Document:

EXHIBIT 10.14

 

 

SUBLEASE

 

1.             Parties.  This Sublease (“Sublease”), dated November
3, 2003 is made by and between REMEC, Inc., a California corporation
(“Sublessor”) and Digirad Corporation, a Delaware corporation (“Sublessee”),
(collectively the “Parties”, or individually a “Party”).

 

2.             Premises.  Sublessor hereby subleases to Sublessee, and
Sublessee hereby subleases from Sublessor, for the term, at the rent, and upon
all of the terms, covenants and conditions set forth in this Sublease, that
certain real property, including all improvements therein, commonly known by
the street address of 13950 Stowe Drive, Poway located in the County of San
Diego, State of California and generally described as an approximately 70,244
square-foot freestanding research and manufacturing facility also known as
Stowe Corporate Center, and more fully described on Exhibit A hereto (the
“Premises”).

 

3.             Term.  The term of this Sublease (“Sublease Term”)
shall be for a period commencing upon the date that Sublessor tenders possession
of the Premises to Sublessee, which date is set forth in Section 1 hereof
(“Commencement Date”) and ending on February 28, 2010 (“Expiration Date”)
unless sooner terminated pursuant to the provisions hereof.

 

3.1           Sublessee Compliance.  Notwithstanding any provision herein to the
contrary, Sublessor shall not be required to tender possession of the Premises
to Sublessee until Sublessee executes this Sublease, pays Sublessor the Base
Rent for July 2004, delivers to Sublessor the Letter of Credit as set forth in
Paragraph 5, and provides Sublessor with evidence of insurance as required by
Paragraph 8.5 of the Master Lease as modified by Paragraph 3.4 of this
Sublease.

 

3.2           Early Occupancy
Period.  “Early Occupancy Period” is
defined as the period beginning on the Commencement Date and ending on June 30,
2004.  During the Early Occupancy
Period, Sublessee shall not be responsible for Base Rent, but shall be
responsible for all Operating Expenses, except for the costs of (a) property
taxes on the Premises and (b) the cost to maintain the property insurance on
the Premises required by Paragraph 8.3 of the Master Lease.  Except as otherwise specifically agreed
herein, Operating Expenses shall be prorated upon the expiration of the Early
Occupancy Period with the Sublessor being liable for all sums incurred prior to
the Early Occupancy Period, and the Sublessee being liable for all sums
incurred subsequent to the expiration of the Early Occupancy Period; provided
that if any of the aforesaid prorations cannot be calculated accurately as of
the expiration of the Early Occupancy Period, then the same shall be calculated
as soon as reasonably practicable and either party owing the other party a sum
of money based such subsequent calculation shall promptly pay said sums to the
other party.

 

4.             Rent.

 

4.1           Base Rent.  Sublessee shall pay to Sublessor as Base
Rent for the

 

4.2           Premises, the monthly
payments set forth in the following Base Rent Schedule, in advance on the first
day of each month.  Notwithstanding the
foregoing, Sublessee shall pay to Sublessor upon execution of this Sublease the
Base Rent for the first full month that

 

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Rent is due in the sum of Seventeen Thousand Seven
Hundred Fifty-Two and 89/100 Dollars ($17,752.89).  The Base Rent Schedule is as follows:

 

	
  July through December, 2004:

  	
   

  	
  $

  	
  17,752.89

  	
   

  
	
  January through December, 2005

  	
   

  	
  $

  	
  36,140.54

  	
   

  
	
  January through December, 2006:

  	
   

  	
  $

  	
  37,947.56

  	
   

  
	
  January through December, 2007:

  	
   

  	
  $

  	
  39,844.94

  	
   

  
	
  January through December, 2008:

  	
   

  	
  $

  	
  41,837.19

  	
   

  
	
  January through December, 2009:

  	
   

  	
  $

  	
  43,929.05

  	
   

  
	
  January through February, 2010:

  	
   

  	
  $

  	
  46,125.50

  	
   

  

 

4.3           Operating Expenses
and Utilities.  After expiration of
the Early Occupancy Period, Sublessee shall directly pay for all expenses on
the Premises, including but not limited to taxes, insurance, maintenance and
utilities (including, but not limited to, the cost of initiating San Diego Gas
& Electric Company service) (“Operating Expenses”), throughout the term of
the Sublease.  Sublessee shall be
exclusively responsible for contracting for its own vendors for all maintenance
and any janitorial service on the Premises. 
This includes but is not limited to an HVAC maintenance contract and parking
lot maintenance/repair.  Sublessee shall
maintain the entire Premises in accordance with Paragraph 7.1 of the Master
Lease, with the sole exceptions that Sublessor, at its own cost and expense,
shall maintain and repair the building foundation, and the structural portions
of the roof, to the extent that such structural portions of the roof are not
affected by Sublessee’s Alterations or Trade Fixtures.  Sublessor’s obligation hereunder to repair
and maintain is subject to the condition precedent that Sublessor shall have
received written notice of the need for such repairs and maintenance and a
reasonable time to perform such repair and maintenance.  Sublessee shall promptly report in writing
to Sublessor any defective condition known to it which Sublessor is required to
repair.

 

4.4           Rent Defined.  All monetary obligations of Sublessee to
Sublessor under the terms of this Sublease (except for the Security Deposit)
are deemed to be rent (“Rent”).  Rent
shall be payable in lawful money of the United States to Sublessor at the
address stated herein or to such other persons or at such other places as
Sublessor may designate in writing.

 

5.             Security Deposit.  On or before the Commencement Date,
Sublessee, at its sole cost and expense, shall deposit with Sublessor a clean,
irrevocable and unconditional standby letter of credit in a form acceptable to
Sublessor in its reasonable discretion (“Letter of Credit”) issued by a bank
approved by Sublessor in its reasonable judgment (hereinafter referred to as
the “Bank”) in favor of Sublessor, in the amount of One Hundred Twenty Thousand
Dollars ($120,000) (“Security Deposit”) as security for the faithful
performance and observance by Sublessee of the terms, conditions and provisions
of this Sublease, including without limitation the surrender of possession of the
Premises to Sublessor as herein provided. 
The Letter of Credit shall have a term which expires no sooner than the
Expiration Date, or Sublessee may deliver a Letter of Credit with a one (1)
year term which by its terms automatically, for the remainder of the Sublease
Term, renews for successive one (1) year periods unless the Bank provides no
less than thirty (30) days written notice to Sublessor that such Letter of
Credit shall not be renewed, in which event Sublessor shall have the right to
draw down the entire amount of the Letter of Credit unless Sublessee
substitutes, not less than ten days prior to the expiration of such Letter of
Credit, a new Letter of Credit which meets the requirements of this Paragraph
5.  On the first day

 

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of the twenty-fourth (24th) month of the Sublease
Term, provided Sublessee is not then in default under the terms of this Lease,
such Letter of Credit shall be reduced in half (1/2) to Sixty Thousand Dollars
($60,000) (Sublessee shall provide Sublessor with a new Letter of Credit in
such amount, and upon receipt, Sublessor shall return the $120,000 Letter of
Credit to Sublessee or Bank, as directed by Sublessee).  If Sublessee fails to pay Rent or otherwise
defaults under this Sublease, Sublessor may draw upon all or any portion of the
Letter of Credit for the payment of any amount then due Sublessor or to
reimburse or compensate Sublessor for any liability, cost, expense, loss or
damage (including attorney’s fees) which Sublessor may suffer or incur by
reason thereof (including without limitation any requirement that Sublessor
repay any amounts previously paid by Sublessee to Sublessor because such
amounts are determined to be preferential transfers under applicable bankruptcy
law).  The use or application of the
Letter of Credit or any portion thereof shall not prevent Sublessor from
exercising any other right or remedy provided under this Sublease and shall not
be construed as liquidated damages. 
Sublessee shall on demand pay Sublessor the amount so used or applied or
restore the Security Deposit to the amount required by this Paragraph 5.  Sublessor shall not be required to keep all
or any part of the Security Deposit separate from its general accounts.  Sublessor shall, within fifteen (15) days
after the expiration or earlier termination of this Sublease and after
Sublessee has vacated the Premises, return to Sublessee that portion of the
Security Deposit not used or applied by Sublessor.  No part of the Security Deposit shall be considered to be held in
trust, to bear interest, or to be prepayment for any monies to be paid by
Sublessee under this Sublease, except as provided herein.  Notwithstanding anything to the contrary
contained in this Sublease, in the event Sublessor files for bankruptcy
(voluntarily or involuntarily) or makes a general assignment for the benefit of
creditors, the Security Deposit shall not be considered part of the assets of
Sublessor and shall be immediately returned to Sublessee.

 

6.             Use.

 

6.1           Agreed Use.  The Premises shall be used and occupied only
for office, manufacturing, warehouse, assembly and research and development, as
permitted under existing zoning and for no other purpose.

 

6.2           Acceptance of
Premises.

 

(a)           Sublessee
acknowledges that:

 

(i)            Sublessee
has been advised by Sublessor 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 their suitability for Sublessee’s
intended use,

 

(ii)           Except
as Sublessor has warranted pursuant to Paragraph 13 herein, Sublessee has made
such investigation as it deems necessary with reference to such matters and
assumes all responsibility therefore as the same relate to the suitability of
the Premises for Sublessee’s intended use, and

 

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(iii)          Neither Sublessor, Sublessor’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 Sublease.

 

(b)           Sublessor
acknowledges that:

 

(i)            Brokers
have made no representations, promises or warranties concerning Sublessee’s
ability to honor the Sublease or its suitability to occupy the Premises, and

 

(ii)           it
is Sublessor’s sole responsibility to investigate the financial capability
and/or suitability of Sublessee.

 

7.             Master Lease.

 

7.1           Sublessor is the lessee
of the Premises by virtue of a lease, hereinafter the “Master Lease”, wherein
Bill and Judi Young, jointly, are the Lessor, hereinafter as the “Lessor”.

 

7.2           This Sublease is and
shall be at all times subject and subordinate to all of the terms and
conditions of the Master Lease, except as specifically excluded herein and
agreed in the Lessor’s consent to this Sublease (hereinafter the “Lessor
Consent Agreement”), attached hereto as Exhibit C.

 

7.3           The terms, conditions
and respective obligations of Sublessor and Sublessee to each other under this
Sublease shall include the terms and conditions of the Master Lease except for
the following provisions of the Master Lease which are expressly excluded from
this Sublease:

 

Lease:  Paragraphs: 
1, 2.2, 2.5, 3, 5, 8.8, 13.4, 15, 18, 23, 31, 37, 38, 39, 44.

 

Addendum:  Paragraphs 1, 2, 4, 5, 6, 7, 8, 15.

 

Therefore, for
the purposes of this Sublease, wherever in the Master Lease the word “Lessor”
is used (except Paragraph 7.4, see Paragraph 17 of this Sublease) it shall be
deemed to mean the Sublessor herein and wherever in the Master Lease the word
“Lessee” is used it shall be deemed to mean the Sublessee herein.  Capitalized terms used herein shall have the
meaning given in the Master Lease, to the extent not defined in this Sublease.

 

7.4           During the term of this
Sublease and for all periods subsequent thereto for obligations which have
arisen prior to the termination of this Sublease, Sublessee does hereby
expressly assume and agree to perform and comply with, for the benefit of
Sublessor and Lessor, each and every obligation of Sublessor under the Master
Lease except for the paragraphs which are excluded from this Sublease pursuant
to Paragraph 7.3 of this Sublease.

 

7.5           Sublessor agrees to
maintain the Master Lease during the entire term of this Sublease, subject,
however, to any earlier termination of the Master Lease without the fault of
the Sublessor.

 

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7.6           Neither Sublessor nor
Sublessee shall do or permit to be done anything which would constitute a
violation or breach of any of the terms, conditions or provisions of the Master
Lease or which would cause the Master Lease to be terminated or forfeited by
virtue of any risks of termination or forfeiture reserved by or vested in
Lessor.

 

8.             Consent of Lessor

 

8.1           In the event that the
Master Lease requires that Sublessor obtain the consent of Lessor to any
subletting by Sublessor then this Sublease shall not be effective unless,
within 10 days of the date hereof, Lessor, Sublessor and Sublessee enter into
the Lessor Consent Agreement.  Sublessor
shall be responsible for and pay any costs and expenses required by the Master
Lease to be paid as a condition to Lessor’s consent.

 

8.2           In the event that
Lessor does execute the Lessor Consent Agreement, then:

 

(a)           Such
consent shall not release Sublessor of its obligations or alter the primary
liability of Sublessor to pay the rent and perform and comply with all of the
obligations of Sublessor to be performed under the Master Lease.

 

(b)           The
acceptance by Lessor of rent from Sublessee or anyone liable under the Master
Lease shall not be deemed a waiver by Lessor of any provisions of the Master
Lease.

 

(c)           The
consent to this Sublease shall not constitute a consent to any subsequent
subletting or assignment.

 

(d)           In
the event of any Default of Sublessor under the Master Lease, Lessor may
proceed directly against Sublessor, or anyone else liable under the Master
Lease without first exhausting Lessor’s remedies against any other person or
entity liable thereon to Lessor.

