EX 10.45




EXHIBIT 10.45
AIR COMMERCIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE -- GROSS
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
1.    Basic Provisions ("Basic Provisions").
1.1    Parties: This Lease ("Lease"), dated for reference purposes only October 24, 2012 is made by and between Cal-Sorrento, Ltd., a California limited partnership ("Lessor") and Halozyme Therapeutics, Inc., a Delaware corporation and Halozyme, Inc., a California corporation ("Lessee"), (collectively the "Parties," or individually a "Party").
1.2    Premises: That certain real property, including all improvements therein or to be provided by Lessor under the terms of this Lease, and commonly known as 11436 Sorrento Valley Road located in the County of San Diego, State of California and generally described as (describe briefly the nature of the property and, if applicable, the "Project", if the property is located within a Project) 18,000 square foot office - R&D Building, excluding the warehouse ("Premises"). (See also Paragraph 2)
1.3    Term: Approximately 5 years and 0 months ("Original Term") commencing See Addendum and Work Letter ("Commencement Date") and ending the date that is 60 months following the Commencement Date, unless, however, such date is not the last day of a calendar month, in which event the Original Term shall end on the last day of the calendar month in which such date occurs ("Expiration Date"). (See also Paragraph 3)
1.4    Early Possession: If the Premises are available Lessee may have non-exclusive possession of the Premises commencing upon substantial completion of tenant improvements ("Early Possession Date"). (See also Paragraphs 3.2 and 3.3)
1.5    Base Rent:    $24,300.00 per month ("Base Rent"), payable on the first day of each month commencing (See also Paragraph 4)
X   If this box is checked, there are provisions in this Lease for the Base Rent to be adjused. See Addendum.
1.6    Base Rent and Other Monies Paid Upon Execution:
(a)    Base Rent: $24,300.00 for the period first twelve months' base rent before abatement
(b)    Security Deposit: $27,253.80 ("Security Deposit"). (See also Paragraph 5)
(c)    Association Fees: None
(d)    Other:    None
(e)    Total Due Upon Execution of this Lease: $27,253.80
1.7    Agreed Use: The premises shall be used for general office use and any other legally permitted uses reasonably acceptable to Lessor, including, but not limited to labs and pharmaceutical research and development and other ancillary or related uses.  (See also Paragraph 6)
1.8    Insuring Party: Lessor is the "Insuring Party". The annual "Base Premium" is $1,985.00 (See also Paragraph 8)
1.9    Real Estate Brokers: (See also Paragraph 15 and 25)
(a) Representation: The following real estate brokers (the "Brokers") and brokerage relationships exist in this transaction (check applicable boxes):





X   Cassidy Turley San Diego (Andy Irwin) represents Lessor exclusively (“Lessor’s Broker”);
X   Cassidy Turley San Diego (Dave Odmark) represents Lessee exclusively (“Lessee’s Broker”);   
__   _______________________represents both Lessor and Lessee (“Dual Agency”).


(b) Payment to Brokers: Lessor shall pay to the Brokers for the brokerage services rendered by the Brokers the fee agreed to in the attached separate written agreement.
1.10    Guarantor. The obligations of the Lessee under this Lease are to be guaranteed by ________("Guarantor") (See also Paragraph 37)
1.11    Attachments, Attached hereto are the following, all of which constitute a part of this Lease:
X    an Addendum consisting of Paragraphs 51 through 59
__  a plot plan depicting the Premises; 
__  a current set of the Rules and Regulations; 
X     a Work Letter; 
__  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, covenants and conditions set forth in this Lease. While the approximate square footage of the Premises may have been used in the marketing of the Premises for purposes of comparison, the Base Rent stated herein is NOT tied to square footage and is not subject to adjustment should the actual size be determined to be different. Note: Lessee is advised to verify the actual size prior to executing this Lease.
2.2     Condition. Lessor shall deliver the Premises to Lessee broom clean and free of debris on the Commencement Date or the Early Possession Date, whichever first occurs ("Start Date"), and, so long as the required service contracts described in Paragraph 7.1(b) below are obtained by Lessee and in effect within thirty days following the Start Date, warrants to the best of its knowledge, without any duty of inquiry or the imputation of constructive notice, that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems "HVAC"), loading doors, sump pumps, if any, and all other such elements in the Premises, other than those constructed by Lessee, shall be in good operating condition on said date and that the surface and structural elements of the roof, bearing walls and foundation of any buildings on the Premises (the "Building") shall be free of material defects, and that the Unit does not contain hazardous levels of any mold or fungi defined as toxic under applicable state or federal law. If a non-compliance with said warranty exists as of the Start Date, or if one of such systems or elements should malfunction or fail within the appropriate warranty period, Lessor shall, as Lessor’s sole obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, malfunction or failure, rectify same at Lessor's expense. The warranty periods shall be as follows: (1) 6 months as to the HVAC systems, and (ii) 30 days as to the remaining systems and other elements of the Building. If Lessee does not give Lessor the required notice within the appropriate warranty period, correction of any such non-compliance, malfunction or failure shall be the obligation of 





Lessee at Lessee's sole cost and expense, except for the roof, foundations, and bearing walls which are handled as provided in paragraph 7.
 2.3    Compliance. Lessor warrants that to the best of its knowledge, without any duty of inquiry or the imputation of constructive notice, the improvements on the Premises, except to the extent designed, constructed and/or installed by Lessee pursuant to the Work Letter, comply with the building codes, applicable laws, covenants or restrictions of record, regulations, and ordinances ("Applicable Requirements") that were in effect at the time that 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 or any similar laws as a result of Lessee's use (see Paragraph 50), or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the Applicable Requirements, and especially the zoning, are appropriate for Lessee's intended use, and acknowledges that past uses of the Premises may no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify the same at Lessor's expense. If Lessee does not give Lessor written notice of a non-compliance with this warranty within 6 months following the Start Date, correction of that non-compliance shall be the obligation of Lessee at Lessee's sole cost and expense. If the Applicable Requirements are hereafter changed so as to require during the term of this Lease the construction of an addition to or an alteration of the Premises and/or Building, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the Unit, Premises and/or Building ("Capital Expenditure"), Lessor and Lessee shall allocate the cost of such work as follows:


(a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required as a result of the specific and unique use of the Premises by Lessee as compared with uses by tenants in general, Lessee shall be fully responsible for the cost thereof, provided, however that if such Capital Expenditure is required during the last 2 years of this Lease and the cost thereof exceeds 6 months' Base Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in writing, within10 days after receipt of Lessee's termination notice that Lessor has elected to pay the difference between the actual cost thereof and an amount equal to 6 months' Base Rent, If Lessee elects termination, Lessee shall immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice specifying a termination date at least 90 days thereafter. Such termination date shall, however, in no event be earlier than the last day that Lessee could legally utilize the Premises without commencing such Capital Expenditure.


(b) If such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such as, governmentally mandated seismic modifications), then Lessor shall pay for such Capital Expenditure and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease or any extension thereof, on the date that on which the Base Rent is due, an amount equal to 1/144th of the portion of such costs reasonably attributable to the Premises. Lessee shall pay interest on the balance but may prepay its obligation at any time. If, however, such Capital Expenditure is required during the last 2 years of this Lease or if Lessor reasonably determines that it is not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, in writing, within 10 days after receipt of Lessor's termination notice that Lessee will pay for such Capital Expenditure. If Lessor does not elect to terminate and fails to tender its share of any such Capital Expenditure, Lessee may advance such funds and deduct same, with Interest, from Rent until Lessor's share of such costs have been fully paid. If Lessee is unable 





to finance Lessor's share, or if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the right to terminate this Lease upon 30 days written notice to Lessor. Lessee shall not be liable for any amounts greater than $10,000.00 in the aggregate in a single calendar year for Capital Expenditures that are not the result of Lessee's specific and unique use of the Premises. 
(c) Notwithstanding the above, the provisions concerning Capital Expenditures are intended to apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use, change in intensity of use, or modification to the Premises then, and in that event, Lessee shall either: (i) immediately cease such changed use or intensity of use and/or take such other steps as may be necessary 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    Acknowledgments. Lessee acknowledges that: (a) it has been advised by Lessor and/or Brokers to satisfy itself with respect to the size and condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements and the Americans with Disabilities Act), and their suitability for Lessee's intended use, subject to satisfactory completion of Lessor's Work, as defined in the Work Letter; (b) it is not relying on any representation as to the size of the Premises made by Brokers or Lessor; (c) the square footage of the Premises was not material to Lessee's decision to lease the Premises and pay the Rent stated herein, and (d) neither Lessor, Lessor's agents, have made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease.
2.5    Lessee as Prior Owner/Occupant. The warranties made by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises. In such event, Lessee shall be responsible for any necessary corrective work.
3.    Term.
3.1    Term. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3.
3.2    Early Possession. Any provision herein granting Lessee Early Possession of the Premises is subject to and conditioned upon the Premises being available for such possession prior to the Commencement Date. Any grant of Early Possession only conveys a non-exclusive right to occupy the Premises. If Lessee totally or partially occupies the Premises prior to the Commencement Date, the obligation to pay Base Rent shall be abated for the period of such Early Possession. All other terms of this Lease (including but not limited to the obligations to pay Real Property Taxes and insurance premiums and to maintain the Premises) shall be in effect during such period. Any such Early Possession shall not affect the Expiration Date.
3.3    Delay in Possession. [SEE WORK LETTER]
3.4    Lessee Compliance. Lessor shall not be required to deliver possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this Lease from 





and after the Start Date, including the payment of Rent, notwithstanding Lessor's election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied.
4.    Rent.
4.1.    Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent ("Rent"). 
4.2     Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. All monetary amounts shall be rounded to the nearest whole dollar. In the event that any invoice prepared by Lessor is inaccurate such inaccuracy shall not constitute a waiver 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 full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor's rights to the balance of such Rent, regardless of Lessor'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 dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in addition to any Late Charge and Lessor, at its option, may require all future payments to be made by Lessee to be by cashier's check. Payments will be applied first to accrued late charges and attorney's fees, second to accrued interest, then to Base Rent, Insurance and Real Property Taxes, and any remaining amount to any other outstanding charges or costs. 
4.3    Association Fees. In addition to the Base Rent, Lessee shall pay to Lessor each month an amount equal to any owner's association or condominium fees levied or assessed against the Premises. Said monies shall be paid at the same time and in the same manner as the Base Rent.
5.    Security Deposit. Lessee shall deposit with Lessor upon execution hereof the Security Deposit as security for Lessee's faithful performance of its obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount already due Lessor, for Rents which will be due in the future, and/ or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of the Security Deposit, Lessee shall within 10 days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to increase the 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 a result thereof. If a 





