Document:

Exhibit 10.2

 

AMERICAN INDUSTRIAL REAL
ESTATE ASSOCIATION

STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE - NET

 

1.             Basic Provisions.

 

1.1           Parties: This Lease (“Lease”),
dated for reference purposes only, July        ,
2005 is made by and between 31 COLUMBIA, INC., a Nevada corporation (“Lessor”), and CLARIENT, INC., a Delaware 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 by the street address as 31
Columbia, Aliso Viejo, located in the County of Orange, State of California
with zip code 92656, and generally described as:  a single-tenant flex building with surrounding
on-site parking area (“Premises”).
(See also Paragraph 2.)

 

1.3           Term: Ten years (“Original
Term”) commencing December 1, 2005 for that portion of the
Premises designated as “Phase I” (30,000 square feet); June 1, 2006 for
that portion of the Premises designated as “Phase II” (35,000 square feet); and
on December 1, 2008 for that portion of the Premises designated as “Phase
III” (13,365 square feet) (each, a “Commencement Date”)
and ending for all Phases November 30, 2015 (“Expiration
Date”), subject to the other terms hereof (see Paragraph 3).  Lessee shall have those options to extend the
term as set forth on Addendum “C”.

 

1.4           Early Possession: Lessee will be provided Early Possession
within five (5) days following mutual execution of the Lease (the “Early Possession Date”), subject to the other terms hereof
(see Paragraphs 3.2 and 3.3).

 

1.5           Base Rent: $39,000.00 per month for Phase I only
(30,000 square feet); (“Base Rent”),
(See Addendum B for Base Rent Adjustments) plus $7,685.00 Common Area Operating
Expenses (see Addendum A, Item D for Common Area Operating Expense Adjustments)
for a total Monthly Remittance of $46,685.00 payable on the first day of each
month commencing December 1, 2005 (See Paragraph 4 for further
provisions).

 

RENT CHECKS ARE PAYABLE TO 31 COLUMBIA, INC. AND ARE DUE ON THE FIRST
OF EACH MONTH.  Please remit to:

 

31 Columbia, Inc.

c/o Olen Commercial Realty Corp.

Seven Corporate Plaza

Newport Beach, California 92660

 

1.6           Base Rent and Other Monies to be
Paid Upon Execution of this Lease:

 

(a)           Base Rent: $39,000.00 for the period December 1,
2005 continuing through November 30, 2006 (See Addendum B for Base Rent
adjustments)

 

(b)           Common Area Operating Expenses:
$7,685.00 for the period December 1,
2005 continuing through May 31, 2006. 
(See Addendum A, Item D for Common Area Operating Expense Adjustments)

 

(c)           Security Deposit: $3,000,000.00 Letter of Credit in
substantially the form attached hereto as Exhibit C (as further described
herein, the “Letter of Credit”)
due on the earlier of (i) fifteen (15) days after the mutual execution of
this Lease, or (ii) the date on which Lessee first requests application of
the Tenant Improvement Allowance (as defined herein) ( “Security
Deposit”). (See also Paragraph 5)

 

(d)           Other: $N/A

 

(e)           Total Due Upon Execution of this
Lease: $46,685.00 (cash)

 

1.7           Agreed Use: General office purposes, “wet-laboratory”
uses, light manufacturing, warehouse and any other legally permitted use as
approved by the City of Aliso Viejo.

 

 

1.8           Insuring Party: Lessor is the “Insuring Party” unless
otherwise stated herein.

 

1.9           Real Estate Brokers:

 

(a)           Representation: The following real estate brokers
(collectively, the “Brokers”) and
brokerage relationships exist in this transaction:

 

Jeff Carr and Gregg Haly of CB Richard Ellis, Inc.,
represent Lessor exclusively (“Lessor’s Broker”);
and Rick Kaplan and Eric Olofson of Cushman & Wakefield represent
Lessee exclusively (“Lessee’s Broker”).

 

(b)           Payment to Brokers: Upon execution and delivery of this Lease by
both Parties, and occupancy of the Premises by Lessee, Lessor shall pay to the
Brokers the fee agreed to in their separate written agreement for the brokerage
services rendered by the Brokers.

 

1.10         Guarantor. The obligations of the Lessee under this
Lease are not to be guaranteed.

 

1.11         Attachments. Attached hereto are Addenda A, B, C, and
Exhibits A, B, C, D and E, all of which constitute a part of this Lease.

 

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.  Lessor represents that to the best of Lessor’s
knowledge 78,365 gross square feet is the actual gross square footage of the
Premises.

 

2.2           Condition. Lessor shall deliver the Premises to Lessee
broom clean and free of debris on the Early Possession Date (the “Start Date”), and Lessor warrants that the existing
electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air
conditioning systems (“HVAC”),
loading doors, sump pumps, if any, and all other such elements in the Premises,
other than those constructed by Lessee, shall be in good operating condition on
said date and that the 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 to the best of Landlord’s knowledge,
the Premises shall be free from mold and from asbestos and other hazardous
materials.

 

2.3           Compliance. Lessor warrants that the improvements on the
Premises 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.  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 noncompliance, rectify the same at Lessor’s expense.  If Lessee does not give Lessor written notice
of a non-compliance with this warranty within nine (9) months following
the Start Date, correction of that noncompliance 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 for
similar space in similar locations, Lessee shall be fully responsible for the
cost thereof.

 

(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 and Lessee shall
allocate the obligation to pay for such costs pursuant to the provisions of
Paragraph 7.1(d);  provided, however,
that if such Capital Expenditure is required during the last eighteen (18)
months of this Lease (or any extension thereof) then Lessor and Lessee shall
each have the option to terminate this Lease upon one hundred eighty (180) days
prior written notice to the other party unless one party

 

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notifies
the other party in writing within thirty (30) days after receipt of the other
party’s termination notice that said party will pay for such Capital
Expenditures or unless Lessee has a right to extend the Term and exercises said
right within thirty (30) days after the receipt of said termination notice, in
which case Lessor shall no longer have said option to terminate this
lease.  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 one hundred eighty (180) days
written notice to Lessor.

 

(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 (subject to Paragraph 6) 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.  Under
such circumstances Lessee shall not, however, have any right to terminate this
Lease.

 

2.4           Acknowledgements. Lessee acknowledges: (a) that it has
been advised by Lessor and/or Brokers to satisfy itself with respect to the
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; (b) Lessee has made such
investigation as it deems necessary with reference to such matters and assumes
all responsibility therefor as the same relate to its occupancy of the
Premises; and (c) neither Lessor, Lessor’s agents, nor Brokers have made
any oral or written representations or warranties with respect to said matters
other than as set forth in this Lease. 
In addition, Lessor acknowledges that: (i) Brokers have made no
representations, promises or warranties concerning Lessee’s ability to honor
the Lease or suitability to occupy the Premises, and (ii) it is Lessor’s
sole responsibility to investigate the financial capability and/or suitability
of all proposed tenants.

 

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. If Lessee totally or partially occupies the
Premises prior to the first Commencement Date, for any purpose of constructing
Lessee Improvements or any other activity permitted hereunder, the obligation
to pay Base Rent and Common Area Operating Expenses shall be abated for the
period of such early possession.  All
other terms of this Lease, shall, however, be in effect during such
period.  During the period, if any,
between Lessee’s occupancy of the Premises and Lessee’s delivery of the Letter
of Credit, Lessee shall indemnify and save harmless Lessor from any and
all liability, damage, expense, cause of action, suits, claims, judgments and
cost of defense arising out of this early occupancy of the Premises that might
have otherwise been covered by the Letter of Credit.  Furthermore, any expenditures undertaken by
Lessee in furtherance of its Tenant Improvements (as defined herein) during the
period of time described in the preceding sentence, shall not be reimbursable
by Lessor, pursuant to Addendum A, Paragraph G of this Lease, until after the
Letter of Credit is accepted by Lessor.  Any such early possession shall not affect
the Expiration Date.