 

(e)           After
the Sublease is executed and consented to, Sublessor shall not modify, amend or
terminate the Master Lease without Sublessee’s consent except as allowed by the
Master Lease.

 

8.3           Consent to the Sublease
shall also be subject to Sublessor obtaining a Nondisturbance Agreement from
Lessor, protecting the terms of the Sublease in the event of Sublessor’s
default under the Master Lease, and Sublessee executing a Subordination and
Tenant Estoppel Agreement.

 

9.             Real Estate
Commissions.  Sublessor shall pay to
David B. Marino of The Irving Hughes Group and Larry Jackel of CB Richard
Ellis, Inc., each licensed real estate brokers retained exclusively by
Sublessee and Sublessor, respectively, the real estate commissions set forth
hereinafter for brokerage services rendered in this transaction.  Sublessor agrees to pay commissions of four
percent (4%) of the total Base Rent of the Sublease through December 2008 and
two percent (2%) of the total Base Rent of the Sublease over the remaining
fourteen (14) months to The Irving Hughes Group, and commissions of three
percent (3%) of the Base Rent of

 

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the Sublease through December 2008 and one and
one-half percent (1.5%) of the Base Rent of the Sublease for the remaining
fourteen (14) months to CB Richard Ellis, Inc. 
Said commissions are due and payable to The Irving Hughes Group one-half
(1⁄2) on February 2, 2004 and one-half (1⁄2) on July 1, 2004; and to CB Richard
Ellis, Inc.  on July 1, 2004.  Each party warrants to the other that there
are no brokerage commissions or fees payable in connection with this Sublease
except to the brokers set forth in this Paragraph 9.  Each Party further agrees to indemnify and hold the other Party harmless
from any cost, liability and expense (including attorney’s fees) that the other
Party may incur as the result of any breach of this Paragraph 9.

 

10.           Tenant Improvements.

 

10.1         Sublessor shall provide
Sublessee with an allowance of One Hundred Thousand Dollars ($100,000) to be
used for Sublessee’s Tenant Improvements, move to the Premises, and
fixturization of the Premises.  Said
allowance shall be granted as a credit against the Base Rent due for the months
of July through December 2004, and is reflected in the Rent Schedule, and is
further subject to Sublessee’s performance of its obligations under this
Sublease.

 

10.2         Sublessor hereby consents
to Sublessee’s construction of the improvements set forth in Exhibit D (“Tenant
Improvements”), and waives, for Sublessor alone, any bond requirements for
these Tenant Improvements, without prejudice to the rights of the Lessor under
the Master Lease.  Sublessee shall
construct the Tenant Improvements pursuant to the terms of all applicable
provisions of the Master Lease. 
Sublessor and Sublessee hereby agree that consent to the construction of
the Tenant Improvements shall be a condition to the effectiveness of this
Sublease and shall be included as part of Lessor’s consent to this Sublease,
provided that, Sublessee shall obtain Lessor’s approval of the plans and
specifications of the Tenant Improvements prior to commencement of the work.

 

11.           Furniture.  Sublessee may use the furniture that is
being stored in the Premises’ warehouse (inventory attached to this Sublease as
Exhibit E) free of charge during the Sublease Term.  In the event of an uncured default of Sublessee under the
Sublease, such furniture shall be surrendered to Sublessor.  Sublessee shall accept such furniture in its
“as is” condition.  Sublessee shall
return all furniture to Sublessor at the end of the Sublease Term, reasonable
wear and tear excepted.  A furniture
security deposit of five thousand dollars ($5,000) shall be deposited with
Sublessor as of mutual execution of the Sublease.

 

12.           Signage.  Sublessee shall be granted all building-top
and monument sign rights in a mutually agreed-upon location in accordance with
the Master Lease.  Sublessee shall pay
for all costs relating to the design, fabrication, installation, permitting,
maintaining and removal of said signage. 
All signage shall be reasonably consented to by Lessor and Sublessor and
shall comply with all applicable codes, ordinances and regulations.  Sublessor shall be responsible for removing
its existing sign age affixed to the building at its sole cost and expense and
agrees to repair any damage occasioned by such removal.

 

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13.           Sublessor’s
Representations.

 

13.1         Notwithstanding anything
to the contrary contained in this Sublease, Sublessor represents and warrants to
Sublessee, as of the Commencement Date, that (i) attached as Exhibit B is a
true and correct copy of the entire Master Lease and all amendments thereto;
(ii) that the Master Lease is in full force and effect and that there have been
no modifications or amendments thereto other than as attached; (iii) no default
exists on the part of any party to the Master Lease as of the Commencement
Date; (iv) to the best of Sublessor’s knowledge, neither Sublessor nor its
employees, agents, contractors or invitees have introduced to the Premises any
asbestos, or any other hazardous materials or toxic substances, as defined in
the Master Lease; and (v) the Premises do not violate any applicable statutes,
building codes, regulations ordinances, or the Americans with Disabilities Act
of 1990.  Said warranties do not apply
to the use to which Sublessee will put the Premises or to any Alterations or
Utility Installations to be made by Sublessee, including Sublessee’s Tenant
Improvements set forth in Exhibit D. 
Notwithstanding anything to the contrary contained in this Sublease,
Sublessor further warrants to Sublessee that Sublessor shall deliver the
Premises to Sublessee on the Commencement Date professionally cleaned and free
of debris, and with the roof, air-conditioning and heating systems, electrical,
plumbing, interior sprinklers, all doors and interior lighting in good working
order.  If a non-compliance with said
warranty exists as of the Commencement Date, Sublessor shall promptly after
receipt of written notice from Sublessee setting forth with specificity the
nature and extent of such non-compliance, rectify same at Sublessor’s
expense.  If Sublessee does not give
Sublessor written notice of non-compliance with this warranty within nine (9)
months after the Commencement Date, correction of that non-compliance shall be
the obligation of Sublessee at Sublessee’s sole cost and expense.

 

13.2         Sublessee is responsible
for determining whether or not the zoning is appropriate for Sublessee’s
intended use, and acknowledges that past uses of the Premises may no longer be
allowed.  If the Premises do not comply
with Sublessor’s warranties, the rights and obligations of Sublessor and
Sublessee shall be as provided in Paragraph 2.3 of the Master Lease, except as
modified herein.

 

14.           Hazardous Substances.

 

14.1         Notwithstanding anything
to the contrary contained in the terms and provisions of this Sublease or the
Master Lease, as incorporated herein, Sublessor hereby consents to Sublessee
storing and using on the Premises radioactive materials used by Sublessee in
its nuclear imaging procedures. 
Sublessor and Sublessee hereby agree that as part of Master Lessor’s
consent to this Sublease and as a condition to the effectiveness of this
Sublease, Master Lessor shall also consent to Sublessee’s storage and usage on
the Premises of radioactive materials used by Sublessee in its nuclear imaging
procedures.  Such consent shall not
waive compliance with any obligation imposed by Paragraph 6 of the Master
Lease.

 

15.           Late Charge.  In the event Sublessee fails to pay any
installment of Base Rent, or other charges within seven (7) days after the same
are due, or fails to make any other payment for which Sublessee is obligated
under this Sublease or the Master Lease, then Sublessee shall pay to Sublessor
a late charge equal to five percent (5%) of the amount so payable to compensate
Sublessor for the extra costs incurred as a result of such late payment.  Notwithstanding the

 

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foregoing and anything to the contrary in this
Sublease, in the event that Sublessee’s failure to pay Base Rent or other
charges due under this Sublease causes Sublessor to pay late charges to Master
Lessor, Sublessee shall pay Sublessor such late charges in place of the late
charges set forth hereinabove.

 

16.           Termination.

 

16.1         Termination of
Sublease.  Notwithstanding anything
to the contrary in the Master Lease, if this Sublease terminates as a result of
a default of one of the parties under this Sublease or the Master Lease, the
defaulting party shall be liable to the non-defaulting party for all damage
suffered by the non-defaulting party as a result of the termination.  Notwithstanding the above, if Sublessor
defaults under the Master Lease or otherwise, Sublessee shall have the right,
but not the obligation, to remedy such default on Sublessor’s behalf.  Sublessor shall, within fifteen (15) days
after deliver by Sublessee to Sublessor of statements therefor, pay to
Sublessee the sums equal to expenditures reasonably made and obligations
incurred by Sublessee in remedying Sublessor’s defaults pursuant to this
Paragraph 16.1, together with interest at the maximum rate allowed by statute.

 

16.2         Termination of Master
Lease.  If the Master Lease is
terminated for any reason that requires Sublessee to assume the terms of the
Master Lease and attorn to the Lessor, Sublessor shall indemnify and hold
Sublessee harmless from any and all damages (including but not limited to
attorneys’ fees reasonably incurred) suffered by Sublessee as a result of
Sublessor’s assumption of the Master Lease.

 

17.           Surrender and
Removal of Personal Property.  All
articles of personal property, and all Trade Fixtures (as defined in the Master
Lease), machinery and equipment, cabinet work, furniture and movable
partitions, if any, owned or installed by Sublessee at its expense in the
Premises shall be and remain the property of Sublessee and may be removed by
Sublessee at any time, provided that Sublessee, at its expense, shall repair
any damage to the Premises caused by such removal.  Sublessee shall have no obligation, under the terms of this
Sublease or the Master Lease, to restore the Premises to their original
condition as of the commencement date of the Master Lease.  The parties hereby acknowledge that prior to
the commencement date of the Sublease, portions of the Premises were damaged by
flood (“Flood Damage”).  The parties
hereby acknowledge and agree that Sublessee’s only obligation to surrender the
Premises to Sublessor (or Landlord, if applicable) on the expiration or
termination date of this Sublease is to surrender the Premises in as good
condition as received on the Commencement Date, wear and tear, casualty and
condemnation excepted, and that Sublessee shall have no obligation to repair or
remediate the Flood Damage or surrender the Premises on the termination or
expiration of the Sublease with the Flood Damage repaired or remediated.  Paragraph 7.4 of the Master Lease is
modified such that “Lessor” shall exclude Sublessor, and the obligation to
return the Premises in good operating order, condition and state of repair
shall be further subject to casualty and condemnation.

 

18.           Assignment and
Subletting.

 

18.1         Sublessee shall have the
right without consent of Sublessor but with prior written notice to Sublessor
to assign this Sublease or to sublet all or a portion of the Premises to

 

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a person or entity which is an Affiliate of Sublessee
or which results (whether through operation of law or otherwise) from a merger
or consolidation with Sublessee, or to any person or entity which acquires all
the assets of Sublessee as a going concern in the business that is being
conducted on the Premises (a “Permitted Transfer”), provided such entity (a
“Permitted Transferee”), in the case of an assignment, assumes all the
obligations of Sublessee under the Lease. 
For purposes hereof, “Affiliate” shall mean any person, entity, firm or
corporation which shall be controlled by, under the control of, or under common
control with Sublessee, and “control” shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a person, entity, firm or corporation, whether through the
ownership of voting securities, by contract or otherwise.  In the event Sublessee is a publicly traded
corporation, the sale of stock alone shall not be deemed to constitute an
assignment or transfer of this Sublease. 
Irrespective of any such assignment, Sublessee shall remain liable for
the full and faithful performance of each and every covenant to be performed by
Sublessee.

 

18.2         Except in connection with
a Permitted Transfer, in the event that Sublessee seeks to make any
assignment/sublease for more than seventy (70%) percent of the Premises,
Sublessor shall have the right to terminate this Sublease in its entirety, in
lieu of accepting or denying the requested assignment/sublease.  In the event Sublessor elects to so
terminate this Sublease, then the Sublease shall so terminate in its entirety
fifteen (15) days after Sublessor has notified Sublessee in writing of such
election.  Upon such termination,
Sublessee shall be released from any further obligation under this Sublease if
it is terminated in its entirety. 
Sublessor and Sublessee shall execute a cancellation and release with
respect to the Lease to effect such termination.

 

18.3         Except with respect to a
Permitted Transfer, if Sublessor approves an assignment or subletting as herein
provided, Sublessee shall pay to Sublessor, as Additional Rent, seventy (70%)
percent of the excess, if any, of (1) the rent and any additional rent payable
by the assignee or sublessee to Sublessee, less any leasing commissions, tenant
improvement costs or allowances, if any, incurred by Sublessee in connection
with such assignment or sublease; minus (2) Base Rent plus Additional Rent
allocable to that part of the Premises affected by such assignment or sublease
pursuant to the provisions of this Lease.

 

18.4         Paragraph 17 of the
Master Lease is amended to provide that upon an assignment by Sublessor of its
interest in this Sublease, Sublessor shall remain liable for any default under
this Sublease occurring prior to any such assignment, and any assignee shall
assume all obligations of Sublessor under this Sublease arising after the
assignment.  .

 

19.           Indemnity.

 

19.1         Sublessee will indemnify,
defend (by counsel reasonably acceptable to Sublessor), protect and hold
Sublessor harmless from and against any and all claims, demands, losses,
damages, costs and expenses (including attorneys’ fees) to the extent arising
out of or relating to Sublessee’s breach or default under this Sublease or, to
the extent incorporated herein, the Master Lease.

