, rectify same at Lessor’sexpense. The warranty periods shall be as follows: (i) 6 months as to the HVACsystems, and (ii) 30 days as to the remaining systems and other elements of theBuilding. If Lessee does not give Lessor the required notice within theappropriate warranty period, correction of any such non-compliance, malfunctionor failure shall be the obligation of Lessee at Lessee’s sole cost and expense.

2.3       **Compliance.** Lessor warrants that to the best of its knowledge the improvements onthe Premises comply with the building codes, applicable laws, covenants orrestrictions of record, regulations, and ordinances (“**Applicable Requirements**”) that were ineffect at the time that each improvement, or portion thereof, was constructed.Said warranty does not apply to the use to which Lessee will put the Premises,modifications which may be required by the Americans with Disabilities Act orany similar laws as a result of Lessee’s use (see Paragraph 50), or to anyAlterations or Utility installations (as defined in Paragraph 7.3(a)) made orto be made by Lessee. **NOTE: Lessee isresponsible for determining whether or not the Applicable Requirements, andespecially the zoning, are appropriate for Lessee’s intended use, andacknowledges that past uses of the Premises may no longer be allowed.**If the Premises do not comply with said warranty, Lessor shall, except asotherwise provided, promptly after receipt of written notice from Lesseesetting forth with specificity the nature and extent of such non-compliance,rectify the same at Lessor’s expense. If Lessee does not give Lessor writtennotice of a non-compliance with this warranty within 6 months following theStart Date, correction of that non-compliance shall be the obligation of Lesseeat Lessee’s sole cost and expense. If the Applicable Requirements are hereafterchanged so as to require during the term of this Lease the construction of anaddition to or an alteration of the Premises and/or Building, the remediationof any Hazardous Substance, or the reinforcement or other physical modificationof the Unit, Premises and/or Building (“**CapitalExpenditure**”), Lessor and Lessee shall allocate the cost of suchwork as follows:

(a)Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required asa result of the specific and unique use of the Premises by Lessee as comparedwith uses by tenants in general, Lessee shall be fully responsible for the costthereof, provided, however that if such Capital Expenditure is required duringthe last 2 years of this Lease and the cost thereof exceeds 6 months’ BaseRent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, inwriting, within 10 days after receipt of Lessee’s termination notice thatLessor has elected to pay the difference between the actual cost thereof and anamount equal to 6 months’ Base Rent. If Lessee elects termination, Lessee shallimmediately cease
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the use of the Premises which requires such CapitalExpenditure and deliver to Lessor written notice specifying a termination dateat least 90 days thereafter. Such termination date shall, however, in no eventbe earlier than the last day that Lessee could legally utilize the Premiseswithout commencing such Capital Expenditure.

(b) If such CapitalExpenditure is not the result of the specific and unique use of the Premises byLessee (such as, governmentally mandated seismic modifications), then Lessorand Lessee shall allocate the obligation to pay for such costs pursuant to theprovisions of Paragraph 7.1(d); provided, however, that if such CapitalExpenditure is required during the last 2 years of this Lease or if Lessorreasonably determines that it is not economically feasible to pay its sharethereof, Lessor shall have the option to terminate this Lease upon 90 daysprior written notice to Lessee unless Lessee notifies Lessor, in writing,within 10 days after receipt of Lessor’s termination notice that Lessee willpay for such Capital Expenditure. If Lessor does not elect to terminate, and failsto tender its share of any such Capital Expenditure, Lessee may advance suchfunds and deduct same, with Interest, from Rent until Lessor’s share of suchcosts have been fully paid. If Lessee is unable to finance Lessor’s share, orif the balance of the Rent due and payable for the remainder of this Lease isnot sufficient to fully reimburse Lessee on an offset basis, Lessee shall havethe right to terminate this Lease upon 30 days written notice to Lessor.

(c) Notwithstanding theabove, the provisions concerning Capital Expenditures are intended to applyonly to non-voluntary, unexpected, and new Applicable Requirements. If theCapital Expenditures are instead triggered by Lessee as a result of an actualor proposed change in use, change in intensity of use, or modification to thePremises then, and in that event, Lessee shall either: (i) immediately ceasesuch changed use or intensity of use and/or take such other steps as may benecessary to eliminate the requirement for such Capital Expenditure, or (ii)complete such Capital Expenditure at its own expense. Lessee shall not,however, have any right to terminate this Lease.

2.4       **Acknowledgements.** Lessee acknowledges that (a) it has beenadvised by Lessor and/or Brokers to satisfy itself with respect to thecondition of the Premises (including but not limited to the electrical, HVACand fire sprinkler systems, security, environmental aspects, and compliancewith Applicable Requirements and the Americans with Disabilities Act), andtheir suitability for Lessee’s intended use, (b) Lessee has made suchinvestigation as it deems necessary with reference to such matters and assumesall responsibility therefor as the same relate to its occupancy of thePremises, and (c) neither Lessor, Lessor’s agents, nor Brokers have made anyoral or written representations or warranties with respect to said mattersother than as set forth in this Lease. In addition, Lessor acknowledges that:(i) Brokers have made no representations, promises or warranties concerningLessee’s ability to honor the Lease or suitability to occupy the Premises, and(ii) it is Lessor’s sole responsibility to investigate the financial capabilityand/or suitability of all proposed tenants.

2.5       **Lessee as Prior Owner/Occupant.** The warranties made by Lessorin Paragraph 2 shall be of no force or effect if immediately prior to the StartDate Lessee was the owner or occupant of the Premises. In such event, Lesseeshall be responsible for any necessary corrective work.

3.         **Term.**

3.1       **Term.** The Commencement Date, Expiration Date and Original Termof this Lease are as specified in Paragraph 1.3.

3.2       **Early Possession.**~~If Lessee totally or partially occupiesthe Premises prior to the Commencement Date, the obligation to pay Base Rentshall be abated for the period of such early possession. All other-terms ofthis Lease (including but no limited to the obligations to pay Real PropertyTaxes and insurance premiums and to maintain the Premises) shall be in effectduring such-period. Any such early possession shall not affect the ExpirationDate.~~

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

3.4       **Lessee Compliance.**~~Lessor shall not be required to deliverpossession of the Premises to Lessee until Lessee complies with its obligationto provide evidence of insurance (Paragraph 8.5). Pending delivery of suchevidence, Lessee shall be required to perform all of its obligations under thisLease from and after the Start Date, including the payment of Rent,notwithstanding Lessor’s election to withhold possession pending receipt ofsuch evidence of insurance. Further, if Lessee is required to perform any otherconditions prior to or concurrent with the Start Date,~~
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~~the Start Date shall occur but Lessor may elect towithhold possession until such conditions are satisfied.~~

4.         **Rent.**

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

4.2       **Payment.**Lessee shall cause payment of Rent to be received by Lessor in lawfulmoney of the United States, without offset or deduction (except as specificallypermitted in this Lease), on or before the day on which it is due. All monetaryamounts shall be rounded to the nearest whole dollar. In the event that anyinvoice prepared by Lessor is inaccurate such inaccuracy shall not constitute awaiver and Lessee shall be obligated to pay the amount set forth in this Lease.Rent for any period during the term hereof which is for less than one fullcalendar month shall be prorated based upon the actual number of days of saidmonth. Payment of Rent shall be made to Lessor at its address stated herein orto such other persons or place as Lessor may from time to time designate inwriting. Acceptance of a payment which is less than the amount then due shallnot be a waiver of Lessor’s rights to the balance of such Rent, regardless ofLessor’s endorsement of any check so stating. In the event that any check,draft, or other instrument of payment given by Lessee to Lessor is dishonoredfor any reason, Lessee agrees to pay to Lessor the sum of $25 in addition to anyLate Charge and Lessor, at its option, may require all future Rent be paid bycashier’s check. Payments will be applied first to accrued late charges andattorney’s fees, second to accrued interest, then to Base Rent and Common AreaOperating Expenses, and any remaining amount to any other outstanding chargesor costs.

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

5.         **Security Deposit.**Lessee shall deposit with Lessor upon execution hereof the SecurityDeposit as security for Lessee’s faithful performance of its obligations underthis Lease. If Lessee fails to pay Rent, or otherwise Defaults under thisLease, Lessor may use, apply or retain all or any portion of said SecurityDeposit for the payment of any amount due Lessor or to reimburse or compensateLessor for any liability, expense, loss or damage which Lessor may suffer orincur by reason thereof. If Lessor uses or applies all or any portion of theSecurity Deposit, Lessee shall within 10 days after written request therefordeposit monies with Lessor sufficient to restore said Security Deposit to thefull amount required by this Lease. If the Base Rent increases during the termof this Lease, Lessee shall, upon written request from Lessor, depositadditional moneys with Lessor so that the total amount of the Security Depositshall at all times bear the same proportion to the increased Base Rent as theinitial Security Deposit bore to the initial Base Rent. Should the Agreed Usebe amended to accommodate a material change in the business of Lessee or toaccommodate a sublessee or assignee, Lessor shall have the right to increasethe Security Deposit to the extent necessary, in Lessor’s reasonable judgment,to account for any increased wear and tear that the Premises may suffer as aresult thereof. If a change in control of Lessee occurs during this Lease andfollowing such change the financial condition of Lessee is, in Lessor’sreasonable judgment, significantly reduced, Lessee shall deposit suchadditional monies with Lessor as shall be sufficient to cause the SecurityDeposit to be at a commercially reasonable level based on such change infinancial condition. Lessor shall not be required to keep the Security Depositseparate from its general accounts. Within ~~14**days after the expiration or termination of this Lease, ifLessor elects to apply the Security-Deposit only to unpaid Rent, and otherwisewithin~~ 30 days after the Premises have been vacated pursuant to Paragraph7.4(c) below, Lessor shall return that portion of the Security Deposit not usedor applied by Lessor. No part of the Security Deposit shall be considered to beheld in trust, to bear interest or to be prepayment for any monies to be paidby Lessee under this Lease. LESSOR HEREBY WAIVES THE PROVISIONS OF CALIFORNIACIVIL CODE SECTION 1950.7.

6.         **Use.**

6.1       **Use.**Lessee shall use and occupy the Premises only for the Agreed Use, or any otherlegal use which is reasonably comparable thereto, and for no other purpose.Lessee shall not use or permit the use of the Premises in a manner that isunlawful, creates damage, waste or a nuisance, or that disturbs occupants of orcauses damage to neighboring premises or properties. Other than guide, signaland seeing eye dogs, Lessee shall not keep or allow in the Premises any pets,animals, birds, fish, or reptiles. Lessor shall not unreasonably withhold ordelay its consent to any written request for a modification of the Agreed Use,so long as the same will not impair the structural integrity of theimprovements on the Premises or the mechanical or electrical systems therein,and/or is not significantly more burdensome to the Premises. If Lessor electsto withhold consent, Lessor shall within 7 days after such request give writtennotification of same, which notice shall include an explanation of Lessor’sobjections to the change in the Agreed Use.

6.2       **Hazardous Substances.**

(a)**Reportable Uses Require Consent.**The term “**Hazardous Substance**” as used in this Leaseshall mean any product,
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substance, or waste whose presence, use, manufacture,disposal, transportation, or release, either by itself or in combination withother materials expected to be on the Premises, is either: (i) potentiallyinjurious to the public health, safety or welfare, the environment or thePremises, (ii) regulated or monitored by any governmental authority, ~~or(iii) a basis for potential liability of Lessor to any governmental agency orthird party under any applicable statute or common law theory~~. HazardousSubstances shall include, but not be limited to, hydrocarbons, petroleum,gasoline, and/or crude oil or any products, by-products or fractions thereof.Lessee shall not engage in any activity in or on the Premises which constitutesa Reportable Use of Hazardous Substances without the express prior writtenconsent of Lessor and timely compliance (at Lessee’s expense) with allApplicable Requirements. “**Reportable Use**”shall mean (i) the installation or use of any above or below ground storagetank, (ii) the generation, possession, storage, use, transportation, ordisposal of a Hazardous Substance that requires a permit from, or with respectto which a report, notice, registration or business plan is required to befiled with, any governmental authority, and/or (iii) the presence at thePremises of a Hazardous Substance with respect to which any ApplicableRequirements requires that a notice be given to persons entering or occupyingthe Premises or neighboring properties. Notwithstanding the foregoing, Lesseemay use any ordinary and customary materials reasonably required to be used inthe normal course of the Agreed Use, ordinary office supplies (copier toner,liquid paper, glue, etc.) and common household cleaning materials, so long assuch use is in compliance with all Applicable Requirements, is not a ReportableUse, and does not expose the Premises or neighboring property to any meaningfulrisk of contamination or damage or expose Lessor to any liability therefor. Inaddition, Lessor may condition its consent to any Reportable Use upon receivingsuch additional assurances as Lessor reasonably deems necessary to protectitself, the public, the Premises and/or the environment against damage,contamination, injury and/or liability, including, but not limited to, theinstallation (and removal on or before Lease expiration or termination) ofprotective modifications (such as concrete encasements) and/or increasing theSecurity Deposit.

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

(c)**Lessee Remediation.** Lessee shall not causeor permit any Hazardous Substance to be spilled or released in, on, under, orabout the Premises (including through the plumbing or sanitary sewer system)and shall promptly, at Lessee’s expense, comply with all ApplicableRequirements and take all investigatory and/or remedial action reasonablyrecommended, whether or not formally ordered or required, for the cleanup ofany contamination of, and for the maintenance, security and/or monitoring ofthe Premises or neighboring properties, that was caused or materiallycontributed to by Lessee, or pertaining to or involving any Hazardous Substancebrought onto the Premises during the term of this Lease, by or for Lessee, orany third party.