 

3.3           Delay In Possession. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee on the Early
Possession Date.  If possession of the
Premises is not so delivered on or about the Early Possession Date, either
party shall have the right to terminate this Lease unless other agreements are
reached between Lessor and Lessee, in writing. 
This paragraph does not apply to any delays in Lessee Improvements or
other work being done by Lessee.  Lessor
and Lessee acknowledge that there may be a short period of time on and shortly
after the Early Possession Date during which Lessor will continue to be moving
off-site some of the existing equipment and miscellaneous items not a part of
this Lease.  Lessor and Lessee will work
together to minimize the impact of this equipment removal on Tenant and agree,
without limitation, that said equipment removal shall not be construed as a
delay of the delivery of the Premises.

 

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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 as set forth in 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 (if applicable),
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 on or before the fifth
(5th) day after which it is due, without offset or deduction (except
as specifically permitted 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 if this occurs twice in any twelve (12) month period, then 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 and Operating Expense Increase, and any remaining amount to any other
outstanding charges or costs.

 

4.3           Association Fees.  In
addition to the Base Rent and as part of Tenant’s Pro Rata Share of Operating
Expenses, Lessee shall pay to Lessor each month an amount equal to any owner’s
association or condominium fees levied or assessed against the Premises as set
forth in those Covenants, Conditions and Restrictions applicable to the
Premises and pursuant to the current budget attached hereto in Addendum A,
Paragraph D of this Lease.  Lessor, however,
shall pay any portion of such levy or assessment attributable to unfunded or
underfunded (to the extent thereof) reserves, maintenance, repair or capital
improvements as of the date of execution of the Lease.  Said monies shall be paid at the same time
and in the same manner as Tenant’s Pro Rata Share of Operating Expenses.

 

5.             Security
Deposit.  At
the time required under Paragraph 1.6(c), Lessee shall deliver to Lessor as the
Security Deposit a clean, unconditional, irrevocable and freely transferable
letter of credit in the amount of $3,000,000.00 as security for the payment and
performance by Lessee of all of Lessee’s obligations, covenants, conditions and
agreements under this Lease, subject to the following terms and
conditions.  The Letter of Credit shall
be (a) in form reasonably comparable to that attached hereto as Exhibit C;
(b) issued by a commercial bank reasonably acceptable to Lessor from time
to time (a “Bank”); (c) made
payable to, and expressly transferable and assignable at no charge by, the
owner from time to time of the Premises provided that such transferee has
assumed Lessor’s obligations hereunder (which transfer/assignment shall be
conditioned only upon the execution by such owner of a written document in
connection with such transfer/assignment) and such owners acknowledgement of
Lessee’s right to quiet enjoyment of the Premises pursuant to the terms of this
Lease; (d) payable at sight upon presentment to the Bank of a simple sight
draft accompanied by a notarized certificate stating that Lessee is in default
under this Lease and the amount that Lessor is owed in connection therewith; (e) of
a term not less than one year; and (f) at least 30 days prior to the
then-current expiration date of the Letter of Credit, renewed (or automatically
and unconditionally extended) from time to time through the 60th day after the
expiration of the Lease Term.  If Lessor
transfers the Security Deposit to any transferee of the Premises or Lessor’s
interest therein, then such transferee shall be liable for the return of the
Security Deposit, and Lessor shall be released from all liability for the
return thereof.  Notwithstanding anything
in this Lease to the contrary, any cure or grace periods set forth in the section of
this Lease entitled “Default” shall not apply to subsection (f) above,
and, specifically, if Lessee fails to timely comply with the requirements of
subsection (f) above, then Lessor shall have the right to immediately
draw upon the Letter of Credit without notice to Lessee and apply the proceeds
to the Security Deposit.  If the credit
rating or financial condition of the Lessor-approved Bank materially and
adversely changes, then Lessor shall have the right to require that Lessee
obtain from a different Bank a substitute Letter of Credit that complies in all
respects with the requirements of this Section, and Lessee’s failure to obtain
such substitute Letter of Credit within 
30 days following Lessor’s written demand therefor (with no other notice
or cure or grace period being applicable thereto,

 

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notwithstanding anything in
this Lease to the contrary) shall entitle Lessor to immediately draw upon the
then-existing Letter of Credit in whole or in part, without notice to
Lessee.  In the event the issuing Bank of
any Letter of Credit held by Lessor is placed into receivership or
conservatorship by the FDIC, or any successor or similar entity, then,
effective as of the date such receivership or conservatorship occurs, said
Letter of Credit shall be deemed not to meet the requirements of this Section,
and, within  30 days thereof, Lessee
shall replace such Letter of Credit with a substitute Letter of Credit that
complies in all respects with the requirements of this paragraph (and Lessee’s
failure to do so shall, notwithstanding anything in this Lease to the contrary,
constitute a Default under the section of this Lease entitled “Default”
for which there shall be no notice or grace or cure periods being applicable
thereto other than the aforesaid  30-day
period).  Any failure or refusal of the
Bank to honor the Letter of Credit shall be at Lessee’s sole risk and shall not
relieve Lessee of its obligation hereunder with respect to the Security
Deposit.  The form Letter of Credit
attached hereto as Exhibit C is hereby approved by Lessor and Comerica
Bank as the initial issuer of the Letter of Credit.

 

Provided
that no uncured Default then exists: (i) on the first day of the 37th
month of the Original Term, the Bank shall automatically reduce the Security
Deposit by $750,000.00 so that $2,250,000.00 remains as Security Deposit; (ii) on
the first day of the 49th month, then on the first day of the 49th
month the Bank shall automatically reduce the Security Deposit by a further
$750,000.00 so that $1,500,000.00 remains as Security Deposit; (iii) on
the first day of the 61st month, then on the first day of the 61st
month, the Bank shall automatically reduce the Security Deposit by a further
$750,000.00 so that $750,000.00 remains as Security Deposit; and (iv) on
the first day of the 73rd month, then on the first day of the 73rd
month, the Bank shall automatically reduce the Security Deposit by a further
$505,000.00 so that $245,000.00 remains as Security Deposit until the end of
the Original Term.

 

In
the event Lessor contends that Lessee is in default on the dates set forth
above, then Lessor shall send a Certified Letter to the Bank, with a copy to
Lessee, prior to the scheduled reduction of the Security Deposit stating the
specifications as to why such Security Deposit should not be reduced at that
time.  If Lessee objects to Lessor’s
statement, the Bank shall not reduce the Security Deposit until Lessee and
Lessor shall jointly direct or, as a secondary alternative, as directed by an
arbitrator the Bank to do so.