 

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19.2         Sublessor will indemnify,
defend (by counsel reasonably acceptable to Sublessee), protect and hold
Sublessee harmless from and against any and all claims, demands, losses,
damages, costs and expenses (including attorneys’ fees) to the extent arising
out of or relating to Sublessor’s breach or default under this Sublease, or, to
the extent incorporated herein, or Master Lease.

 

19.3         Sublessor will indemnify,
defend (by counsel reasonably acceptable to Sublessee), protect and hold
Sublessee harmless from and against any and all losses, damages, costs and
expenses (including attorneys’ fees) arising out of or related to demands,
claims, or actions by any third party (including but not limited to Sublessee’s
employees, contractors, invitees or agents) against Sublessee arising out of or
related to the water line break and resulting flooding that occurred on the
Premises on or about August 16-17, 2003.

 

19.4         Except as caused by
Sublessor’s negligence or willful misconduct, Sublessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property
of Sublessee, Sublessee’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. 
Sublessor shall not be liable for any damages arising from any act or
neglect of any other tenant of Sublessor. 
Notwithstanding Sublessor’s negligence or breach of this Sublease,
Sublessor shall under no circumstances be liable for injury to Sublessee’s
business or for any loss of income or profit therefrom.

 

20.           Covenant Of Quiet
Enjoyment.  Subject to this Sublease
terminating as provided herein or in the Master Lease, Sublessor represents
that if Sublessee performs all the provisions in this Sublease to be performed
by Sublessee, Sublessee shall have and enjoy throughout the term of this
Sublease the quiet and undisturbed possession of the Premises by anyone
claiming by or through Sublessor.

 

21.           Special Notice.  Should either party receive any notice of
default under the Master Lease from Master Lessor, such party shall promptly
cause a copy of such notice of default to be transmitted via facsimile to the
other party at the fax number provided in Paragraph 24 below as well as mailing
a copy to such other party at the addresses provided in Paragraph 24 below,
provided that such requirement shall be deemed waived in any instance where the
notice of default reflects on its face that it is being sent simultaneously to
Sublessor and Sublessee.  Any further
written communications between the parties and the Lessor regarding the status
of the such default shall be similarly noticed via facsimile and mail as
provided in this Paragraph.

 

22.           Notices.  All notices given under this Sublease must
be in writing and shall be delivered (a) in person, (b) by certified mail,
postage prepaid, return receipt requested, (c) by a commercial overnight
courier that guarantees next day delivery and provides a receipt, or (d) by
facsimile or telecopy, and such notices shall be addressed as follows, sent to
the party at its address set forth in this Paragraph 24.  Either party may change these addresses by
notice to the other party.  (Sublessee
shall provide a fax number upon occupying the Premises.)

 

10

 

	
  Sublessor:

  	
   

  	
  REMEC, INC

  
	
   

  	
   

  	
  3790 Via de la
  Valle

  
	
   

  	
   

  	
  Del Mar, CA
  92014

  
	
   

  	
   

  	
  Attn:  Vice President, General Counsel

  
	
   

  	
   

  	
  Fax:  (858) 259-4186

  
	
   

  	
   

  	
   

  
	
  Sublessee:

  	
   

  	
  DIGIRAD, INC.

  
	
   

  	
   

  	
  13950 Stowe
  Drive

  
	
   

  	
   

  	
  Poway, CA.  92064

  
	
   

  	
   

  	
  Attn.:  Vice President, General Counsel

  
	
   

  	
   

  	
  Fax:

  	
   

  	
   

  

 

23.           Attorneys’ Fees.  If there is any legal or arbitration action
or proceeding between Sublessor and Sublessee to enforce any provision of this
Sublease or to protect or establish any right or remedy of either Sublessor or
Sublessee hereunder, the unsuccessful party to such action or proceeding will
pay to the prevailing party all direct costs and expenses, including reasonable
attorneys’ fees incurred by such prevailing party in such action or proceeding
and in any appearance in connection therewith, and if such prevailing party
recovers a judgment in any such action, proceeding or appeal, such costs,
expenses and attorney’s fees will be determined by the court or arbitration
panel handling the proceeding and will be included in and as a part of such
judgment.

 

24.           Authority.  Sublessor and Sublessee each represents and
warrants to the other that it is authorized to execute and deliver and perform
its obligations under this Sublease. 
Each individual executing this Sublease on behalf of Sublessor and
Sublessee, respectively, represents and warrants that he or she is duly
authorized to execute and deliver this Sublease on behalf of the entity in
accordance with its corporate bylaws and that this Sublease is binding upon the
entity in accordance with its terms.

 

25.           Priority.  It is intended that the terms of this
Sublease and the terms of the Master Lease as incorporated herein shall be read
together to complement each other.  In
the event of a conflict between the terms of this Sublease and the terms of the
Master Lease provisions, the terms of this Sublease shall prevail.28.

 

26.           Successors and
Assigns.  This Sublease shall be
binding on and shall inure to the benefit of the parties and their successors
and assigns.

 

27.           Severability.  If any term or provisions of this Sublease
shall, to any extent, be determined by a court of competent jurisdiction to be
invalid or unenforceable, the remainder of this Sublease shall not be affected
thereby, and each term and provision of this Sublease shall be valid and be
enforceable to the fullest extent permitted by law.

 

28.           Survival.  All representations, warranties, obligations
and liabilities contained in this Sublease shall survive the expiration,
termination or revocation of this Sublease.

 

29.           Counterparts;
Facsimile Signatures.  This Sublease
may be executed in two or more counterparts and all such counterparts shall
constitute one instrument binding on the parties in accordance therewith.  This Sublease shall be deemed executed and
delivered upon each

 

11

 

party’s delivery of executed signature pages of this
Sublease to each other party, which signature pages may be delivered by
facsimile with the same force and effect as delivery of the originals (with
original signatures to follow via overnight courier).

 

30.           Entire Agreement.  This Sublease constitutes the entire
agreement between the parties, and there are no agreements or representations
between the parties except as expressed herein.  Except as otherwise provided herein, no subsequent change or
addition to this Sublease shall be binding unless in writing and signed by the
parties hereto.

 

31.           Attachments.  Attached hereto are the following, all of
which constitute a part of this Sublease:

 

Exhibit A:               a plot plan
depicting the Premises

 

Exhibit B:               a copy of the
Master Lease

 

Exhibit C:               Lessor Consent
Agreement

 

Exhibit D:               Tenant Improvements

 

Exhibit E:                Furniture
Inventory

 

WHEREFORE, the Parties
have executed this Sublease as of the date set forth in Paragraph 1 above.

 

	 
	
  REMEC, Inc.
  (“Sublessor”)

  	 

	 
	
   

  	 

	 
	
   

  	 

	 
	
  /s/ Thomas H.
  Waechter

  	
   

  	 

	 
	
  By:  Thomas H. Waechter

  	 

	 
	
  President and
  Chief Operating Officer

  	 

	 
	
   

  	 

	 
	
   

  	 

	
  Digirad, Inc.
  (“Sublessee”)

  
	
   

  
	
   

  
	
  /s/ David M.
  Sheehan

  	
   

  
	
  By:  David M. Sheehan

  
	
  President and
  Chief Executive Officer

  
				

 

12

 

EXHIBIT “A”

 

SUBJECT PROPERTY

 

[Graphic]

 

13

 

EXHIBIT “B”

 

AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

 

STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT
LEASE - NET

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

 

1.             Basic
Provisions (“Basic Provisions”)

 

1.1          Parties:  This Lease (“Lease”), dated for reference
purposes only December 8, 1999, is made by and between Bill and Judy Young
(“Lessor”) and Remec, Inc., a California corporation (“Lessee”), (collectively
the “Parties,” or individually a “Party”).

 

1.2          Premises:  That certain real property, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
and commonly known as 13950 Stowe Drive, Poway, located in the County of San
Diego, State of California, and generally described as (describe briefly the
nature of the property and, if applicable, the “Project”, if the property is
located within a Project) Approximately 60,244 square foot research &
manufacturing facility known as Stowe Corporate Centre (“Premises”).  (See also Paragraph 2)

 

1.3          Term:  Ten (10) years and 0 months (“Original
Term”) commencing March 1, 2000 (“Commencement Date”) and ending February 28,
2010 (“Expiration Date”).  (See also
Paragraph 3)

 

1.4          Early
Possession:  on or about December
10, 1999 (“Early Possession Date”). 
(See also Paragraphs 3.2 and 3.3)

 

1.5          Base
Rent:  $33,736.64 per month (“Base
Rent”), payable on the first (1st) day of each month commencing March 1,
2000.  (See also Paragraph 4)

 

o
If this box is checked, there are provisions in this Lease for the Base Rent to
be adjusted.  See Addendum

 

1.6          Base
Rent Paid Upon Execution: 
$33,736.64 as Base Rent for the period the first month (March 1, 2000
through March 31, 2000).

 

1.7          Security
Deposit:  $ waived (“Security
Deposit”).  (See also Paragraph 5)

 

1.8          Agreed
Use:  General office, manufacturing
and warehouse.  (See also Paragraph 6)

 

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

 

1.10        Real
Estate Brokers:  (See also Paragraph
15)

 

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

 

Initials /s/

 

1

 

ý Business Real Estate Brokerage Co. represents
Lessor exclusively (“Lessor’s Broker”);

 

ý CB Richard Ellis represents Lessee
exclusively (“Lessee’s Broker”); or

 

o
                                                               represents
both Lessor and Lessee (“Dual Agency”).

 

(b)           Payment
to Brokers:  Upon execution and
delivery of this Lease by both Parties, Lessor shall pay to the Broker the fee
agreed to in their separate written agreement (or if there is no such
agreement, the sum of * % of the total Base Rent for the brokerage
services rendered by the Brokers).  *See
Addendum

 

1.11        Guarantor.  The obligations of the Lessee under this
Lease are to be guaranteed by N/A (“Guarantor”).  (See also Paragraph 37)

 

1.12        Addenda
and Exhibits.  Attached hereto is an
Addendum or Addenda consisting of Paragraphs 1 through 8 and Exhibits A &
B, 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.  Unless otherwise provided herein, any
statement of size set forth in this Lease, or that may have been used in
calculating rental, is an approximation which the Parties agree is reasonable
and the rental based thereon are not subject to revision whether or not the
actual size is more or less.

 

2.2          Condition.  Lessor shall deliver the Premises to Lessee
broom clean and free of debris on the Commencement Date or the Early Possession
Date, whichever first occurs (“Start Date”), and, so long as the required
service contracts described in Paragraph 7.1(b) below are obtained by Lessee
within thirty (30) days following the Start Date, warrants that the existing
electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air
conditioning systems (“HVAC”), loading doors, sump pumps, if any, and all other
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. 
If a non-compliance with said warranty exists as of the Start Date, or
if one of such systems or elements should malfunction or fail within the
appropriate warranty period, Lessor shall, as Lessor’s sole obligation with
respect to such matter, except as otherwise provided in this Lease, promptly
after receipt of written notice from Lessee setting forth with specificity the
nature and extent of such non-compliance, rectify same at Lessor’s
expense.  If, after the Start Date,
Lessee does not give Lessor written notice of any non-compliance with this
warranty within (i) one year as to the surface of the roof and the structural
portions of the roof, foundations and bearing walls, (ii) six (6) months as to
the HVAC systems, (iii) thirty (30) days as to the remaining systems and other
elements of the Building, correction of

 

2

 

such non-compliance shall be the obligation of Lessee
at Lessee’s sole cost and expense.  See
Addendum.

 

2.3          Compliance.  Lessor warrants that the improvements on the
Premises comply with all applicable laws, covenants or restrictions of record,
building codes, regulations, and ordinances (“Applicable Requirements”) in
effect on the Start Date.  Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or
to be made by Lessee.  NOTE:  Lessee is responsible for determining
whether or not the zoning is appropriate for Lessee’s intended use, and
acknowledges that past uses of the Premises may no longer be allowed.  If the Premises do not comply with said
warranty, Lessor shall, except as otherwise provided, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify the same at Lessor’s expense.  If Lessee does not give Lessor written
notice of a non-compliance with this warranty within 6 months following the
Start Date, correction of that non-compliance shall be the obligation of Lessee
at Lessee’s sole cost and expense.  If
the Applicable Requirements are hereafter changed (as opposed to being in
existence at the Start Date, which is addressed in paragraph 6.2(e) below) so
as to require during the term of this Lease the construction of an addition to
or an alteration of the Building, the remediation of any Hazardous Substance,
or the reinforcement or other physical modification of the Building (“Capital
Expenditure”), Lessor and Lessee shall allocate the cost of such work as
follows:

 

(a)           Subject
to Paragraph 2.3(c) below, if such Capital Expenditures are required as a result
of the specific and unique use of the Premises by Lessee as compared with uses
by tenants in general, Lessee shall be fully responsible for the cost thereof,
provided, however that if such Capital Expenditure is required during the last
two (2) years of this Lease and the cost thereof exceeds six (6) months’ Base
Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in
writing, within ten (10) days after receipt of Lessee’s termination notice that
Lessor has elected to pay the difference between the actual cost thereof and an
amount equal to six (6) months’ Base Rent. 
If Lessee elects termination, Lessee shall immediately cease the use of
the Premises which requires such Capital Expenditure and deliver to Lessor
written notice specifying a termination date at least ninety (90) days
thereafter.  Such termination date
shall, however, in no event be earlier than the last day that Lessee could
legally utilize the Premises without commencing such Capital Expenditure.