(d)**Lessee Indemnification.** Lessee shallindemnify, defend and hold Lessor, its agents, employees, lenders and groundlessor, if any, harmless from and against any and all loss of rents and/ordamages, liabilities, judgments, claims, expenses, penalties, and reasonableattorneys’ and consultants’ fees arising out of or involving any HazardousSubstance brought onto the Premises by or for Lessee, or any third party(provided, however, that Lessee shall have no liability under this Lease withrespect to underground migration of any Hazardous Substance under the Premisesfrom adjacent properties not caused or contributed to by Lessee). Lessee’sobligations shall include, but not be limited to, the effects of anycontamination or injury to person, property or the environment created or sufferedby Lessee, and the cost of investigation, removal, remediation, restorationand/or abatement, and shall survive the expiration or termination of thisLease. **No termination, cancellation orrelease agreement entered into by Lessor and Lessee shall release Lessee fromits obligations under this Lease with respect to Hazardous Substances, unlessspecifically so agreed by Lessor in writing at the time of such agreement.**

(e)**Lessor Indemnification.** Lessor and itssuccessors and assigns shall indemnify, defend, reimburse and hold Lessee, itsemployees and lenders, harmless from and against any and all environmentaldamages, including the cost of remediation, which result from HazardousSubstances which existed on the Premises prior to the**term of the Prior Leases ~~Lessee’s occupancy~~ or whichare caused by the gross negligence or willful misconduct of Lessor, its agentsor employees. Lessor’s obligations, as and when required by the ApplicableRequirements, shall include, but not be limited to, the cost of investigation,removal, remediation, restoration and/or abatement, and shall survive theexpiration or termination of this Lease.

(f)**Investigations and Remediations.** Lessorshall retain the responsibility and pay for any investigations or remediationmeasures required by governmental entities having jurisdiction with respect tothe existence of Hazardous Substances on the Premises prior to ~~Lessee’soccupancy,~~ the term of the Prior Leases unless such remediation measure isrequired as a result of Lessee’s use (including “Alterations”, as defined inparagraph 7.3(a) below) of the Premises, in which event Lessee shall beresponsible for such payment. Lessee shall cooperate fully in any suchactivities at the request of Lessor, including allowing Lessor and Lessor’sagents to have reasonable access to the Premises at reasonable times in orderto carry out Lessor’s investigative and remedial responsibilities.

(g)**Lessor Termination Option.** If a HazardousSubstance Condition (see Paragraph 9.1(e)) occurs during the term of thisLease,
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unless Lessee is legally responsible therefor (inwhich case Lessee shall make the investigation and remediation thereof requiredby the Applicable Requirements and this Lease shall continue in full force andeffect, but subject to Lessor’s rights under Paragraph 6.2(d) and Paragraph13), Lessor may, at Lessor’s option, either (i) investigate and remediate suchHazardous Substance Condition, if required, as soon as reasonably possible atLessor’s expense, in which event this Lease shall continue in full force andeffect, or (ii) if the estimated cost to remediate such condition exceeds 12times the then monthly Base Rent or $100,000, whichever is greater, givewritten notice to Lessee, within 30 days after receipt by Lessor of knowledgeof the occurrence of such Hazardous Substance Condition, of Lessor’s desire toterminate this Lease as of the date 60 days following the date of such notice.In the event Lessor elects to give a termination notice, Lessee may, within 10days thereafter, give written notice to Lessor of Lessee’s commitment to paythe amount by which the cost of the remediation of such Hazardous SubstanceCondition exceeds an amount equal to 12 times the then monthly Base Rent or$100,000, whichever is greater. Lessee shall provide Lessor with said funds orsatisfactory assurance thereof within 30 days following such commitment. Insuch event, this Lease shall continue in full force and effect, and Lessorshall proceed to make such remediation as soon as reasonably possible after therequired funds are available. If Lessee does not give such notice and providethe required funds or assurance thereof within the time provided, this Leaseshall terminate as of the date specified in Lessor’s notice of termination.

6.3       **Lessee’s Compliance with Applicable Requirements.** Except asotherwise provided in this Lease, Lessee shall, at Lessee’s sole expense,fully, diligently and in a timely manner, materially comply with all ApplicableRequirements, the requirements of any applicable fire insurance underwriter orrating bureau, and the reasonable recommendations of Lessor’s engineers and/orconsultants which reasonably relate in any manner to the such Requirements,without regard to whether such Requirements are now in effect or becomeeffective after the Start Date. Lessee shall, within 10 days after receipt ofLessor’s written request, provide Lessor with copies of all permits and otherdocuments, and other information evidencing Lessee’s compliance with anyApplicable Requirements specified by Lessor, and shall immediately uponreceipt, notify Lessor in writing (with copies of any documents involved) ofany threatened or actual claim, notice, citation, warning, complaint or reportpertaining to or involving the failure of Lessee or the Premises to comply withany Applicable Requirements. Likewise, Lessee shall immediately give writtennotice to Lessor of: (i) any water damage to the Premises and any suspectedseepage, pooling, dampness or other condition conducive to the production ofmold; or (ii) any mustiness or other odors that might indicate the presence ofmold in the Premises.

6.4       **Inspection; Compliance.** Lessor and Lessor’s **“Lender”** (as defined in Paragraph 30) andconsultants shall have the right to enter into Premises at any time, in thecase of an emergency, and otherwise at reasonable times after reasonable priornotice, for the purpose of inspecting the condition of the Premises and forverifying compliance by Lessee with this Lease. The cost of any suchinspections shall be paid by Lessor, unless a violation of ApplicableRequirements, or a Hazardous Substance Condition (see paragraph 9.1) is foundto exist or be imminent, or the inspection is requested or ordered by a governmentalauthority. In such case, Lessee shall upon request reimburse Lessor for thecost of such inspection, so long as such inspection is reasonably related tothe violation or contamination. In addition, Lessee shall provide copies of allrelevant material safety data sheets (**MSDS**)to Lessor within 10 days of the receipt of a written request therefor.

7.         **Maintenance; Repairs, Utility Installations; TradeFixtures and Alterations.**

7.1       **Lessee’s Obligations.**

(a)**In General.** Subject to the provisions ofParagraph ~~2.2 (Condition), 2.3 (Compliance),~~ 6.3 (Lessee’s Compliancewith Applicable Requirements), 7.2 (Lessor’s Obligations), 9 (Damage orDestruction), and 14 (Condemnation), Lessee shall, at Lessee’s sole expense,keep the Premises, Utility Installations (intended for Lessee’s exclusive use,no matter where located), and Alterations in good order, condition and repair(whether or not the portion of the Premises requiring repairs, or the means ofrepairing the same, are reasonably or readily accessible to Lessee, and whetheror not the need for such repairs occurs as a result of Lessee’s use, any prioruse, the elements or the age of such portion of the Premises), including, butnot limited to, all equipment or facilities, such as plumbing, HVAC equipment,electrical, lighting facilities, boilers, pressure vessels, fire protectionsystem, fixtures, walls (interior and exterior), foundations, ceilings, roofs,roof drainage systems, floors, windows, doors, plate glass, skylights, ~~landscaping,driveways, parking lots, fences, retaining walls,~~ and**signs,~~sidewalks and parkways~~located in, on, or ~~adjacent~~ appurtenant to the Premises. Lessee, inkeeping the**Premises in goodorder, condition and repair, shall exercise and perform good maintenancepractices, specifically including the procurement and maintenance of theservice contracts required by Paragraph 7.1(b) below. Lessee’s obligationsshall include restorations, replacements or renewals when necessary to keep thePremises and all improvements thereon or a part thereof in good order,condition and state of repair. Lessee shall, during the term of this Lease,keep the exterior appearance of the Building in a first-class condition(including, e.g. graffiti removal) consistent with the exterior appearance ofother similar facilities of comparable age and size in the vicinity, ~~including,when necessary, the exterior repainting of the Building~~.

(b)**Service Contracts.** Lessee shall, at Lessee’ssole expense, procure and maintain contracts, ~~with copies to Lessor,~~ incustomary form and substance for, and with contractors specializing andexperienced in the maintenance of the following equipment and improvements, ifany, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler,and pressure vessels, (iii) fire extinguishing systems,
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including fire alarm and/orsmoke detection, (iv) ~~landscaping and irrigation systems, (v)~~ roofcovering and drains, (vi) clarifiers (vii) basic utility feed to the perimeterof the Building, and (viii) any other equipment, if reasonably required byLessor. ~~However, Lessor reserves the right, upon notice to Lessee, to procureand maintain any or all of such service contracts, and Lessee shall reimburseLessor, upon demand, for the cost thereof.~~

(c)**Failure to Perform.** If Lesseefails to perform Lessee’s obligations under this Paragraph 7.1, Lessor mayenter upon the Premises after 10 days’ prior written notice to Lessee (exceptin the case of an emergency, in which case no notice shall be required),perform such obligations on Lessee’s behalf, and put the Premises in goodorder, condition and repair, and Lessee shall promptly pay to Lessor a sumequal to ~~115% of~~ the cost thereof.

(d)**Replacement.**~~Subject to Lessee’sindemnification of Lessor as set forth in Paragraph 8.7 below, and withoutrelieving Lessee of liability resulting from  Lessee’s failure to exercise and perform goodmaintenance practices, if an item described in Paragraph 7.1(b) cannot berepaired other than at a cost which is in excess of 50% of the cost ofreplacing such item, then such item shall be replaced by Lessor, and the costthereof shall be prorated between the Parties and Lessee shall only be obligatedto pay, each month during the remainder of the term of this Lease, on the dateon which Base Rent is due, an amount equal to the product of multiplying thecost of such replacement by a fraction, the numerator of which is one, and thedenominator of which is 144 (ie. 1/144th of the cost per month). Lessee shallpay interest on the unamortized balance but may prepay its obligation at anytime.~~

7.2       **Lessor’s Obligations.** Subject to the provisions of Paragraphs ~~2.2(Condition), 2.3 (Compliance),~~ 9 (Damage or Destruction) and 14(Condemnation), and the Addendum**itis intended by the Parties hereto that Lessor have no obligation, in any mannerwhatsoever, to repair and maintain the Premises, or the equipment therein, allof which obligations are intended to be that of the Lessee. It is the intentionof the Parties that the terms of this Lease govern the respective obligationsof the Parties as to maintenance and repair of the Premises, and they expresslywaive the benefit of any statute now or hereafter in effect to the extent it isinconsistent with the terms of this Lease.

7.3       **Utility Installations; Trade Fixtures; Alterations.**

(a)**Definitions.** The term “**Utility Installations**” refers to all floorand window coverings, air and/or vacuum lines, power panels, electricaldistribution, security and fire protection systems, communication cabling,lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises.The term “**Trade Fixtures**” shallmean Lessee’s machinery and equipment that can be removed without doingmaterial damage to the Premises. The term “**Alterations**”shall mean any modification of the improvements, other than UtilityInstallations or Trade Fixtures, whether by addition or deletion. “**Lessee Owned Alterations and/or Utility Installations**”are defined as Alterations and/or Utility Installations made by Lessee that arenot yet owned by Lessor pursuant to Paragraph 7.4(a).

(b)**Consent.** Lessee shall not make anyAlterations or Utility Installations to the Premises without Lessor’s priorwritten consent. Lessee may, however, make non-structural Utility Installationsto the interior of the Premises (excluding the roof) without such consent butupon notice to Lessor, as long as they are not visible from the outside, do notinvolve puncturing, relocating or removing the roof or any existing walls, willnot affect the electrical, plumbing, HVAC, and/or life safety systems, and thecumulative cost thereof during this Lease as extended does not exceed a sum equalto 3 month’s Base Rent in the aggregate or a sum equal to one month’s Base Rentin any one year. Notwithstanding the foregoing, Lessee shall not make or permitany roof penetrations and/or install anything on the roof without the priorwritten approval of Lessor. Lessor may, as a precondition to granting suchapproval, require Lessee to utilize a contractor chosen and/or approved byLessor. Any Alterations or Utility Installations that Lessee shall desire tomake and which require the consent of the Lessor shall be presented to Lessorin written form with detailed plans. Consent shall be deemed conditioned uponLessee’s: (i) acquiring all applicable governmental permits, (ii) furnishingLessor with copies of both the permits and the plans and specifications priorto commencement of the work, and (iii) compliance with all conditions of saidpermits and other Applicable Requirements in a prompt and expeditious manner.Any Alterations or Utility Installations shall be performed in a workmanlikemanner with good and sufficient materials. Lessee shall promptly uponcompletion furnish Lessor with as-built plans and specifications. For workwhich costs an amount in excess of one month’s Base Rent, Lessor may conditionits consent upon Lessee providing a lien and completion bond in an amount equalto 150% of the estimated cost of such Alteration or Utility Installation and/orupon Lessee’s posting an additional Security Deposit with Lessor.

(c) **Liens; Bonds.** Lessee shall pay, when due,all claims for labor or materials furnished or alleged to have been furnishedto or for Lessee at or for use on the Premises, which claims are or may besecured by any mechanic’s or materialmen’s lien against the Premises or anyinterest therein. Lessee shall give Lessor not less than 10 days notice priorto the commencement of any work in, on or about the Premises, and Lessor shallhave the right to post notices of non-responsibility. If Lessee shall contestthe validity of any such lien, claim or demand, then Lessee shall, at its soleexpense defend and protect itself, Lessor and the Premises against the same andshall pay and satisfy any such adverse judgment that may be rendered thereonbefore the enforcement thereof. If Lessor shall require, Lessee shall furnish asurety bond in an amount equal to 150% of the amount of such contested lien,claim or demand, indemnifying Lessor against liability for the same. If Lessorelects to participate in any such action, Lessee shall pay Lessor’s attorneys’fees and costs.
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7.4       **Ownership; Removal; Surrender; and Restoration.**

(a)**Ownership.** Subject to Lessor’sright to require removal or elect ownership as hereinafter provided, allAlterations and Utility Installations made by Lessee shall be the property ofLessee, but considered a part of the Premises. Lessor may, at any time, electin writing to be the owner of all or any specified part of the Lessee OwnedAlterations and Utility Installations. Unless otherwise instructed perparagraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installationsshall, at the expiration or termination of this Lease, become the property ofLessor and be surrendered by Lessee with the Premises.