 

6.             Use.

 

6.1           Use. Lessee shall use and occupy the Premises only
for the Agreed Use, or any other legal use which is reasonably comparable
thereto, and for no other purpose. 
Lessee shall not use or permit the use of the Premises in a manner that
is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of
or causes damage to neighboring premises or properties.  Lessor shall not unreasonably withhold or
delay its consent to any written request for a modification of the Agreed Use,
so long as the same will not impair the structural integrity of the
improvements on the Premises or the mechanical or electrical systems therein,
and/or is not significantly more burdensome to the Premises.  If Lessor elects to withhold consent, Lessor
shall within seven 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 Substances” 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 Substance 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 in

 

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compliance
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 therefor.  In addition, Lessor may condition its consent
to 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 or 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.  Notwithstanding the foregoing, (i) Lessee
may use and store in accordance with all present and future applicable
environmental laws, ordinances, rules, regulations and orders, reasonable
quantities of standard cleaning materials and other products as may be
reasonable necessary to conduct normal operations in the Premises, and (ii) use
and maintain in accordance with all applicable environmental laws, ordinances,
rules, regulations and orders such Hazardous Materials as are reasonably
necessary for the operation of any back-up generator, fuel tanks appurtenant
thereto and the uninterruptible power supply (i.e., battery back-up
system).  Lessor acknowledges that Lessee
will be using the substances set forth on Exhibit ”E” to this Lease in the
course of Lessee’s business and Lessor hereby consents to the commercially
acceptable use of said substances.

 

(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 any third party.

 

(d)           Lessee Indemnification. Lessee shall indemnify, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, harmless from
and against any and all loss of 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 agents (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 parent organizations and all
of their respective directors, officers, parent organizations and their
officers and directors, 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 gross 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 times in order to carry out Lessor’s
investigative and remedial responsibilities. 
Lessor acknowledges that it possesses a Phase 1

 

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environmental
study and that to the best of Lessor’s knowledge the Premises do not currently
contain any hazardous substances (including asbestos).

 

(g)           Lessor Termination Option. If a Hazardous Substance Condition (as
defined in Paragraph 9.1(e)) occurs during the term of this Lease, unless
Lessee is legally responsible therefor (in which case Lessee shall make the
investigation and remediation thereof required by the Applicable Requirements
and this Lease shall continue in full force and effect, but subject to Lessor’s
rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor’s
option, either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor’s expense, in
which event this Lease shall continue in full force and effect, or (ii) if
the estimated cost to remediate such condition exceeds 12 times the then
monthly Base Rent give written notice to Lessee, within 30 days after receipt
by Lessor of knowledge of the occurrence of such Hazardous Substance Condition,
of Lessor’s desire to terminate this Lease as of the date 180 days following
the date of such notice.  In the event
Lessor elects to give a termination notice, Lessee may, within 20 days
thereafter, give written notice to Lessor of Lessee’s commitment to pay the
amount by which the cost of the remediation of such Hazardous Substance
Condition exceeds an amount equal to 12 times the then monthly Base Rent.  Lessee shall provide Lessor with such funds
or satisfactory assurance thereof within 30 days following such
commitment.  In such event, this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
remediation as soon as reasonably possible after the Lessee provides such funds
are available.  If Lessee does not give
such notice and provide the required funds or assurance thereof within the time
provided, this Lease shall terminate as of the date specified in Lessor’s
notice of termination.  If Lessee does
not make such election and Lessor cancels the Lease, Lessor shall pay to Lessee
the unamortized balance, based on generally accepted accounting principles
consistently applied, of any amount paid by Lessee for tenant improvements in
excess of the allowance provide by Lessor of $45 per square foot within the
Premises.

 

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 ten
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.

 

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
reasonable times after reasonable notice (or any time, in the case of an
emergency) 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
material violation of Applicable Requirements, or a Hazardous Substance
Condition 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 reasonable cost
of such inspection (not to exceed $500.00), 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 ten 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 Paragraphs 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 reasonable expense, keep the Premises, Utility Installations (intended for
Lessee’s exclusive use within the Building), 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, 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 (within the Building), HVAC

 

7

 

equipment,
electrical (within the Building), lighting facilities, boilers, pressure
vessels, fire protection system, fixtures (within the Building), walls (interior),
ceilings, floors, windows, doors, plate glass, skylights, signs located in or
on the Premises.   Lessee, in keeping the
Premises in good order, condition and repair, shall exercise and perform good
maintenance practices.   Lessee at Lessee’s
reasonable cost shall procure and maintain service contracts required by
Paragraph 7.1(b) below.   Lessee’s
obligations shall include restorations, replacements 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 consistent with (or better than) its current condition (including, e.g. reasonable graffiti removal) and consistent with the exterior
appearance of other similar facilities of comparable age and size in the
vicinity.

 

(b)           Service Contracts. 
Lessee shall, at Lessee’s sole expense, procure and maintain reasonable
contracts (and provide 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; and (ii) fire
extinguishing systems, including fire alarm and/or smoke detection.  At Lessee’s request, Lessor will agree to
procure the aforementioned service contracts and perform general maintenance
and repairs relating to the exterior of the Building and parking area at Lessee’s
sole cost.  Lessor will agree to perform
said management duties for a fee of two and one-half percent (2.5%) of the
amount of money under management.  The
anticipated cost of the aforementioned services will be included in the triple
net charges to be paid by Lessee.   Any
failure by Lessee to pay for the above mentioned charges shall constitute a
default of this Lease.  Notwithstanding
the foregoing, Lessee shall have the right, at any time during the Term, to
take over such obligations if delegated to Lessor upon sixty (60) days written
notice to Lessor.

 

(c)           Lessee’s Failure to Perform.  If
Lessee fails to perform Lessee’s obligations (other than those assumed by
Lessor pursuant to Paragraph 7.1(b)) under this Paragraph 7.1, Lessor may enter
upon the Premises after ten (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.

 

(d)           Lessor’s Failure to Perform.            If Lessor fails to perform its obligations
under this Paragraph 7.1, then Lessee shall deliver to Lessor written notice
asking Lessor to perform such specifically identified obligations and put the
Premises in good order, condition and repair. 
If Lessor does not commence curing such failure to perform within thirty
(30) days of receipt of Lessee’s written notice, Lessee may perform said
obligations and charge Lessor the amount expended as compensation and deduct
such amount from any rent due and payable.

 

(e)           Replacement. Subject to Lessee’s indemnification of
Lessor as set forth in Paragraph 8.7 below, and without relieving Lessee of
liability resulting from Lessee’s failure to exercise and perform good
maintenance practices, if an item described in Paragraph 7.1(b) cannot be
repaired other that at a cost which is in excess of 25% of the cost of
replacing such item, then such item shall be replaced by Lessor, and the cost
thereof shall be prorated between the Parties and Lessee shall only be
obligated to pay, each month during the remainder of the term of this Lease, on
the date on which Base Rent is due, an amount equal to the product of
multiplying the cost of such replacement by a fraction, the numerator of which
is one, and the denominator of which is the useful life of the item according
to GAAP in months.  Lessee shall pay
interest on the unamortized balance at the prime rate plus 1% as reported from
time to time in the Wall Street Journal (Western Edition) (“Prime Rate”).  Lessee
may, however, prepay its obligation at any time.

 

7.2           Lessor’s Obligations. Lessor, at Lessor’s sole expense, shall be
responsible for the fire sprinkler supply, structural aspects and of exterior
walls, foundations, roofs, roof drainage systems, plumbing outside of the
Building, retaining walls, sidewalks, basic utility feed to the Building.  Lessor shall repair and maintain in good
working order any and all portions of the Premises not specifically allocated
to Lessee hereunder.    Lessor shall
provide basic utility services, at its expense stubbed to the Premises.  In the event Lessor does not begin performing
any required functions with reasonable diligence within   thirty (30) days of Lessee’s written notice
to Lessor, Lessee may undertake such repair, alteration, maintenance or other
required work and, to the extent it is Lessor’s responsibility, deduct the
reasonable cost thereof from Rent.  If
Lessor fails to undertake a repair or maintenance obligation under this Section 7.2
after written notice from Lessee that such action is “Business Critical,” then
Lessee may immediately commence such repair or maintenance and deduct the cost
thereof form any rental charge under this Lease.  “Business Critical” for these purposes shall
mean Lessee’s inability to manufacture its products or fully utilize its
laboratory facilities.