 

(b)           If
such Capital Expenditure is not the result of the specific and unique use of
the Premises by Lessee (such as, governmentally mandated seismic
modifications), then Lessor and Lessee shall allocate the obligation to pay for
such costs pursuant to the provisions of Paragraph 7.1(c); provided, however,
that if such Capital Expenditure is required during the last two (2) years of
this Lease or if Lessor reasonably determines that it is not economically
feasible to pay its share thereof, Lessor shall have the option to terminate
this Lease upon ninety (90) days prior written notice to Lessee unless Lessee
notifies Lessor, in writing, within ten (10) days after receipt of Lessor’s
termination notice that Lessee will pay for such Capital Expenditure.  If Lessor does not elect to terminate, and
fails to tender its share of any such Capital Expenditure, Lessee may advance
such funds and deduct same, with Interest, from Rent until Lessor’s share of
such costs have been fully paid.  If
Lessee is unable to finance Lessor’s share, or if the balance of the Rent due
and payable for the remainder of this Lease is

 

3

 

not sufficient to fully reimburse Lessee on an offset
basis, Lessee shall have the right to terminate this Lease upon thirty (30)
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 then, and in that event,
Lessee shall be fully responsible for the cost thereof, and Lessee shall not
have any right to terminate this Lease.

 

2.4          Acknowledgements.  Lessee acknowledges that:  (a) 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 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 any Broker has 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: 
(a) Broker has made no representations, promises or warranties
concerning Lessee’s ability to honor the Lease or suitability to occupy the
Premises, and (b) it is Lessor’s sole responsibility to investigate the
financial capability and/or suitability of all proposed tenants.

 

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

 

3.             Term.

 

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

 

3.2          Early
Possession.  If Lessee totally or
partially occupies the Premises prior to the Commencement Date, the obligation
to pay Base Rent shall be abated for the period of such early possession.  All other terms of this Lease (including but
not limited to the obligations to pay Real Property Taxes and insurance premiums
and to maintain the Premises) shall, however, be in effect during such
period.  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 by the Commencement Date.  If,
despite said efforts, Lessor is unable to deliver possession as agreed, Lessor
shall not be subject to any liability therefor, nor shall such failure affect
the validity of this Lease.  Lessee
shall not, however, be obligated to pay Rent or perform its other obligations
until it receives possession of the Premises. 
If possession is not delivered within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing within ten
(10) days after

 

4

 

the end of such sixty (60) day period, cancel this
Lease, in which event the Parties shall be discharged from all obligations
hereunder.  If such written notice is
not received by Lessor within said ten 10 day period, Lessee’s right to cancel
shall terminate.  Except as otherwise
provided, if possession is not tendered to Lessee by the Start Date and Lessee
does not terminate this lease, as aforesaid, any period of rent abatement that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to what Lessee would otherwise have
enjoyed under the terms hereof, but minus any days of delay caused by the acts
or omissions of Lessee.  If possession
of the Premises is not delivered within four (4) months after the Commencement
Date, this Lease shall terminate unless other agreements are reached between
Lessor and Lessee, in writing.

 

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

 

4.             Rent.

 

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

 

4.2          Payment.  Lessee shall cause payment of Rent to be
received by Lessor in lawful money of the United States, without offset or
deduction (except as specifically permitted in this Lease) on or before the day
on which it is due.  Rent for any period
during the term hereof which is for less than one (1) 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.

 

5.             Security
Deposit.  Lessee shall deposit with
Lessor upon execution hereof the Security Deposit as security for Lessee’s
faithful performance of its obligations under this Lease.  If Lessee fails to pay Rent, or otherwise
Defaults under this Lease, Lessor may use, apply or retain all or any portion
of said Security Deposit for the payment of any amount due Lessor or to
reimburse or compensate Lessor for any liability, expense, loss or damage which
Lessor may suffer or incur by reason thereof. 
If Lessor uses or applies all or any portion of the Security Deposit,
Lessee shall within ten 10 days after written request therefor deposit monies
with Lessor sufficient to restore said Security Deposit to the full amount
required by this Lease.  If the Base
Rent increases during the term of this Lease, Lessee shall, upon written
request from Lessor, deposit additional moneys with Lessor so that the total
amount of the Security Deposit shall at all times bear the same proportion to
the increased Base Rent as the initial Security Deposit bore to the initial
Base Rent.  Should the Agreed Use be
amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor

 

5

 

shall have the right to increase the Security Deposit
to the extent necessary, in Lessor’s reasonable judgment, to account for any
increased wear and tear that the Premises may suffer as a result thereof.  If a change in control of Lessee occurs
during this Lease and following such change the financial condition of Lessee
is, in Lessor’s reasonable judgment, significantly reduced, Lessee shall
deposit such additional monies with Lessor as shall be sufficient to cause the
Security Deposit to be at a commercially reasonable level based on such change
in financial condition.  Lessor shall
not be required to keep the Security Deposit separate from its general
accounts.  Within fourteen 14 days after
the expiration or termination of this Lease, if Lessor elects to apply the
Security Deposit only to unpaid Rent, and otherwise within thirty (30) days
after the Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor
shall return that portion of the Security Deposit not used or applied by
Lessor.  No part of the Security Deposit
shall be considered to be held in trust, to bear interest or to be prepayment
for any monies to be paid by Lessee under this Lease.

 

6.             Use.

 

6.1          Use.  Lessee shall use and occupy the Premises
only for the Agreed Use, 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. 
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, is not significantly more burdensome
to the Premises.  If Lessor elects to
withhold consent, Lessor shall within five (5) business days after such request
give written notification of same, which notice shall include an explanation of
Lessor’s objections to the change in Use.

 

6.2          Hazardous
Substances.

 

(a)           Reportable
Uses Require Consent.  The term
“Hazardous Substance” as used in this Lease shall mean any product, substance,
or waste whose presence, use, manufacture, disposal, transportation, or
release, either by itself or in combination with other materials expected to be
on the Premises, is either:  (i)
potentially injurious to the public health, safety or welfare, the environment
or the Premises, (ii) regulated or monitored by any governmental authority, or
(iii) a basis for potential liability of Lessor to any governmental agency or
third party under any applicable statute or common law theory.  Hazardous Substances shall include, but not
be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any
products, by-products or fractions thereof. 
Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use of Hazardous Substances without the express prior
written consent of Lessor and timely compliance (at Lessee’s expense) with all
Applicable Requirements.  “Reportable
Use” shall mean (i) the installation or use of any above or below ground
storage tank, (ii) the generation, possession, storage, use, transportation, or
disposal of a Hazardous Substance that requires a permit from, or with respect
to which a report, notice, registration or business plan is required to be
filed with, any governmental authority, and/or (iii) the presence at the
Premises of a Hazardous Substance with respect to which any Applicable
Requirements requires that a notice be given to persons entering or occupying
the Premises or neighboring properties. 
Notwithstanding the foregoing, Lessee may use any ordinary and

 

6

 

customary materials reasonably required to be used in
the normal course of the Agreed Use, so long as such use is in 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 any Reportable
Use upon receiving such additional assurances as Lessor reasonably deems
necessary to protect itself, the public, the Premises and/or the environment
against damage, contamination, injury and/or liability, including, but not
limited to, the installation (and removal on or before Lease expiration or
termination) of protective modifications (such as concrete encasements) and/or
increasing the Security Deposit.

 

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

 

(c)           Lessee
Remediation.  Lessee shall not cause
or permit any Hazardous Substance to be spilled or released in, on, under, or
about the Premises (including through the plumbing or sanitary sewer system)
and shall promptly, at Lessee’s expense, 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 third party (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).  Lessee’s
obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination
of this Lease.  No termination,
cancellation or release agreement entered into by Lessor and Lessee shall
release Lessee from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed by Lessor in writing at the time of
such agreement.

 

(e)           Lessor
Indemnification.  Lessor and its
successors and assigns shall indemnify, defend, reimburse and hold Lessee, its
employees and lenders, harmless from and against any and all environmental
damages, including the cost of remediation, which existed as a result of
Hazardous Substances on the Premises prior to the Start Date 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.

 

7

 

(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 the Start Date,
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.

 

(g)           Lessor
Termination Option.  If a Hazardous
Substance Condition 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 twelve (12) times the then monthly Base Rent
or $100,000, whichever is greater, give written notice to Lessee, within thirty
(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 sixty (60) days following the date of such notice.  In the event Lessor elects to give a
termination notice, Lessee may, within ten (10) 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 twelve (12) times the then monthly Base Rent or $100,000, whichever is
greater.  Lessee shall provide Lessor
with said funds or satisfactory assurance thereof within thirty (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
required 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.

 

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 premises, without regard
to whether said Requirements are now in effect or become effective after the
Start Date.  Lessee shall, within ten
(10) days after receipt of Lessor’s written request, provide Lessor with copies
of all permits and other documents, and other information evidencing Lessee’s
compliance with any Applicable Requirements specified by Lessor, and shall
immediately upon receipt, notify Lessor in writing (with copies of any documents
involved) of any threatened or actual claim, notice, citation, warning,
complaint or report pertaining to or involving the failure of Lessee or the
Premises to comply with any Applicable Requirements.

 

6.4          Inspection;
Compliance.  Lessor and Lessor’s
“Lender” (as defined in Paragraph 30 below) and consultants shall have the
right to enter into Premises at any time, in

 

8

 

the case of an emergency, and otherwise at reasonable
times, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease.  The cost of any such inspections shall be paid by Lessor, unless
a violation of Applicable Requirements, or a contamination is found to exist or
be imminent, or the inspection is requested or ordered by a governmental
authority.  In such case, Lessee shall
upon request reimburse Lessor for the cost of such inspection, so long as such
inspection is reasonably related to the violation or contamination.

 

7.             Maintenance;
Repairs, Utility Installations; Trade Fixtures and Alterations.

 

7.1          Lessee’s
Obligations.

 

(a)           In
General.  Subject to the provisions
of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee’s Compliance with
Applicable Requirements), 7.2 (Lessor’s Obligations), 9 (Damage or
Destruction), and 14 (Condemnation), Lessee shall, at Lessee’s sole expense,
keep the Premises, Utility Installations and Alterations in good order,
condition and repair (whether or not the portion of the Premises requiring repairs,
or the means of repairing the same, are reasonably or readily accessible to
Lessee, and whether or not the need for such repairs occurs as a result of
Lessee’s use, any prior use, the elements or the age of such portion of the
Premises), including, but not limited to, all equipment or facilities, such as
plumbing, heating, ventilating, air-conditioning, electrical, lighting
facilities, boilers, pressure vessels, fire protection system, fixtures, walls
(interior and exterior), foundations, ceilings, roofs, floors, windows, doors,
plate glass, skylights, landscaping, driveways, parking lots, fences, retaining
walls, signs, sidewalks and parkways located in, on, or adjacent to the
Premises.  Lessee, in keeping the
Premises in good order, condition and repair, shall exercise and perform good
maintenance practices, specifically including the procurement and maintenance
of the service contracts required by Paragraph 7.1(b) below.  Lessee’s obligations shall include restorations,
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 in a first-class
condition consistent with the exterior appearance of other similar facilities
of comparable age and size in the vicinity, including, when necessary, the
exterior repainting of the Building.

 

(b)           Service
Contracts.  Lessee shall, at
Lessee’s sole expense, procure and maintain contracts, with copies to Lessor,
in customary form and substance for, and with contractors specializing and
experienced in the maintenance of the following equipment and improvements, if
any, if and when installed on the Premises: 
(i) HVAC equipment, (ii) boiler, and pressure vessels, (iii) fire
extinguishing systems, including fire alarm and/or smoke detection, (iv)
landscaping and irrigation systems, (v) roof covering and drains, (vi)
driveways and parking lots, (vii) clarifiers, (viii) basic utility feed to the
perimeter of the Building, and (ix) any other equipment, if reasonably required
by Lessor.

 

(c)           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 the basic elements described in Paragraph 7.1(b)
cannot be repaired other than at a cost which is in excess of 50% of the cost
of replacing such Basic Elements, then such Basic Elements shall be replaced by
Lessor, and the

 

9

 

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 number of months
of the useful life of such replacement as such useful life is specified
pursuant to Federal income tax regulations or guidelines for depreciation
thereof (including interest on the unamortized balance as is then commercially
reasonable in the judgment of Lessor’s accountants, with Lessee reserving the
right to prepay its obligations at any time.

 

7.2          Lessor’s
Obligations.  Subject to the
provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 9 (Damage or
Destruction) and 14 (Condemnation), it is intended by the Parties hereto that
Lessor have no obligation, in any manner whatsoever, to repair and maintain the
Premises, or the equipment therein, all of which obligations are intended to be
that of the Lessee.  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.  Consent Required.  The term “Utility Installations” refers to all floor and window
coverings, air lines, power panels, electrical distribution, security and fire
protection systems, communication systems, lighting fixtures, HVAC equipment,
plumbing, and fencing in or on the Premises. 
The term “Trade Fixtures” shall mean Lessee’s machinery and equipment
that can be removed without doing material damage to the Premises.  The term “Alterations” shall mean any
modification of the improvements, 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). 
Lessee shall not make any Alterations or Utility Installations to the
Premises without Lessor’s prior written consent.  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, and
the cumulative cost thereof during this Lease as extended does not exceed
$50,000 in the aggregate or $10,000 in any one year.