change in control of Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessor's reasonable judgment, significantly reduced, Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on such change in financial condition. Lessor shall not be required to keep the Security Deposit separate from its general accounts. Within 90 days after the expiration or termination of this Lease, Lessor shall return that portion of the Security Deposit not used or applied by Lessor. No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease. 
6.    Use.
6.1    Use. Lessee shall use and occupy the Premises only for the Agreed Use, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of or causes damage to neighboring premises or properties. Other than guide, signal, seeing eye dogs and a vivarium, Lessee shall not keep or allow in the Premises any pets, animals, birds, fish, or reptiles. Lessor shall not unreasonably withhold or delay its consent to any written request for modification of the Agreed Use, so long as the same will not impair the structural integrity of the improvements Lessor shall within 7 days after such request give written notification of same, which notice shall include an explanation of Lessor’s objections to the change in the Agreed Use.
6.2    Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance" as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or fractions thereof. Lessee shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee's expense) with all Applicable Requirements. "Reportable Use" shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, ordinary office supplies (copier toner, liquid paper, glue, etc.) and common household cleaning materials, so long as such use is incompliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Lessor to any liability therefore. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the 





public, the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance.
(c) Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee's expense, comply with all Applicable Requirements and take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Lessee, or Lessee’s employees, agents, contractors, representatives, licensees, or invitees. 
(d) Lessee Indemnification. Lessee shall indemnify, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents and/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys' and  consultants' fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any of Lessee's employees, agents, contractors, representatives, licensees, or invitees (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from adjacent properties not caused or contributed to by Lessee). Lessee's obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement.
(e) Lessor Indemnification.  Lessor and its successors and assigns shall indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all environmental damages, including the cost of remediation, which result from Hazardous Substances which existed on the Premises prior to Lessee's occupancy or which are caused by the negligence or willful misconduct of Lessor, its agents or employees. Lessor's obligations, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. 
(f) Investigations and Remediations. Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to Lessee's occupancy, unless such 





remediation measure is required as a result of Lessee's use (including "Alterations", as defined in paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor's agents to have reasonable access to the Premises at reasonable tines in order to carry out Lessor's investigative and remedial responsibilities.
6.3     Lessee's Compliance with Applicable Requirements. Except as otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of any applicable fire insurance underwriter or rating bureau, and the recommendations of Lessor's engineers and/or consultants which relate in any manner to the such Requirements, without regard to whether such Requirements are now in effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of Lessor's written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee's compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements. Likewise, Lessee shall immediately give written notice to Lessor of: (i) any water damage to the Premises and any suspected seepage, pooling, dampness or other condition conducive to the production of mold; or (ii) any mustiness or other odors that might indicate the presence of mold in the Premises. 
6.4     Inspection; Compliance. Lessor and Lessor's "Lender" (as defined in Paragraph 30) and consultants shall have the right to enter into Premises at any time, in the case of an emergency, and otherwise at reasonable times after reasonable notice, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements or a Hazardous Substance Condition (see paragraph 9.1) is found to exist or be imminent, or the inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such inspection is reasonably related to the violation or contamination. In addition, Lessee shall provide copies of all relevant material safety data sheets (MSDS) to Lessor within 10 days of the receipt of a written request therefor. 
7.    Maintenance; Repairs; Utility Installations; Trade Fixtures and Alterations.
7.1    Lessee's Obligations.
(a) In General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), 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 of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the Premises), including, but not limited to, all equipment or facilities, such as plumbing, HVAC equipment, 





electrical, lighting facilities, boilers, pressure vessels, fire protection system, fixtures, walls (interior and exterior), ceilings, floors, windows, doors, plate glass, skylights, landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks and parkways located in, on, or adjacent to the Premises. Lessee is also responsible for keeping the roof and roof drainage clean and free of debris. Lessor shall keep the surface and structural elements of the roof, foundations, and bearing walls in good repair (see paragraph 7.2). Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Paragraph 7.1(b) below. Lessee's obligations shall include restorations, or renewals when necessary to keep the Premises 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 of other 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's sole expense, procure and maintain contracts, with copies to Lessor, in customary form and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements, if any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler, and pressure vessels, (iii) fire extinguishing systems, including fire alarm and/or smoke detection, (iv) landscaping and irrigation systems, and (v) clarifiers. However, Lessor reserves the right, upon notice to Lessee, to procure and maintain any or all of such service contracts, and Lessee shall reimburse Lessor upon demand, for the cost thereof.
(c) Failure to Perform. If Lessee fails to perform Lessee’s obligations under this Paragraph 7.1, Lessor may enter upon the Premises after 10 days’ prior written notice to Lessee (except in 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 good order, condition and repair, and Lessee shall promptly pay to Lessor a sum equal to 115% of the cost thereof.
7.2    Lessor's Obligations. Subject to the provisions of Paragraphs 2,2 (Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14 (Condemnation), it is intended by the Parties hereto that Lessor have no obligation, in any manner whatsoever, to repair and maintain the Premises, or the equipment therein, all of which obligations are intended to be that of the Lessee, except for the surface and structural elements of the roof, foundations and bearing walls, the repair of which shall be the responsibility of Lessor upon receipt of written notice that such a repair is necessary. It is the intention of the Parties that the terms of this Lease govern the respective obligations of the Parties as to maintenance and repair of the Premises, and they expressly waive the benefit of any statute now or hereafter in effect to the extent it is inconsistent with the terms of this Lease.
7.3    Utility Installations; Trade Fixtures; Alterations.
(a) Definitions. The term "Utility Installations" refers to all floor and window coverings, air and/or vacuum lines, power panels, electrical distribution, security and fire protection systems, communication cabling, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The term "Trade Fixtures" shall mean Lessee's machinery and equipment that can be removed without 





doing material damage to the Premises. The term "Alterations" shall mean any modification of the improvements after the Commencement Date, other than Utility Installations, the Improvements, 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 are not yet owned by Lessor pursuant to Paragraph 7.4(a). 
(b) Consent. Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor's prior written consent. Lessee may, however, make non-structural Alterations or Utility Installations to the interior of the Premises (excluding the roof) without such consent but upon notice to Lessor, as long as they are not visible from the outside, do not involve puncturing, relocating or removing the roof or any existing walls, will not affect the electrical, plumbing, HVAC, and/or life safety systems, and the cumulative cost thereof during this Lease as extended does not exceed a sum equal to 3 month's Base Rent in the aggregate or a sum equal to one month's Base Rent in any one year. Notwithstanding the foregoing, Lessee shall not make or permit any roof penetrations and/or install anything on the roof without the prior written approval of Lessor. Lessor may, as a precondition to granting such approval, require Lessee to utilize a contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee's: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expeditious manner, Any Alterations or Utility Installations shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount in excess of one month's Base Rent, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount equal to 110% of the estimated cost of such Alteration or Utility Installation and/or upon Lessee's posting an additional Security Deposit with Lessor. 
(c) Liens; Bonds. Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises or any interest therein. Lessee shall give Lessor not less than 10 days notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and Lessor's successors, assigns, officers, directors, shareholders, members, partners, participants, affiliates, trustees, beneficiaries, subsidiaries, representatives and agents (collectively the "Lessor Parties") and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to 150% of the amount of such contested lien, claim or demand, indemnifying Lessor, the Lessor Parties and the Premises against liability for the same. If Lessor elects to participate in any such action, Lessee shall pay Lessor's attorneys' fees and costs.
7.4    Ownership; Removal; Surrender; and Restoration.





(a) Ownership. Subject to Lessor's right to require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property of Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or termination of this Lease, become the property of Lessor and be surrendered by Lessee with the Premises. 
(b) Removal. By delivery to Lessee of written notice from Lessor not earlier than 90 and not later than 30 days prior to the end of the term of this Lease, Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this Lease. This right to request removal shall not apply to Lessee Owned Alterations and Utility Installations consented to by Lessor unless at the time of consenting Lessor specifies it will require any such alterations to be removed at the end of the Lease term. Lessor may require the removal at any time of all or any part of any Lessee Owned Alterations or Utility Installations made without the required consent. 
(c) Surrender; Restoration. Lessee shall surrender the Premises by the Expiration Date or any earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. “Ordinary wear and tear” shall not include any damage or deterioration that would have been prevented by good maintenance practice. Notwithstanding the foregoing, if this Lease is for 12 months or less, then Lessee shall surrender the Premises in the same condition as delivered to Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any damage occasioned by the installation, maintenance or removal of Trade Fixtures. Lessee owned Alterations and/or Utility Installations, furnishings and equipment as well as the removal of any storage tank installed by or for Lessee. Lessee shall completely remove from the Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or any third party (except Hazardous Substances which were deposited via underground migration from areas outside of the Premises) even if such removal would require Lessee to perform or pay for work that exceeds statutory requirements Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. Any personal property of Lessee not removed on or before the Expiration Date or any earlier termination date shall be deemed to have been abandoned by Lessee and may be disposed of or retained by Lessor as Lessor may desire. The failure by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 26 below. 
8.    Insurance; Indemnity,
8.1    Payment of Premium Increases.
(a) Lessee shall pay to Lessor any Insurance cost increase ("Insurance Cost Increase") occurring during the term of this Lease. Insurance Cost Increase is defined as any increase in the actual cost of the insurance required under Paragraph 8.2(b), 8.3(a) and 8.3(b) ("Required Insurance"), over and above the Base Premium as hereinafter defined calculated on an annual basis. Insurance Cost Increase shall include but not be limited to increases resulting from the nature of Lessee's occupancy, any act or omission of Lessee, requirements of the holder of mortgage or deed of trust covering the Premises, increased 





valuation of the Premises and/or a premium rate increase. The parties are encouraged to fill in the Base Premium in paragraph 1.8 with a reasonable premium for the Required Insurance based on the Agreed Use of the Premises. If the parties fail to insert a dollar amount in Paragraph 1.8, then the Base Premium shall be the lowest annual premium reasonably obtainable for the Required Insurance as of the commencement of the Original Term for the Agreed Use of the Premises. In no event, however, shall Lessee be responsible for any portion of the increase in the premium cost attributable to liability insurance carried by Lessor under Paragraph 8.2(b) in excess of $2,000,000 per occurrence. 
(b) Lessee shall pay any such Insurance Cost Increase to Lessor within 30 days after receipt by Lessee of a copy of the premium statement or other reasonable evidence of the amount due. If the insurance policies maintained hereunder cover other property besides the Premises, Lessor shall also deliver to Lessee a statement of the amount of such Insurance Cost Increase attributable only to the Premises showing in reasonable detail the manner in which such amount was computed. Premiums for policy periods commencing prior to, or extending beyond the term of this Lease, shall be prorated to correspond to the term of this Lease. 
8.2    Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force a Commercial General Liability policy of insurance protecting Lessee and Lessor as an additional insured against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing liability of not less than $1,000,000 per occurrence, subject to an annual aggregate of not less than $2,000,000. Lessee shall add Lessor as an additional insured by means of an endorsement at least as broad as the Insurance Service Organization's "Additional Insured-Managers or Lessors of Premises" Endorsement. The policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an "insured contract" for the performance of Lessor's and Lessee's indemnity obligations under this Lease. Lessee shall provide an endorsement on its liability policy(ies) which provides that its insurance shall be primary to and not contributory with any similar insurance carried by Lessor, whose insurance shall be considered excess insurance only. 
(b) Carried by Lessor. Lessor shall maintain 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. Lessee shall not be named as an additional insured therein. 
8.3     Property Insurance - Building, Improvements and Rental Value. 
(a) Building and Improvements. The Insuring Party shall obtain and keep in force a policy or policies in the name of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender insuring loss or damage to the Premises. The amount of such insurance shall be equal to the full insurable replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lender, but in no event more than the commercially reasonable and available insurable value thereof. Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's personal property shall be insured by Lessee not by Lessor. If the coverage is available and commercially appropriate, such 





policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender or included in the Base Premium), including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed $5,000 per occurrence, and Lessee shall be liable for such deductible amount in the event of an Insured Loss. 
(b) Rental Value. The insuring Party shall obtain and keep in force a policy or policies in the name of Lessor with loss payable to Lessor and any Lender, insuring the loss of the full Rent for one year with an extended period of indemnity for an additional 180 days ("Rental Value Insurance"). Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Lessee, for the next 12 month period. Lessee shall be liable for any deductible amount in the event of such loss. 
(c) Adjacent Premises. If the Premises are part of a larger building, or of a group of buildings owned by Lessor which are adjacent to the Premises, the Lessee shall pay for any increase in the premiums for the property insurance of such building or buildings if said increase is caused by Lessee's acts, omissions, use or occupancy of the Premises. 
8.4     Lessee's Property; Business Interruption Insurance; Worker's Compensation Insurance. 
(a) Property Damage. Lessee shall obtain and maintain insurance coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such insurance shall be full replacement cost coverage. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility installations. Lessee shall 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 in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils. 
(c) Worker's Compensation Insurance. Lessee shall obtain and maintain Worker's Compensation Insurance in such amount as may be required by Applicable Requirements, including applicable state statutes, and provide Lessor with evidence of such coverage. Such policy shall include a Waiver of Subrogation endorsement. Lessee shall provide Lessor with a copy of such endorsement along with the certificate of insurance or copy of the policy required by paragraph 8.5.
(d) No Representation of Adequate Coverage. Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee's property, business operations or obligations under this Lease. 





(e) Commercial Automobile Insurance. Lessee shall obtain and maintain commercial automobile liability insurance, including non-owned and hired automobile liability. Such insurance shall provide combined single limits of not less than $1,000,000.00 and Lessee shall provide Lessor with evidence of such coverage. Lessee shall add Lessor as an additional insured by means of an endorsement. 
8.5     Insurance Policies. Insurance required herein shall be by companies maintaining during the policy term a "General Policyholders Rating" of at least A-, VII, as set forth in the most current issue of "Best's Insurance Guide", or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of policies of such insurance or certificates with copies of the required endorsements evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or subject to modification except after 30 days prior written notice to Lessor to the extent Lessee's Insurer is willing to commit to provide such notice. If such a policy is canceled for non-payment of premiums, 10 days notice shall be given to Lessor. If requested by Lessor, Lessee shall furnish Lessor with evidence of renewal or “insurance binders” evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fail to procure and maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same. 
8.6     Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the 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 perils required to be insured against herein. The effect of such releases and waivers is not limited by the amount of insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby. 
8.7     Indemnity. Except for Lessor's gross negligence or willful misconduct, Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor's master or ground lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, liens, judgments, penalties, attorneys' and consultants' fees, expenses and/or liabilities arising out of, involving, or in connection with, the use and/or occupancy of the Premises by Lessee. If any action or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee shall upon notice defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified. 
8.8    Exemption of Lessor and its Agents from Liability. Except to the extent caused by the gross negligence of willful misconduct of Lessor, and to the maximum extent allowed by law, neither Lessor nor its agents shall be liable under any circumstances for: (i) injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee's employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, indoor air quality, the presence of mold or from the breakage, 





leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the building 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 Lessor or from the failure of Lessor or its agents to enforce the provisions of any other lease in the Project, or (iii) injury to Lessee's business or for any loss of income or profit therefrom. Instead, it is intended that Lessee's sole recourse in the event of such damages or injury be to file a claim on the insurance policy(ies) that Lessee is required to maintain pursuant to the provisions of paragraph 8. 
8.9     Failure to Provide Insurance. Lessee acknowledges that any failure on its part to obtain or maintain the insurance required herein will expose Lessor to risks and potentially cause Lessor to incur costs not contemplated by this Lease, the extent of which will be extremely difficult to ascertain. Accordingly, for any month or portion thereof that Lessee does not maintain the required insurance and/or does not provide Lessor with the required binders or certificates evidencing the existence of the required insurance, the Base Rent shall be automatically increased, without any requirement for notice to Lessee, by an amount equal to 10% of the then existing Base Rent or $100, whichever is greater. The parties agree that such increase in Base Rent represents fair and reasonable compensation for the additional risk/ costs that Lessor will incur by reason of Lessee's failure to maintain the required insurance. Such increase in Base Rent shall in no event constitute a waiver of Lessee's Default or Breach with respect to the failure to maintain such insurance, prevent the exercise of any of the other rights and remedies granted hereunder, nor relieve Lessee of its obligation to maintain the insurance specified in this Lease. 
9.    Damage or Destruction.
9.1    Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations, which can reasonably be 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 the damage or destruction as to whether or not the damage is Partial or Total. Notwithstanding the foregoing, Premises Partial Damage shall not include damage to windows, doors, and/or other similar items which Lessee has the responsibility to repair or replace pursuant to the provisions of Paragraph 7.1. 
(b) "Premises Total Destruction" shall mean damage or destruction to the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be 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 the damage or destruction as to whether or not the damage is Partial or Total. 
(c) "Insured Loss" shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3 (a), irrespective of any deductible amounts or coverage limits involved. 





(d) "Replacement Cost" shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation. 
(e) "Hazardous Substance Condition" shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance, in, on, or under the Premises which requires restoration. 
9.2     Partial Damage - Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor's election, make the repair of any damage or destruction the total cost to repair of which is $10,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose, Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds (except as to the deductible which is Lessee's responsibility) as and when required to complete said repairs. In the event, however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written notice of such shortage and request therefore. If Lessor receives said funds or adequate assurance thereof within said 10 day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10 days thereafter to: (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect, or (Ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction, Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party. 
9.3     Partial Damage - Uninsured Loss. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), Lessor may either: (i) repair such damage as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective 60 days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within 10 days after receipt of the termination notice to give written notice to Lessor of Lessee's commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days after making such commitment. In such event this Lease shall continue 





in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not make the required commitment, this Lease shall terminate as of the date specified in the termination notice. 
9.4     Total Destruction. Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, this Lease shall terminate 60 days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lessor's damages from Lessee, except as provided in Paragraph 8.6. 
9.5     Damage Near End of Term. If at any time during the last 6 months of this Lease there is damage for which the cost to repair exceeds six month's Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective 60 days following the date of occurrence of such damage by giving a written termination notice to Lessee within 30 days after the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor 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 10 days after Lessee's receipt of Lessor's written notice purporting to terminate this 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 Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee's option shall be extinguished. 
9.6    Abatement of Rent; Lessee's Remedies.
(a) Abatement. In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired, but not to exceed the proceeds received from the Rental Value insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein. 
(b) Remedies. If Lessor is obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within 90 days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee's election to terminate this Lease on a date not less than 60 days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within 30 days thereafter, 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 shall continue in full force and effect. "Commence" shall mean either the unconditional authorization of 





the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs. 
9.7    Termination; Advance Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit as has not been, or is not then required to be, used by Lessor.
10.    Real Property Taxes.
10.1    Definition. As used herein, the term "Real Property Taxes" shall include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal income or estate taxes); improvement bond; and/or license fee imposed upon or levied against any legal or equitable interest of Lessor in the Premises or the Project, Lessor's right to other income therefrom, and/or Lessor's business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Building address and where the proceeds so generated are to be applied by the city, county or other local taxing authority of a jurisdiction within which the Premises are located. Real Property Taxes shall also include any tax, fee, levy, assessment or charge, or any increase therein: (i) imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Premises, and (ii) levied or assessed on machinery or equipment provided by Lessor to Lessee pursuant to this Lease. 
10.2     
(a) Payment of Taxes. Lessor shall pay the Real Property Taxes applicable to the Premises provided, however, that Lessee shall pay to Lessor the amount, if any, by which Real Property Taxes applicable to the Premises increase over the fiscal tax year during which the Commencement Date Occurs (“Tax Increase”). Payment of any such Tax Increase shall be made by Lessee to Lessor within 30 days after receipt of Lessor’s written statement setting forth the amount due and computation thereof. If any such taxes shall cover any period of time prior to or after the expiration or termination of this Lease, Lessee's share of such taxes shall be prorated to cover only that portion of the tax bill applicable to the period that this Lease is in effect. In the event Lessee incurs a late charge on any Rent payment, Lessor may estimate the current Real Property Taxes, and require that the Tax Increase be paid in advance to Lessor by Lessee monthly in advance with the payment of the Base Rent. Such monthly payment shall be an amount equal to the amount of the estimated installment of the Tax Increase divided by the number of months remaining before the month in which said installment becomes delinquent. When the actual amount of the applicable Tax Increase is known, the amount of such equal monthly advance payments shall be adjusted as required to provide the funds needed to pay the applicable Tax Increase. If the amount collected by Lessor is insufficient to pay the Tax Increase when due, Lessee shall pay Lessor, upon demand, such additional sums as are necessary to pay such obligations. Advance payments may be intermingled with other moneys of Lessor and shall not bear interest. In the event of a Breach by Lessee in the performance of its obligations under this Lease, then any such advance payments may be treated by Lessor as an additional Security Deposit. 





(b) Additional Improvements. Notwithstanding anything to the contrary in this Paragraph 10.2, Lessee shall pay to Lessor upon demand therefor the entirety of any increase in Real Property Taxes assessed by reason of Alterations or Utility Installations placed upon the Premises by Lessee or at Lessee's request or by reason of any alterations or improvements to the Premises made by Lessor subsequent to the execution of this Lease by the Parties. 
10.3     Joint Assessment. If the Premises are not separately assessed, Lessee's liability shall be an equitable proportion of the Tax Increase for all of the land and improvements included within the tax parcel assessed, such proportion to be conclusively determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. 
10.4    Personal Property Taxes. Lessee shall pay, prior to delinquency, all taxes assessed against and levied upon Lessee Owned Alterations, Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee. When possible, Lessee shall cause its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property 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 10 days after receipt of a written statement setting forth the taxes applicable to Lessee's property.
11.    Utilities and Services. Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon. If any such services are not separately metered or billed to Lessee, Lessee shall pay a reasonable proportion, to be determined by Lessor, of all charges jointly metered or billed. There shall be no abatement of rent and Lessor shall not be liable in any respect whatsoever for the inadequacy, stoppage, interruption or discontinuance of any utility or service due to riot, strike, labor dispute, breakdown, accident, repair or other cause beyond Lessor’s reasonable control or in cooperation with governmental request or directions.
12. Assignment and Subletting. 
12.1    Lessor's Consent Required.
(a) Lessee shall not 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 Premises without Lessor's prior written consent.
(b) Unless Lessee is a corporation and its stock is publicly traded on a national stock exchange, a change    in the control of Lessee shall constitute an assignment requiring consent. The transfer, on a cumulative basis, of 25% or more of the voting control of Lessee shall constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or series of transactions    (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs,which results or will result 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 this Lease or at the time of the most recent assignment to 