 

8

 

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, moveable partition, HVAC equipment and plumbing
installed by Lessee 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, other than Utility Installations 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). 
The Tenant improvements to the Premises as set forth in Addendum “A” to
this Lease shall not be considered Alterations or Utility Installations.

 

(b)           Consent. Lessee shall not make any Alterations or
Utility Installations to the Premises without Lessor’s prior written consent
which consent shall not be unreasonably withheld, conditioned or delayed beyond
ten (10) business days after Lessee’s written notice.  Lessee may, however, make non-structural 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 adversely affect the electrical, plumbing, HVAC,
and/or life safety systems. 
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 which approval shall not be unreasonably
conditioned or delayed. 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.  Except as otherwise provided in Paragraph G,
Addendum A with respect to the original Tenant Improvements, 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, and in compliance with all Applicable Law.  Lessee shall promptly upon completion furnish
Lessor with as-built plans and specifications.

 

(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 ten 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 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 the amount of such contested
lien, claim or demand, indemnifying Lessor against liability for the same.  If Lessor elects to participate in any such
action, Lessee will pay Lessor’s reasonable attorneys’ fees and costs.

 

7.4           Ownership, Removal, Surrender,
and Restoration.

 

(a)           Ownership. All trade fixtures, moveable partitions,
laboratory or manufacturing equipment, inventory, personal property, furniture,
laboratory benches and similar items shall be the property of Lessee.  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 within ten (10) business days after Lessee provides notice of said
Alterations or Utility Installations, Lessor may require that any or all Lessee
Owned

 

9

 

Alterations
or Utility Installations be removed by the expiration or termination of this
Lease.  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.  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 also
completely remove from the Premises any and all Hazardous Substances brought
onto the Premises by or for Lessee, or any of Lessee’s agents (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 within ten (10) days after 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.

 

(d)           Generator and Tank. 
Lessee may, upon reasonable prior approval at any time during the Term,
install an additional electric generator on the Premises and to utilize the
existing above-ground fuel tank and pad at its cost and expense.  Although Lessee may use its Tenant
Improvement Allowance in whole or in part for the cost thereof, Lessee, at its
sole cost and expense, shall maintain said equipment.  Lessee shall provide written notice to Lessor
at least thirty (30) days prior to expiration of the Term of its decision as to
whether it shall remove the electric generator. 
Lessee shall have no responsibility to remove the above-ground fuel
tank.

 

8.             Insurance; Indemnity.

 

8.1           Payment for Insurance. Lessee shall pay for all insurance required
under Paragraph 8 except to the extent of the cost attributable to liability
insurance carried by Lessor under Paragraph 8.2(b) in excess of $2,000,000
per occurrence.  Premiums for policy
periods commencing prior to or extending beyond the Lease term shall be
prorated to correspond to the Lease term. 
Payment shall be made by Lessee to Lessor within ten days following
receipt of an invoice.

 

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 a claims made basis providing single limit coverage in an amount
not less than $1,000,000 per occurrence with an annual aggregate of not less
than $2,000,000, an “Additional Insured-Managers or Lessors of Premises
Endorsement”.  The policy shall (i) have
a deductible reasonably appropriate for the size and nature of Lessee’s
business, (ii) not contain any intra-insured exclusions as between insured
persons or organizations, and (iii) include coverage for liability assumed
under this Lease as an “Insured contract” for the performance of Lessee’s
indemnity obligations under this Lease. 
The limits of said insurance shall not, however, limit the liability of
Lessee nor relieve Lessee of any obligation hereunder.  All insurance carried by Lessee 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
throughout the Term and any extension period(s) under law or 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 lnsurance - 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

 

10

 

damage
to the Premises.  The amount of such
insurance shall be equal to the full replacement cost of the Premises, as the
same shall exist from time to time, or the amount required by any Lender(s),
but in no event more than the commercially reasonable and available insurable
value thereof.  If Lessor is the Insuring
Party, however, Lessee Owned Alterations and Utility Installations, Trade
Fixtures, and Lessee’s personal property shall be insured by Lessee under
Paragraph 8.4 rather than 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), 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 co-insurance 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 Lessee is the Insuring Party and if such insurance coverage has a
deductible clause, the deductible amount shall not exceed $100,000 per
occurrence, and Lessee shall be liable for such deductible amount in the event
of an Insured Loss.  At Lessee’s request,
Lessor will offer to insure the Premises under Lessor’s master property
insurance policy and bill Lessee for the cost thereof as a part of the triple
net charges.

 

(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 (“Rental Value Insurance”). 
Said insurance shall contain an agreed valuation provision in lieu of
any co-insurance 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)           Lessor’s Failure to Provide
Insurance.  If Lessor shall fail to peform any of its
obligations regarding the acquisition and maintenance of insurance, Lessee may
perform the same and charge Lessor the amount expended as compensation and
deduct such amount from any rent due and payable.

 

8.4           Lessee’s Property;  Business Interruption 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 with a deductible
of not to exceed $100,000 per occurrence. 
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)           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.

 

8.5           Insurance Policies. Insurance required herein shall be by
companies duly licensed or admitted to transact business in California, and
maintaining during the policy term a “General Policyholders Rating” of at least
B+, V, 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.  Insuring Party shall, prior to the Start
Date, deliver to Lessor and Lessee certified copies of policies of such
insurance or certificates evidencing the existence and amounts of the required
insurance.  No such policy shall be
cancelable or subject to material modification except after 30 days prior
written notice to Lessor and Lessee. 
Insuring Party shall, at least 30 days prior to the expiration of such
policies, furnish Lessor and Lessee with evidence of renewals 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.

 

11

 

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. Lessee shall indemnify, protect, defend and
hold harmless the Premises, Lessor and its agents, 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
(collectively, “Liabilities”)
arising out of, involving, or in connection with bodily injury in and on the
Premises or public areas of the Building to the extent such Liabilities arise
out of the negligence, willful misconduct or illegal conduct of Lessee, its
agents or employees.  Lessor shall
indemnify, protect, defend and hold harmless Lessee from and against any and
all claims, damages, liens, judgments, penalties, attorneys’ and consultants’
fees, expenses and/or liabilities arising out of, involving, or in connection
with bodily injury in and on the Premises or public areas of the Building to
the extent such Liabilities arise out of the negligence, willful misconduct or
illegal conduct of Lessor, its agents or employees.  If any action or proceeding is brought
against Lessor or Lessee by reason of any of the foregoing matters, then each
party shall upon notice defend the same at the other party’s expense by counsel
reasonably satisfactory to said party and each party shall cooperate with the
other party in such defense.  Neither
Lessor nor Lessee need have first paid any such claim in order to be defended
or indemnified.

 

8.8           Exemption of Lessor from
Liability. Except for Lessor’s
negligence or willful misconduct, Lessor shall not be liable for 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, 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.  Notwithstanding
Lessor’s negligence or breach of this Lease, Lessor shall under no
circumstances be liable for injury to Lessee’s business or for any loss of
income or profit therefrom.

 

8.9.          Lessee’s 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, if Lessee shall fail to perform
any of its obligations regarding the acquisition and maintenance of insurance,
Lessor may perform the same and the cost of same shall be deemed additional
rent, payable upon Lessor’s request.

 

9.             Damage or Destruction.

 

9.1           Definitions.

 

(a)           “Premises Partial Damage” shall mean damage or destruction to the
improvements on the Premises, (including the Tenant Improvements, but not
including Lessee’s non-building standard Tenant Improvements and any other
property located in the Premises) other than Lessee Owned Alterations and
Utility Installations, which can reasonably be repaired in six months or less
from the date of the damage or destruction. 
Lessor shall notify Lessee in writing within thirty (30) days from the
date of the damage or destruction as to whether or not the damage is Partial or
Total.