(b)**Removal.** By delivery to Lessee ofwritten notice from Lessor not earlier than 90 and not later than 30 days priorto the end of the term of this Lease, Lessor may require that any or all LesseeOwned Alterations or Utility Installations be removed by the expiration ortermination of this Lease. Lessor may require the removal at any time of all orany part of any Lessee Owned Alterations or Utility Installations made withoutthe required consent.

(c)**Surrender; Restoration.** Lesseeshall surrender the Premises by the Expiration Date or any earlier terminationdate, with all of the improvements, parts and surfaces thereof broom clean andfree of debris, and in good operating order, condition and state of repair, ordinarywear and tear excepted. “Ordinary wear and tear” shall not include any damageor deterioration that would have been prevented by good maintenance practice.Notwithstanding the foregoing, if this Lease is for 12 months or less, thenLessee shall surrender the Premises in the same condition as delivered toLessee on the Start Date with NO allowance for ordinary wear and tear. Lesseeshall repair any damage occasioned by the installation, maintenance or removalof Trade Fixtures, Lessee owned Alterations and/or Utility Installations,furnishings, and equipment as well as the removal of any storage tank installedby or for Lessee. Lessee shall completely remove from the Premises any and allHazardous Substances brought onto the Premises by or for Lessee, ~~or anythird party~~ (except Hazardous Substances which were deposited viaunderground migration from areas outside of the Premises, or if applicable, thePremises) even if such removal would require Lessee to perform or pay for workthat exceeds statutory requirements. Trade Fixtures shall remain the propertyof Lessee and shall be removed by Lessee. Any personal property of Lessee notremoved on or before the Expiration Date or any earlier termination date shallbe deemed to have been abandoned by Lessee and may be disposed of or retainedby Lessor as Lessor may desire. The failure by Lessee to timely vacate thePremises pursuant to this Paragraph 7.4(c) without the express written consentof Lessor shall constitute a holdover under the provisions of Paragraph 26below.

8.         **Insurance; Indemnity.**

8.1       **Payment For Insurance.** Lessee shall pay for all insurance requiredunder Paragraph 8 except to the extent of the cost attributable to liabilityinsurance carried by Lessor under Paragraph 8.2(b) in excess of ~~$2,000,000~~$5,000,000 per occurrence. Premiums for policy periods commencing prior to orextending beyond the Lease term shall be prorated to correspond to the Leaseterm. Payment shall be made by Lessee to Lessor within 10 days followingreceipt of an invoice.

8.2       **Liability Insurance.**

(a)**Carried by Lessee**. Lessee shallobtain and keep in force a Commercial General Liability policy of insuranceprotecting Lessee and Lessor as an additional insured against claims for bodilyinjury, personal injury and property damage based upon or arising out of theownership, use, occupancy or maintenance of the Premises and all areasappurtenant thereto. Such insurance shall be on an occurrence basis providingsingle limit coverage in an amount not less than $5,000,000 per occurrence ~~withan annual aggregate-of not less than $2,000,000~~. Lessee shall add Lessor asan additional insured by means of an endorsement at least as broad as theInsurance Service Organization’s “Additional Insured-Managers or Lessors ofPremises” Endorsement and coverage shall also be extended to include damagecaused by heat, smoke or fumes from a hostile fire. The policy shall notcontain any intra-insured exclusions as between insured persons ororganizations, but shall include coverage for liability assumed under thisLease as an “**insured contract**” forthe performance of Lessee’s indemnity obligations under this Lease. The limitsof said insurance shall not, however, limit the liability of Lessee nor relieveLessee of any obligation hereunder. Lessee shall provide an endorsement on itsliability policy(ies) which provides that its insurance shall be primary to andnot contributory with any similar insurance carried by Lessor, whose insuranceshall be considered excess insurance only.

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

8.3       **Property Insurance - Building, Improvements and RentalValue.**

(a)**Building and Improvements.** TheInsuring Party shall obtain and keep in force a policy or policies in the nameof Lessor, with loss payable to Lessor, any ground lessor, and to any Lenderinsuring loss or damage to the Premises. The amount of such insurance shall beequal to the full insurable replacement cost of the Premises, as the same shallexist from time to time, or the amount required by any Lender, but in no eventmore than the commercially reasonable and available insurable value thereof. IfLessor is the Insuring Party, however, Lessee Owned Alterations and UtilityInstallations, Trade Fixtures, and Lessee’s personal property shall be insuredby Lessee under Paragraph 8.4 rather than by Lessor. If the coverage isavailable and commercially appropriate, such policy or policies shall insureagainst all risks of direct physical loss or damage (~~except~~
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includingthe perils of flood and/or earthquake ~~unless required by a Lender~~),including coverage for debris removal and the enforcement of any ApplicableRequirements requiring the upgrading, demolition, reconstruction or replacementof any portion of the Premises as the result of a covered loss. Said policy orpolicies shall also contain an agreed valuation provision in lieu of anycoinsurance clause, waiver of subrogation, and inflation guard protectioncausing an increase in the annual property insurance coverage amount by afactor of not less than the adjusted U.S. Department of Labor Consumer PriceIndex for All Urban Consumers for the city nearest to where the Premises arelocated. If such insurance coverage has a deductible clause, the deductible amountshall not exceed $1,000 per occurrence, and Lessee shall be liable for suchdeductible amount in the event of an Insured Loss.

(b) **Rental Value.** TheInsuring Party shall obtain and keep in force a policy or policies in the nameof Lessor with loss payable to Lessor and any Lender, insuring the loss of thefull Rent for one year with an extended period of indemnity for an additional180 days (“Rental Value insurance”). Said insurance shall contain an agreedvaluation provision in lieu of any coinsurance clause, and the amount ofcoverage shall be adjusted annually to reflect the projected Rent otherwisepayable by Lessee, for the next 12 month period. Lessee shall be liable for anydeductible amount in the event of such loss.

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

8.4       **Lessee’s Property; Business Interruption Insurance**.

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

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

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

8.5       **Insurance Policies.** Insurance requiredherein shall be by companies duly licensed or admitted to transact business inthe state where the Premises are located, and maintaining during the policyterm a “General Policyholders Rating” of at least ~~A-, VI,~~ B+, V, as setforth in the most current issue of “Best’s Insurance Guide”, or such otherrating as may be required by a Lender. Lessee shall not do or permit to be doneanything which invalidates the required insurance policies. Lessee shall, priorto the Start Date, deliver to Lessor certified copies of policies of suchinsurance or certificates evidencing the existence and amounts of the requiredinsurance. No such policy shall be cancelable or subject to modification exceptafter 30 days prior written notice to Lessor. Lessee shall, at least 10 daysprior to the expiration of such policies, furnish Lessor with evidence ofrenewals or “insurance binders” evidencing renewal thereof, or Lessor may ordersuch insurance and charge the cost thereof to Lessee, which amount shall bepayable by Lessee to Lessor upon demand. Such policies shall be for a term ofat least one year, or the length of the remaining term of this Lease, whicheveris less. If either Party shall fail to procure and maintain the insurancerequired to be carried by it, the other Party may, but shall not be requiredto, procure and maintain the same.

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

8.7       **Indemnity.** Except for Lessor’s grossnegligence or willful misconduct, Lessee shall indemnify, protect, defend andhold harmless the Premises, Lessor and its agents, Lessor’s master or groundlessor, partners and Lenders, from and against any and all claims, loss ofrents and/or damages, liens, judgments, penalties, attorneys’ and consultants’fees, expenses and/or liabilities arising out of, involving, or in connectionwith, the use and/or occupancy of the Premises by Lessee. If any action orproceeding is brought against Lessor by reason of any of the foregoing matters,Lessee shall upon notice defend the same at Lessee’s expense by counselreasonably satisfactory to Lessor and Lessor shall cooperate with Lessee insuch defense. Lessor need not have first paid any such claim in order to bedefended or indemnified.

8.8       **Exemptionof Lessor and its Agents from Liability.** Notwithstanding thenegligence or breach of this Lease by Lessor or its agents, neither Lessor norits agents shall be liable under any circumstances for: (i) injury or damage tothe person or goods, wares, merchandise or other property of Lessee, Lessee’semployees, contractors, invitees, customers, or any other person in or aboutthe Premises, whether such damage or
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injuryis caused by or results from fire, steam, electricity, gas, water or rain, indoorair quality, the presence of mold or from the breakage, leakage, obstruction orother defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC orlighting fixtures, or from any other cause, whether the said injury or damageresults from conditions arising upon the Premises or upon other portions of thebuilding of which the Premises are a part, or from other sources or places,(ii) any damages arising from any act or neglect of any other tenant of Lessoror from the failure of Lessor or its agents to enforce the provisions of anyother lease in the Project, or (iii) injury to Lessee’s business or for anyloss of income or profit therefrom. Instead, it is intended that Lessee’s solerecourse in the event of such damages or injury be to file a claim on theinsurance policy(ies) that Lessee is required to maintain pursuant to theprovisions of paragraph 8.

8.9       **Failure to Provide Insurance.** Lesseeacknowledges that any failure on its part to obtain or maintain the insurancerequired herein will expose Lessor to risks and potentially cause Lessor toincur costs not contemplated by this Lease, the extent of which will beextremely difficult to ascertain. Accordingly, for any month or portion thereofthat Lessee does not maintain the required insurance and/or does not provideLessor with the required binders or certificates evidencing the existence ofthe required insurance, the Base Rent shall be automatically increased, withoutany requirement for notice to Lessee, by an amount equal to 10% of the thenexisting Base Rent or $100, whichever is greater. The parties agree that suchincrease in Base Rent represents fair and reasonable compensation for theadditional risk/costs that Lessor will incur by reason of Lessee’s failure tomaintain the required insurance. Such increase in Base Rent shall in no eventconstitute a waiver of Lessee’s Default or Breach with respect to the failureto maintain such insurance, prevent the exercise of any of the other rights andremedies granted hereunder, nor relieve Lessee of its obligation to maintainthe insurance specified in this Lease.

9.         **Damageor Destruction.**

 9.1      **Definitions.**

(a) **“Premises Partial Damage”**shall mean damage or destruction to the improvements on the Premises, otherthan Lessee Owned Alterations and Utility Installations, which can reasonablybe repaired in 6 months or less from the date of the damage or destruction.Lessor shall notify Lessee in writing within 30 days from the date of thedamage or destruction as to whether or not the damage is Partial or Total.Notwithstanding the foregoing, Premises Partial Damage shall not include damageto windows, doors, and/or other similar items which Lessee has theresponsibility to repair or replace pursuant to the provisions of Paragraph7.1.

(b) **“Premises Total Destruction”**shall mean damage or destruction to the Premises, other than Lessee OwnedAlterations and Utility Installations and Trade Fixtures, which cannotreasonably be repaired in 6 months or less from the date of the damage ordestruction. Lessor shall notify Lessee in writing within 30 days from the dateof the damage or destruction as to whether or not the damage is Partial orTotal.

(c) **“Insured Loss”** shallmean damage or destruction to improvements on the Premises, other than LesseeOwned Alterations and Utility Installations and Trade Fixtures, which wascaused by an event required to be covered by the insurance described inParagraph 8.3(a), irrespective of any deductible amounts or coverage limitsinvolved.

(d) **“Replacement Cost”**shall mean the cost to repair or rebuild the improvements owned by Lessor atthe time of the occurrence to their condition existing immediately priorthereto, including demolition, debris removal and upgrading required by theoperation of Applicable Requirements, and without deduction for depreciation.

(e) **“Hazardous Substance Condition”**shall mean the occurrence or discovery of a condition involving the presenceof, or a contamination by, a Hazardous Substance as defined in Paragraph6.2(a), in, on, or under the Premises which requires repair, remediation, orrestoration.

9.2       **PartialDamage - Insured Loss.** If a Premises Partial Damage that is anInsured Loss occurs, then Lessor shall, at Lessor’s expense, repair such damage(but not Lessee’s Trade Fixtures or Lessee Owned Alterations and UtilityInstallations) as soon as reasonably possible and this Lease shall continue infull force and effect; provided, however, that Lessee shall, at Lessor’selection, make the repair of any damage or destruction the total cost to repairof which is $10,000 or less, and, in such event, Lessor shall make anyapplicable insurance proceeds available to Lessee on a reasonable basis forthat purpose. Notwithstanding the foregoing, if the required insurance was notin force or the insurance proceeds are not sufficient to effect such repair,the insuring Party shall promptly contribute the shortage in proceeds (exceptas to the deductible which is Lessee’s responsibility) as and when required tocomplete said repairs. In the event, however, such shortage was due to the factthat, by reason of the unique nature of the improvements, full replacement costinsurance coverage was not commercially reasonable and available, Lessor shallhave no obligation to pay for the shortage in insurance proceeds or to fullyrestore the unique aspects of the Premises unless Lessee provides Lessor withthe funds to cover same, or adequate assurance thereof, within 10 daysfollowing receipt of written notice of such shortage and request therefor. IfLessor receives said funds or adequate assurance thereof within said 10 dayperiod, the party responsible for making the repairs shall complete them assoon as reasonably possible and this Lease shall remain in full force andeffect. If such funds or assurance are not received, Lessor may neverthelesselect by written notice to Lessee within 10 days thereafter to: (i) make suchrestoration and repair as is commercially reasonable with Lessor paying any
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shortage in proceeds, inwhich case this Lease shall remain in full force and effect, or (ii) have thisLease terminate 30 days thereafter. Lessee shall not be entitled toreimbursement of any funds contributed by Lessee to repair any such damage ordestruction. Premises Partial Damage due to flood or earthquake shall besubject to Paragraph 9.3, notwithstanding that there may be some insurancecoverage, but the net proceeds of any such insurance shall be made availablefor the repairs if made by either Party.