which Lessor has consented, or    as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent. "Net Worth of Lessee" shall mean the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles.
(d) An assignment or subletting without consent shall, at Lessor's option, be a Default curable after notice per Paragraph 13.1(c), or a non curable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a non curable Breach, Lessor may either: (1) terminate this Lease, or (ii) upon 30 days written notice, increase the monthly Base Rent to 110% of the Base Rent then in effect. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to 110% of the price previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of 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 be limited to compensatory damages and/or injunctive relief.
(f) Lessor may reasonably withhold consent to a proposed assignment or subletting if Lessee is in Default at the time consent is requested.(g) Notwithstanding the foregoing, allowing a de minimis portion of the Premises, ie. 20 square feet or less, to be used by a third party vendor in connection with the installation of a vending machine or payphone shall not constitute a subletting.
12.2    Terms and Conditions Applicable 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 or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be    performed by Lessee. 
(b) Lessor may accept Rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for Lessee's Default or Breach. 
(c) Lessor's consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee’s obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor’s remedies against any other person or entity responsible therefor to Lessor, or any security held by Lessor. 
(e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor's determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/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 information and/or documentation as may be reasonably requested. (See also Paragraph 36). Lessee shall pay Lessor’s attorneys’ fees and costs in processing and documenting any assignment or subletting. 
(f) Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment, entering into such sublease, or entering into possession of the Premises or any portion thereof, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing. 
 (g) Lessor's consent to any assignment or subletting shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease unless such transfer is specifically consented to by Lessor in writing. (See Paragraph 39.2) 
(h) Lessee shall pay to Lessor fifty percent (50%) of any "Transfer Premium" (as herein defined) derived by Lessee from any assignment of subletting after first deducting all of Lessee's marketing costs (including without limitation, tenant improvements, commissions and incentives) associated with such sublease or assignment. For purposes of this Lease "Transfer Premium" means (i) for an assignment of the Lease, all consideration paid or payable to Lessee thereafter; and (ii) for a sublease all additional rent or other consideration paid by such subtenant in excess of the Rent payable by Lessee under this Lease (on a monthly basis during the term and on a per rentable square foot basis if less than the entire Premises is sublet). The Transfer Premium shall be paid to Lessor within ten (10) days after Lessee receives the Transfer Premium.
12.3     Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein: 
 (a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest in all Rent payable on any sublease, and Lessor may collect such Rent and 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 Lessor exceeds Lessee’s then outstanding obligations any such excess shall be refunded to Lessee. Lessor shall not, by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee by any failure of Lessee to perform and comply with any of the Lessee’s obligations to such  sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee's obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without 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 undertake the obligations of the sublessor under such sublease from 





the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior Defaults or Breaches of such sublessor. 
(c) Any matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor. 
(d) No sublessee shall further assign or sublet all or any part of the Premises without Lessor's prior written consent. 
(e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee. 
13.    Default; Breach; Remedies.
13.1    Default; Breach. A "Default" is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or Rules and Regulations under this Lease. A "Breach" is defined as the occurrence of one or more of the following Defaults, and the failure of Lessee to cure such Default within any applicable grace period: 
(a) The abandonment of the Premises; or the vacating of the Premises without providing a commercially reasonable level of security, or where the coverage of the property insurance described in Paragraph 8.3 is jeopardized as a result thereof, or without providing reasonable assurances to minimize potential vandalism. 
(b) The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to provide reasonable evidence of insurance or surety bond, or to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of 3.5 business days following written notice to Lessee. THE ACCEPTANCE BY LESSOR OF A PARTIAL PAYMENT OF RENT OR SECURITY DEPOSIT SHALL NOT CONSTITUTE A WAIVER OF ANY OF LESSOR'S RIGHTS, INCLUDING LESSOR'S RIGHT TO RECOVER POSSESSION OF THE PREMISES. 
(c) The failure of Lessee to allow Lessor and/or its agents access to the Premises or the commission of waste, act or acts constituting public or private nuisance, and/or an illegal activity on the Premises by Lessee, where such actions continue for a period of 3 business days following written notice to Lessee.
(d) The failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized assignment or subletting, (iv) and Estoppel Certificate or financial statements, (v) a requested subordination, (vi) evidence concerning any guarant and/or Guarantor, (vii) any document requested under Paragraph 42, (viii) material safety data sheets (MSDS), or (ix) any other documentation or information which Lessor 





may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of 10 days following written notice to Lessee.
(e) A Default by Lessee as to the terms, covenants, conditions or provisions 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 more than 30 days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said 30 day period and thereafter diligently prosecutes such cure to completion.
(f) The occurrence of any of the following events: (i) the making of any general 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 filed against Lessee, the same is dismissed within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where such seizure is not discharged within 30 days; provided, however, in the event that any provision of this subparagraph (e) is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions.
(g) The discovery that any financial statement of Lessee or of any Guarantor given to Lessor was materially false.
(h) If the performance of Lessee's obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's liability with respect to this Lease other than in accordance with the terms of such guaranty,    (iii) a Guarantor's becoming insolvent or the subject of a bankruptcy filing,(iv) a Guarantor's refusal to honor the guaranty, or (v) a Guarantor's breach of its guaranty obligation on an anticipatory basis, and Lessee's failure, within 60 days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of the time of execution of this Lease.
(i) When this Lease requires service of notice, that notice shall replace (rather than supplement) any equivalent or similar statutory notices, including any notice required pursuant to the provisions and conditions of Section 1161 of the California Code of Civil Procedure or any similar statute. When a statute requires service of notice in a particular manner, service of that notice (or similar notice required by this Lease) in the manner required by this Lease, shall replace, and satisfy the statutory service of notice procedure or any similar or successor statute.
13.2 Remedies. If Lessee fails to perform any of its affirmative duties or obligations, within 10 days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duty or obligation on Lessee's behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. Lessee shall pay to Lessor an amount equal to 115% of the costs and expenses incurred by Lessor in such performance upon receipt of an 





invoice therefore. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of 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 lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover from Lessee:    (1) the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result there from, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys’ fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent. Efforts by Lessor to mitigate damages caused by Lessee's Breach of this Lease shall not waive Lessor's right to recover any damages to which Lessor is otherwise entitled. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute. 
(b) Continue the Lease and Lessee's right to possession and recover the Rent as it becomes due, in which event Lessee may sublet or assign, subject only to reasonable limitations, Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor's interests, shall not constitute a termination of the Lessee's right to possession. 
(c) Pursue any other remedy now or hereafter available under the laws or judicial decisions of the slate wherein the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee's right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee's occupancy of the Premises. 





13.3     Inducement Recapture. Any agreement for free or abated rent or other charges, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee's entering into this Lease, all of which concessions are hereinafter referred to as "Inducement Provisions," shall be deemed conditioned 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 this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor under such an inducement Provision shall be immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this paragraph shall not be deemed a waiver by Lessor of the provisions of this paragraph unless specifically so stated in writing by Lessor at the time of such acceptance. 
13.4     Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent shall not be received by Lessor within 5 days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall immediately pay to Lessor a one-time late charge equal to 3% of each such overdue amount or $100, whichever is greater. The Parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for 3 consecutive installments of Base Rent, then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor's option, become due and payable quarterly in advance. 
13.5     Interest. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor, when due as to scheduled payments (such as Base Rent) or within 30 days following the date on which it was due for non-scheduled payment, 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 the rate of 10% 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 Paragraph 13.4. 
13.6    Breach by Lessor.
(a) Notice of Breach. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than 30 days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor's obligation is such that more than 30 days are reasonably required for its performance, then Lessor shall not be in breach if performance is commenced within such 30 day period and thereafter diligently pursued to completion. 





(b) Performance by Lessee on Behalf of Lessor. In the event that neither Lessor nor Lender cures said breach within 30 days after receipt of said notice, or if having commenced said cure they do not diligently pursue it to completion, then Lessee may elect to cure said breach at Lessee's expense and offset from Rent the actual and reasonable cost to perform such cure, provided however, that such offset shall not exceed an amount equal to the greater of one month's Base Rent or the Security Deposit, reserving Lessee's right to seek reimbursement from Lessor for any such expense in excess of such offset, Lessee shall document the cost of said cure and supply said documentation to Lessor. 
14.     Condemnation, If the Premises or any portion thereof are taken under the power of eminent 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 condemning authority 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 occupied by any building, is taken by Condemnation, Lessee may, at Lessee's option, to be exercised in writing within 10 days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within 10 days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation paid by the condemnor for Lessee's relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnation.
15.    Brokerage Fees.
15.1     Additional Commission. [INTENTIONALLY DELETED] 
15.2    Assumption of Obligations. [INTENTIONALLY DELETED] 
15.3     Representations and Indemnities of Broker Relationships. Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) in connection with this Lease, and that no one other than said named Brokers is entitled to any commission or finder's fee in connection herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any 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 and deliver to the Requesting Party a statement in writing in form similar to the then most current "Estoppel Certificate" form published by the AIR Commercial Real Estate Association, or any commercially reasonable form Estoppel Certificate prepared by a Lender, plus such additional information, confirmation and/or statements as may be reasonably requested by the Requesting Party. 
(b) If the Responding Party shall fail to execute or deliver the Estoppel Certificate within such 10 day period, the Requesting Party may execute an Estoppel Certificate stating that: (i) the Lease is in full force and effect without modification except as may be represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting Party's performance, and (iii) if Lessor is the Requesting Party, not more than one month's rent has been paid in advance. Prospective purchasers and encumbrancers may rely upon the Requesting Party's Estoppel Certificate, and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate. In addition, Lessee acknowledges that any failure on its part to provide such an Estoppel Certificate will expose Lessor to risks and potentially cause Lessor to incur costs not contemplated by this Lease, the extent of which will be extremely difficult to ascertain. Accordingly, should the Lessee fail to execute and/or deliver a requested Estoppel Certificate in a timely fashion the monthly Base Rent shall be automatically increased, without any requirement for notice to Lessee, by an amount equal to 10% of the then existing Base Rent or $100, whichever is greater for remainder of the Lease. The Parties agree that such increase in Base Rent represents fair and reasonable compensation for the additional risk/costs that Lessor will incur by reason of Lessee's failure to provide the Estoppel Certificate. Such increase in Base Rent shall in no event constitute a waiver of Lessee's Default or Breach with respect to the failure to provide the Estoppel Certificate nor prevent the exercise of any of the other rights and remedies granted hereunder. 
(c) If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee and all Guarantors shall within 10 days after written notice from Lessor deliver to any potential lender or purchaser designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee's financial statements for the past 3 years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth. 
17.     Definition of Lessor. The term "Lessor" as used herein shall mean the 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 the event of a transfer of Lessor's title or interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor. Upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shaft be binding only upon the Lessor as herein above defined. 
18.    Severabllity. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.