 

(b)           Consent.  Any Alterations or Utility Installations
that Lessee shall desire to make and which require the consent of the Lessor
shall be presented to Lessor in written form with detailed plans.  Consent shall be deemed conditioned upon
Lessee’s:  (i) acquiring all applicable
governmental permits, (ii) furnishing Lessor with copies of both the permits
and the plans and specifications prior to commencement of the work, and (iii)
compliance with all conditions of said permits and other Applicable
Requirements in a prompt and expeditious manner.  Any Alterations or Utility Installations shall be performed in a
workmanlike manner with good and sufficient materials.  Lessee shall promptly upon completion
furnish Lessor with as-built plans and specifications.  For work which costs an amount in equal to
the greater of one month’s Base Rent, or $10,000, Lessor may condition its
consent upon Lessee providing a lien and completion bond in an amount equal to
one and one-half times the

 

10

 

estimated cost of such Alteration or Utility
Installation and/or upon Lessee’s posting an additional Security Deposit with
Lessor.

 

(c)           Indemnification.  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
(10) days’ notice prior to the commencement of any work in, on or about the
Premises, and Lessor shall have the right to post notices of
non-responsibility.  If Lessee shall
contest the validity of any such lien, claim or demand, then Lessee shall, at
its sole expense defend and protect itself, Lessor and 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 one and one-half times 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 shall pay Lessor’s attorneys’ fees and costs.

 

7.4          Ownership;
Removal; Surrender; and Restoration.

 

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

 

(b)           Removal.  By delivery to Lessee of written notice from
Lessor not earlier than ninety (90) and not later than thirty (30) days prior
to the end of the term of this Lease, Lessor may require that any or all Lessee
Owned Alterations or Utility Installations be removed by the expiration or termination
of this Lease.  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.  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.

 

11

 

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 (10) 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 against claims for bodily injury, personal injury and
property damage based upon or arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto.  Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $2,000,000 per
occurrence with an “Additional Insured-Managers or Lessors of Premises
Endorsement” and contain the “Amendment of the Pollution Exclusion Endorsement”
for damage caused by heat, smoke or fumes from a hostile fire.  The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an “insured contract”
for the performance of 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 as described in Paragraph 8.2(a), in addition to, and not
in lieu of, the insurance required to be maintained by Lessee.  Lessee shall not be named as an additional
insured therein.

 

8.3          Property
Insurance - Building, Improvements and Rental Value.

 

(a)           Building
and Improvements.  The Insuring
Party shall obtain and keep in force a policy or policies in the name of
Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender(s)
insuring loss or 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 Lenders, 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
coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a

 

12

 

factor of not less than the adjusted U.S.  Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are
located.  If such insurance coverage has
a deductible clause, the deductible amount shall not exceed $1,000 per
occurrence, and Lessee shall be liable for such deductible amount in the event
of an Insured Loss.

 

(b)           Rental Value.  The Insuring Party shall obtain and keep in
force a policy or policies in the name of Lessor with loss payable to Lessor
and any Lender, insuring the loss of the full Rent for one (1) year.  Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected Rent otherwise
payable by Lessee, for the next 12 month period.  Lessee shall be liable for any deductible amount in the event of
such loss.

 

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

 

8.4          Lessee’s
Property/Business Interruption Insurance.

 

(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 $1,000 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 the state where the
Premises are located, 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.  Lessee shall, prior to the Start Date,
deliver to Lessor 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 modification except after thirty (30) days prior written
notice to Lessor.  Lessee shall, at least
thirty (30) days prior to the expiration of such policies, furnish Lessor with
evidence of renewals or “insurance binders”

 

13

 

evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand.  Such
policies shall be for a term of at least one year, or the length of the
remaining term of this Lease, whichever is less.  If either Party shall fail to procure and maintain the insurance
required to be carried by it, the other Party may, but shall not be required
to, procure and maintain the same.

 

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

 

8.7          Indemnity.  Except for Lessor’s gross negligence or
willful misconduct, Lessee shall indemnify, protect, defend and hold harmless
the Premises, Lessor and its agents, Lessor’s master or ground lessor, partners
and Lenders, from and against any and all claims, loss of rents and/or damages,
liens, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or
liabilities arising out of, involving, or in connection with, the use and/or
occupancy of the Premises by Lessee.  If
any action or proceeding is brought against Lessor by reason of any of the
foregoing matters, Lessee shall upon notice defend the same at Lessee’s expense
by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with
Lessee in such defense.  Lessor need not
have first paid any such claim in order to be defended or indemnified.

 

8.8          Exemption of Lessor from
Liability.  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. 
Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant of Lessor. 
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.

 

9.             Damage or Destruction.

 

9.1          Definitions.

 

(a)           “Premises Partial
Damage” shall mean damage or destruction to the improvements on the Premises,
other than Lessee Owned Alterations and Utility Installations, which can
reasonably be repaired in six (6) 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.

 

14

 

(b)           “Premises Total
Destruction” shall mean damage or destruction to the Premises, other than Lessee
Owned Alterations and Utility Installations and Trade Fixtures, which cannot
reasonably be repaired in six (6) 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 improvements on the Premises, other than
Lessee Owned Alterations and Utility Installations and Trade Fixtures, which
was caused by an event required to be covered by the insurance described in
Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits
involved.

 

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

 

(e)           “Hazardous
Substance Condition” shall mean the occurrence or discovery of a condition
involving the presence of, or a contamination by, a Hazardous Substance as
defined in Paragraph 6.2(a), in, on, or under the Premises.

 

9.2          Partial Damage - Insured
Loss.  If a Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor’s expense, repair
such damage (but not Lessee’s Trade Fixtures or Lessee Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect; provided, however, that Lessee shall, at
Lessor’s election, make the repair of any damage or destruction the total cost
to repair of which is $10,000 or less, and, in such event, Lessor shall make
any applicable insurance proceeds available to Lessee on a reasonable basis for
that purpose.  Notwithstanding the
foregoing, if the required insurance was not in force or the insurance proceeds
are not sufficient to effect such repair, the Insuring Party shall promptly
contribute the shortage in proceeds (except as to the deductible which is
Lessee’s responsibility) as and when required to complete said repairs.  In the event, however, such shortage was due
to the fact that, by reason of the unique nature of the improvements, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor.  If Lessor receives
said funds or adequate assurance thereof within said ten (10) day period, the
party responsible for making the repairs shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect.  If such funds or assurance are not received,
Lessor may nevertheless elect by written notice to Lessee within ten (10) days
thereafter to:  (i) make such
restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect, or have this Lease terminate thirty (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.

 

15

 

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 thirty (30) days
after receipt by Lessor of knowledge of the occurrence of such damage.  Such termination shall be effective sixty
(60) days following the date of such notice. 
In the event Lessor elects to terminate this Lease, Lessee shall have
the right within ten (10) days after receipt of the termination notice to give
written notice to Lessor of Lessee’s commitment to pay for the repair of such
damage without reimbursement from Lessor. 
Lessee shall provide Lessor with said funds or satisfactory assurance
thereof within thirty (30) days after making such commitment.  In such event this Lease shall continue in
full force and effect, and Lessor shall proceed to make such repairs as soon as
reasonably possible after the required funds are available.  If Lessee does not make the required
commitment, this Lease shall terminate as of the date specified in the termination
notice.

 

9.4          Total Destruction.  Notwithstanding any other provision hereof,
if a Premises Total Destruction occurs, this Lease shall terminate sixty (60)
days following such Destruction.  If the
damage or destruction was caused by the gross negligence or willful misconduct
of Lessee, Lessor shall have the right to recover Lessor’s damages from Lessee,
except as provided in Paragraph 8.6.

 

9.5          Damage Near End of Term.  If at any time during the last six (6)
months of this Lease there is damage for which the cost to repair exceeds one
(1) month’s Base Rent, whether or not an Insured Loss, Lessor may terminate
this Lease effective sixty (60) days following the date of occurrence of such
damage by giving a written termination notice to Lessee within thirty (30) days
after the date of occurrence of such damage. 
Notwithstanding the foregoing, if Lessee at that time has an exercisable
option to extend this Lease or to purchase the Premises, then Lessee may
preserve this Lease by, (a) exercising such option and (b) providing Lessor
with any shortage in insurance proceeds (or adequate assurance thereof) needed
to make the repairs on or before the earlier of (i) the date which is ten (10)
days after Lessee’s receipt of Lessor’s written notice purporting to terminate
this Lease, or (ii) the day prior to the date upon which such option
expires.  If Lessee duly exercises such
option during such period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor’s
commercially reasonable expense, repair such damage as soon as reasonably
possible and this Lease shall continue in full force and effect.  If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate on the date specified in the termination notice and Lessee’s option
shall be extinguished.

 

9.6          Abatement of Rent;
Lessee’s Remedies.

 

(a)           Abatement.  In the event of Premises Partial Damage or
Premises Total Destruction or a Hazardous Substance Condition for which Lessee
is not responsible under this Lease, the Rent payable by Lessee for the period
required for the repair, remediation or restoration of such damage shall be
abated in proportion to the degree to which Lessee’s use of the Premises is
impaired, but not to exceed the proceeds received from the Rental Value

 

16

 

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 ninety (90) days after such obligation
shall accrue, Lessee may, at any time prior to the commencement of such repair
or restoration, give written notice to Lessor and to any Lenders of which
Lessee has actual notice, of Lessee’s election to terminate this Lease on a date
not less than sixty (60) 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 said 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.

 

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

 

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 inconsistent
herewith.

 

10.          Real Property Taxes.

 

10.1        Definition of “Real
Property Taxes.”  As used herein,
the term “Real Property Taxes” shall include any form of assessment; real
estate, general, special, ordinary or extraordinary, or rental levy or tax
(other than inheritance, personal income or estate taxes); improvement bond;
and/or license fee imposed upon or levied against any legal or equitable
interest of Lessor in the Premises, 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.  The term “Real
Property Taxes” shall also include any tax, fee, levy, assessment or charge, or
any increase therein imposed by reason of events occurring during the term of
this Lease, including but not limited to, a change in the ownership of the
Premises.

 

10.2

 

(a)           Payment of Taxes.  Lessee shall pay the Real Property Taxes
applicable to the Premises during the term of this Lease.  Subject to Paragraph 10.2(b), all such
payments shall be made at least ten (10) days prior to any delinquency
date.  Lessee shall promptly furnish
Lessor with satisfactory evidence that such taxes have been paid.  If any such

 

17

 

taxes shall cover any period of time prior to or after
the expiration or termination of this Lease, Lessee’s share of such taxes shall
be prorated to cover only that portion of the tax bill applicable to the period
that this Lease is in effect, and Lessor shall reimburse Lessee for any
overpayment.  If Lessee shall fail to
pay any required Real Property taxes, Lessor shall have the right to pay the
same, and Lessee shall reimburse Lessor therefor upon demand.

 

(b)           Advance Payment.  In the event Lessee incurs a late charge on
any Rent payment, Lessor may, at Lessor’s option, estimate the current Real
Property Taxes, and require that such taxes be paid in advance to Lessor by
Lessee, either:  (i) in a lump sum
amount equal to the installment due, at least twenty (20) days prior to the
applicable delinquency date, or (ii) monthly in advance with the payment of the
Base Rent.  If Lessor elects to require
payment monthly in advance, the monthly payment shall be an amount equal to the
amount of the estimated installment of taxes divided by the number of months
remaining before the month in which said installment becomes delinquent.  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 by Lessor is
insufficient to pay such Real Property Taxes when due, Lessee shall pay Lessor,
upon demand, such additional sums as are necessary to pay such
obligations.  All moneys paid to Lessor
under this Paragraph may be intermingled with other moneys of Lessor and shall
not bear interest.  In the event of a
Breach by Lessee in the performance of its obligations under this Lease, then
any balance of funds paid to Lessor under the provisions of this Paragraph may
at the option of Lessor, be treated as an additional Security Deposit.

 

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 conclusively determined by Lessor from the respective
valuations assigned in the assessor’s work sheets or such other information as
may be reasonably available.

 

10.4        Personal Property Taxes.  Lessee shall pay, prior to delinquency, all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee.  When possible, Lessee shall
cause such 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 (10) days after
receipt of a written statement.

 

11.          Utilities.  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 to Lessee, Lessee shall pay a reasonable proportion, to be determined
by Lessor, of all charges jointly metered.

 

18

 

12.          Assignment and
Subletting.  SEE ADDENDUM

 

12.1        Lessor’s Consent Required.

 

(a)           Lessee shall not
voluntarily or by operation of law assign, transfer, mortgage or encumber
(collectively, “assign or assignment”) or sublet all or any part of Lessee’s
interest in this Lease or in the Premises without Lessor’s prior written
consent.

 

(b)           A change in the
control of Lessee shall constitute an assignment requiring consent.  The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.