 

(b)           “Premises Total Destruction” shall mean damage or destruction to the
Premises (including Tenant Improvements but not including Lessee’s non-building
standard Tenant Improvements and any other property located in the Premises),
other than Lessee Owned Alterations and Utility Installations and Trade
Fixtures, which cannot reasonably be repaired in six months or less from the
date of the damage or destruction. 
Lessor shall notify Lessee in writing within   thirty (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 the
improvements on the Premises (including the Tenant Improvements, but not
including Lessee’s non-building standard Tenant Improvements and any

 

12

 

other
property located in 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 (including the Tenant Improvements, but not including Lessee’s
non-building standard Tenant Improvements and any other property located in the
Premises) 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 as defined in Paragraph 6.2(a), in, on or under the Premises which
requires repair, remediation or restoration.

 

9.2           Partial Damage - Insured Loss. If 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, Lessee Owned Alterations, Utility
Installations, and non-building standard Tenant Improvements) as soon as
reasonably possible and this Lease shall continue in full force and
effect.  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 or
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 30 days following receipt of written notice of such shortage and request
therefor. If Lessor receives said funds or adequate assurance thereof within
said 30 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 30 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 60 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 ten days after the 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 reasonably satisfactory assurance
thereof within 30 days following 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 provisions hereof,
if a Premises Total Destruction occurs, this Lease shall terminate thirty (30)
days following such Destruction.  If the
damage or destruction was caused by the illegal conduct 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 nine (9) months
of this Lease there is damage for which the cost to repair exceeds three month’s
Base Rent, which is an uninsured Loss, Lessor or Lessee may terminate this
Lease effective 180 days following the date of occurrence of such damage by
giving a written termination notice to the other party within 30 days after the
date of occurrence of such damage. 
Notwithstanding the foregoing, if

 

13

 

Lessee
at that time has an exercisable Option (as defined in Paragraph 39), then
Lessee may preserve this Lease by exercising such Option.  If Lessee duly exercises such Option during
such period, 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 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,
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 for
any intended Agreed Use 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 shall be obligated to repair or
restore the Premises and does not commence, in a substantial and meaningful
way, such repair or restoration within sixty (60) 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 of Lessee’s election to terminate
this Lease on a date not less than 30 days following the giving of such notice.  If Lessee gives such notice and such repair
or restoration is not commenced within thirty (30) days thereafter, this Lease
shall terminate as of the date specified in said notice.  If the repair or restoration is commenced
within such thirty (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. 
Notwithstanding the foregoing, in the event that repair or restoration
is necessary to restore Business Critical functions, Lessee may immediately
commence such repair or restoration if Lessor does not do so after 48 hours
written notice provided, however, such work does not interfere with Lessor’s or
Lessor’s agents ability to investigate the damage and/or collect insurance
proceeds.  In such event, Lessee shall
entitled to utilize any available insurance proceeds or deduct from rent
obligations costs or expenses directly related to such repair or restoration
that would have been Lessor’s.

 

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,
within ten (10) days, return to Lessee so much of Lessee’s Security
Deposit as has not been, or is not then required to be, used by Lessor.

 

9.8           Waive Statutes. Lessor and Lessee agree that the terms of
this Lease shall govern the effect of any damage to or destruction of the
Premises with respect to the termination of this Lease and hereby waive the
provisions of any present or future statute to the extent it is inconsistent
herewith.

 

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,
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, 
(specifically excluding any tax increase imposed due to a subsequent
change in the ownership of the Premises or a change of control or ownership of
Lessor), and (ii) levied or assessed on machinery or equipment provided by
Lessor to Lessee pursuant to this Lease.

 

10.2.        Payment of Taxes. In addition to Base Rent, Lessee shall pay
to Lessor an amount equal to the Real Property Tax installment due as least 20
days prior to the applicable delinquency date. 
If any such installment shall cover any period of time prior to or after
the expiration or termination of this Lease, Lessee’s share of such installment
shall be prorated.  When the actual
amount of the applicable tax bill is known, the amount of such equal monthly
advance payments shall be adjusted as required to provide the funds needed to
pay the applicable taxes.  If the amount
collected

 

14

 

by
Lessor is insufficient to pay such Real Property Taxes when due, Lessee shall
pay Lessor, within 30 days of receipt of a demand therefor, such additional sum
as is necessary.  Advance payments may be
intermingled with other moneys of Lessor and shall not bear interest.

 

10.3         Joint Assessment. If the Premises are not separately assessed,
Lessee’s liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be reasonably 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 ten 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   Notwithstanding the
foregoing, if for reasons within the control of Lessor and not caused by force
majeure, any interruption, curtailment, stoppage or suspension of the
Essential Services (as hereinbelow defined), shall continue for more than five (5) consecutive
days and shall render the Premises unusable, and if Lessee shall in fact cease
conducting business in the Premises, then so long as Lessee is not in default
hereunder, all rent and additional rent due hereunder shall be abated for the
period beginning on the latter of the first (1st) consecutive
business day of such failure or the day Lessee ceases to conduct business in
the Premises, and shall continue until use of the Premises is restored to
Lessee.  If due to a force majeure event
or an event beyond the control of Lessor, any interruption, curtailment, stoppage or
suspension of Essential Services shall continue for more than thirty (30)
consecutive business days and shall render the Premises unusable, and if Lessee
shall in fact cease conducting business in the Premises, then so long as Lessee
is not in default hereunder, all rent and additional rent payable hereunder
shall be abated for the period beginning on the latter of the first (1st)
consecutive business day of such failure or the day Lessee ceases to conduct
business in the Premises, and shall continue until use of the Premises is
restored to Lessee.  For purposes hereof,
“Essential Services” shall mean the provision of (a) cold water, and (b) electricity.

 

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 which shall not be unreasonably
withheld, conditioned or delayed beyond ten (10) business days.  Lessee shall describe the full particulars of
the proposed transaction and shall provide a description of the identity, net
worth and previous business experience of the proposed sublessee or assignee,
including without limitation recent copies of financial statements (with
accompanying notes and disclosures of all material changes thereto) in audited
form, if available, and certified as accurate by the proposed sublessee or
assignee.  Lessor also shall have the
right to approve the form of sublease or assignment agreement, such approval
not to be unreasonably withheld.

 

(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)           Lessee shall be permitted to assign the Lease
or sublease any portion of the Premises during the initial term and any
extension term, to any related entity, parent company, subsidiary or affiliate
of Lessee (collectively,

 

15

 

“Affiliate”),
or any assignment resulting from a consolidation, merger, stock transfer or
purchase of substantially all of Lessee’s assets.  Lessee shall retain any net profit from any
such sublease or assignment.  As used
herein, the term “Affiliate” shall mean any corporation or other entity or
persons which controls, is controlled by or is under common control with
Lessee, with the term “control” being deemed to mean beneficial ownership or
more than twenty percent (20%) of the voting power of such entity.

 

(d)           Notwithstanding anything herein to the contrary,
Lessee shall have the right to sublease the Phase III portion of the Premises
upon Commencement Date and retain one hundred percent (100%) of the sublease
rent generated from subleasing the Phase III space.  Except for Affiliates and the Phase III
portion of the Premises, to the extent Lessee receives sublease rent that
exceeds the Base Rent due under this Lease after deducting all of the costs
incurred by Lessee in subleasing, including but not limited to brokerage
commissions, tenant improvement costs, advertising costs, attorneys’ fees,
rental abatement, downtime after space has been vacated and any other
reasonable costs, then Lessee shall pay fifty percent (50%) of such excess to
Lessor upon receipt of said excess from the sublessee.  Lessor shall have no right to terminate this
Lease or recapture any portion of the Premises as a result of any permitted
assignment or sublease.