19.    Days. Unless otherwise specifically indicated to the contrary, the word "days" as used in this Lease shall mean and refer to calendar days.
20.    Limitation on Liability. The obligations of Lessor under this Lease shall not constitute personal obligations of Lessor or its partners, members, directors, officers or shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against Lessor's partners, members, directors, officers or shareholders, or any of their personal assets for such satisfaction.
21.    Time of Essence. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease.
22.     No Prior or Other Agreements; Broker Disclaimer. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this 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 default or breach hereof by either Party. 
23.    Notices.
23.1    Notice Requirements. All notices required or permitted by this Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by Federal Express or other recognized overnight courier, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease shall be that Party's address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate in writing. 
23.2     Date of Notice. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given 72 hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantees next day delivery shall be deemed given 24 hours after delivery of the same to the Postal Service or courier. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.
24.    Waivers.
(a)    No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any 





subsequent Default or Breach by Lessee of the same or of any other term, covenant or condition hereof. Lessor's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor'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 or provisions of this Lease requiring such consent. 
(b)     The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment. 
(c)    THE PARTIES AGREE THAT THE TERMS OF THIS LEASE SHALL GOVERN WITH REGARD TO ALL MATTERS RELATED THERETO AND HEREBY WAIVE THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE TO THE EXTENT THAT SUCH STATUTE IS INCONSISTENT WITH THIS LEASE.
25.    Disclosures Regarding The Nature of a Real Estate Agency Relationship.
(a)    When entering into a discussion with a real estate agent regarding a real estate transaction, a Lessor or Lessee should from the outset understand what type of agency relationship or representation it has with the agent or agents in the transaction. Lessor and Lessee acknowledge being advised by the Brokers in this transaction, as follows: 
(i)     Lessor's Agent. A Lessor's agent under a listing agreement with the Lessor acts as the agent for the Lessor only. A Lessor's agent or subagent has the following affirmative obligations: To the Lessor: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessor. To the Lessee and the Lessor: a. Diligent exercise 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 all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not Involve the affirmative duties set forth above. 
(ii)    Lessee's Agent. An agent can agree to act as agent for the Lessee only. In these situations, the agent is not the Lessor's agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Lessor. An agent acting only for a Lessee has the following affirmative obligations. To the Lessee: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessee. To the Lessee and the Lessor: a. Diligent exercise 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 all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above. 





(iii)     Agent Representing Both Lessor and Lessee. A real estate agent, either acting directly or through one or more associate licenses, can legally be the agent of both the Lessor and the Lessee in a transaction, but only with the knowledge and consent of both the Lessor and the Lessee. In a dual agency situation, the agent has the following affirmative obligations to both the Lessor and the Lessee: a. A fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either Lessor or the Lessee. b. Other duties to the Lessor and the Lessee as stated above in subparagraphs (t) or (ii). In representing both Lessor and Lessee, the agent may not without the express permission of the respective Party, disclose to the other Party that the Lessor will accept rent in an amount less than that indicated in the listing or that the Lessee is willing to pay a higher rent than that offered. The above duties of the agent in a real estate transaction do not relieve a Lessor or Lessee from the responsibility to protect their own interests. Lessor and Lessee should carefully read all agreements to assure that they adequately express their understanding of the transaction. A real estate agent is a person qualified to advise about real estate. If legal or tax advice is desired, consult a competent professional. 
(b)     Brokers have no responsibility with respect to any default or breach hereof by either Party. The Parties agree that no lawsuit or other legal proceeding involving any breach of duty, error or omission relating to this Lease may be brought against Broker more than one year after the Start Date and that the liability (including court costs and attorneys' fees), of any Broker with respect to any such lawsuit and/or legal proceeding shall not exceed the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker's liability shall not be applicable to any gross negligence or willful misconduct of such Broker. 
(c)    Lessor and Lessee agree to identify to Brokers as "Confidential" any communication or information given Brokers that is considered by such Party to be confidential.
26.     No Right To Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over, then the Base Rent shall be increased to 150% of the Base Rent applicable immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee. 
27.     Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity. 
28.     Covenants and Conditions; Construction of Agreement. All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the Parties only and shall not be considered a part of this Lease. Whenever required 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, but rather according to its fair meaning as a whole, as if both Parties had prepared it. 
29.    Binding Effect; Choice of Law. This Lease shall be binding upon the Parties, their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located,





30.    Subordination; Attornment; Non-Disturbance.
30.1    Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, "Security Device"), now or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together referred to as "Lender") shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, whereupon this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof. 
30.2    Attornment. In the event that Lessor transfers title to the Premises, or the Premises are acquired by another upon the foreclosure or termination of a Security Devise to which this Lease is subordinated (i) Lessee shall, subject to the non-disturbance provisions of Paragraph 30.3,attorn to such new owner, and upon request, enter into a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder of the term hereof, or, at the election of the new owner, this Lease will automatically become a new lease between Lessee and such new owner, and (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor's obligations, except that such new owner shall not: (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (b) be subject to any offsets or defenses which Lessee might have against any prior lessor, (c) be bound by prepayment of more than one month's rent, or (d) be liable for the return of any security deposit paid to any prior lessor which was not paid or credited to such new owner. 
30.3     Non-Disturbance. With respect to Security Devices entered into by Lessor after the execution of this Lease, Lessee's subordination of this Lease shall be subject to receiving a commercially reasonable non-disturbance agreement (a "Non-Disturbance Agreement") from the Lender which Non-Disturbance Agreement provides that Lessee's possession of the Premises, and this Lease, including any options to extend the term hereof, will not be disturbed so long as Lessee is not in Breach hereof and attorns to the record owner of the Premises. Further, within 60 days after the execution of this Lease, Lessor shall, if requested by Lessee, use its commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security Device which is secured by the Premises. In the event that Lessor is unable to provide the Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee's option, directly contact Lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement. 
30.4     Self-Executing. The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attornment and/or Non-Disturbance Agreement provided for herein. 





31.     Attorneys' Fees. If any Party or Broker brings an action or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term, "Prevailing Party" shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be entitled to attorneys' fees, costs and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence for such services and consultation). 
32.     Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall have 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 purpose of showing the same to prospective purchasers, lenders, or tenants, and making such alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary or desirable and the erecting, using and maintaining of utilities, services, pipes and conduits through the Premises and/or other premises as long as there is no material adverse effect to Lessee's use of the Premises, All such activities shall be without abatement of rent or liability to Lessee. 
33.     Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor's prior written consent. Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction. 
34.     Signs. Lessor may place on the Premises ordinary "For Sale" 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 upon the Premises without Lessor's prior written consent. All signs must comply with all Applicable Requirements. 
35.     Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing subtenancies. Lessor's failure within 10 days following any such event to elect to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor's election to have such event constitute the termination of such interest. 
36.     Consents. Except as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed or conditioned. Lessor's actual reasonable costs and expenses    (not to exceed $1,500.00) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents only to an assignment, or a subletting shall be paid by Lessee upon receipt of an invoice and 





supporting documentation therefor. Lessor's consent to any act, assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor's consent shall not preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and In reasonable detail within 10 business days following such request. 
37.    Guarantor.
37.1    Execution. The Guarantors, if any, shall each execute a guaranty in the form most recently published by the AIR Commercial Real Estate Association or such other commercially reasonable form prepared by Lessor.
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 Guarantor's behalf to obligate Guarantor, and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect.
38.    Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions on Lessee's part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof.
39.    Options. If Lessee is granted an Option, as defined below, then the following provisions shall apply:
39.1    Definition. "Option" shall mean: (a) the right to extend or reduce the term of or renew this Lease or to extend or reduce the term of or renew any lease that Lessee has on other property of Lessor; (b) the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase, the right of first offer to purchase or the right of first refusal to purchase the Premises or other property of Lessor.
39.2    Intentionally Blank
 39.3    Multiple Options. In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot 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 and continuing until said Default is cured, (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee), or (iii) during the time Lessee is in Breach of this Lease.





(b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of Paragraph 39.4(a). 
(c) An Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and prior to the commencement of the extended term or completion of the purchase, (i) Lessee fails to pay Rent for a period of 30 days after such Rent becomes due or (ii) if Lessee commits a Breach of this Lease. 
40.     Multiple Buildings. If the Premises are a part of a group of buildings controlled by Lessor, Lessee agrees that it will abide by and conform to all reasonable rules and regulations which Lessor may make from time to time for the management, safety, and care of said properties, including the care and cleanliness of the grounds and including the parking, loading and unloading of vehicles, and to cause its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform. Lessee also agrees to pay its fair share of common expenses incurred in connection with such rules and regulations. 
41.     Security Measures. Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not include the cost of guard service or other security measures, 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 the consent or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights, dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate any such easement rights, dedication, map or restrictions. 
43.     Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or -so much thereof as it was not legally required to pay. A Party who does not initiate suit for the recovery of sums paid "under protest" within 6 months shall be 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, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each Party shall, within 30 days after request, deliver to the other Party satisfactory evidence of such authority. 





(b)  If this Lease is executed by more than one person or entity as "Lessee", each such person or entity shall be jointly and severally liable hereunder. It is agreed that any one of the named Lessees shall be empowered to execute any amendment to this Lease, or other document ancillary thereto and bind all of the named Lessees, and Lessor may rely on the same as if all of the named Lessees had executed such document. 
(c)  This Lease may be executed by the Parties in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
45.    Conflict. Any conflict between the printed provisions of this Lease and typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions.
46.     Offer. Preparation of this Lease by either Party or their agent and submission of same to 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 all Parties hereto. 
47.     Amendments. This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. As long as they do not materially change Lessee's obligations hereunder, Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises. 
48.    Waiver of Jury Trial. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR ARISING OUT OF THIS AGREEMENT.
49.    Arbitration of Disputes. An Addendum requiring the Arbitration of disputes between the Parties and/or Brokers arising out of this Lease ❑is     ❑ is not attached to this Lease.
50.    Americans with Disabilities Act. Since compliance with the Americans with Disabilities Act (ADA) is dependent upon Lessee's specific use of the Premises, Lessor makes no warranty or representation as to whether or not the Premises comply with ADA or any similar legislation. In the event that Lessee's use of the Premises requires modifications or additions to the Premises in order to be in ADA compliance, Lessee agrees to make any such necessary modifications and/or additions at Lessee's expense. 
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES. 
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO: 





1.    SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
2.    RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES,















THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE. 
WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES 15 LOCATED. 
 The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures.





	
			
	Executed at: San Diego, CA
	 
	Executed at: San Diego, CA

	On: 10/31/12
	 
	On: 31 Oct 2012

	By LESSOR:
	 
	By LESSEE:

	Cal-Sorrento, Ltd., a California limited Partnership, By H&M Investments
	 
	Halozyme Therapeutics, Inc., a Delaware  corporation

	 
	 
	 

	By: /s/ Steve Higgins
	 
	By: /s/ Kurt Gustafson

	Name Printed: Steve Higgins
	 
	Name Printed: Kurt Gustafson

	Title: General Partner
	 
	Title: Chief Financial Officer

	 
	 
	 

	By:
	 
	By: LESSEE: /s/ Kurt Gustafson

	Name Printed:
	 
	Halozyme, Inc., a California corporation

	Title:
	 
	Name Printed: Kurt Gustafson

	Address:
	 
	Title: Chief Financial Officer

	 
	 
	Address:

	 
	 
	 

	Telephone:
	 
	Telephone:

	Facsimile:
	 
	Facsimile:

	Email:
	 
	Email:

	Email:
	 
	Email:

	Federal ID No.
	 