9.3       **PartialDamage - Uninsured Loss.** If a Premises Partial Damage that is not anInsured Loss occurs, unless caused by a negligent or willful act of Lessee (inwhich event Lessee shall make the repairs at Lessee’s expense), Lessor mayeither: (i) repair such damage as soon as reasonably possible at Lessor’sexpense, in which event this Lease shall continue in full force and effect, or(ii) terminate this Lease by giving written notice to Lessee within 30 daysafter receipt by Lessor of knowledge of the occurrence of such damage. Suchtermination shall be effective 60 days following the date of such notice. Inthe event Lessor elects to terminate this Lease, Lessee shall have the rightwithin 10 days after receipt of the termination notice to give written noticeto Lessor of Lessee’s commitment to pay for the repair of such damage withoutreimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactoryassurance thereof within 30 days after making such commitment. In such eventthis Lease shall continue in full force and effect, and Lessor shall proceed tomake such repairs as soon as reasonably possible after the required funds areavailable. If Lessee does not make the required commitment, this Lease shallterminate as of the date specified in the termination notice.

9.4       **TotalDestruction.** Notwithstanding any other provision hereof, if aPremises Total Destruction occurs, this Lease shall terminate 60 days followingsuch Destruction. If the damage or destruction was caused by the grossnegligence or willful misconduct of Lessee, Lessor shall have the right torecover Lessor’s damages from Lessee, except as provided in Paragraph 8.6.

9.5       **DamageNear End of Term.** If at any time during the last 6 months of thisLease there is damage for which the cost to repair exceeds one month’s BaseRent, whether or not an Insured Loss, Lessor may terminate this Lease effective60 days following the date of occurrence of such damage by giving a writtentermination notice to Lessee within 30 days after the date of occurrence ofsuch damage. Notwithstanding the foregoing, if Lessee at that time has anexercisable option to extend this Lease or to purchase the Premises, thenLessee may preserve this Lease by, (a) exercising such option and (b) providingLessor with any shortage in insurance proceeds (or adequate assurance thereof)needed to make the repairs on or before the earlier of (i) the date which is 10days after Lessee’s receipt of Lessor’s written notice purporting to terminatethis Lease, or (ii) the day prior to the date upon which such option expires.If Lessee duly exercises such option during such period and provides Lessorwith funds (or adequate assurance thereof) to cover any shortage in insuranceproceeds, Lessor shall, at Lessor’s commercially reasonable expense, repairsuch damage as soon as reasonably possible and this Lease shall continue infull force and effect. If Lessee fails to exercise such option and provide suchfunds or assurance during such period, then this Lease shall terminate on thedate specified in the termination notice and Lessee’s option shall beextinguished.

9.6       **Abatementof Rent; Lessee’s Remedies.**

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

(b) **Remedies**. If Lessor shall be obligated torepair or restore the Premises and does not commence, in a substantial andmeaningful way, such repair or restoration within 90 days after such obligationshall accrue, Lessee may, at any time prior to the commencement of such repairor restoration, give written notice to Lessor and to any Lenders of whichLessee has actual notice, of Lessee’s election to terminate this Lease on adate not less than 60 days following the giving of such notice. If Lessee givessuch notice and such repair or restoration is not commenced within 30 daysthereafter, this Lease shall terminate as of the date specified in said notice.If the repair or restoration is commenced within such 30 days, this Lease shallcontinue in full force and effect. “Commence” shall mean either theunconditional authorization of the preparation of the required plans, or thebeginning of the actual work on the Premises, whichever first occurs.

9.7       **Termination;Advance Payments**. Upon termination of this Lease pursuant toParagraph 6.2(g) or Paragraph 9, an equitable adjustment shall be madeconcerning advance Base Rent and any other advance payments made by Lessee toLessor. Lessor shall, in addition, return to Lessee so much of Lessee’sSecurity Deposit as has not been, or is not then required to be, used byLessor.

9.8       **WaiveStatutes.** Lessor and Lessee agree that the terms of this Lease shallgovern the effect of any damage to or destruction of the Premises with respectto the termination of this Lease and hereby waive the provisions of any presentor future statute to the extent inconsistent herewith.

10.       **RealProperty Taxes.**

10.1     **Definition.**As used herein, the term **“Real Property Taxes”**shall include any form of assessment; real estate, general, special,
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ordinary orextraordinary, or rental levy or tax (other than inheritance, personal incomeor estate taxes); improvement bond; and/or license fee imposed upon or leviedagainst any legal or equitable interest of Lessor in the Premises or theProject, Lessor’s tight to other income therefrom, and/or Lessor’s business ofleasing, by any authority having the direct or indirect power to tax and wherethe funds are generated with reference to the Building address and where theproceeds so generated are to be applied by the city, county or other localtaxing authority of a jurisdiction within which the Premises are located. RealProperty Taxes shall also include any tax, fee, levy, assessment or charge, orany increase therein; (i) imposed by reason of events occurring during the termof this Lease, including but not limited to, a change in the ownership of thePremises, and (ii) levied or assessed on machinery or equipment provided byLessor to Lessee pursuant to this Lease.

10.2     **Paymentof Taxes.** As part of the Common Area Operating Expenses underParagraph 51 ~~In addition to Base~~~~Rent, L~~essee Lessor shall payand Lessee**shall reimburse ~~toLessor an amount equal to~~ the Real Property Taxes applicable to**the Premises during the term of thisLease, ~~installment due-at-least 20 days prior to the applicable delinquencydate.~~ If any such i~~nsta~~l~~lm~~e~~nt~~ Real Property Taxesshall cover any period of time prior to or after the expiration or terminationof this Lease, Lessee’s share of such i~~nstallment~~ Real Property Taxesshall be prorated to cover**onlythat portion**of the tax billapplicable to the period**thatthis Lease is in effect, and Lessor shall reimburse Lessee for any overpayment.~~In the event Lessee incurs a late charge on any Rent payment, Lessor mayestimate the current Real Property Taxes, and require that such taxes be paidin advance to Lessor by Lessee monthly-in advance-with the payment of the BaseRent. Such monthly payments shall be an amount equal to the amount of theestimated installment of taxes divided by the number of months remaining beforethe month in which said installment becomes delinquent. When the actual amountof the applicable tax bill is known, the amount of such equal monthly advancepayments shall be adjusted as required to-provide the funds needed-to-pay theapplicable taxes. If the amount collected by Lessor is insufficient to pay suchReal Property Taxes when due Lessee shall pay Lessor,-upon demand suchadditional sum as is necessary. Advance-payments may be intermingled with othermoneys of Lessor and shall not bear-interest. In the event of a Breachby-Lessee in the performance of its obligations-under this Lease~~~~, then any such advancepayments-may be treated by Lessor as on additional Security-Deposit.~~

10.3     **JointAssessment.** If the Premises are not separately assessed, Lessee’sliability shall be an equitable proportion of the Real Property Taxes for allof the land and improvements included within the tax parcel assessed, suchproportion to be conclusively determined by Lessor from the respectivevaluations assigned in the assessor’s work sheets or such other information asmay be reasonably available.

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

11.       **Utilitiesand Services.** Lessee shall pay for all water, gas, heat, light,power, telephone, trash disposal and other utilities and services supplied tothe Premises, together with any taxes thereon. If any such services are notseparately metered or billed to Lessee, Lessee shall pay a reasonableproportion, to be determined by Lessor, of all charges jointly metered orbilled. There shall be no abatement of rent and Lessor shall not be liable inany respect whatsoever for the inadequacy, stoppage, interruption ordiscontinuance of any utility or service due to riot, strike, labor dispute,breakdown, accident, repair or other cause beyond Lessor’s reasonable control orin cooperation with governmental request or directions.

12.       **Assignmentand Subletting.**

12.1     **Lessor’sConsent Required.**

(a) Lessee shallnot voluntarily or by operation of law assign, transfer, mortgage or encumber(collectively, “**assign or assignment**”)or sublet all or any part of Lessee’s interest in this Lease or in the Premiseswithout Lessor’s prior written consent.

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

(c) Theinvolvement of Lessee or its assets in any transaction, or series oftransactions (by way of merger, sale, acquisition, financing, transfer,leveraged buy-out or otherwise), whether or not a formal assignment orhypothecation of this Lease or Lessee’s assets occurs, which results or willresult in a reduction of the Net Worth of Lessee by an amount greater than 25%of such Net Worth as it was represented at the time of the execution of thisLease or at the time of the most recent assignment to which Lessor hasconsented, or as it exists immediately prior to said transaction ortransactions constituting such reduction, whichever was or is greater, shall beconsidered an assignment of this Lease to which Lessor may withhold itsconsent. “**Net Worth of Lessee**”shall mean the net worth of Lessee (excluding any guarantors) established undergenerally accepted accounting principles.
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(d) An assignment or subletting without consent shall, at Lessor’soption, be a Default curable after notice per Paragraph 13.1(c), or anoncurable Breach without the necessity of any notice and grace period. IfLessor elects to treat such unapproved assignment or subletting as a noncurableBreach, Lessor may either: (i) terminate this Lease, or (ii) upon 30 dayswritten notice, increase the monthly Base Rent to 110% of the Base Rent then ineffect. Further, in the event of such Breach and rental adjustment, (i) thepurchase price of any option to purchase the Premises held by Lessee shall besubject to similar adjustment to 110% of the price previously in effect, and(ii) all fixed and non-fixed rental adjustments scheduled during the remainderof the Lease term shall be increased to 110% of the scheduled adjusted rent.

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

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

(g) Notwithstanding the foregoing, allowing a diminimus portion of thePremises, ie. 20 square feet or less, to be used by a third party vendor inconnection with the installation of a vending machine or payphone shall notconstitute a subletting.

12.2     **Terms and ConditionsApplicable to Assignment and Subletting.**

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

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

(c) Lessor’s consent to any assignment or subletting shall notconstitute a consent to any subsequent assignment or subletting.

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

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

(f) Any assignee of, or sublessee under, this Lease shall, by reason ofaccepting such assignment, entering into such sublease, or entering intopossession of the Premises or any portion thereof, be deemed to have assumedand agreed to conform and comply with each and every term, covenant, conditionand obligation herein to be observed or performed by Lessee during the term ofsaid assignment or sublease, other than such obligations as are contrary to orinconsistent with provisions of an assignment or sublease to which Lessor hasspecifically consented to in writing.

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

12.3     **AdditionalTerms and Conditions Applicable to Subletting.** The following termsand conditions shall apply to any subletting by Lessee of all or any part ofthe Premises and shall be deemed included in all subleases under this Leasewhether or not expressly incorporated therein:

(a) Lessee hereby assigns and transfers to Lessor all of Lessee’sinterest in all Rent payable on any sublease, and Lessor may collect such Rentand apply same toward Lessee’s obligations under this Lease; provided, however,that until a Breach shall occur in the performance of Lessee’s obligations,Lessee may collect said Rent. In the event that the amount collected by Lessorexceeds Lessee’s then outstanding obligations any such excess shall be refundedto Lessee. Lessor shall not, by reason of the foregoing or any assignment ofsuch sublease, nor by reason of the collection of Rent, be deemed liable to thesublessee for any failure of Lessee to perform and comply with any of Lessee’sobligations to such sublessee. Lessee hereby irrevocably authorizes and directsany such sublessee, upon receipt of a written notice from Lessor stating that aBreach exists in the performance of Lessee’s obligations under this Lease, topay to Lessor all Rent due and to become due under the sublease. Sublesseeshall rely upon any such notice from Lessor and shall pay all Rents to Lessorwithout any obligation or right to inquire as to whether such Breach exists,notwithstanding any claim from Lessee to the contrary.

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

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

(d) No sublessee shall further assign or sublet all or any part of thePremises without Lessor’s prior written consent.
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(e) Lessor shall deliver a copy of any notice of Default or Breach byLessee to the sublessee, who shall have the right to cure the Default of Lesseewithin the grace period, if any, specified in such notice. The sublessee shallhave a right of reimbursement and offset from and against Lessee for any suchDefaults cured by the sublessee.

13.       **Default; Breach; Remedies.**

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

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

(b) The failure of Lessee to make any payment of Rent or any SecurityDeposit required to be made by Lessee hereunder, whether to Lessor or to athird party, when due, to provide reasonable evidence of insurance or suretybond, or to fulfill any obligation under this Lease which endangers orthreatens life or property, where such failure continues for a period of 3business days following written notice to Lessee.

(c) The commission of waste, act or acts constituting public or privatenuisance, and/or an illegal activity on the Premises by Lessee, where suchactions continue for a period of 3 business days following written notice toLessee.

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

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

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

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

(h) If the performance of Lessee’s obligations under this Lease isguaranteed: (i) the death of a**Guarantor,(ii) the termination of a Guarantor’s liability with respect to this Leaseother than in accordance with the terms of such guaranty, (iii) a Guarantor’sbecoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’srefusal to honor the guaranty, or (v) a Guarantor’s breach of its guarantyobligation on an anticipatory basis, and Lessee’s failure, within 60 daysfollowing written notice of any such event, to provide written alternativeassurance or security, which, when coupled with the then existing resources ofLessee, equals or exceeds the combined financial resources of Lessee and theGuarantors that existed at the time of execution of this Lease.