 

(c)           The involvement of
Lessee or its assets in any transaction, or series of transactions (by way of
merger, sale, acquisition, financing, transfer, leveraged buy-out or
otherwise), whether or not a formal assignment or hypothecation of this Lease
or Lessee’s assets occurs, which results or will result in a reduction of the Net
Worth of Lessee by an amount greater than twenty-five percent (25%) of such Net
Worth as it was represented at the time of the execution of this Lease or at
the time of the most recent assignment to which Lessor has consented, or as it
exists immediately prior to said transaction or transactions constituting such
reduction, whichever was or is greater, shall be considered an assignment of
this Lease to which Lessor may withhold its consent.  “Net Worth of Lessee” shall mean the net worth of Lessee (excluding
any guarantors) established under generally accepted accounting principles.

 

(d)           An assignment or
subletting without consent shall, at Lessor’s option, be a Default curable
after notice per Paragraph 13.1(c), or a noncurable Breach without the necessity
of any notice and grace period.  If
Lessor elects to treat such unapproved assignment or subletting as a noncurable
Breach, Lessor may either:  (i)
terminate this Lease, or (ii) upon thirty (30) days written notice, increase
the monthly Base Rent to one hundred ten percent (110%) of the Base Rent then
in effect.  Further, in the event of
such Breach and rental adjustment, (i) the purchase price of any option to
purchase the Premises held by Lessee shall be subject to similar adjustment to
one hundred ten percent (110%) of the price previously in effect, and (ii) all
fixed and non-fixed rental adjustments scheduled during the remainder of the
Lease term shall be increased to One Hundred Ten Percent (110%) of the
scheduled adjusted rent.

 

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

 

12.2        Terms and Conditions
Applicable to Assignment and Subletting.

 

(a)           Regardless of
Lessor’s consent, no assignment or subletting shall not:  (i) be effective without the express written
assumption by such assignee or sublessee of the obligations of Lessee under
this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter
the primary liability of Lessee for the payment of Rent or for the performance
of any other obligations to be performed by Lessee.

 

(b)           Lessor may accept
Rent or performance of Lessee’s obligations from any person other than Lessee
pending approval or disapproval of an assignment.  Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or

 

19

 

performance shall constitute a waiver or estoppel of
Lessor’s right to exercise its remedies for Lessee’s Default or Breach.

 

(c)           Lessor’s consent to
any assignment or subletting shall not constitute a consent to any subsequent
assignment or subletting.

 

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

 

(e)           Each request for
consent to an assignment or subletting shall be in writing, accompanied by
information relevant to Lessor’s determination as to the financial and
operational responsibility and appropriateness of the proposed assignee or
sublessee, including but not limited to the intended use and/or required
modification of the Premises, if any, together with a fee of $1,000 or ten
percent (10%) of the current monthly Base Rent applicable to the portion of the
Premises which is the subject of the proposed assignment or sublease.  Whichever is greater, 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.

 

12.3        Additional Terms and
Conditions Applicable to Subletting. 
The following terms and conditions shall apply to any subletting by
Lessee of all or any part of the Premises and shall be deemed included in all
subleases under this Lease whether or not expressly incorporated therein:

 

(a)           Lessee hereby
assigns and transfers to Lessor all of Lessee’s interest in all Rent payable on
any sublease, and Lessor may collect such Rent and apply same toward Lessee’s
obligations under this Lease; provided, however, that until a Breach shall
occur in the performance of Lessee’s obligations, Lessee may collect said
Rent.  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.

 

20

 

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

 

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

 

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

 

(e)           Lessor shall
deliver a copy of any notice of Default or Breach by Lessee to the sublessee,
who shall have the right to cure the Default of Lessee within the grace period,
if any, specified in such notice.  The
sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.

 

13.          Default; Breach;
Remedies.

 

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

 

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

 

(b)           The failure of
Lessee to make any payment of Rent or any Security Deposit required to be made
by Lessee hereunder, whether to Lessor or to a third party, when due, to
provide reasonable evidence of insurance or surety bond, or to fulfill any
obligation under this Lease which endangers or threatens life or property,
where such failure continues for a period of three (3) 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, (iii) the rescission of an
unauthorized assignment or subletting, (iv) a Tenancy Statement, (v) a
requested subordination, (vi) evidence concerning any guaranty and/or
Guarantor, (vii) any document requested under Paragraph 42 (easements), or
(viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this Lease, where any such failure
continues for a period of ten (10) days following written notice to Lessee.

 

(d)           A Default by Lessee
as to the terms, covenants, conditions or provisions of this Lease, or of the
rules adopted under Paragraph 40 hereof, other than those described in subparagraphs
13.1(a), (b) or (c), above, where such Default continues for a period of thirty
(30) days after written notice; provided, however, that if the nature of
Lessee’s Default

 

21

 

is such that more than thirty (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 thirty (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.C.  § 101 or any successor statute thereto (unless, in the case of a
petition filed against Lessee, the same is dismissed within sixty (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
thirty (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 thirty (30)
days; provided, however, in the event that any provision of this subparagraph
(e) is contrary to any applicable law, such provision shall be of no force or
effect, and not affect the validity of the remaining provisions.

 

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

 

(g)           If the performance
of Lessee’s obligations under this Lease is guaranteed:  (i) the death of a Guarantor, (ii) the
termination of a Guarantor’s liability with respect to this Lease other than in
accordance with the terms of such guaranty, (iii) a Guarantor’s becoming
insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’s refusal to
honor the guaranty, or (v) a Guarantor’s breach of its guaranty obligation on
an anticipatory basis, and Lessee’s failure, within sixty (60) days following
written notice of any such event, to provide written alternative assurance or
security, which, when coupled with the then existing resources of Lessee,
equals or exceeds the combined financial resources of Lessee and the Guarantors
that existed at the time of execution of this Lease.

 

13.2        Remedies.  If Lessee fails to perform any of its
affirmative duties or obligations, within ten (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. 
The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee upon receipt of invoice therefor.  If any check given to Lessor by Lessee shall
not be honored by the bank upon which it is drawn, Lessor, at its option, may
require all future payments to be made by Lessee to be by cashier’s check.  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

 

22

 

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 one
percent (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 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 statute shall run concurrently, and the failure
of Lessee to cure the Default within the greater of the two such grace periods
shall constitute both an unlawful detainer and a Breach of this Lease entitling
Lessor to the remedies provided for in this Lease and/or by said statute.

 

(b)           Continue the Lease
and Lessee’s right to possession and recover the Rent as it becomes due, in
which event Lessee may sublet or assign, subject only to reasonable
limitations.  Acts of maintenance,
efforts to relet, and/or the appointment of a receiver to protect the Lessor’s
interests, shall not constitute a termination of the Lessee’s right to
possession.

 

(c)           Pursue any other
remedy now or hereafter available under the laws or judicial decisions of the
state wherein the Premises are located. The expiration or termination of this
Lease and/or the termination of Lessee’s right to possession shall not relieve
Lessee from liability under any indemnity provisions of this Lease as to
matters occurring or accruing during the term hereof or by reason of Lessee’s
occupancy of the Premises.

 

13.3        Inducement Recapture.  Any agreement for free or abated rent or
other charges, or for the giving or paying by Lessor to or for Lessee of any
cash or other bonus, inducement or consideration for Lessee’s entering into
this Lease, all of which concessions are hereinafter referred to as “Inducement
Provisions,” shall be deemed conditioned upon Lessee’s full and faithful
performance of all of the terms, covenants and conditions of this Lease.  Upon Breach of this Lease by Lessee, any
such Inducement Provision shall automatically be deemed deleted from this Lease
and of no further force or effect, and any rent, other charge, bonus,
inducement or consideration theretofore abated, given or paid by Lessor under
such an inducement Provision shall be immediately due and payable by Lessee to
Lessor, notwithstanding any subsequent cure of said Breach by Lessee.  The acceptance by Lessor of rent or the cure
of the Breach which initiated the operation of this paragraph shall not be
deemed

 

23

 

a waiver by Lessor of the provisions of this paragraph
unless specifically so stated in writing by Lessor at the time of such
acceptance.

 

13.4        Late Charges.  Lessee hereby acknowledges that late payment
by Lessee of Rent will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain.  Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by any Lender.  Accordingly, if
any Rent shall not be received by Lessor within five (5) days after such amount
shall be due, then, without any requirement for notice to Lessee, Lessee shall
pay to Lessor a one-time late charge equal to ten percent (10%) of each such
overdue amount.  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 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 thirty (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 thirty-first (31st) day after it was
due as to non-scheduled payments.  The
interest (“Interest”) charged shall be equal to the prime rate reported in the
Wall Street Journal as published closest prior to the date when due plus four
percent (4%), 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
thirty (30) days after receipt by Lessor, and any Lender whose name and address
shall have been furnished Lessee in writing for such purpose, of written notice
specifying wherein such obligation of Lessor has not been performed; provided,
however, that if the nature of Lessor’s obligation is such that more than
thirty (30) days are reasonably required for its performance, then Lessor shall
not be in breach if performance is commenced within such thirty (30) day period
and thereafter diligently pursued to completion.

 

(b)           Performance by Lessee
on Behalf of Lessor.  In the event
that neither Lessor nor Lender cures said breach within thirty (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 an amount equal to the greater of one month’s Base
Rent or the Security Deposit, and to pay an excess of such expense under
protest, reserving Lessee’s right to reimbursement from Lessor.  Lessee shall document the cost of said cure
and supply said documentation to Lessor.

 

24

 

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 ten percent (10%) of any building portion of the premises,
or more than twenty-five percent (25%) of the land area 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 (10) days after Lessor shall have
given Lessee written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession.  If Lessee does not
terminate this Lease in accordance with the foregoing, this Lease shall remain
in full force and effect as to the portion of the Premises remaining, except
that the Base Rent shall be reduced in proportion to the reduction in utility
of the Premises caused by such Condemnation. 
Condemnation awards and/or payments shall be the property of Lessor,
whether such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided,
however, that Lessee shall be entitled to any compensation for Lessee’s
relocation expenses, loss of business goodwill and/or Trade Fixtures, without
regard to whether or not this Lease is terminated pursuant to the provisions of
this Paragraph.  All Alterations and Utility
Installations made to the Premises by Lessee, for purposes of Condemnation
only, shall be considered the property of the Lessee and Lessee shall be
entitled to any and all compensation which is payable therefor.  In the event that this Lease is not terminated
by reason of the Condemnation, Lessor shall repair any damage to the Premises
caused by such Condemnation.

 

15.          Brokerage Fees.  SEE ADDENDUM

 

15.1        Additional Commission.  In addition to the payments owed pursuant to
Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in
writing, Lessor agrees that:  (a) if
Lessee exercises any Option, (b) if Lessee acquires any rights to the Premises
or other premises owned by Lessor and located within the same Project, if any,
within which the Premises is located, (c) if Lessee remains in possession of
the Premises, with the consent of Lessor, after the expiration of this Lease,
or (d) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then, Lessor shall pay Brokers a fee in accordance
with the schedule of said Brokers 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.  Each Broker shall be a third
party beneficiary of the provisions of Paragraphs 1.10, 15, 22 and 31.  If Lessor fails to pay to a Broker any
amounts due as and for commissions 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.

 

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,

 

25

 

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 ten (10) days after written notice from the
other Party (the “Requesting Party”) execute, acknowledge and deliver to the
Requesting Party a statement in writing in form similar to the then most
current “Estoppel Certificate” form published by the 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 ten
(10) day period, the Requesting Party may execute an Estoppel Certificate
stating that:  (i) the Lease is in full
force and effect without modification except as may be represented by the
Requesting Party, (ii) there are no uncured defaults in the Requesting Party’s
performance, and (iii) if Lessor is the Requesting Party, not more than one
month’s rent has been paid in advance. 
Prospective purchasers and encumbrancers may rely upon the Requesting
Party’s Estoppel Certificate, and the Responding Party shall be estopped from
denying the truth of the facts contained in said Certificate.

 

(c)           If Lessor desires
to finance, refinance, or sell the Premises, or any part thereof, Lessee and
all Guarantors 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 (3) years.  All such
financial statements shall be received by Lessor and such lender or purchaser
in confidence and shall be used only for the purposes herein set forth.

 

17.          Definition of Lessor.  The term “Lessor” as used herein shall mean
the owner or owners at the time in question of the fee title to the Premises,
or, if this is a sublease, of the Lessee’s interest in the prior lease.  In the event of a transfer of Lessor’s title
or interest in the Premises or this Lease, Lessor shall deliver to the
transferee or assignee (in cash or by credit) any unused Security Deposit held
by Lessor.  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.  Notwithstanding the above, and subject to
the provisions of Paragaph 20 below, the original Lessor under this Lease, and
all subsequent holders of the Lessor’s interest in this Lease shall remain liable
and responsible with regard to the potential duties and liabilities of Lessor
pertaining to Hazardous Substances as outlined in Paragraph 6 above.

 

26

 

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.  Subject to the provisions of Paragraph 17
above, the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.