 

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

 

12.2         Terms and Conditions Applicable
to Assignment and Subletting.

 

(a)           Regardless of Lessor’s consent, no assignment
or subletting shall be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease with
respect to the portion of the Premises assigned or subleased.

 

(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.  In the event Lessor does not consent to an
assignment or sublease within fifteen (15) business days after Lessee’s
request, then Lessor shall be deemed to have consented to said sublease or
assignment.

 

(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, or anyone else responsible
for the performance of the 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.

 

(f)            Any
assignee of, or sublessee under, this Lease shall, by reason of accepting such
assignment or entering into such sublease, 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.

 

16

 

(h)           Lessor shall execute documents reasonably
required or requested by Lessee to recognize a permitted assignment or
sublease, subject to applicable Lessor approvals, without further conditions.

 

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, unless
expressly provided otherwise in such sublease:

 

(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 shall collect said Rent. 
In the event that the amount collected by Lessor exceeds Lessee’s
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 for any failure of Lessee to perform and comply
with any of 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, sublessee
shall 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.  Lessor shall provide the sublessee with a
recognition agreement whereby Lessor agrees to continue to recognize sublessee’s
tenancy in the event of default by Lessee.

 

(c)           No sublessee shall further assign or sublet
all or any part of the Premises without Lessor’s prior written consent.

 

(d)           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 material
term, covenant, condition or Rule or Regulation hereunder.  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 accompanied by non-payment of Rent 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 5 business days following written notice to Lessee.

 

(c)           The failure by Lessee to provide:  (i) reasonable written evidence of
compliance with Applicable Requirements; (ii) the service contracts
(provided such service contracts are not being handled by Lessor), (iii) the
rescission of an unauthorized assignment or subletting; (iv) an Estoppel
Certificate,  (v) a requested
subordination;  (vi) any document
requested under Paragraph 42; or  (vii) material
safety data sheets (MSDS), where any such failure continues for a period of
twenty (20) days following written notice to Lessee.

 

17

 

(d)           A Default,
other than those described in Subparagraphs 13.1(a), (b) or (c), 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.

 

(e)           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. Code § 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 effect the validity
of the remaining provisions.

 

(f)            The discovery that any financial statement of
Lessee given to Lessor was materially false in a way that undermines Lessee’s
ability to perform its obligations hereunder notwithstanding the Security
Deposit.

 

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 110% of the costs and expenses incurred by Lessor
in such performance upon receipt of an invoice therefor.  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: (i) 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 therefrom, 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 1%.  Efforts by Lessor to
mitigate damages caused by Lessee’s Breach of this Lease shall not waive Lessor’s
right to recover damages under this Paragraph 12.  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
statue shall run concurrently, and the failure of Lessee to cure the Default
within the greater of the 2 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 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 interest, shall not
constitute a termination of the Lessee’s right to possession.

 

18

 

(c)           Pursue any other remedy now or hereafter
available under the laws or judicial decisions of the state of California.  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 during the first five years of the
Original Term, 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.

 

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 five 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 10% of each such
overdue amount or $100, whichever is greater provided, however, that the
foregoing charge shall be waived once per year. 
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 three (3) consecutive installments of Base Rent, then
notwithstanding any other 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 the
Prime Rate plus 1% 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 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; provided, further, that if Lessor’s obligation must be fulfilled to
protect health or safety, Lessor must act in a reasonable and timely manner.

 

(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. 
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 ten days after Lessor shall have given Lessee
written

 

19

 

notice
of such taking (or in the absence of such notice, within ten 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 the 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 for Lessee’s relocation expenses, loss of business
goodwill, leasehold improvements paid for by Lessee, 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. 
To the extent that the Premises are reduced, the Security Deposit and
underlying letter of credit shall be reduced in accordance with the reduction
of useable space to total useable space immediately prior to the condemnation.

 

15.          Brokerage Fees.

 

15.1         Additional Commission. In addition to the payments owed pursuant
to Paragraph 1.9 above, Lessor shall pay Brokers any Additional Commission only
in accordance with Lessor’s schedule in effect at the time of the
execution of this Lease.

 

15.2         Assumption of Obligations. Any buyer or transferee of Lessor’s interest
in this Lease shall be deemed to have assumed Lessor’s obligation hereunder.
Brokers shall be third party beneficiaries of the provisions of Paragraphs 1.9,
15, 22 and 31.  If Lessor fails to pay to
Brokers any amounts due as and for brokerage fees pertaining to this Lease when
due, then such amounts shall accrue interest. 
In addition, if Lessor fails to pay any amounts to Lessee’s Broker when
due, Lessee’s Broker may send written notice to Lessor and Lessee of such failure
and if Lessor fails to pay such amounts within ten (10) days after said
notice, Lessee shall pay said monies to its Broker and offset such amounts
against Rent.  In addition, Lessee’s
Broker shall be deemed to be a third party beneficiary of any commission
agreement entered into by and/or between Lessor and Lessor’s Broker for the
limited purpose of collecting any brokerage fee owed.

 

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 fifteen (15) 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
American Industrial Real Estate Association, 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   twenty (20) 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.

 

(c)           If Lessor desires to finance, refinance, or
sell the Premises, or any part thereof, Lessee shall 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 three years.  All such financial statements shall be
received by Lessor and such lender or purchaser in confidence and shall be used
only for the purpose herein set forth.

 

20

 

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.  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.  Except as provided in
Paragraph 15, 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 shall be binding only upon the Lessor as hereinabove defined.

 

18.          Severability. The
invalidity of any provision of this Lease, as determined by a court 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 and Lessee under this Lease shall not
constitute obligations of theirs or their parent organization’s respective
partners, members, directors, officers or shareholders by either party, and
neither party shall seek recourse against the other’s or its parent organization’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. 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.

 

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 facsimile
transmission, and shall be deemed sufficiently given if served in a manner
specified in 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 unless
otherwise directed by Lessee.  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 48 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 guarantee next day delivery shall be deemed given 24 hours after delivery
of the same to the Postal Service or courier. 
Notices transmitted by facsimile transmission or similar means, shall be
deemed delivered upon telephone confirmation of receipt (confirmation report
from fax machine is sufficient), provided a copy is also delivered via delivery
or mail.  If notice is received on a
Saturday, Sunday or legal holiday, it shall be deemed received on the next
business day.

 

24.          Waivers. 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 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.  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.

 

21

 

25.          Disclosures Regarding The Nature of a Real Estate Agency Relationship.

 

(a)           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.

 

(b)           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 for the first thirty (30) days shall be 125% of the Base Rent, plus
Lessee’s Pro Rata Share of Operating Expenses and Real Estate Taxes, and
thereafter shall be increased to 150% of the Base Rent applicable immediately
preceding the expiration or termination, plus Lessee’s Pro Rata Share of
Operating Expenses and Real Estate Taxes. 
Nothing contained herein shall be construed as a 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 of California.  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

 

22

 

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 Device 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 such new owner, this Lease shall
automatically become a new Lease between Lessee and such new owner, upon all of
the terms and conditions hereof, for the remainder of the term hereof, and (ii) Lessor
shall thereafter be relieved of any further obligations hereunder and such new
owner shall assume all of Lessor’s obligations hereunder, 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, or (c) be bound by prepayment of more than one month’s rent.