	Federal ID No.

	 
	 
	 

	 
	 
	 

	BROKER:
	 
	BROKER:

	 
	 
	 

	 
	 
	 

	Att:
	 
	Att:

	Title:
	 
	Title:

	Address:
	 
	Address:

	 
	 
	 

	Telephone:( )
	 
	Telephone:( )

	Facsimile:( )
	 
	Facsimile:( )

	Email:
	 
	Email:

	Federal ID No.
	 
	Federal ID No.

	Broker/Agent DRE License
	 
	Broker/Agent DRE License






NOTICE: These forms are often modified to meet changing requirements of law and industry needs. Always write or call to make sure you are utilizing the most current form: AIR Commercial Real Estate Association, 800 W 6th Street, Suite 800, Los Angeles, CA 90017. 
Telephone No. (213) 687-8777. Fax No.: (213) 687-8616. 





© Copyright 2001 - By AIR Commercial Real Estate Association. All rights reserved. No part of these works may be reproduced in any form without permission in writing.









ADDENDUM TO STANDARD SINGLE-TENANT OFFICE LEASE- GROSS
THIS ADDENDUM TO STANDARD SINGLE-TENANT OFFICE LEASE-GROSS ("Addendum") is attached to and made part of that certain Standard Single-Tenant Office Lease - Gross, dated for reference purposes only as October 24, 2012 ("Lease"), by and between CAL-SORRENTO, LTD., a California limited partnership ("Lessor") and HALOZYME THERAPEUTICS, INC, a Delaware corporation, and HALOZYME, INC., a California corporation, (collectively "Lessee"). Should the provisions and conditions of this Addendum conflict with the provisions and conditions of the Lease, the provisions and conditions of this Addendum shall prevail. All references in the Lease and in this Addendum to the "Lease" shall be construed to mean the Lease (and all exhibits attached to the Lease), as amended and  supplemented by this Addendum. All capitalized terms not defined herein shall have the meanings set forth in the -ease. This Addendum modifies the Lease in the following particulars only. 
51.    Base Rent Schedule.
Subject to the provisions and conditions of Paragraph 52 hereof, Lessor and Lessee agree to the following Base Rent schedule (the "Base Rent Schedule")
	
				
	Lease
	Monthly Base Rent Per
	Percentage
	Monthly Base

	Months
	Rentable Square Foot
	Increase
	Rent

	1-12
	$1.35
	3%
	$24,300.00

	13-24
	$1.39
	3%
	$25,029.00

	25-36
	$1.43
	3%
	$25,770.60

	37-48
	$1.47
	3%
	$26,512.20

	49-60
	$1.51
	3%
	$27,253.80






52.    Base Rent Abatement.
Notwithstanding anything to the contrary contained herein, Base Rent shall be abated in full for the first month of the Term ($24,300.00) and Lessee shall not be responsible for fifty percent (50%) of each payment of Base Rent otherwise due in months 2 through 12 of the Term ($133,650.00) (collectively, the "Rent Abatement Months"); provided, however, if Lessee is in monetary Default under this Lease during any of the Rent Abatement Months (i.e., failure to pay the fifty percent (50%) of Base Rent or any additional rent that is due for any of the Rent Abatement Months) beyond any applicable notice and cure period provided, then Lessee shall be responsible for payment of one hundred percent (100%) of the Base Rent for such month, as set forth in the Base Rent Schedule set forth in Paragraph 51 above. Notwithstanding anything to the contrary contained herein, Lessee shall remain obligated to pay to Lessor the Insurance Cost Expense and Property Tax Increase during any month in which the Base Rent is abated pursuant to the provisions and conditions of this Paragraph 52. 
53.    Tenant Improvements.





Lessor shall provide Lessee with Turn Key Tenant Improvements as set forth in the Work Letter. 
54.    Option To Renew.
Lessor hereby grants to Lessee two (2) consecutive three (3) year options (each, an "Extension Term") to renew the Lease for the Premises upon six (6) months prior written notice (the "Extension Notice"). Provided Lessee has timely delivered the Extension Notice, the then current Term of the Lease shall be extended for the applicable Extension Term, and all terms covenants and conditions of the Lease shall remain unmodified and in full force and effect, except that the Base Rent shall be as set forth herein. Notwithstanding anything to the contrary contained herein, once Lessee has timely delivered the Extension Notice, the Term of the Lease shall be extended by the applicable Extension Term and Lessee shall not have the right to cancel or otherwise terminate the Extension Notice (other than as expressly described below). 
The Base Rent for each Extension Term shall be the then current "Fair Market Rental Rate" (as herein defined). As used in this Lease, the term "Fair Market Rental Rate" shall mean the terms and conditions, including rent, free rent, tenant improvement allowances (taking into consideration the Lessor provided improvements already within the Premises), brokerage commissions, base years, construction time and all other lease concessions, which non-renewing, non-equity tenants are then receiving in connection with leases of comparable space, in buildings comparable to the building in terms of age, quality, size, location, amenities, freeway signage, quality of construction and appearance. Any improvements, including space upgrades beyond building standard, or capital upgrades paid for by Lessee shall specifically be excluded from the calculation. In addition, Lessor shall consider all elements affecting the lease transaction, including, but not limited to, Lessee's credit worthiness. 
Lessor and Lessee shall negotiate the Fair Market Rental Rate in good faith during the sixty (60) day period after the delivery of the Extension Notice. If Lessor and Lessee are unable to agree upon the Fair Market Rental Rate within this sixty (60) day period, and Lessee elects to proceed with the applicable Extension Term (rather than revoke the Extension Notice), then the Fair Market Rental Rate shall be determined as follows: 
(i)     Lessor and Lessee shall select a mutually acceptable, non-related MAI appraiser or licensed real estate broker with at least ten     (10) years of experience in appraising similar space in San Diego, California, to serve as the arbitrator (the "Arbitrator"). 
(ii)     Lessor and Lessee shall each present their determination of Fair Market Rental Rate to the Arbitrator within the thirty (30) days after the selection of the Arbitrator. 
(iii)     The Arbitrator shall select either Lessor or Lessee's determination of Fair Market Rental Rate, without modification, within thirty (30) days after receipt of both parties' determinations of Fair Market Rental Rate. 
(iv)     The determination of Fair Market Rental Rate selected by the Arbitrator shall be the Base Rent for the first year of the applicable Extension Term and such Base Rent shall be subject to an annual 





increase of 3% (which increase the Arbitrator will consider in determining whether to select Lessor's or Lessee's determination of Fair Market Rent). 
(v)     The party whose estimate of the Fair Market Rental Rate was not selected by the Arbitrator shall be solely responsible for the Arbitrator's fee. 
(vi) 
(vii)    The decision of the Arbitrator described in this Paragraph 54 shall be binding upon the parties. 
Notwithstanding anything to the contrary contained herein, for each Extension Term, the Base Year for the Real Property Taxes and the Insurance Costs shall be adjusted to reflect a then current Base Year (i.e., either the then current year in which the Extension Term is commencing or the immediately prior one) and the Arbitrator shall consider that in determining whether to select Lessor's or Lessee's determination of Fair Market Rent. 
55.     Commencement Of Lease, Expiration of Lease. 
Lessor and Lessee acknowledge and agree that the Commencement Date of the Lease shall occur on the date fourteen (14) days after (i) "Substantial Completion" (as defined in the Work Letter) and (ii) Lessor's delivery to Lessee of possession of the Premises for the purpose of installing its equipment, computer cabling and telecommunicating wiring, its security systems and any other fixtures, furnishings and equipment in order to ready the Premises for the conduct of Tenant's business. Lessor presently estimates that the date of Substantial Completion will be April 1, 2013 (which date may be referred to as the "Target Commencement Date"). The Original Term of this Lease shall expire on January 14, 2018. This Expiration Date is fixed and may only be changed by an amendment to this Lease, executed by Lessee. This Expiration Date will not be adjusted or extended by Lessor's failure to deliver the Premises to Lessee on or before the Target Commencement Date. 
56.    Assignment.
Notwithstanding anything to the contrary contained in this Lease, Lessee shall have the right to assign the Lease, or to sublease all or a portion of its Premises with written notice, without the consent of Lessor, to: (i) any subsidiary or affiliate of Lessee; (ii) any entity resulting from a merger or consolidation with Lessee; or (iii) any entity succeeding to substantially all of the business and assets of Lessee. In the event of any assignment pursuant to the provisions and conditions of this Paragraph 56, the assignee must have either: (i) the same creditworthiness as the Lessee had as of Lease execution, or (ii) reasonable creditworthiness as reasonably determined by Lessor in light of the remaining Term and the obligations of Lessee hereunder. If these conditions are not satisfied, then Lessor's consent to such assignment shall be required pursuant to the provisions and conditions of Paragraph 12 of the Lease. Notwithstanding anything to the contrary contained herein, no assignment or subletting pursuant to the provisions and conditions of this Paragraph 56 shall release Lessee of any obligations under this Lease or alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee under this Lease. 







57.    Hazardous Substances.
Notwithstanding anything to the contrary contained in this Lease, Lessor acknowledges that Lessee uses Hazardous Substances in connection with the conduct of Lessee's business and Lessor does not intend that the provisions of Paragraph 6 of this Lease will have the effect of frustrating, impeding or prohibiting Lessee from operating its business for the Agreed Use. Lessee shall be permitted to use Hazardous Substances in the conduct of its business at the Premises provided Lessee's use, storage and disposal of Hazardous Substances complies with all applicable laws. Prior to the execution of this Lease, Lessor acknowledges that Lessee provided to it a list of all Hazardous Substances used by Lessee in the conduct of its business, and Lessor hereby approves such list. Lessee will from time to time during the term of this Lease provide to Lessor an updated list as Hazardous Substances are added or removed from the list in connection with Lessee's business operations, specifically with regards to the conduct of Lessee's business at the Premises. Lessor shall not unreasonably withhold consent to any Hazardous Substances added by Lessee to an updated list so long as such added Hazardous Substances are similar to the Hazardous Substances reflected in any prior list provided to Lessor. 
58.    Lessee Alterations.
Notwithstanding anything to the contrary contained in Paragraph 7.3(b) of this Lease, if Lessee desires to make any Alterations during the term of this Lease and requests Lessor's consent thereto, Lessor will specify at that time whether it will require any such Alterations to be removed when the term of this Lease expires or the Lease otherwise terminates. If Lessor fails to specify, Lessee may leave such Alterations in place (meaning Lessee will have no obligation to remove any such Alterations and repair any damage caused by such removal). Further, Lessor acknowledges and agrees that all improvements made to the Premises pursuant to the Work Letter or made to the Remainder Area will remain in place when the term of this Lease expires or the Lease otherwise terminates. 
59.    Lessor Additional Permissions.
Lessor grants Lessee permission to install, at Lessee's cost, fiber cabling between its existing buildings and the Premises at 11436 Sorrento Valley Road. It is understood that this installation will require trenching across the parking lot serving the building located at 11.436 Sorrento Valley Road and a wall punch-through in order to bring the cabling into the building. Lessor grants Lessee permission to install, at Lessee's cost, a sign upon the Premises with Lessee's name, which sign may be either on the face of the building or in the form of a monument on the front lawn.