13.2     **Remedies.** If Lessee fails to perform any of itsaffirmative duties or obligations, within 10 days after written notice (or incase of an emergency, without notice), Lessor may, at its option, perform suchduty or obligation on Lessee’s behalf, including but not limited to theobtaining of reasonably required bonds, insurance policies, or governmentallicenses, permits or approvals. Lessee shall pay to Lessor an amount equal to115% of the costs and expenses incurred by Lessor in such performance uponreceipt of an invoice therefor. In the event of a Breach, Lessor may, with orwithout further notice or demand, and without limiting Lessor in the exerciseof any right or remedy which Lessor may have by reason of such Breach:

(a) Terminate Lessee’s right to possession of the Premises by any lawfulmeans, in which case this Lease shall terminate and Lessee shall immediatelysurrender possession to Lessor. In such event Lessor shall be entitled torecover from Lessee: (i) the unpaid Rent which had been earned at the time oftermination; (ii) the worth at the time of award of the amount by which theunpaid rent which would have been earned after termination until the time ofaward exceeds the amount of such rental loss that the Lessee proves could havebeen reasonably avoided; (iii) the worth at the time of award of the amount bywhich the unpaid rent for the balance of the term after the time of awardexceeds the amount of such rental loss that
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theLessee proves could be reasonably avoided; and (iv) any other amount necessaryto compensate Lessor for all the detriment proximately caused by the Lessee’sfailure to perform its obligations under this Lease or which in the ordinarycourse of things would be likely to result therefrom, including but not limitedto the cost of recovering possession of the Premises, expenses of reletting,including necessary renovation and alteration of the Premises, reasonableattorneys’ fees, and that portion of any leasing commission paid by Lessor inconnection with this Lease applicable to the unexpired term of this Lease. Theworth at the time of award of the amount referred to in provision (iii) of theimmediately preceding sentence shall be computed by discounting such amount atthe discount rate of the Federal Reserve Bank of the District within which thePremises are located at the time of award plus one percent. Efforts by Lessorto mitigate damages caused by Lessee’s Breach of this Lease shall not waiveLessor’s right to recover damages under Paragraph 12. If termination of thisLease is obtained through the provisional remedy of unlawful detainer, Lessorshall have the right to recover in such proceeding any unpaid Rent and damagesas are recoverable therein, or Lessor may reserve the right to recover all orany part thereof in a separate suit. If a notice and grace period requiredunder Paragraph 13.1 was not previously given, a notice to pay rent or quit, orto perform or quit given to Lessee under the unlawful detainer statute shallalso constitute the notice required by Paragraph 13.1. In such case, theapplicable grace period required by Paragraph 13.1 and the unlawful detainerstatute shall run concurrently, and the failure of Lessee to cure the Defaultwithin the greater of the two such grace periods shall constitute both anunlawful detainer and a Breach of this Lease entitling Lessor to the remediesprovided for in this Lease and/or by said statute.

(b) Continue the Lease and Lessee’s right to possession and recover theRent as it becomes due, in which event Lessee may sublet or assign, subjectonly to reasonable limitations. Acts of maintenance, efforts to relet, and/orthe appointment of a receiver to protect the Lessor’s interests, shall notconstitute a termination of the Lessee’s right to possession.

(c) Pursue any other remedy now or hereafter available under the laws orjudicial decisions of the state wherein the Premises are located. Theexpiration or termination of this Lease and/or the termination of Lessee’sright to possession shall not relieve Lessee from liability under any indemnityprovisions of this Lease as to matters occurring or accruing during the termhereof or by reason of Lessee’s occupancy of the Premises.

13.3     **Inducement Recapture.** Any agreement for free or abated rent orother charges, or for the giving or paying by Lessor to or for Lessee of anycash or other bonus, inducement or consideration for Lessee’s entering intothis Lease, all of which concessions are hereinafter referred to as “**Inducement Provisions**,” shall be deemedconditioned upon Lessee’s full and faithful performance of all of the terms,covenants and conditions of this Lease. Upon Breach of this Lease by Lessee,any such Inducement Provision shall automatically be deemed deleted from thisLease and of no further force or effect, and any rent, other charge, bonus,inducement or consideration theretofore abated, given or paid by Lessor undersuch an Inducement Provision shall be immediately due and payable by Lessee toLessor, notwithstanding any subsequent cure of said Breach by Lessee. Theacceptance by Lessor of rent or the cure of the Breach which initiated theoperation of this paragraph shall not be deemed a waiver by Lessor of theprovisions of this paragraph unless specifically so stated in writing by Lessorat the time of such acceptance.

13.4     **Late Charges.** Lessee hereby acknowledges that late paymentby Lessee of Rent will cause Lessor to incur costs not contemplated by thisLease, the exact amount of which will be extremely difficult to ascertain. Suchcosts include, but are not limited to, processing and accounting charges, andlate charges which may be imposed upon Lessor by any Lender. Accordingly, ifany Rent shall not be received by Lessor within 5 days after such amount shallbe due, then, without any requirement for notice to Lessee, Lessee shallimmediately pay to Lessor a one-time late charge equal to 10% of each suchoverdue amount ~~or $100, whichever is greater~~. The Parties hereby agreethat such late charge represents a fair and reasonable estimate of the costsLessor will incur by reason of such late payment. Acceptance of such latecharge by Lessor shall in no event constitute a waiver of Lessee’s Default orBreach with respect to such overdue amount, nor prevent the exercise of any ofthe other rights and remedies granted hereunder. In the event that a latecharge is payable hereunder, whether or not collected, for 3 consecutiveinstallments of Base Rent, then notwithstanding any provision of this Lease tothe contrary, Base Rent shall, at Lessor’s option, become due and payablequarterly in advance.

13.5     **Interest.**Any monetary payment due Lessor hereunder, other than late charges, notreceived by Lessor, when due as to scheduled payments (such as Base Rent) orwithin 30 days following the date on which it was due for non-scheduledpayment, shall bear interest from the date when due, as to scheduled payments,or the 31st day after it was due as to non-scheduled payments. The interest (“**Interest**”) charged shall be computed at therate equal to the prime**rate ~~of10% per annum~~ but shall not exceed the maximum rate allowed by law.Interest is payable in addition to the potential late charge provided for in Paragraph13.4.

13.6     **Breach by Lessor.**

(a) **Notice of Breach.**Lessor shall not be deemed in breach of this Lease unless Lessor fails within areasonable time to perform an obligation required to be performed by Lessor.For purposes of this Paragraph, a reasonable time shall in no event be lessthan 30 days after receipt by Lessor, and any Lender whose name and addressshall have been furnished Lessee in writing for such purpose, of written noticespecifying wherein such obligation of Lessor has not been performed; provided,however, that if the nature of Lessor’s obligation is such that more than 30days are reasonably required for its performance, then Lessor shall not be inbreach if performance is commenced within such 30 day period and thereafterdiligently pursued to completion.
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(b) **Performance by Lessee on Behalf ofLessor.** In the event that neither Lessor nor Lender cures saidbreach within 30 days after receipt of said notice, or if having commenced saidcure they do not diligently pursue it to completion, then Lessee may elect tocure said breach at Lessee’s expense and offset from Rent the actual andreasonable cost to perform such cure, provided, however, that such offset shallnot exceed an amount equal to the greater of one month’s Base Rent or theSecurity Deposit, reserving Lessee’s right to seek reimbursement from Lessorfor any such expense in excess of such offset. Lessee shall document the costof said cure and supply said documentation to Lessor.

14.       **Condemnation.** If the Premises or any portion thereof are taken under the power ofeminent domain or sold under the threat of the exercise of said power(collectively “**Condemnation**”),this Lease shall terminate as to the part taken as of the date the condemningauthority takes title or possession, whichever first occurs. If more than 10%of the Building, or more than 25% of that portion of the Premises not occupiedby any building, is taken by Condemnation, Lessee may, at Lessee’s option, tobe exercised in writing within 10 days after Lessor shall have given Lesseewritten notice of such taking (or in the absence of such notice, within 10 daysafter the condemning authority shall have taken possession) terminate thisLease as of the date the condemning authority takes such possession. If Lesseedoes not terminate this Lease in accordance with the foregoing, this Leaseshall remain in full force and effect as to the portion of the Premisesremaining, except that the Base Rent shall be reduced in proportion to thereduction in utility of the Premises caused by such Condemnation. Condemnationawards and/or payments shall be the property of Lessor, whether such awardshall be made as compensation for diminution in value of the leasehold, thevalue of the part taken, or for severance damages; provided, however, thatLessee shall be entitled to any compensation for Lessee’s relocation expenses,loss of business goodwill and/or Trade Fixtures, without regard to whether ornot this Lease is terminated pursuant to the provisions of this Paragraph. AllAlterations and Utility Installations made to the Premises by Lessee, forpurposes of Condemnation only, shall be considered the property of the Lesseeand Lessee shall be entitled to any and all compensation which is payabletherefor. In the event that this Lease is not terminated by reason of theCondemnation, Lessor shall repair any damage to the Premises caused by suchCondemnation.

15.       **Brokerage Fees.**

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

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

15.3     **Representations andIndemnities of Broker Relationships.** Lessee and Lessor each represent and warrant to the other that it hashad no dealings with any person, firm, broker or finder (other than theBrokers, if any) in connection with this Lease, and that no one other than saidnamed Brokers is entitled to any commission or finder’s fee in connectionherewith. Lessee and Lessor do each hereby agree to indemnify, protect, defendand hold the other harmless from and against liability for compensation orcharges which may be claimed by any such unnamed broker, finder or other similarparty by reason of any dealings or actions of the indemnifying Party, includingany costs, expenses, attorneys’ fees reasonably incurred with respect thereto.

16.       **Estoppel Certificates.**

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

(b) If the Responding Party shall fail to execute or deliver theEstoppel Certificate within such 10 day period, the Requesting Party mayexecute an Estoppel Certificate stating that: (i) the Lease is in full forceand effect without modification except as may be represented by the RequestingParty, (ii) there are no uncured defaults in the Requesting Party’sperformance, and (iii) if Lessor is the Requesting Party, not more than one
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month’s rent has beenpaid in advance. Prospective purchasers and encumbrancers may rely upon theRequesting Party’s Estoppel Certificate, and the Responding Party shall beestopped from denying the truth of the facts contained in said Certificate.

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

17.       **Definitionof Lessor.** The term “**Lessor**” as used herein shall meanthe owner or owners at the time in question of the fee title to the Premises,or, if this is a sublease, of the Lessee’s interest in the prior lease. In theevent of a transfer of Lessor’s title or interest in the Premises or thisLease, Lessor shall deliver to the transferee or assignee (in cash or bycredit) any unused Security Deposit held by Lessor. Except as provided inParagraph 15, upon such transfer or assignment and delivery of the SecurityDeposit, as aforesaid, the prior Lessor shall be relieved of all liability withrespect to the obligations and/or covenants under this Lease thereafter to beperformed by the Lessor. Notwithstanding the above, and subject to theprovisions of Paragraph 20 below, the original Lessor under this Lease, and allsubsequent holders of the Lessor’s interest in this Lease shall remain liableand responsible with regard to the potential duties and liabilities of Lessorpertaining to Hazardous Substances as outlined in Paragraph 6 above. Subject tothe foregoing, the obligations and/or covenants in this Lease to be performedby the Lessor shall be binding only upon the Lessor as hereinabove defined.

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

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

20.       **Limitationon Liability.** Subject to the provision of Paragraph 17 above, ~~T~~theobligations of Lessor under this Lease shall not constitute personalobligations of Lessor or its partners, members, directors, officers orshareholders, and Lessee shall look to the Premises, and to no other assets ofLessor, for the satisfaction of any liability of Lessor with respect to thisLease, and shall not seek recourse against Lessor’s partners, members,directors, officers or shareholders, or any of their personal assets for suchsatisfaction.

21.       **Time ofEssence.** Time is of the essence with respect to the performance ofall obligations to be performed or observed by the Parties under this Lease.

22.       **NoPrior or Other Agreements; Broker Disclaimer.** This Lease containsall agreements between the Parties with respect to any matter mentioned herein,and no other prior or contemporaneous agreement or understanding shall beeffective. Lessor and Lessee each represents and warrants to the Brokers thatit has made, and is relying solely upon, its own investigation as to thenature, quality, character and financial responsibility of the other Party tothis Lease and as to the use, nature, quality and character of the Premises.Brokers have no responsibility with respect thereto or with respect to any defaultor breach hereof by either Party. The liability (including court costs andattorneys’ fees), of any Broker with respect to negotiation, execution,delivery or performance by either Lessor or Lessee under this Lease or anyamendment or modification hereto shall be limited to an amount up to the feereceived by such Broker pursuant to this Lease; provided, however, that theforegoing limitation on each Broker’s liability shall not be applicable to anygross negligence or willful misconduct of such Broker.

23.       **Notices.**

23.1     **NoticeRequirements.** All notices required or permitted by this Lease orapplicable law shall be in writing and may be delivered in person (by hand orby courier) or may be sent by regular, certified or registered mail or U.S.Postal Service Express Mail or by overnight courier, with postage prepaid, orby facsimile transmission, and shall be deemed sufficiently given if served ina manner specified in this Paragraph 23. The addresses noted adjacent to aParty’s signature on this Lease shall be that Party’s address for delivery ormailing of notices. Either Party may by written notice to the other specify adifferent address for notice, except that upon Lessee’s taking possession ofthe Premises, the Premises shall constitute Lessee’s address for notice. A copyof all notices to Lessor shall be concurrently transmitted to such party orparties at such addresses as Lessor may from time to time hereafter designatein writing.

23.2     **Date ofNotice.** Any notice sent by registered or certified mail, returnreceipt requested, shall be deemed given on the date of delivery shown on thereceipt card, or if no delivery date is shown, the postmark thereon. If sent byregular mail the notice shall be deemed given 72 hours after the same isaddressed as required herein and mailed with postage prepaid. Notices deliveredby United States Express Mail or overnight
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courier that guaranteenext day delivery shall be deemed given ~~24 hours~~ on the next businessday after delivery of the same to the Postal Service or courier. Noticestransmitted by facsimile transmission or similar means shall be deemed deliveredupon telephone confirmation of receipt (confirmation report from fax machine issufficient), provided a copy is also delivered via delivery or mail. If noticeis received on a Saturday, Sunday or legal holiday, it shall be deemed receivedon the next business day.