 

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

 

22.          No Prior or Other
Agreements; Broker Disclaimer.  This
Lease contains all agreements between the Parties with respect to any matter
mentioned herein, and no other prior or contemporaneous agreement or
understanding shall be effective. 
Lessor and Lessee each represents and warrants to the Brokers that it
has made, and is relying solely upon, its own investigation as to the nature,
quality, character and financial responsibility of the other Party to this
Lease and as to the nature, quality and character of the Premises.  Brokers have no responsibility with respect
thereto or with respect to any default or breach hereof by either Party.  The liability (including court costs and
attorneys’ fees), of any Broker with respect to negotiation, execution,
delivery or performance by either Lessor or Lessee under this Lease or any
amendment or modification hereto shall be limited to an amount up to the fee
received by such Broker pursuant to this Lease; provided, however, that the
foregoing limitation on each Broker’s liability shall not be applicable to any
gross negligence or willful misconduct of such Broker.

 

23.          Notices.

 

23.1        Notice Requirements.  All notices required or permitted by this
Lease 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 this Paragraph 23.  The addresses noted adjacent to a Party’s signature on this Lease
shall be that Party’s address for delivery or mailing of notices.  Either Party may by written notice to the
other specify a different address for notice, except that upon Lessee’s taking
possession of the Premises, the Premises shall constitute Lessee’s address for
notice.  A copy of all notices to Lessor
shall be concurrently transmitted to such party or parties at such addresses as
Lessor may from time to time hereafter designate in writing.

 

23.2        Date of Notice.  Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of delivery
shown on the receipt card, or if no delivery date is shown, the postmark
thereon.  If sent by regular mail the
notice shall be

 

27

 

deemed given forty-eight (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 twenty-four (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, 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 of any other term, covenant or condition
hereof. Lessor’s consent to, or approval of, any act shall not be deemed to
render unnecessary the obtaining of Lessor’s consent to, or approval of, any
subsequent or similar act by Lessee, or be construed as the basis of an
estoppel to enforce the provision or provisions of this Lease requiring such
consent.  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.

 

25.          Recording.  Either Lessor or Lessee shall, upon request
of the other, execute, acknowledge and deliver to the other a short form
memorandum of this Lease for recording purposes.  The Party requesting recordation shall be responsible for payment
of any fees applicable thereto.

 

26.          No Right To Holdover.  Lessee has no right to retain possession of
the Premises or any part thereof beyond the expiration or termination of this
Lease.  In the event that Lessee holds
over, then the Base Rent shall be increased to one hundred fifty percent (150%)
of the Base Rent applicable during the month immediately preceding the
expiration or termination.  Nothing
contained herein shall be construed as consent by Lessor to any holding over by
Lessee.

 

27.          Cumulative Remedies.  No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.

 

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

 

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

 

28

 

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 “Lessor’s Lender”)
shall have no liability or obligation to perform any of the obligations of
Lessor under this Lease.  Any Lender may
elect to have this Lease and/or any Option granted hereby superior to the lien
of its Security Device by giving written notice thereof to Lessee, whereupon
this Lease and such Options shall be deemed prior to such Security Device,
notwithstanding the relative dates of the documentation or recordation thereof.

 

30.2        Attornment.  Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall
not:  (i) be liable for any act or
omission of any prior lessor or with respect to events occurring prior to
acquisition of ownership; (ii) be subject to any offsets or defenses which
Lessee might have against any prior lessor, or (iii) be bound by prepayment of
more than one (1) 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
sixty (60) days after the execution of this Lease, Lessor shall use its
commercially reasonable efforts to obtain a Non-Disturbance Agreement from the
holder of any pre-existing Security Device which is secured by the
Premises.  In the event that Lessor is
unable to provide the Non-Disturbance Agreement within said sixty (60) days,
then Lessee may, at Lessee’s option, directly contact Lessor’s Lender and
attempt to negotiate for the execution and delivery of a Non-Disturbance
Agreement.

 

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

 

31.          Attorneys’ Fees.  If any Party or Broker brings an action or
proceeding involving the Premises to enforce the terms hereof or to declare
rights hereunder, the Prevailing Party (as hereafter defined) in any such
proceeding, action, or appeal thereon, shall be entitled to reasonable
attorneys’ fees.  Such fees may be
awarded in the same suit or recovered in a separate suit, whether or not such
action or proceeding is pursued to decision or judgment.  The term, “Prevailing Party” shall include,
without limitation, a Party or Broker who substantially obtains

 

29

 

or defeats the relief sought, as the case may be,
whether by compromise, settlement, judgment, or the abandonment by the other
Party or Broker of its claim or defense. 
The attorneys’ fees award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all attorneys’ fees
reasonably incurred.  In addition,
Lessor shall be entitled to attorneys’ fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach.

 

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 for the purpose of
showing the same to prospective purchasers, lenders, or lessees, and making
such alterations, repairs, improvements or additions to the Premises as Lessor
may deem necessary.  All such activities
shall be without abatement of rent or liability to Lessee.  Lessor may at any time place on the Premises
any ordinary “For Sale” signs and Lessor may during the last six (6) months of
the term hereof place on the Premises any ordinary “For Lease” signs.  Lessee may at any time place on or about the
Premises any ordinary “For Sublease” sign.

 

33.          Auctions.  Lessee shall not conduct, nor permit to be
conducted, any auction upon the Premises without Lessor’s prior written
consent.  Lessor shall not be obligated
to exercise any standard of reasonableness in determining whether to permit an
auction.

 

34.          Signs.  Except for ordinary “For Sublease” signs,
Lessee shall not place any sign upon the Premises without Lessor’s prior
written consent.  All signs must comply
with all Applicable Requirements.

 

35.          Termination; Merger.  Unless specifically stated otherwise in
writing by Lessor, the voluntary or other surrender of this Lease by Lessee,
the mutual termination or cancellation hereof, or a termination hereof by
Lessor for Breach by Lessee, shall automatically terminate any sublease or
lesser estate in the Premises; provided, however, that Lessor may elect to
continue any one or all existing subtenancies. 
Lessor’s failure within ten (10) days following any such event to elect
to the contrary by written notice to the holder of any such lesser interest,
shall constitute Lessor’s election to have such event constitute the
termination of such interest.

 

36.          Consents.  Except as otherwise provided herein,
wherever in this Lease the consent of a Party is required to an act by or for
the other Party, such consent shall not be unreasonably withheld or
delayed.  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 any act, assignment or subletting shall not
constitute an acknowledgment that no Default or Breach by Lessee of this Lease
exists, nor shall such consent be deemed a waiver of any then existing Default
or Breach, except as may be otherwise specifically stated in writing by Lessor
at the time of such consent.  The
failure to specify herein any particular condition to Lessor’s consent shall
not preclude the imposition by Lessor at the time of consent of such further or
other conditions as are then reasonable with reference to the

 

30

 

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.          Guarantor.

 

37.1        Execution.  The Guarantors, if any, shall each execute a
guaranty in the form most recently published by the American Industrial Real
Estate Association, and each such Guarantor shall have the same obligations as
Lessee under this Lease.

 

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

 

38.          Quiet Possession.  Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on Lessee’s part
to be observed and performed under this Lease, Lessee shall have quiet
possession and quiet enjoyment of the Premises during the term hereof.

 

39.          Options.  See Addendum

 

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 Personal To
Original Lessee.  Each 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
requested 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

 

31

 

Lessee has been given three (3) 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.

 

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

 

(c)           An Option shall
terminate and be of no further force or effect, notwithstanding Lessee’s due
and timely exercise of the Option, if, after such exercise and prior to the
commencement of the extended term, (i) Lessee fails to pay Rent for a period of
thirty (30) days after such Rent becomes due (without any necessity of Lessor
to give notice thereof), (ii) (ii) Lessor gives to Lessee three (3) or more
notices of separate Default during any twelve (12) month period, whether or not
the Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.

 

40.          Multiple Buildings.  If the Premises are a part of a group of
buildings controlled by Lessor, Lessee agrees that it will observe 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 that Lessee will to pay its fair share of common expenses
incurred in connection therewith.

 

41.          Security Measures.  Lessee hereby acknowledges that the rental
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.  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

 

32

 

behalf.  Each
party shall, within thirty (30) days after request, deliver to the other party
satisfactory evidence of such authority.

 

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.          Multiple Parties.  If more than one person or entity is named
herein as either Lessor or Lessee, such multiple parties shall have joint and
several responsibility to comply with the terms of this Lease.

 

49.          Mediation and
Arbitration of Disputes.  An
Addendum requiring the Mediation and/or the Arbitration of all disputes between
the Parties and/or Brokers arising out of this Lease o
is o is not attached to this Lease.

 

LESSOR AND LESSEE HAVE
CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED
HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY
CONSENT THERETO.  THE PARTIES HEREBY
AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND
LESSEE WITH RESPECT TO THE PREMISES.

 

ATTENTION:  NO REPRESENTATION OR RECOMMENDATION IS MADE
BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE
LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE
TRANSACTION TO WHICH IT RELATES.  THE
PARTIES ARE URGED TO:

 

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

2.  RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND
INVESTIGATE THE CONDITION OF THE PREMISES. 
SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO:  THE POSSIBLE PRESENCE OF HAZARDOUS
SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION
OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR
LESSEE’S INTENDED USE.

 

33

 

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

 

 

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

 

	
  Executed at:

  	
   

  	
   

  	
  Executed at:

  	
   

  
	
  on:

  	
   

  	
   

  	
  On:

  	
   

  
	
  By LESSOR:

  	
   

  	
  By LESSEE:

  
	
  /s/ William Young

  	
   

  	
   

  
	
  Bill Young

  	
   

  	
  Remec, Inc., a California Corporation

  
	
   

  	
   

  	
   

  
	
  By:

  	
    /s/
  Judith Young

  	
   

  	
  By:

  	
    /s/
  Errol Ekaireb

  
	
  Name Printed:

  	
  Judy Young

  	
   

  	
  Name Printed:

  	
    Errol Ekaireb

  
	
  Title:

  	
  (illegible)

  	
   

  	
  Title:

  	
    President/Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
    /s/
  Clark Hickock

  
	
  Name Printed:

  	
   

  	
   

  	
  Name Printed:

  	
    Clark Hickock

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
    Senior Vice President

  
	
  Address:  Mission Valley
  Cabinets

  	
   

  	
  Address:

  	
   

  
	
  12254 Iavelli Way, Poway, CA 
  92064

  	
   

  	
  San Diego, CA  92123

  	
   

  
	
  Telephone:  (619) 748-1901

  	
   

  	
  Telephone:  (858) 560-

  	
   

  
	
  Facsimile:  (619) 748-1941

  	
   

  	
  Facsimile:  (858)

  	
   

  
	
  Federal ID No.

  	
   

  	
   

  	
  Federal ID No.

  	
   

  
																						

 

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

 

34

 

ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT

LEASE-NET DATED 12-13-99 BY AND BETWEEN BILL & JUDY YOUNG AS

LESSOR AND REMEC, INC., A CALIFORNIA CORPORATION AS LESSEE FOR

13950 STOWE DRIVE.

 

 

1.             1.5 Base Rent:  The Base Rent shall be adjusted annually
based upon compounded three percent (3%) increases.

 

2.             Tenant Improvement
Allowance:  Landlord shall provide a
Tenant Improvement Allowance equal to two hundred eight thousand dollars
($208,000.00).  Tenant will present to
Landlord for payment all receipts or invoices due.  Landlord will pay such bills on the 1st and 15th of each month
starting December 30th.  Such amount not
to exceed $208,000.  The Tenant
Improvement Allowance shall be used to pay toward the cost associated with the
construction of the Tenant Improvements as well as pay for the cost of all
space planning, design and engineering, reimbursable costs, as well as
permits/tees associated with Tenant Improvements.  Landlord and Tenant shall mutually agree to all tenant
Improvements prior to construction of such tenant improvements.

 

3.             7. Through 10.  Operating Expenses:  This will be a “triple net” lease with
Tenant responsible for property management and customary operating expense
charges (which include, but are not limited to, Mello-Roos bond taxes, property
taxes, insurance, and common area maintenance charges) and will be based on the
actual expenses for the property.

 

For the first (1st) three
(3) years of the initial lease term, Tenant shall not be obligated to pay any
increase in real estate taxes due to a reassessment of the building resulting
from (a) the sale or refinance of the building or (b) the sale or refinance of
any interest therein or any change of ownership whatsoever.

 

4.             2.2 Premises Condition:  Tenant shall occupy the premises in a
finished-shell condition. Landlord shall be responsible for providing 4,000
amp, 277/480 volt power electrical service, finished 9,700 square feet of
mezzanine space (as currently exists), two (2) dock-high and four (4)
grade-level loading doors, a fully paved and striped parking lot, a sprinkler
system of 4.5 GPM/3,OOO square feet, and a generally clean premises prior to
the commencement of the early occupancy period.  Landlord shall warrant that the shell premises complies with all
local and state codes and regulations, including but not limited to ADA and
Title 24.

 

Landlord will be
responsible for all costs associated with base building/building shell
compliance with the Americans With Disabilities Act (ADA).  Landlord, at Landlord’s sole cost and
expense, shall be 100% responsible for the repair of any and all structural
and/or latent defects in the base building over the term of the lease and the
extension period(s) (if exercised by Tenant) as pertains to ADA.  Additionally, Tenant shall be responsible
for ADA compliance pertaining to the tenant improvement construction.