	
		
	LESSOR
	LESSEE

	 
	 

	CAL-SORRENTO, LTD,. a California limited partnership, by H&M Investments
	HALOZYME THERAPEUTICS, INC., a Delaware corporation

	 
	 

	Signature: /s/ Steve Higgins
	Signature: /s/ Kurt Gustafson

	Steve Higgins
	Kurt Gustafson

	Title: General Partner
	Title: CFO

	Dated: 10/31/2012
	Dated: 31 Oct 2012

	 
	 

	 
	HALOZYME, INC., a California corporation

	 
	 

	 
	Signature: /s/ Kurt Gustafson

	 
	Kurt Gustafson

	 
	Title: CFO

	 
	Dated: 31 Oct 2012













WORK LETTER
This Work Letter (“Work Letter”) sets forth the respective rights, duties, and obligations of Lessor and Lessee in connection with the build-out of the Premises under that certain Lease (“Lease”) to which this Work Letter is attached.  Lessor's responsibilities under this Work Letter consist of the turn-key build-out of the Office Premises depicted on the space plan (“Preliminary Space Plan”) attached as Exhibit A (and more particularly described in the detailed design development plans and specifications (“Preliminary TI Plans”) attached as Exhibit B (which Preliminary Space Plan and Preliminary TI Plans comprise the scope of the “Lessor's Work”) in accordance with the approved tenant improvement plans and specifications - as further defined below (the “TI Plans”), subject to the terms, provisions, and conditions of this Work Letter. 
1.    Definitions.  All terms used in this Work Letter which are not specifically defined herein shall have the meanings ascribed to them in the Lease to which this Work Letter is attached. 
 2.    Construction Representatives.  Lessor appoints Lessor's Representative (identified below) to act for Lessor and Lessee appoints Lessee's Representative (identified below) to act for Lessee in all matters covered by this Work Letter. All inquiries, requests, instructions, authorizations, and other communications with respect to the matters covered by this Work Letter will be made to Lessor's Representative or Lessee's Representative, as the case may be.  Lessee will not make any inquiries of or requests to, and will not give any instructions or authorizations to, any other employee or agent of Lessor, including Lessor's architect, engineers, and contractors or any of their agents or employees, with regard to matters covered by this Work Letter and any such instruction or authorization will, at Lessor's election, be of no force or effect.  Either party may change its designated Representative under this Work Letter at any time upon three-business days' prior written notice to the other party.
2.1.    Lessee's Representative: Kurt Gustafson, CFO 
2.2.    Lessor's Representative:  Sam Higgins, Director of RE
2.3.    Lessor's Architect:  Howard Anderson
2.4.    Lessor's Project Manager: Martin Brumfield
Lessee's Representative shall be kept updated by Lessor's Representative relative to the construction process and Lessor's Representative shall grant Lessee's Representative complete access, under reasonable conditions, to the Premises, all relevant documents (architectural and otherwise), and the construction process.  Notwithstanding the foregoing, Lessee's Representative shall not interfere with Lessor's construction activities and may not give direction to any third party relative to such construction activities; it being agreed that any communications by Lessee's Representative shall be with Lessor's Representative and not with the contractors or subcontractors involved in the construction of the Premises.







3.    Lessor's Work.  Promptly following the execution of the Lease, Lessee and/or Lessor shall work together in good faith with the Lessee Improvement Planner and cause the Lessee Improvement Planner to prepare (and deliver to Lessor and Lessee) complete, detailed working plans and specifications (consistent with the approved Preliminary TI Plans) sufficient to obtain the necessary building permits and to then fully complete the Lessor's Work (the “TI Plans”); which TI Plans will then serve as the basis for Lessor to undertake and to complete the Lessor's Work.  Lessee's Representative and Lessor's Representative shall make good faith efforts to furnish the Lessee Improvement Planner all information reasonably requested by the Lessee Improvement Planner promptly.  Lessor shall cause the Lessor's Work to be completed in conformance with the TI Plans.
4.    Application for Permits.  As soon as the TI Plans are approved by Lessee, Lessor shall submit such plans to all appropriate governmental agencies from whom permits are required for the construction of the Lessor's Work.  Lessor shall notify Lessee of any changes required by any governmental agencies, and Lessee shall have ten (10) days thereafter to indicate its approval thereof.  All such changes required by governmental agencies shall be deemed acceptable to Lessee unless Lessee's use of the Premises is materially impaired thereby.  The TI Plans, all specifications and working drawings as approved, and all change orders specifically permitted pursuant to Paragraph 3 above and any Change Orders adopted pursuant to Paragraph 5 below, shall be referred to herein as the “Approved Plans.”
5.    Modifications/Approvals.
5.1.    Lessee may request changes in the Lessor's Work only by written request (sometimes known as a “bulletin”) from Lessee's Representative to Lessor's Representative.  All such changes shall be subject to Lessor's and Lessee's prior written approval in accordance with this Paragraph 5.  Prior to commencing any such change, Lessor shall prepare and deliver to Lessee, for Lessee's approval, a change order  (the “Change Order”) setting forth the estimated additional time required to perform the change and the total cost of such change, which will include associated architectural, engineering, and construction contractor's fees, delay costs, additional coordination costs, and Lessor's estimated internal overhead/supervisory costs in implementing the Change Order (such overhead/supervisory costs not to exceed ten percent of the amount of the Change Order).
5.2.    Lessor may withhold its approval of any Lessee-requested revision or change pursuant to Paragraph 5.1, above, if such revision or change would require work which: (i) exceeds or affects the structural integrity of the Building or any part of the utility installations or HVAC systems serving the Building;  (ii) does not conform to applicable building codes or is not approved by any governmental authority with jurisdiction over the Premises and/or the Building; or (iii) if Lessee does not agree to pay for the costs of the Change Order.
5.3.    As soon as (i) the Approved TI Plans have been developed as provided above and approved by Lessor and Lessee, and (ii) all necessary permits for commencement of construction of the Lessor's Work have been obtained, Lessor shall cause the Lessor's Contractor to commence and to thereafter diligently prosecute to completion the construction of the Lessor's Work in accordance with the Approved TI Plans by the scheduled completion dates therefor contained in the Construction Schedule; provided, however, Lessor shall not be liable for delay in the substantial completion date for the Lessor's 





Work to the extent reasonably attributable to a Force Majeure delay, except as specifically provided in the Lease.
5.4    Lessor shall cause the Lessor's Work to be constructed in a good and workmanlike manner, free from material design and workmanship defects in accordance with the Approved TI Plans, the permits and applicable law.  Notwithstanding anything to the contrary in the Lease or this Work Letter, Lessee's acceptance of the Lessor's Work and/or the Premises shall not waive the foregoing warranty and Lessor shall promptly remedy all violations of the warranty at its sole cost and expense which occur during the first twelve (12) months of the term of the Lease.  Such warranty shall expire and be of no further force or effect on the date which is twelve (12) months after the Commencement Date.  Lessor shall obtain in the construction documents a 12-month warranty from Lessor's Contractor equivalent to the warranty Lessor is providing to Lessee under this Section 5.4.  Lessee shall promptly notify Lessor in writing during the warranty period of any defect in construction or in the operation of equipment discovered during such period, and promptly thereafter Lessor shall commence the cure of such defect and complete such cure with diligence at Lessor's sole cost.  After such 12-month period, Lessee shall conclusively be deemed to have approved the construction of the Lessor's Work and accepted them “as is”, subject only to defects claimed as provided above.  With respect to defects discovered after the expiration of such 12-month period, the parties hereto acknowledge that it is their intention that Lessee have the benefit of any construction or equipment warranties existing in favor of Lessor that would assist Lessee in correcting such construction defects and in discharging its obligations regarding the repair and maintenance of the Premises.  Upon request by Lessee following the expiration of such 12-month period, Lessor shall inform Lessee of all written construction and equipment warranties existing in favor of Lessor which affect the Lessor's Work.  Lessor shall assign such warranties to Lessee upon request in order that Lessee may enforce the same, but if such warranties are not assignable, then Lessor shall pursue, at Lessee's cost, all claims on such warranties on Lessee's behalf.
6.    Costs Of Lessor's Work.  The cost of Lessor's Work includes all hard and soft costs incurred by Lessor in connection with the designing, constructing, and completion of the Lessor's Work, including, without limitation, costs of space planning, interior architectural work, costs of the preparation of the Preliminary TI Plans, the TI Plans, all labor, materials, and construction costs, supervision/construction management fees, the Lessor's Contractor's fee and general conditions, and costs of all fees, inspections, engineering services, blueprints, and reimbursables.  The cost of Lessor's Work does not include the cost of Lessee's furniture, fixtures, and/or equipment, or other items of personal property, (“FF&E”) all of which will be Lessee's sole responsibility and expense.
7.    Early Entry.  Lessor will use good faith efforts to allow Lessee to have early access to the Premises prior to Substantial Completion (as defined below) for the limited purpose of coordinating Lessee's installation of its vendor-installed equipment, computer cabling and telecommunications wiring, its security systems, and/ or its FF&E, necessary to ready the Premises for Lessee's use.  Such early entry must be accomplished without delay to, or interference with, Lessor or Lessor's Work, and shall be subject to all other conditions of the Lease. 
8.    Inspection And Punchlist.  Lessee's Representative and individuals designated by Lessee shall have the right to enter on the Premises at all reasonable times and upon notice to Lessor's Representative 





for the purpose of inspecting the progress of the Lessor's Work.  Lessee's Representative and Lessor's Representative, and such advisers as they shall desire, shall inspect the Lessor's Work upon its Substantial Completion using their best efforts to discover all uncompleted or defective construction.  After such inspection has been completed, a list of “punchlist” items shall be prepared jointly by Lessor and Lessee which the parties agree are to be corrected by Lessor.  Lessor shall use its best efforts to complete and/or repair such “punchlist” items within thirty (30) days.
9.    Substantial Completion.  For purposes of this Lease, the term “Substantially Complete” (and its grammatical variations, such as Substantial Completion) when used with reference to Lessor's Work, will mean that Lessor's Work has been completed in accordance with the provisions of this Work Letter and in conformance with the TI Plans (except for minor punchlist items which do not substantially interfere with Lessee's use of the Premises), (ii) all utilities are connected and available for Lessee's use, (iii) all necessary governmental approvals for occupancy of the Building has been obtained (including, if applicable, a certificate of occupancy), and (iv) the removal of all construction trailers not being used for continuing work on the Premises to such an extent that Lessee can lawfully commence its occupancy of the Premises, and that the Lessor's Work can be finally completed within forty-five (45) days and without material interference to Lessee's occupancy and use of the Premises.  The Rent Commencement Date shall be accelerated one day for each day that Substantial Completion of Lessor's Work would have occurred but for any Lessee Delays (as defined below).  Lessor shall provide Lessee with a factually accurate “Confirmation of Lease Terms” written memorandum following the Lease Commencement Date reflecting the exact Lease Commencement Date and Rent Commencement Date; however, any failure to do so shall not affect the Lease.  Lessee shall execute and return to Lessor the Confirmation of Lease Terms memorandum within ten (10) days of its submittal by Lessor to Lessee.  Failure by Lessee to execute the Confirmation of Lease Terms memorandum shall not amend the terms thereof, but shall be deemed as Lessee's final and conclusive acceptance of the terms thereof.
10.    Delays.  Lessor agrees to use its best commercially reasonable efforts to Substantially Complete all of the Lessor's Work by April 1, 2013 and to deliver possession of the Premises to Lessee by that same date, subject to any Lessee caused delay.  If, despite such efforts, Lessor is unable to achieve Substantial Completion and to deliver possession by such date, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or change the Expiration Date.  Lessee shall not, however, be obligated to pay Rent or perform its other obligations until Lessor delivers possession of the Premises and any period of rent abatement that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what Lessee would otherwise have enjoyed under the terms hereof, but minus any days of delay caused by the acts or omissions of Lessee.  If possession is not delivered by August 1, 2013, as the same may be extended under the terms of the Work Letter executed by Parties, Lessee may, at its option, by notice in writing, on or before August 11, 2013, (except as extended under the terms of the Work Letter) cancel this Lease, in which event the Parties shall be discharged from all obligations hereunder.  If such written notice of cancelation is not timely received by Lessor, Lessee's right to cancel shall terminate.
Each of the following events shall constitute a “Lessee Delay”: (a) delays resulting from any direction by Lessee that Lessor suspend work or otherwise hold up construction of any portion of the Lessor's Work because of a possible change to be initiated by Lessee or for any other reason directed by 