24.       **Waivers.**No waiver by Lessor of the Default or Breach of any term, covenant or conditionhereof by Lessee, shall be deemed a waiver of any other term, covenant orcondition hereof, or of any subsequent Default or Breach by Lessee of the sameor of any other term, covenant or condition hereof. Lessor’s consent to, orapproval of, any act shall not be deemed to render unnecessary the obtaining ofLessor’s consent to, or approval of, any subsequent or similar act by Lessee,or be construed as the basis of an estoppel to enforce the provision orprovisions of this Lease requiring such consent. The acceptance of Rent byLessor shall not be a waiver of any Default or Breach by Lessee. Any payment byLessee may be accepted by Lessor on account of moneys or damages due Lessor,notwithstanding any qualifying statements or conditions made by Lessee inconnection therewith, which such statements and/or conditions shall be of noforce or effect whatsoever unless specifically agreed to in writing by Lessorat or before the time of deposit of such payment.

25.       **DisclosuresRegarding The Nature of a Real Estate Agency Relationship.**

(a)       When entering into a discussion with areal estate agent regarding a real estate transaction, a Lessor or Lesseeshould from the outset understand what type of agency relationship orrepresentation it has with the agent or agents in the transaction. Lessor andLessee acknowledge being advised by the Brokers in this transaction, asfollows:

(i)        Lessor’s Agent. A Lessor’s agent undera listing agreement with the Lessor acts as the agent for the Lessor only. ALessor’s agent or subagent has the following affirmative obligations: To theLessor: A fiduciary duty of utmost care, integrity, honesty, and loyalty indealings with the Lessor. To the Lessee and the Lessor: a. Diligentexercise of reasonable skills and care in performance of the agent’s duties. b.A duty of honest and fair dealing and good faith. c. A duty to disclose allfacts known to the agent materially affecting the value or desirability of theproperty that are not known to, or within the diligent attention andobservation of, the Parties. An agent is not obligated to reveal to eitherParty any confidential information obtained from the other Party which does notinvolve the affirmative duties set forth above.

(ii)       Lessee’s Agent. An agent can agreeto act as agent for the Lessee only. In these situations, the agent is not theLessor’s agent, even if by agreement the agent may receive compensation forservices rendered, either in full or in part from the Lessor. An agent actingonly for a Lessee has the following affirmative obligations. To the Lessee:A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealingswith the Lessee. To the Lessee and the Lessor: a. Diligent exercise ofreasonable skills and care in performance of the agent’s duties. b. A duty ofhonest and fair dealing and good faith. c. A duty to disclose all facts knownto the agent materially affecting the value or desirability of the propertythat are not known to, or within the diligent attention and observation of, theParties. An agent is not obligated to reveal to either Party any confidentialinformation obtained from the other Party which does not involve theaffirmative duties set forth above.

(iii)      Agent Representing Both Lessor andLessee. A real estate agent, either acting directly or through one or moreassociate licenses, can legally be the agent of both the Lessor and the Lesseein a transaction, but only with the knowledge and consent of both the Lessorand the Lessee. In a dual agency situation, the agent has the followingaffirmative obligations to both the Lessor and the Lessee: a. A fiduciary dutyof utmost care, integrity, honesty and loyalty in the dealings with either Lessoror the Lessee. b. Other duties to the Lessor and the Lessee as stated above insubparagraphs (i) or (ii). In representing both Lessor and Lessee, the agentmay not without the express permission of the respective Party, disclose to theother Party that the Lessor will accept rent in an amount less than thatindicated in the listing or that the Lessee is willing to pay a higher rentthan that offered. The above duties of the agent in a real estate transactiondo not relieve a Lessor or Lessee from the responsibility to protect their owninterests. Lessor and Lessee should carefully read all agreements to assurethat they adequately express their understanding of the transaction. A realestate agent is a person qualified to advise about real estate. If legal or taxadvice is desired, consult a competent professional.

(b)       Brokers have no responsibility withrespect to any default or breach hereof by either Party. The Parties agree thatno lawsuit or other legal proceeding involving any breach of duty, error oromission relating to this Lease may be brought against Broker more than oneyear after the Start Date and that the liability (including court costs andattorneys’ fees), of any Broker with respect to any such lawsuit and/or legalproceeding shall not exceed the fee received by such Broker pursuant to thisLease; provided, however, that the foregoing limitation on each Broker’sliability shall not be applicable to any gross negligence or willful misconductof such Broker.

(c)       Lessor and Lessee agree to identify toBrokers as “Confidential” any communication or information given Brokers thatis considered by such Party to be confidential.

26.       **NoRight To Holdover.** Lessee has no right to retain possession of thePremises or any part thereof beyond the expiration or termination of
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this Lease. In the event that Lessee holds over, thenthe Base Rent shall be increased to 150% of the Base Rent applicableimmediately preceding the expiration or termination. Nothing contained hereinshall be construed as consent by Lessor to any holding over by Lessee.

27.       **CumulativeRemedies.** No remedy or election hereunder shall be deemed exclusivebut shall, wherever possible, be cumulative with all other remedies at law orin equity.

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

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

30.       **Subordination;Attornment; Non-Disturbance.**

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

30.2       **Attornment.**In the event that Lessor transfers title to the Premises, or the Premises areacquired by another upon the foreclosure or termination of a Security Device towhich this Lease is subordinated (i) Lessee shall, subject to thenon-disturbance provisions of Paragraph 30.3, attorn to such new owner, andupon request, enter into a new lease, containing all of the terms andprovisions of this Lease, with such new owner for the remainder of the termhereof, or, at the election of the new owner, this Lease will automaticallybecome a new lease between Lessee and such new owner, for the remainder of theterm hereof, and (ii) Lessor shall thereafter be relieved of any furtherobligations hereunder and such new owner shall assume all of Lessor’sobligations, except that such new owner shall not: (a) be liable for any act oromission of any prior lessor or with respect to events occurring prior toacquisition of ownership; (b) be subject to any offsets or defenses whichLessee might have against any prior lessor, (c) be bound by prepayment of morethan one month’s rent, or (d) be liable for the return of any security depositpaid to any prior lessor.

30.3    **Non-Disturbance.**With respect to Security Devices entered into by Lessor after the execution ofthis Lease, Lessee’s subordination of this Lease shall be subject to receivinga commercially reasonable non-disturbance agreement (a “**Non-Disturbance Agreement**”) from the Lenderwhich Non-Disturbance Agreement provides that Lessee’s possession of thePremises, and this Lease, including any options to extend the term hereof, willnot be disturbed so long as Lessee is not in Breach hereof and attorns to therecord owner of the Premises. Further, within 60 days after the execution ofthis Lease, Lessor shall use its commercially reasonable efforts to obtain aNon-Disturbance Agreement from the holder of any pre-existing Security Devicewhich is secured by the Premises. In the event that Lessor is unable to providethe Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee’soption, directly contact Lender and attempt to negotiate for the execution anddelivery of a Non-Disturbance Agreement.

30.4**    Self-Executing.**The agreements contained in this Paragraph 30 shall be effective without theexecution of any further documents; provided, however, that, upon writtenrequest from Lessor or a Lender in connection with a sale, financing orrefinancing of the Premises, Lessee and Lessor shall execute such furtherwritings as may be reasonably required to separately document anysubordination, attornment and/or Non-Disturbance Agreement provided for herein.

31.       **Attorneys’ Fees.** If any Party or Broker brings anaction or proceeding involving the Premises whether founded in tort, contractor equity, or to declare rights hereunder, the Prevailing Party (as hereafterdefined) in any such proceeding, action, or appeal thereon, shall be entitledto reasonable attorneys’ fees. Such fees may be awarded in the same suit orrecovered in a separate suit, whether or not such action or proceeding ispursued to decision or judgment. The term, “**PrevailingParty**” shall include, without limitation, a Party or Broker whosubstantially obtains or defeats the relief sought, as the case may be, whetherby compromise, settlement, judgment, or the abandonment by the other Party orBroker of its claim or defense.
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The attorneys’ fees award shall not be computed inaccordance with any court fee schedule, but shall be such as to fully reimburseall attorneys’ fees reasonably incurred. In addition, Lessor shall be entitledto attorneys’ fees, costs and expenses incurred in the preparation and serviceof notices of Default and consultations in connection therewith, whether or nota legal action is subsequently commenced in connection with such Default orresulting Breach ($200 is a reasonable minimum per occurrence for such servicesand consultation).

32.       **Lessor’sAccess; Showing Premises; Repairs.** Lessor and Lessor’s agents shallhave the right to enter the Premises at any time, in the case of an emergency,and otherwise at reasonable times after reasonable prior notice for the purposeof showing the same to prospective purchasers, lenders, or tenants, and makingsuch alterations, repairs, improvements or additions to the Premises as Lessormay deem necessary or desirable and the erecting, using and maintaining ofutilities, services, pipes and conduits through the Premises and/or otherpremises as long as there is no material adverse effect to Lessee’s use of thePremises. All such activities shall be without abatement of rent of liabilityto Lessee.

33.       **Auctions.**Lessee shall not conduct, nor permit to be conducted, any auction upon thePremises without Lessor’s prior written consent. Lessor shall not be obligatedto exercise any standard of reasonableness in determining whether to permit anauction.

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

35.       **Termination;Merger.** Unless specifically stated otherwise in writing by Lessor,the voluntary or other surrender of this Lease by Lessee, the mutualtermination or cancellation hereof, or a termination hereof by Lessor forBreach by Lessee, shall automatically terminate any sublease or lesser estatein the Premises; provided, however, that Lessor may elect to continue any oneor all existing subtenancies. Lessor’s failure within 10 days following any suchevent to elect to the contrary by written notice to the holder of any suchlesser interest, shall constitute Lessor’s election to have such eventconstitute the termination of such interest.

36.       **Consents.**Except as otherwise provided herein, wherever in this Lease the consent of aParty is required to an act by or for the other Party, such consent shall notbe unreasonably withheld or delayed. Lessor’s actual reasonable costs andexpenses (including but not limited to architects’, attorneys’, engineers’ andother consultants’ fees) incurred in the consideration of, or response to, arequest by Lessee for any Lessor consent, including but not limited to consentsto an assignment, a subletting or the presence or use of a Hazardous Substance,shall be paid by Lessee upon receipt of an invoice and supporting documentationtherefor. Lessor’s consent to any act, assignment or subletting shall notconstitute an acknowledgment that no Default or Breach by Lessee of this Leaseexists, nor shall such consent be deemed a waiver of any then existing Defaultor Breach, except as may be otherwise specifically stated in writing by Lessorat the time of such consent. The failure to specify herein any particularcondition to Lessor’s consent shall not preclude the imposition by Lessor atthe time of consent of such further or other conditions as are then reasonablewith reference to the particular matter for which consent is being given. Inthe event that either Party disagrees with any determination made by the otherhereunder and reasonably requests the reasons for such determination, thedetermining party shall furnish its reasons in writing and in reasonable detailwithin 10 business days following such request.

37.       **Guarantor.**

~~37.1       **Execution.**The Guarantors, if any, shall each execute a guaranty in the form most recentlypublished by the AIR Commercial Real Estate Association, and each such Guarantorshall have the same obligations as Lessee under this Lease~~.

~~37.2       **Default.**It shall constitute a Default of the Lessee if any Guarantor fails or refuses,upon request to provide: (a) evidence of the execution of the guaranty,including the authority of the party signing on Guaranter’s behalf to obligateguarantor, and in the case of a corporate Guarantor, a certified copy of aresolution of its board of directors authorizing the making of such guaranty,(b) current financial statements, (c) an Estoppel Certificate, or (d) writtenconfirmation that the guaranty is still in effect.~~

38.       **QuietPossession.** Subject to payment by Lessee of the Rent and performanceof all of the covenants, conditions and provisions on Lessee’s part to beobserved and performed under this Lease, Lessee shall have quiet possession andquiet enjoyment of the Premises during the term hereof.

39.       **Options.**~~If Lessee is granted an Option, as defined below, then the followingprovisions shall apply:~~
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39.1     **~~Definition~~**~~.“**Option**” shall mean: (a) the rightto extend the term of or renew this Lease-or-to-extend-or-renew-any lease thatLessee has on other property of Lesser; (b) the right of first refusal or firstoffer to lease either the Premises or other property of Lessor; (c) the rightto purchase or the right of first refusal to purchase-the Premises or-otherproperty of Lessor.~~

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

39.3     **~~Multiple Options~~**~~. In the-event thatLessee has any multiple Options to extend or renew this Lease, a later Optioncannot be exercised unless the prior Options have been validly exercised.~~

39.4     **~~Effect-of-Default on-Options~~**~~.~~

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

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

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

40.       **MultipleBuildings.** If the Premises are a part of a group of buildingscontrolled by Lessor, Lessee agrees that it will abide by and conform to allreasonable rules and regulations which Lessor may make from time to time forthe management, safety, and care of said properties, including the care andcleanliness of the grounds and including the parking, loading and unloading ofvehicles, and to cause its employees, suppliers, shippers, customers,contractors and invitees to so abide and conform. Lessee also agrees to pay itsfair share of common expenses incurred in connection with such rules andregulations.

41.       **SecurityMeasures.** Lessee hereby acknowledges that the Rent payable to Lessorhereunder does not include the cost of guard service or other securitymeasures, and that Lessor shall have no obligation whatsoever to provide same.Lessee assumes all responsibility for the protection of the Premises, Lessee,its agents and invitees and their property from the acts of third parties.

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

43.       **PerformanceUnder Protest**. If at any time a dispute shall arise as to any amountor sum of money to be paid by one Party to the other under the provisionshereof, the Party against whom the obligation to pay the money is assertedshall have the right to make payment “under protest” and such payment shall notbe regarded as a voluntary payment and there shall survive the right on thepart of said Party to institute suit for recovery of such sum. If it shall beadjudged that there was no legal obligation on the part of said Party to paysuch sum or any part thereof, said Party shall be entitled to recover such sumor so much thereof as it was not legally required to pay. A Party who does notinitiate suit for the recovery of sums paid “under protest” with 6 months shallbe deemed to have waived its right to protest such payment.