 

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 approximately 30 days
after the execution of this Lease, Lessor shall use its best efforts to obtain
a Non-Disturbance Agreement from the holder of any pre-existing Security Device
which is secured by the Premises.  The
Non-Disturbance Agreement shall be in recordable form and may be recorded at
Lessee’s election and expense.  In the
event that Lessor is unable to provide the Non-Disturbance Agreement within
said 60 30 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 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 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 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, provided that
such relief is not subject to further appeal(s).  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.

 

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, of at least 24
hours and all such persons must be accompanied by a designated employee of
Lessee, for the purpose of showing the same to prospective purchasers, lenders
or, nine (9) months prior to the expiration of the then-current lease
term, tenants, and upon at least 24 hours notice and satisfactory
security measures, for purposes of 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 provided
that Lessee’s use and enjoyment of the Premises for the intended Agreed Uses is
not unreasonably disturbed for extended periods of time.  Lessor, its employees, contractors, agents or
guests shall reasonably comply with Lessee’s protocols, rules and
procedures necessary for Lessee to comply with federal, state and local laws,
including but not limited to Federal Drug Administration requirements.  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.

 

23

 

34.          Signs. Lessor may
place on the Premises ordinary “For Sale” signs at any time and ordinary “For
Lease” signs during the last six (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 which shall not be unreasonably withheld, conditioned or
delayed beyond 10 business days.  All
signs must comply with all Applicable Requirements.   (See Addendum “A”)

 

35.          Termination; Merger.
Unless specifically stated otherwise in this Lease or 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
ten 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, conditioned or delayed. 
Lessor’s actual reasonable costs and expenses (including but not limited
to architects’, attorneys’, engineers’ and other consultants’ fees) incurred in
the consideration of, or response to, a request by Lessee for any Lessor
consent, including but not limited to consents to an assignment, a subletting
or the presence or use of a Hazardous Substance, shall be paid by Lessee upon
receipt of an invoice and supporting documentation therefor.  Lessor’s consent to an 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 ten (10) business days following
such request.

 

37.          [Omitted].

 

38.          Quiet Possession.
Subject to payment by Lessee of the Rent and Lessee’s adherence to the terms
hereof, Lessee shall have quiet possession and quiet enjoyment of the Premises
for the Original Term and any extension hereof afforded by an Option that
Lessee exercises.

 

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 the term of or renew this Lease or to extend 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 or the right of first refusal to
purchase the Premises or other property of Lessor.

 

39.2         Options. Any Option granted to Lessee in this Lease
is personal to the original Lessee, and cannot be assigned or exercised by
anyone other than said original Lessee and only while the original Lessee is in
full possession of the Premises and, if required by Lessor, with Lessee
certifying that Lessee has no intention of thereafter assigning or subletting.

 

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),   (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessee has given five (5) or
more notices of separate Default, whether or not the Defaults are cured, during
the twelve (12) month period immediately preceding the exercise of the Option.

 

24

 

(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).

 

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.

 

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)           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 the 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.          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

 

25

 

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.

 

 

THIS SECTION LEFT
INTENTIONALLY BLANK

 

26

 

The
Parties hereto have executed this Lease at the place and on the dates specified
above their respective signatures.

 

	
  Executed at Newport Beach, California

  	
  Executed at: 

  	
  Wayne, Pennsylvania

  	
   

  
	
   

  	
   

  
	
  on:

  	
  7/21/05

  	
   

  	
  on:

  	
  7/19/05

  	
   

  
	
   

  	
   

  
	
  By LESSOR:

  	
  By LESSEE:

  	
   

  
	
   

  	
   

  	
   

  
	
  31 COLUMBIA, INC., A NEVADA CORPORATION

  	
  CLARiENT, INC., A DELAWARE CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Andrei Olenicoff

  	
   

  	
  By:

  	
  Ronald A. Andrews

  	
   

  
	
  Name Printed:  Andrei Olenicoff

  	
  Name Printed:

  	
  Ronald A. Andrews

  	
   

  
	
  Title:  Vice President

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Lessor’s Mailing
  Address:

  	
  7 Corporate Plaza

  	
  Lessee’s Mailing
  Address:

  	
  31 Columbia

  
	
   

  	
  Newport Beach, CA
  92660

  	
   

  	
  Aliso Viejo, CA 92656

  
	
   

  	
   

  	
   

  	
   

  
	
  Rent Payment Address:

  	
  31 Columbia, Inc.

  	
  with a mandatory copy to:

  	
  c/o CFO

  
	
   

  	
  c/o Olen Commercial Realty Corp.

  	
   

  	
  33171 Paeco Ceneza

  
	
   

  	
  Seven Corporate Plaza

  	
   

  	
  San
  Juan Capistrano, 

  
	
   

  	
  Newport Beach, CA 92660

  	
   

  	
  CA
  92675

  
	
   

  	
   

  
	
  Telephone/Facsimile:

  	
      949.644.6536 / 949.719.7200

  	
   

  	
  Telephone/Facsimile:

  	
  949-443-3355/949-443-5259

  	
   

  
	
   

  	
   

  	
   

  
	
  Federal ID No.

  	
   

  	
   

  	
  Federal ID No.

  	
   

  	
   

  
																			

 

27Exhibit 10.1

 

Form of
Restricted Stock Unit Agreement

 

	
   

  	
  Grant No.: 

  	
   

  

 

 

ON ASSIGNMENT, INC.

RESTATED
1987 STOCK OPTION PLAN

(as amended
and restated April 18, 2003)

 

STOCK
UNIT AGREEMENT

 

On
Assignment, Inc., a Delaware corporation (the “Company”), hereby grants
stock units relating to shares of its common stock, $.01 par value (the “Stock”),
to the individual named below as the Grantee, subject to the vesting conditions
set forth in the attachment.  Additional
terms and conditions of the grant are set forth in this cover sheet, in the
attachment and in the Company’s Restated 1987 Stock Option Plan (the “Plan”).

 

	
  Grant Date:

  	
   

  	
  , 20

  	
   

  	
   

  
	
   

  
	
  Name of Grantee:

  	
   

  	
   

  
	
   

  
	
  Grantee’s Employee Identification Number:

  	
   

  	
  -

  	
   

  	
  -

  	
   

  	
   

  
	
   

  
	
  Number of Stock Units Covered by Grant:

  	
   

  	
   

  
															

 

By signing this cover sheet, you
agree to all of the terms and conditions described in this Agreement and in the
Plan, a copy of which will be provided on request.  You acknowledge that you have carefully
reviewed the Plan and agree that the Plan will control in the event any
provision of this Agreement should appear to be inconsistent with the terms of
the Plan.

 

	
  Grantee:

  	
   

  	
   

  
	
   

  	
  (Signature)

  	
   

  
	
   

  	
   

  
	
  Company:

  	
   

  	
   

  
	
   

  	
  (Signature)

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
				

 

Attachment

 

This is not a stock
certificate or a negotiable instrument.

 

 

ON ASSIGNMENT, INC.

RESTATED
1987 STOCK OPTION PLAN

 

STOCK
UNIT AGREEMENT

 

	
  Stock Unit Transferability

  	
   

  	
  This grant is an award of stock units in the number of units set
  forth on the cover sheet, subject to the vesting conditions described below (“Stock
  Units”). Your Stock Units may not be transferred, assigned, pledged or
  hypothecated, whether by operation of law or otherwise, nor may the Stock
  Units be made subject to execution, attachment or similar process.

  
	
   

  	
   

  	
   

  
	
  Definitions

  	
   

  	
  Capitalized terms not
  defined in this Agreement are defined in the Plan, and have the meaning set
  forth in the Plan.