Lessee; (b) delays due to the failure of Lessee to pay when due any amount payable pursuant to this Lease or this Work Letter; (c) delays which result directly or indirectly from Lessee's requested changes in the Approved TI Plans or Lessor's Work; or (d) any other action or inaction of Lessee that directly delays Lessor in completing Lessor's Work.  Notwithstanding anything to the contrary in the foregoing, a Lessee Delay shall not commence to occur unless and until Lessor provides to Lessee written notice of the occurrence of an event [as described in (a), (b), (c) or (d) above] giving rise to the possibility of a Lessee Delay and an opportunity during the ensuing two (2) days to cure or otherwise fully mitigate the event giving rise to a possible Lessee Delay.  Lessee shall pay any actual and documented costs or expenses incurred by Lessor as a result of any Lessee Delays, including without limitation, any increases in costs or expenses for labor or materials.  Lessor's Representative shall make good faith efforts to respond to all such changes requested by Lessee under Paragraph 5.1 above within ten (10) days, and any failure to respond within that time period shall constitute a Lessor delay.  Notwithstanding anything to the contrary in this Lease, in the event that the Commencement Date is delayed at any time by strikes, fire, embargoes, windstorm, flood, earthquake, or acts of war, terrorism or God, by changes in public laws, regulations or ordinances enacted after the date of execution of this Agreement, by acts of public officials not caused by any action or inaction of Lessor or Lessee, or by any other cause beyond the reasonable control of Lessor and/or Lessee, then the targeted Commencement Date shall be extended for a period commensurate with the delay, and no party shall be liable for any failure to perform its obligations where such failure is as a result of such an event.







EXHIBIT 'A'


A1.1 FLOOR PLANS
(Window Option B)
[Blueprint of Level One Floor Plan and Level Two Floor Plan]


A2.1 EXTERIOR ELEVATIONS
(Window Option B)
[Blueprint of Northwest, Southeast, Southwest and Northeast Elevations]
Exhibit "B"







Turnkey Build Out Specifications


Partitions: Partitions within the tenant suite shall be constructed using 3-5/8" 25 gauge, and 5/8" 
gypsum wallboard and sound attenuation from floor to under ceiling grid with 4' of insulation above ceiling on each side of all walls. 
Partitions around conference rooms and corridor walls shall be constructed using 3-5/8" 25 gauge, 
and 5/8" gypsum wallboard and sound attenuation blanket insulation from slab to structural deck above. 
Corridor partitions separating tenant space from the public corridor and adjacent tenant spaces shall be constructed using 3-5/8" 25 gauge, and 5/8" gypsum wallboard and sound attenuation blanket  
insulation from floor slab to structural deck above. 
All tenant LAN rooms to receive 4'-0"x8'-0"x3/4" fire treated plywood sheet for telephone switch and equipment. 
Door Frames: Door frames will be 5" painted Hollow metal knock down. 
Entry Doors: PR 3'0" x 8'0" aluminum frame single glazed storefront entry door. 
Exterior Door:     3'0" x 6'8" H.M primed door, paint color to match adjacent wall. 
Tenant Doors: Labeled as #3 on Floor Plan ALL dated      3'-0"x7'0"xl-3/8" paint grade solid 
core wood. Doors are to be provided with a manufacturer's lifetime warranty and be prepped to receive cylindrical locksets, four hinges, floor stops and silencers. 
Tenant Doors: Labeled as #4 on Floor Plan A1.1 dated      3'-0"x7'0"xl-3/8" paint grade solid 
core wood. Doors are to be provided with a manufacturer's lifetime warranty and be prepped to receive cylindrical locksets, four hinges, floor stops and silencers with 18" wide sidelight. 
Door Hardware: Building standard to be approved by Tenant. 
Ceiling Grid:    2x4 Armstrong Silhouette 9/16" bolt-slot white grid with 1/4" reveal. Typical ceiling
height to be 8'6"AFF.
Ceiling Tile:    2'x4' radar ceiling tile
Vinyl Composite Tile: Armstrong Standard Excelon 12"x12"xi/8" standard commercial grade vinyl 
composite tile, Armstrong Standard Excelon in standard colors as selected by tenant in rooms selected 





by Tenant. 
Vinyl Wall Base: Johnsonite 4" high vinyl straight base for carpet. Johnsonite 4" high vinyl cove base for VCT flooring. Standard colors as selected by tenant. 
Carpet:     $25 SY installed allowance 
Tile: New stone entry allowance $1.4.00 PSF . New restroom tile floor and wall (4' -0" AFF) allowance of $6.00 PSF 
Gym Floor: "Sport" Flooring to be installed. Samples to be sent to tenant for approval. 
Paint: Three (3) coats minimum. Standard colors as selected by Tenant (includes (1) prime coat and 
 two finish coats of latex, eggshell finish) with a limit of one (1) color per room and two (2) colors per 
suite. All wood and metal surfaces will receive (1) primer coat and two (2) coats of semi-gloss paint. 
Pantry Millwork: Pantry millwork will be prefabricated upper & lower cabinets finished in plastic laminate (color selection by Tenant). Counter tops will be plastic laminate. Handles will be satin 
finish, 4" wire style. ADA complaint sink and faucet with 1/4" water line for coffee maker and ice 
maker. 
Appliances:     Appliances will include In-Sink-Erator 3/4 horsepower disposal. 
Pantry Power: Two GFI outlets on dedicated circuits will be provided above the counter. 
Sprinkler System:    Sprinkler system installed to meet all current applicable Local and NFPA
standards. All heads to be semi-recessed in center of ceiling tile.
Skylights:    4'x4' skylight with translucent diffuser below
Restroom Specifications:
1.    New or relocated wall hung lavatories
2.    New or relocated wall mounted urinals
3.    New or relocated floor mounted. water closets
4.    New floor tile - $6.00 PSF allowance
5.    New Wall tile - 4'0" AFF, $6,00 PSF Allowance
6.    New Laminate counter
7.    New or reused toilet partitions





8.    Relocated toilet grab bars and accessories
9.    Restrooms to meet code and ADA requirements.
10.     New ADA shower in women's and men's restrooms located near Gym. 
HVAC Specifications: 
1. The system consists of a combination of rooftop and split system heat pumps with a combined total of 53.5-tons. 
2. The first floor will utilize a total of 28.5 tons of split system heat pumps. These units will be divided into 8 zones of control. The condensing unit will be located above the ceiling and mounted up tight to the structure. 
3. The second floor will be provided with 25 tons of rooftop package units. There will be 7 units providing individual zones of control. 
4. All duct will be new pre-insulated flexible duct and will include all supply and return air distribution. Ducts will be equipped    with balancing dampers to adjust for proper air flow. 
5. Control of both the split system and rooftop package heat pumps will be through electronic programmable thermostats. 
6. All equipment will be new with the exception of 16 tons of existing condensing units and the ductless split system for the IT rooms that require "24/7" operation. 
7. Exhaust fan will be provided for the telephone room with a thermostat control to circulate conditioned air as required. 
8. Exhaust fans will be provided for new restrooms. 
9. Gym will be air conditioned with exhaust fan for additional circulation 
10. Areas currently deemed as storage areas will not be
conditioned.
11. Smoke detectors will be provided to meet code.
Electrical Specifications: 
a.     An energy efficient lighting system using lighting fixtures of the type and quality described  herein will be furnished. Lighting fixtures will utilize energy efficient T5 lamps in 2 X 4 and 2 X 2  lights. Down lighting to be installed in the perimeter of the (2) larger conference rooms, with (2)  lighting zones. 







b.     In order to save maximum energy and meet current energy conservation codes it is recommended that lighting fixtures be automatically controlled wherever possible. Wall mounted occupancy sensor type light switches (building standard) should be utilized in each individual office, conference room, kitchen and break area, storage room, etc. 
c.     Lighting in tenant corridors, entry lobbies and open office areas where controlled by wall mounted occupancy sensors is not practical, the lighting fixtures will be wired to the building wide automatic lighting control system. This system provides time of day, on/off scheduling of lighting fixtures based on tenant prescribed standard operating hours. Should the lights in these areas be required to operate beyond the normal. tenant occupied schedule, a local override switch will provide two (2) hours of override lighting each time the switch is activated, 
d. Dedicated circuits for all specialty equipment. Tenant to provide equipment list and electrical requirements. 
e. Floor cores in each conference room for power/data/A/V distribution. 
f. Building standard distribution for each private office. Minimum of (3) outlets and ring and string location in each office. 
g. Floor cores for power distribution for workstations not abutting to wall. 
Building Standard Lighting Fixtures: 
a.    New 2 x 4 fluorescent fixtures, parabolic lens
b.    Compact fluorescent downlights (building standard) will be used where accent            lighting is desired in lobbies, corridors or conference rooms.
c.    Exit lights (building standard) will be provided in corridors and egress areas to meet            local building codes.
d.    Emergency lights (building standard) will be provided in corridors and egress areas to meet local building codes. Emergency lights will either be wall mounted type or be integral with the overhead 2 X 4 light fixtures. 
Elevator: 
Elevator specifications and finishes to be provided to Tenant and agreed to prior to lease being executed. 
EXTERIOR IMPROVEMENTS: 
A. Parking lot - slurry seal and repair as needed, striped, painted curb. 
B. Exterior glazing: New 1.75"x6" aluminum storefront system with I" low E insulated glazing center glazed with standard finish. 
C. Existing fluted CMU to be cleaned & painted. Patch & Fill all holes and damaged areas. 





D. New aluminum sunshade awning 48" projection 
E. Existing stairwells to remain. Installation of new metal pipe guardrails and handrails at each stairway. 
F. Existing roll-up door to be cleaned and painted.