44.       **Authority; Multiple Parties;Execution.**

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

(b)       Ifthis Lease is executed by more than one person or entity as “Lessee”, each suchperson or entity shall be jointly and severally liable hereunder. It is agreedthat any one of the named Lessees shall be empowered to execute any amendmentto this Lease, or other document ancillary thereto and bind all of the namedLessees, and Lessor may rely on the same as if all of the named Lessees hadexecuted such document.
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(c)       This Lease may be executed by the Partiesin counterparts, each of which shall be deemed an original and all of whichtogether shall constitute one and the same instrument.

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

46.       **Offer.**Preparation of this Lease by either Party or their agent and submission of sameto the other Party shall not be deemed an offer to lease to the other Party.This Lease is not intended to be binding until executed and delivered by allParties hereto.

47.       **Amendments.**This Lease may be modified only in writing, signed by the Parties in interestat the time of the modification. As long as they do not materially changeLessee’s obligations hereunder, Lessee agrees to make such reasonablenon-monetary modifications to this Lease as may be reasonably required by aLender in connection with the obtaining of normal financing or refinancing ofthe Premises.

**48.      Waiver of Jury Trial. THE PARTIES HEREBYWAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDINGINVOLVING THE PROPERTY OR ARISING OUT OF THIS AGREEMENT.**

49.       **Mediationand Arbitration of Disputes.** An Addendum requiring the Mediationand/or the Arbitration of all disputes between the Parties and/or Brokersarising out of this Lease ois þ is not attached to this Lease.

LESSOR AND LESSEE HAVECAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINEDHEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARYCONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE ISEXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATETHE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

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

LESSORAND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM ANDPROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIRINFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THETIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLYREASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITHRESPECT TO THE PREMISES.

**ATTENTION:****NO REPRESENTATION ORRECOMMENDATION IS MADE BY THE AIR COMMERCIAL REAL ESTATE ASSOCIATION OR BY ANYBROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THISLEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:**

**1.  SEEK ADVICEOF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.**

**2.  RETAINAPPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THEPREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLEPRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURALINTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITYOF THE PREMISES FOR LESSEE’S INTENDED USE.**

**WARNING:****IF THE PREMISES IS LOCATEDIN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEED TOBE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES ISLOCATED.**

Theparties hereto have executed this Lease at the place and on the dates specifiedabove their respective signatures.
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| Executed at:                                           |                |                                      | Executed at:                                      |                         |
|--------------------------------------------------------|---------------------|-------------------------------------------|---------------------------------------------------|------------------------------|
| On:                                                    |                |                                      | On:                                               |                         |
|                                                   |                |                                      |
| By **LESSOR:**                                         |                | By **LESSEE:**                            |
|   OAKPORT  ASSOCIATES, a California limited  |                | WORLD HEART, INC., a Delaware corporation |
|   partnership                                |                |                                      |
|                                                   |                |                                      |                                              |
| By:                                                    | /s/ Michael Kuhn    |                                      | By:                                               |  /s/ Jal S.  Jassawalla |
| Name Printed:                                          | Michael Kuhn        |                                      | Name Printed:                                     |  JAL S.  JASSAWALLA     |
| Title:                                                 | General Partner     |                                      | Title:                                            | PRES & CEO               |
| By:                                                    |                |                                      | By:                                               |                         |
| Name Printed:                                          |                |                                      | Name Printed:                                     |                         |
| Title:                                                 |                |                                      | Title:                                            |                         |
| Address:                                               | 50 San Pablo  Court |                                      | Address:                                          |  7799 Pardee  Lane      |
|                                                   | Moraga, CA 94556    |                                      |                                              | Oakland, CA                  |
| Telephone:(415)                                        | 860-5014            |                                      | Telephone:(      )  |                         |
| Facsimile:(      )       |                |                                      | Facsimile: (      ) |                         |
| Federal ID No.                                         |                |                                      | Federal ID No.                                    |                         |
|                                                   |                |                                      |                                              |                         |
|                                                   | ** **          | ** **                                |
| **BROKER:**                                            | ** **          | **BROKER:**                               |
|                                                   |                |                                      |
|                                                   |                |                                      |
| Attn:                                                  |                |                                      | Attn:                                             |                         |
| Title:                                                 |                |                                      | Title:                                            |                         |
| Address:                                               |                |                                      | Address:                                          |                         |
|                                                   |                |                                      |                                              |                         |
| Telephone:(       ) |                |                                      | Telephone: (     )       |                         |
| Facsimile:(       ) |                |                                      | Facsimile: (      ) |                         |
| Federal ID No.                                         |                |                                      | Federal ID No.                                    |                         |
|                                                        |                     |                                           |                                                   |                              |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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

***©*****Copyright 2001 - By AIRCommercial Real Estate Association. All rights reserved.**

**No part of these works may be reproduced in any form withoutpermission in writing.**
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**ADDENDUMTOSTANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET**

This Addendum (“Addendum”) forms an integral part of the printed formStandard Industrial/Commercial Single-Tenant Lease – Net, dated for referencepurposes only July 20*,*2007 (the “FormLease”), entered into by and between OAKPORT ASSOCIATES, a California limitedpartnership (“Lessor”), and WORLD HEART, INC., a Delaware corporation (“Lessee”),demising the Premises commonly known as 7799 Pardee Lane, Oakland, AlamedaCounty, California. Part A of this Addendum sets forth provisions which modifyand supplement the correspondingly numbered and lettered paragraphs of the FormLease, while part B of this Addendum contains paragraphs which are in additionto those of the Form Lease. Unless otherwise defined herein, capitalized termsused in this Addendum have the meanings given them in the Form Lease. Whereprovisions of this Addendum are in conflict with the Form Lease, this Addendumshall control. References in the Form Lease and this Addendum to “the Lease,” “thisLease,” and words of similar import shall refer to the Form Lease and thisAddendum collectively.

**A.**       MODIFICATIONS TO EXISTING PARAGRAPHS OF FORMLEASE

**1.3****     Term; Commencement Date;Parties Performance.**Lessor and Lessee acknowledge and agree that thisLease shall be effective upon execution and shall be an executory agreementbetween the parties, however the parties’ performance of their covenants andpromises hereunder shall not begin until the Commencement Date has occurred.The Commencement Date shall occur, if it shall occur, upon the date on whichall of the conditions precedent set forth in Section 3 of that certainCompromise Agreement between Lessor and Lessee, dated as of even date herewith,have been satisfied. A copy of the Compromise Agreement is attached hereto as ExhibitB. The parties agree to promptly execute a Memorandum of Commencement Datememorializing the Commencement Date and Expiration Date in the form of thememorandum attached hereto as Exhibit C. Until satisfaction of all ofthe conditions precedent set forth in Section 3 of the Compromise Agreementhave been met and the Commencement Date of this Lease has occurred, Lesseeshall be holdover tenant of the Premises pursuant to the 2002 Lease describedin Paragraph 1.4**below, except asprovided in Section 1(e) of the Compromise Agreement with respect to holdoverrent. Notwithstanding any other provision of this Lease, if the CommencementDate of this Lease has not occurred by February 1, 2008, Lessor shall have theright at any time thereafter, upon written notice to Lessee, to terminate thisLease.
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**1.4****     Possession Under Existing Leases.**Lesseeacknowledges that, prior to the Commencement Date of this Lease, Lesseeoccupied the Premises and a neighboring building, 7755 Pardee Lane (“7755Pardee Lane”) pursuant to that certain Standard Industrial/CommercialSingle-Tenant Lease – Net, dated for reference purposes only May 1, 2002,between Lessor and Lessee (“2002 Lease”). Prior to entering into the 2002Lease, Lessee occupied the Premises and 7755 Pardee Lane pursuant to twosubleases (“Subleases”) between Lessee, as Subtenant, and Edwards Novacor LLC,a Delaware limited liability company (“Edwards”), as Sublandlord, which aresubject and subordinate to two leases (individually, an “Prior Lease” andcollectively, the “Prior Leases”) described as follows: the StandardIndustrial/Commercial Multi-Tenant Lease-Net, dated December 21, 1999 betweenBaxter Healthcare Corporation (“Baxter”) and Lessor for the building at 7755Pardee Lane, Oakland, California; and the Standard Form Lease, dated January14, 1981, between Lessor and Baxter (as successor to Andros Incorporated), asamended by Lease Extension and Amendment dated April 27, 1988, Lease Amendmentdated October 30, 1988, Second Lease Amendment dated May 10, 1990, Third LeaseAmendment dated May 31, 1990, Fourth Lease Amendment dated August 5, 1992,Fifth Lease Amendment dated July 3, 1996, Sixth Lease Amendment dated January28, 1998 and Seventh Lease Amendment dated December 24, 1999, for the buildingat 7799 Pardee Lane, Oakland, California. The interest of tenant under thePrior Leases was assigned by Baxter to Edwards and Edwards assumed allobligations of the tenant under the Prior Leases.

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

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

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

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

**2.2**     **Condition of Premises.**Lesseeacknowledges that, by virtue of Lessee’s occupancy of the Premises pursuant tothe 2002 Lease, Lessee is fully familiar with the current physical andenvironmental conditions on or affecting the Premises. Lessee agrees to acceptthe Premises on the Commencement Date in their present (or their then existing)condition, **AS IS**and **WITH ALL FAULTS.**
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Lessor shall notbe required to alter, repair, modify the Premises or any part thereof inconnection with Lessee’s occupancy under this Lease, it being expresslyunderstood that, as between Lessor and Lessee, Lessor shall have noresponsibility whatsoever in regard to the present or future condition of thePremises, except as otherwise expressly provided in this Lease.

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

**6.2(a)****Reportable Uses RequireConsent.**As used in the next to last sentence of Paragraph 6.2(a) ofthe Form Lease, Lessee’s “use of any ordinary and customary materialsreasonably required to be used in the normal course of the Agreed Use” shall beconstrued to include the use, transport, warehousing and distribution of suchmaterials, including those which may constitute a Hazardous Substance, providedall such activities are conducted strictly in compliance with all ApplicableRequirements.

**7.2 Lessor’s Obligations**

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

(b) NotwithstandingParagraph 7.1(a) of the Form Lease, Lessee shall not be responsible forreplacing the roof on Building, although Lessee shall be responsible formaintaining and repairing such roof.

(c) Also notwithstanding Paragraph7.1(a) of the Form Lease, Lessor rather than Lessee shall be responsible forreplacing this existing HVAC units in the Premises which were installed at thetime of the original construction of the Buildings (the “Original HVAC Units”).Lessee shall remain responsible for the maintenance and repair of all HVACunits (including the Original HVAC Units) and also shall be responsible for thereplacement of all HVAC units which are not Original HVAC Units.
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**7.3     UtilityInstallations and Alterations.**Lessee Owned Alterationsand Utility Installations shall include, without limitation, all such otheritems as are defined in the Lease which were installed in the Premises byLessee during its occupancy under the 2002 Lease, the Subleases or by Baxter orEdwards during their occupancy under the Prior Leases.

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

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

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

 

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the same directly againstthe subtenant. If Lessee assigns this Lease or sublets all or any part of thePremises to an Affiliate, Lessor’s prior written consent shall be required forany event or condition which would result in the assignee or subtenant nolonger being an Affiliate of Lessee; and Lessor shall not unreasonably withholdsuch consent. As used herein, an “Affiliate” means an entity which controlsLessee, is controlled by Lessee or is under common control with Lessee; and “control”shall mean: (x) in the case of a corporation, ownership of a majority of theoutstanding stock and the ability to elect a majority of the board ofdirectors; (y) in the case of a partnership, ownership of a majority of thepartnership interests and the ability to appoint the managing partner (or amajority of the managing partners if there is more than one); and (z) in thecase of a limited liability company, ownership of a majority of the membershipinterests and the ability to appoint the managing member (or a majority of themanaging members if there is more than one).

**32.****Lessor’s Access.**Inexercising its right of access under Paragraph 32 of the Form Lease, Lessorshall undertake all reasonable efforts to avoid undue interference with Lessee’sbusiness operations in the Premises.

**B.**      PARAGRAPHS ADDED TO LEASE

**50.****     Common Areas.**

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

50.2    Lessee’s Rights of Use.Lessor grants to Lessee, for the benefit of Lessee and its employees,suppliers, shippers, contractors, customers and invitees, during the term ofthis Lease, the non-exclusive right to use, in common with others entitled tosuch use, the Common Areas as they exist from time to time, subject to anyrights, powers, and privileges reserved by Lessor under the terms of thisLease, under any Rules and Regulations (as defined below), or under the termsof any covenants, conditions, easements or restrictions (“CC&Rs”) governingthe Project. Under no circumstances shall the right herein granted to use theCommon Areas be deemed to include the right to store any property, temporarilyor
|                        |   | MSK                    |   |
|------------------------|--------|------------------------|--------|
| Lessee’s Initials |   | Lessor’s Initials |   |

 

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permanently, in theCommon Areas. Any such storage shall be permitted only by the prior writtenconsent of Lessor or Lessor’s designated agent, which consent may be withheldin Lessor’s sole discretion and revoked at any time. In the event that anyunauthorized storage shall occur then Lessor shall have the right, withoutnotice, in addition to such other rights and remedies that it may have, toremove the property and charge the cost to Lessee, which cost shall beimmediately payable upon demand by Lessor.

50.3    Rules and Regulations. Lessor or such other person(s) as Lessor mayappoint or who shall be appointed under any CC&Rs shall have the exclusivecontrol and management of the Common Areas and shall have the right, from timeto time, to establish, modify, amend and enforce reasonable rules andregulations (“Rules and Regulations”) for the management, safety, care, andcleanliness of the grounds, the parking and unloading of vehicles and thepreservation of good order, as well as for the convenience of other occupantsor tenants of the Building and the Project and their invitees. Lessee agrees toabide by and conform to all such Rules and Regulations, and to cause itsemployees, suppliers, shippers, customers, contractors and invitees to so abideand conform. Lessor shall not be responsible to Lessee for the non-compliancewith said Rules and Regulations by other tenants of the Project.