  
	
   

  	
   

  	
   

  
	
  Vesting

  	
   

  	
  Your Stock Unit grant vests as to twenty five percent (25%) of the
  total number of Stock Units shown on the cover sheet on August 3, 2006,
  as long as you continue to be a Service Provider on that date. An additional
  one-sixteenth (1/16) of the Stock Units under this Stock Unit grant (as shown
  on the cover sheet) will become vested on each of the following dates;
  provided, that, you then continue in Service:

   

  Vesting Dates

  
November 3, 2006

  
February 3, 2007
May 3, 2007
August 3, 2007
November 3, 2007

  
February 3, 2008
May 3, 2008
August 3, 2008
November 3, 2008

  
February 3, 2009
May 3, 2009
August 3, 2009

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The resulting aggregate number of vested Stock Units will be rounded
  down to the nearest whole number of Stock Units. You may not vest in more
  than the number of Stock Units covered by this grant.  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  No additional Stock Units will vest after your Service has terminated
  for any reason.

  
	
   

  	
   

  	
   

  
	
  Forfeiture of Unvested Units

  	
   

  	
  In the event that your Service terminates for any reason, unless
  otherwise provided in an applicable employment agreement between you and the
  Company or an Affiliate, you will forfeit all 

  

 

2

 

	
   

  	
   

  	
  of the Stock Units that have not yet vested.

  
	
   

  	
   

  	
   

  
	
  Delivery of Stock Pursuant to Vested Units

  	
   

  	
  On each Vesting Date, a certificate for the shares of Stock
  represented by the Stock Units that became vested on that Vesting Date shall
  be delivered to you (or at the Company’s option an appropriate book-entry
  shall be made representing the issuance of the Stock), subject to the
  paragraph below regarding withholding taxes. Once the share of Stock
  represented by a vested Stock Unit has been delivered or otherwise issued to
  you, you shall have no further rights with regard to the Stock Unit.

  
	
   

  	
   

  	
   

  
	
  Leaves of Absence

  	
   

  	
  For purposes of this Stock
  Unit grant, your Service does not terminate when you go on a bona fide
  employee leave of absence that was approved by the Company in writing, if the
  terms of the leave provide for continued Service crediting, or when continued
  Service crediting is required by applicable law. However, your Service will
  be treated as terminating three months after you went on employee leave,
  unless your right to return to active work is guaranteed by law or by a
  contract. Your Service terminates in any event when the approved leave ends
  unless you immediately return to active employee work. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Company determines, in
  its sole discretion, which leaves count for this purpose, and when your
  Service terminates for all purposes under the Plan.

  
	
   

  	
   

  	
   

  
	
  Withholding Taxes

  	
   

  	
  You agree, as a condition of this grant, that you will make
  acceptable arrangements to pay any withholding or other taxes that may be due
  as a result of vesting in Stock Units or your acquisition of Stock under this
  grant. In the event that the Company determines that any federal, state,
  local or foreign tax or withholding payment is required relating to this
  grant, the Company will have the right to: (i) require that you arrange
  such payments to the Company, (ii) withhold such amounts from other
  payments due to you from the Company or any Affiliate, or (iii) cause an
  immediate forfeiture of shares of Stock subject to the Restricted Units
  granted pursuant to this Agreement in an amount equal to the withholding or
  other taxes due.

  
	
   

  	
   

  	
   

  
	
  Retention Rights

  	
   

  	
  This Agreement does not give you the right to be retained or employed
  by the Company (or any Affiliates) in any capacity. The Company (and any
  Affiliate) reserve the right to terminate your Service at any time and for
  any reason.

  
	
   

  	
   

  	
   

  
	
  Shareholder Rights

  	
   

  	
  You do not have any of the rights of a shareholder with respect to
  the Stock Units unless and until the Stock relating to the Stock Units has
  been delivered to you. You will, however, be entitled to receive, upon the
  Company’s payment of a cash dividend on its outstanding Stock, a cash payment
  for each Stock Unit that you then hold equal to the per-share dividend paid
  on the Stock. Such cash payment will be deemed reinvested in additional Stock
  Units 

  

 

3

 

	
   

  	
   

  	
  at a price per unit equal to the Fair Market Value of a share of
  Stock on the date that such dividend is paid.

  
	
   

  	
   

  	
   

  
	
  Adjustments

  	
   

  	
  In the event of a stock split, a stock dividend or a similar change
  in the Company stock, the number of Stock Units covered by this grant will be
  adjusted (and rounded down to the nearest whole number) in accordance with
  the terms of Section 18 of the Plan.

  
	
   

  	
   

  	
   

  
	
  Corporate Transaction

  	
   

  	
  Your Stock Unit grant shall immediately vest in full, in the event
  of, and contingent upon the consummation of, any Corporate Transaction (as
  defined in the Plan), except to the extent the obligation to issue shares in
  connection with the Stock Unit grant is assumed by the successor corporation
  (or parent thereof), or replaced with stock units relating to the common
  stock of the successor corporation (or parent thereof) in connection with
  such Corporate Transaction. In the event
  that the obligation to issue
  shares in connection with the Stock Unit grant is assumed or substituted for
  by the successor corporation (or parent thereof) in connection with such
  Corporate Transaction, the Stock Unit
  grant shall continue to vest in accordance with the schedule set forth
  in this Stock Unit Agreement.

  
	
   

  	
   

  	
   

  
	
  Applicable Law

  	
   

  	
  This Agreement will be interpreted and enforced under the laws of the
  State of California, other than any conflicts or choice of law rule or
  principle that might otherwise refer construction or interpretation of this
  Agreement to the substantive law of another jurisdiction.

  
	
   

  	
   

  	
   

  
	
  Data Privacy

  	
   

  	
  In order to administer the
  Plan, the Company may process personal data about you. Such data includes but
  is not limited to the information provided in this Agreement and any changes
  thereto, other appropriate personal and financial data about you such as home
  address and business addresses and other contact information, payroll
  information and any other information that might be deemed appropriate by the
  Company to facilitate the administration of the Plan. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By accepting this Stock
  Unit grant, you give explicit consent to the Company to process any such
  personal data. You also give explicit consent to the Company to transfer any
  such personal data outside the country in which you work or are employed,
  including, with respect to non-U.S. resident Grantees, to the United States,
  to transferees who shall include the Company and other persons who are
  designated by the Company to administer the Plan.

  
	
   

  	
   

  	
   

  
	
  Consent to Electronic
  Delivery

  	
   

  	
  The Company may choose to
  deliver certain statutory materials relating to the Plan in electronic form.
  By accepting this Stock Unit grant you agree that the Company may deliver the
  Plan prospectus and the Company’s annual report to you in an electronic
  format. If at any time you would prefer to receive paper copies of these
  documents, as you are entitled to, the Company 

  

 

4

 

	
   

  	
   

  	
  would be pleased to
  provide copies. Please contact Julie Hernandez at (818) 878-3136 to request
  paper copies of these documents.

  
	
   

  	
   

  	
   

  
	
  The Plan

  	
   

  	
  The text of the Plan is incorporated in this Agreement by reference.
  This Agreement, the Plan, and an applicable employment agreement with the
  Company, if any, constitute the entire understanding between you and the
  Company regarding this grant of Stock Units. Any prior agreements,
  commitments or negotiations concerning this grant are superseded. The Plan will
  control in the event any provision of this Agreement should appear to be
  inconsistent with the terms of the Plan.

  

 

By signing the cover sheet of
this Agreement, you agree to all of the terms and

conditions described above and in the Plan.

 

5

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