50.4    Lessor’s Right to Make Changes. Subject to any CC&Rs, Lessor shall havethe right, in Lessor’s sole discretion, from time to time:

(a)        To make changes to the Common Areas, including without limitation,changes in the location, size, shape and number of driveways, entrances,parking spaces, parking areas, loading and unloading areas, ingress, egress,direction of traffic, landscaped areas, walkways and utility raceways;

(b)        To close temporarily any of the Common Areasfor maintenance purposes so long as reasonable access to the Premises remainsavailable;

(c)        To designate other land outside the boundariesof the Project to be a part of the Common Areas;

(d)        To add additional buildings and improvementsto the Common Areas:

(e)        To use the Common Areas while engaged inmaking additional improvements, repairs or alterations to the Project or anyportion thereof; and
|                        |   | MSK                    |   |
|------------------------|--------|------------------------|--------|
| Lessee’s Initials |   | Lessor’s Initials |   |

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(f)          To do and perform suchother acts and make such other changes in, to or with respect to the CommonAreas and Project as Lessor may, in the exercise of sound business judgment,deem to be appropriate.

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

**51.**      Common Area OperatingExpense.

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

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

(b)        The cost of water, gas,electricity and telephone to service the Common Areas and any utilities notseparately metered.

(c)        Trash disposal, pestcontrol services, property management, security services, and the costs of anyenvironmental inspections.

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

(e)        Real Property Taxes (asdefined in Paragraph 10).

(f)         The cost of the premiumsfor the insurance maintained by Lessor pursuant to Paragraph 8.
|                        |   | MSK                    |   |
|------------------------|--------|------------------------|--------|
| Lessee’s Initials |   | Lessor’s Initials |   |

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(g)        Anydeductible portion of an insured loss concerning the Building, the Common Areasor the Project.

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

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

51.2   Lessee’s Share. Lessorshall pay to Lessor Lessee’s Share of Common Area Operating Expenses inaccordance with this Paragraph 51.2.

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

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

(c)        Lessor shall deliver to Lessee within 120 days afterthe expiration of each calendar year a reasonably detailed statement showingLessee’s Share of the actual Common Area Operating Expenses incurred during thepreceding calendar year. If Lessee’s payments under Paragraph 51.2(b) duringthe preceding year exceed Lessee’s Share as indicated on such statement, Lessorshall credit the amount of such over-payment against Lessee’s Share of CommonArea Operating Expenses next becoming due. If Lessee’s payments under Paragraph51.2(b) during the preceding year were less than Lessee’s Share as indicated onsuch statement, Lessee shall pay to Lessor the amount of the deficiency within10 days after delivery by Lessor to Lessee of the statement.

**52.****       Parking.** Lesseeshall be entitled to use a proportionate share of the parking spaces in thoseportions of the Common Areas designated from time to time by Lessor for parkingby vehicles no larger than full-size passenger
|                        |   | MSK                    |   |
|------------------------|--------|------------------------|--------|
| Lessee’s Initials |   | Lessor’s Initials |   |

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automobiles or pick-uptrucks, herein called “Permitted Size Vehicles.” Lessor may regulate theloading and unloading of vehicles by adopting Rules and Regulations. Novehicles other than Permitted Size Vehicles may be parked in the Common Areawithout the prior written permission of Lessor. Lessee shall not permit orallow any vehicles that belong to or are controlled by Lessee or Lessee’s employees,suppliers, shippers, customers, contractors or invitees to be loaded, unloaded,or parked in areas other than those designated by Lessor for such activities.

[Signatureson following page.]
|                        |   | MSK                    |   |
|------------------------|--------|------------------------|--------|
| Lessee’s Initials |   | Lessor’s Initials |   |

 

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IN WITNESS WHEREOF,Lessor and Lessee have duly executed this Addendum concurrently with theirexecution of the Form Lease, intending to be bound by all terms, covenants andprovisions of this Lease.
| LESSOR                                                   |             | LESSEE                                        |
|----------------------------------------------------------|------------------|-----------------------------------------------|
|                                                     |             |                                          |   |   |
| **OAKPORT ASSOCIATES,**a California limited  partnership |             | **WORLD HEART, INC.,**a Delaware  corporation |
| ** **                                               |             | ** **                                    |
| ** **                                               |             | ** **                                    |
| By:                                                 | /s/ Michael Kuhn |                                          | By: | /s/ Jal S. Jassawalla |
|                                                     | Michael Kuhn     |                                          | Name: | JAL S. JASSAWALLA |
|                                                     | General Partner  |                                          | Title: | PRES & CEO |
|                                                     |             |                                          |   | (Print name and title) |

 

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**Exhibit A**

**Description of the Premises**

(See attached.)

Exhibit A

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EXHIBIT A

 

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**Exhibit B**

**Compromise****Agreement**

(Seeattached.)

Exhibit B

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**COMPROMISE AGREEMENT**

ThisCompromise Agreement (“Agreement”) is entered into by and between OAKPORTASSOCIATES, a California limited partnership (“Lessor”), and WORLD HEART, INC.,a Delaware corporation (“Lessee”), as of July 20, 2007 (the “Effective Date”),and is based on the following facts. Defined terms used herein but nototherwise defined herein shall have the meaning given those terms in the 2002Lease (as defined below).

**RECITALS**

A.        On or about May 1, 2002, Lessor andLessee entered into that certain Standard Industrial/Commercial Single-TenantLease – Net dated for reference purposes May 1, 2002 (the “2002 Lease”),pertaining to premises located at 7755 and 7799 Pardee Lane, Oakland,California (“Premises”). The term of the 2002 Lease was from May 1, 2002through April 30, 2007. The 2002 Lease has expired and Lessee is presentlyoccupying the Premises as a holdover tenant pursuant to Paragraph 26 of the2002 Lease.

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

C.         Lessee acknowledges that suchobligation to restore the premises extends to both the 7755 and 7799 PardeeLane buildings.

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

E.         Concurrently with the execution of the2002 Lease, World Heart Corporation, a corporation organized and existing underthe laws of the Province of Ontario Canada (“Guarantor”), executed a Guarantyof Lease in favor of Lessor and further agreed to deposit, and did deposit,with Lessor the sum of $150,000 plus any accrued interest on the sumsdeposited. Lessor presently holds $150,000 plus interest accrued on saiddeposits in a segregated bank account the “Cash Collateral”). The funds sodeposited are security for the performance of the Guaranty.

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

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

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**AGREEMENT**

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

**1.        Month to Month Extension of the 2002Lease.**

(a)        Commencing on May 1, 2007, the 2002Lease shall be extended on a month-to-month basis until the earlier of: January30, 2008, or the date upon which the Baxter Restoration Work for the 7755Pardee Lane building (“7755 Restoration Work”) has been Completed, subject toForce Majeure (as hereinafter defined). The Term “Completed” (or “Complete” or “Completion”)shall mean the date upon which all of the following items have been deliveredor satisfied: (i) a certificate of completion of the 7755 Restoration Workexecuted by Lessee’s architect, certifying that, except for minor punchlistitems identified by Lessor and Lessee, during a mutual walkthrough, the 7755Restoration Work has been completed in compliance with the plans andspecifications approved by the Lessor; (ii) a final inspection of the 7755Restoration Work signed and approved in all respects by the City of Oakland andany other governmental agencies with jurisdiction over the Premises or Lessee’soperations at the Premises, as required by applicable law; and (iii) a copy ofan unconditional waiver and release upon final payment, in the form prescribedin Section 3262 of the California Civil Code, from the general contractor andall subcontractors (including architects and engineers) hired in connectionwith the 7755 Restoration Work, and any lien or stop notice delivered inconnection with the 7755 Restoration Work has been cleared to Lessor’ssatisfaction.

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

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

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

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

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

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

**3.       New Lease.**The parties have entered into that AIR Commercial Real Estate AssociationStandard Industrial/Commercial Single-Tenant Lease - Net dated as of evendate herewith for the 7799 Pardee Lane building (“New Lease”). The New Leaseshall be effective upon execution and shall be an executory agreement betweenthe parties however, the parties’ performance of their covenants and promisesthereunder shall not begin until the Commencement Date of the New Lease hasoccurred, if it shall occur. The “Commencement Date” of the New Lease shalloccur upon the full and complete satisfaction of all of the followingconditions: (i) the 7755 Restoration Work has been Completed no later thanJanuary 30, 2008 (subject to Force Majeure as provided herein); (ii) novoluntary or involuntary petition under any applicable bankruptcy law has beenfiled by or against Lessee; no trustee, receiver or conservator has beenappointed with respect to all or any substantial part of the Lessee’s assets;and no general assignment for the benefit of creditors or any other similaraction for the protection or benefit of creditors has been made by Lessee; and(iii) no claim has been made by Lessee or other party, in bankruptcy orotherwise, seeking Lessor’s disgorgement of the Letter of Credit proceeds.Until the Commencement Date of New Lease occurs, Lessee shall be a holdovertenant under the 2002 Lease, except as provided in Section l(e) above withrespect to holdover rent. If the Commencement Date of the New Lease has notoccurred by February 1, 2008, Lessor may terminate the New Lease at any timethereafter by written notice to Lessee.

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

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

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

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

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

**6.        AlterationsDue to Parcel Map.**Lessorhas advised Lessee that Lessor is in the process of preparing a parcel mapwhich shall divide the real property upon which the Premises and the 7777Pardee Lane building are located into three separate legal parcels. In theevent that the City of Oakland requires the installation of fire-resistantwindows in the 7755 Pardee Building, Lessor will undertake to make suchalterations at Lessor’s sole cost and expense. In addition, if the Cityrequires any other any alterations or modifications to the 7755 Pardee Buildingdue to the creation of the separate parcels, Lessor agrees, at Lessor’s option,either (a) to undertake such alterations or modifications at Lessor’s sole costand expense, or (b) to reimburse Lessee for all of Lessee’s costs in makingsuch alterations or modifications. Lessee agrees to obtain at least two bidsfor any such alterations or modifications to be undertaken by Lessee includingone from a contractor selected by Lessor. The delay, if any, caused by the needto install fire-resistant windows or to make any other alterations ormodifications due to the creation of separate parcels shall be considered ForceMajeure.

**7.        Miscellaneous.**

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

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

(c) This Agreement and each provision hereof shall beinterpreted in accordance with its fair meaning and not against or in favor ofany party.

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

**(Signatures on following page)**

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

 
|   |   | LESSOR: OAKPORT ASSOCIATES,  a   California limited partnership |
|--------|--------|-----------------------------------------------------------------|
|   |   |                                                            |   |
|   |   | By:                                                        |   |
|   |   |                                                            | Michael  S. Kuhn, General Partner |

 
|   |   | LESSEE: WORLD HEART INC., a  Delaware corporation |
|--------|--------|---------------------------------------------------|
|   |   |                                              |
|   |   |                                              |   |
|   |   | By:                                               |   |
|   |   | Name:                                             |   |
|   |   | Title:                                            |   |
|        |        |                                                   |  |  |  |  |

 

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**EXHIBIT A**

**Form of Acknowledgment and Release**

**ACKNOWLEDGEMENT AND RELEASE**

ThisAcknowledgement and Release (“Release”) dated as of                 ,200    , isbeing delivered pursuant to Section 2 of that certain CompromiseAgreement (“Compromise Agreement”) dated as of July 20, 2007, between OakportAssociates (“Lessor”) and World Heart Inc. (“Lessee”). Defined terms used butnot otherwise defined herein shall have the meaning given such terms in theCompromise Agreement.

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

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

AGENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW ORSUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENTWITH THE DEBTOR

ThisRelease does not affect nor modify the covenants, terms and conditions setforth in the 2002 Lease (including without limitation the Baxter RestorationWork for the 7755 Pardee Lane Premises), the Compromise Agreement nor the NewLease, except in each case with respect to the subject matter of this Release.

INWITNESS WHEREOF, Lessor has executed this Agreement as of the date first setforth above.

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|   |   | LESSOR:                                                 |
|--------|--------|---------------------------------------------------------|
|   |   |                                                    |
|   |   | OAKPORT ASSOCIATES, a  California   limited partnership |
|   |   |                                                    |   |
|   |   | By:                                                |   |
|   |   |                                                    | Michael S. Kuhn, General  Partner |

 

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**Exhibit C**

**Formof Memorandum of Commencement Date**

**MEMORANDUM OF COMMENCEMENT DATE**

ThisMemorandum of Commencement Date is executed as of             ,2007, between Oakport Associates, a California limited partnership (“Lessor”),and World Heart, Inc., a Delaware corporation (“Lessee”) pursuant to Section1.3 of the Addendum to that certain Standard Industrial/CommercialSingle-Lessee Lease — Net, dated for reference purposes onlyJuly       , 2007, between Lessor and Lessee (“Lease”)for premises located at 7799 Pardee Lane, Oakland, California. Capitalized terms used but not otherwise definedherein shall have the meaning given such terms in the Lease.

Lessor and Lessee herebyacknowledge and agree:

1.        The Commencement Date of the Leaseis:                                                           .

2.        The Expiration Date of the Leaseis:                                                    .

ThisMemorandum of Commencement Date shall constitute an amendment to the Lease.

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

Lessorand Lessee have executed this Memorandum of Commencement Date as of the datefirst set forth above.

Exhibit C

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| LESSOR                           |            | LESSEE                 |
|----------------------------------|-----------------|------------------------|
|                             |            |                   |
| **OAKPORT ASSOCIATES,**          |            | **WORLD HEART, INC.,** |
| a California limited partnership | ** **      | a Delaware corporation |
|                             |            |                   |
|                             |            |                   |
| By:                              |            |                   | By: |   |
|                             | Michael Kuhn    |                   | Name: |   |
|                             | General Partner |                   | Title: |   |
|                                  |                 |                        |  |  |  |

 

Exhibit C

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