 

Tenant shall provide its
own tenant improvements to the premises, which shall include approximately
10,000 square feet of build-out office space as well as climate-controlled
manufacturing space.  Tenant shall
complete its tenant improvements with a licensed and bonded contractor in compliance
with all local and state codes and regulations.

 

35

 

5.             Building Warranty:  For the first twelve (12) months of the
lease term, Landlord shall warrant that the premises, the roof, windows and
seals, mechanical items, and underground electrical and plumbing systems are in
good condition.  In addition, Landlord
shall provide workmanship warranty documentation pertaining to the roof and
exterior walls to Tenant, and said warranties shall be transferable.

 

6.             12. 
Assignment and Subletting:  Tenant shall have the right to sublease or assign any portion of
the space to any related entity, parent company, subsidiary or affiliate
without Landlord’s consent, provided that the entity shares at least fifty
percent (50%) common ownership with Tenant. 
Tenant shall have the right to sublease or assign any portion of the
space to any other subtenant with Landlord’s written consent, which shall not
be unreasonably withheld or delayed.

 

Tenant understands that
any sublease or assignment of any portion of the premises shall not relieve
Tenant of any of its obligations under the lease.  Any profits resulting from such sublease or assignment to an
outside entity shall be split equally by Landlord and Tenant, after Tenant’s
costs associated with subleasing.  (Including
but not limited to commissions, etc.)

 

7.             Right of First
Refusal to Purchase:  Tenant shall
be granted a Continuous Non-Terminating Right of First Refusal to Purchase the
property during years one (1), two (2) and three (3) of the initial Lease Term.  The purchase price during each period shall
be as follows:

 

	
  Purchase Price

  	
   

  	
  Purchase Price Calculation

  
	
  Year 1:  $4,498,218

  	
   

  	
  (60,244 square feet × $.56 per square foot per month × 12 ÷ 9%)

  
	
  Year 2:  $4,678,725

  	
   

  	
  (60,244 square feet × $.576 per square foot per month × 12 ÷ 8.9%)

  
	
  Year 3:  $4,879,764

  	
   

  	
  (60,244 square feet × $.594 per square foot per month × 12 ÷ 8.8%)

  

 

This
Continuous Non-Terminating Right of First Refusal pricing structure is agreed
to by Landlord and Tenant and shall not change regardless of any third party
offering price.  Additionally, the
prospective third party offer shall be legitimate in nature, bonafide, and in
the form of a signed letter of intent. 
Further said prospective third party offer shall be presented in its
form (a copy) to Tenant for review and consideration.  Tenant shall then have ten (10) business days in which to respond
of its intent to exercise said Continuous Non-Terminating Right of First
Refusal to Purchase.  Such Continuous
Non-Terminating Right of First Refusal shall terminate March 1, 2003.

 

Further, the purchase
price paid by Tenant should they elect to purchase the building shall be equal
to the pricing outlined in the above.

 

8.             Option to Renew:  Tenant shall have two (2) five (5) year
options to extend the Lease at ninety five percent (95%) of fair market
rent.  Fair market rent shall be
determined by an MAI appraisal.  Tenant
shall provide Landlord with four (4) months prior written notice of its intent
to exercise each option.

 

9.             15.  Commissions:  Business Real Estate Represents Lessor and
has a separate written Agreement with Lessor. 
CB Richard Ellis, Inc., as Tenant’s representative, shall receive a
leasing commission equal to one hundred thirty thousand five hundred
thirty-four dollars and

 

36

 

twenty-six cents ($130,434.26).  Business Real Estate and CB Richard Ellis
shall not be entitled to any additional commissions if Tenant exercises the
lease option.

 

Commissions to Business
Real Estate and CB Richard Ellis shall be due and payable half upon mutual
execution of the Lease, and half upon occupancy.  In addition, if Tenant exercises the Continuous Non-Terminating
Right of First Refusal to purchase the building, then Business Real Estate and
CB Richard Ellis, Inc.  shall not
be entitled to a sales commission.

 

	
   

  	
  AGREED AND ACCEPTED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LESSOR

  	
  LESSEE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Bill & Judy Young

  	
  Remec, Inc., a California Corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ William Young

  	
   

  	
  By:

  	
  /s/ Errol Ekaireb

  
	
   

  	
  Bill Young

  	
   

  	
   

  	
  Errol Ekaireb

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Owner

  	
   

  	
  Title:

  	
  President/Chief Operating Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  12-13-1999

  	
   

  	
  Date:

  	
  12/13/99

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Judith Young

  	
   

  	
  By:

  	
  /s/ Clark Hickock

  
	
   

  	
  Judy Young

  	
   

  	
   

  	
  Clark Hickock

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Owner

  	
   

  	
  Title:

  	
  Senior Vice President, B.O.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  12-13-99

  	
   

  	
  Date:

  	
  12/13/99

  
							

 

37

 

EXHIBIT “A”

 

SUBJECT PROPERTY

 

[Graphic]

 

1

 

EXHIBIT B

 

BUSINESS REAL ESTATE BROKERAGE COMPANY

 

HAZARDOUS MATERIALS WARNING AND DISCLAIMER

(SALE AND/OR LEASE OF PROPERTY)

 

 

Re:  13950 Stowe Drive, Poway, CA 92064

 

Various materials
utilized in the construction of any improvements to the Property may contain
materials that have been or may in the future be determined to be toxic,
hazardous or undesirable and may need to be specially treated, specially
handled and/or removed from the Property. 
For example, some electrical transformers and other electrical
components can contain PCBs, and asbestos has been used in a wide variety of
building components such as fire-proofing, air duct insulation, acoustical
tiles, spray-on acoustical materials, linoleum, floor tiles and plaster.  Due to current or prior uses, the Property
or improvements may contain materials such as metals, minerals, chemicals,
hydrocarbons, biological or radioactive materials and other substances which
are considered, or in the future may be determined to be, toxic wastes,
hazardous materials or undesirable substances. 
Such substances may be in above- and below-ground containers on the
Property or may be present on or in soils, water, building components or other
portions of the Property in areas that may or may not be accessible or
noticeable.

 

Current and future
federal, state and local laws and regulations may require the clean-up of such
toxic, hazardous or undesirable materials at the expense of those persons who
in the past, present or future have had any interest in the Property including,
but not limited to, current, past and future owners and users of the Property.  Owners and Buyers/Lessees are advised to
consult with independent legal counsel or experts of their choice to determine
their potential liability with respect to toxic, hazardous, or undesirable
materials.  Owners and Buyers/Lessees
should also consult with such legal counsel or experts to determine what
provisions regarding toxic, hazardous or undesirable materials they may wish to
include in purchase and sale agreements, leases, options and other legal
documentation related to transactions they contemplate entering into with
respect to the Property.

 

The real estate
salespersons and brokers in this transaction have no expertise with respect to
toxic wastes, hazardous materials or undesirable substances.  Proper inspections of the Property by qualified
experts are an absolute necessity to determine whether or not there are any
current or potential toxic wastes, hazardous materials or undesirable
substances in or on the Property.  The
real estate salespersons and brokers in this transaction have not made, nor
will they make, any representations, either express or implied, regarding the
existence or nonexistence of toxic wastes, hazardous materials, or undesirable
substances in or on the Property. 
Problems involving toxic wastes, hazardous materials or undesirable
substances can be extremely costly to correct. 
It is the responsibility of the Owners and Buyers/Lessees to retain
qualified experts to deal with the detection and correction of such matters.

 

1

 

AMERICANS WITH DISABILITIES ACT DISCLOSURE

 

The United States
Congress has enacted the Americans With Disabilities Act (the “ADA”), a federal
law codified al 42 USC § 12101 et seq., which became effective January 26,
1992.  Owners and lessees are subject to
this law which, among other things, is intended to make business establishments
equally accessible to persons with a variety of disabilities.  Under this law, modifications to real
property improvements may be required by owners and lessees.  Owners and lessees may delegate between
themselves costs and responsibilities for meeting the requirements of the law
but the fact that responsibilities have been allocated does not reduce or
negate liability to an individual with a disability who files and wins a
lawsuit.  Broker strongly recommends
that owners and lessees consult design professionals, architects or attorneys
to advise them with respect to the law’s applicability and to prepare, if
necessary, any language in leases or other contracts.  The undersigned acknowledge that Broker is not qualified as an
expert in this matter.

 

	
   

  	
  OWNER

  	
   

  	
  BUYER/LESSEE:

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ William
  Young  /s/ Judith Young

  	
   

  	
  By:

  	
  /s/         illegible

  	
   

  
	
   

  	
  Bill & Judy Young

  	
   

  	
  Remec, Inc., a California Corporation

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Owner

  	
   

  	
  Title:

  	
  Sr. V.P. Business Operations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  Dec. 12, 1999

  	
   

  	
  Date:

  	
  12/13/99

  	
   

  
								

 

2

 

EXHIBIT “C”

 

CONSENT TO SUBLEASE

 

 

THIS CONSENT TO SUBLEASE
(“Consent Agreement”) dated as of November 3, 2003, is made with reference to
that certain sublease (the “Sublease”) of even date herewith by and between
REMEC, Inc., a California corporation (“Tenant”), and Digirad Corporation., a
Delaware corporation (“Sublessee”), and is entered into between the foregoing
parties and Bill and Judi Young, jointly (“Landlord”), with reference to the
following facts:

 

1.             Landlord and Tenant
have previously entered into that certain master lease dated as of December 8,
1999 (the “Master Lease”) for Premises located at 13590 Stowe Drive, Poway,
California (the “Premises”).  All
capitalized terms defined in the Master Lease shall have the same meanings when
used herein except as otherwise provided.

 

2.             Tenant and Sublessee
wish to enter into the Sublease respecting the Premises described therein (the
“Sublease Premises”).

 

3.             The Master Lease
provides that Tenant may not enter into any sublease without Landlord’s prior
written approval.

 

4.             Landlord hereby
consents to the subletting of the Sublease Premises by Tenant to Sublessee
pursuant to the terms of the Sublease subject to the following terms and
conditions:

 

NOW, THEREFORE, for good
and valuable consideration, the parties hereto agree as follows:

 

1.             Pursuant to Section
12 of the Master Lease, Landlord hereby acknowledges that Landlord has reviewed
the terms and conditions of the Sublease and hereby consents to the
Sublease.  Except as set forth herein,
neither the Master Lease, the Sublease nor this Consent shall be deemed to
grant Sublessee any rights whatsoever against Landlord.  Sublessee hereby acknowledges and agrees
that, except as set forth herein, its sole remedy for any alleged or actual
breach of its rights in connection with the Sublease Premises shall be solely
against Tenant.

 

2.             This Consent shall
not release Tenant from any existing or future duty, obligation or liability to
Landlord pursuant to the Master Lease, nor shall this Consent change, modify or
amend the Master Lease in any manner. 
Tenant shall be and remain liable and responsible for the due keeping,
performance and observance throughout the term of the Master Lease, of all of
the covenants and agreements therein set forth on the part of Tenant to be
kept, preformed and observed, including without limitation the obligation for
the payment of the fixed rent, additional rent and all other sums now and/or
hereinafter becoming payable thereunder, expressly including as such additional
rent, any and all charges for any property, material, labor, utility or other
services furnished or rendered by Landlord in or in connection with the
Sublease Premises demised by the Master Lease, whether for, or at the request
of, Tenant or Sublessee.

 

1

 

3.             The Sublease shall be
subject and subordinate at all times to the Master Lease, and to all of the
covenants and agreements of the Master Lease and of this Consent, and Sublessee
shall not do, permit or suffer anything to be done in, or in connection with,
Sublessee’s use or occupancy of the portion of the Sublease Premises so sublet
which would violate any such covenants and agreements.  Landlord shall have the right, but not the
obligation, to enforce the provisions of the Sublease, including collection of
rent reserved thereunder.

 

4.             Subject to Paragraph
5 below, this Consent shall not be construed as consent by the Landlord to, or
as permitting, any further subletting or any assignment by either Tenant or
Sublessee.

 

5.             Landlord hereby
agrees that Sublessee shall have the right, without Landlord’s consent (which
is required pursuant to the terms of the Master Lease), to assign the Sublease
or to sublet all or a portion of the Premises to a person or entity which is an
Affiliate of Sublessee or which results (whether through operation of law or
otherwise) from a merger or consolidation with Sublessee, or to any person or
entity which acquires all the assets of Sublessee as a going concern in the
business that is being conducted on the Premises (a “Permitted Transfer”),
provided such entity (a “Permitted Transferee”), in the case of an assignment,
assumes all the obligations of Sublessee under the Sublease.  For purposes hereof, “Affiliate” shall mean
any person, entity, firm or corporation which shall be controlled by, under the
control of, or under common control with Sublessee, and “control” shall mean
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, entity, fmn or
corporation, whether through the ownership of voting securities, by contract or
otherwise.  In the event Sublessee is a
publicly traded corporation, the sale of stock alone shall not be deemed to
constitute an assignment or transfer of the Sublease.  Irrespective of any such assignment, Sublessee shall remain
liable for the full and faithful performance of each and every covenant to be
performed by Sublessee.

 

6.             The Sublease Premises
so sublet shall (subject to all of the covenants and agreements of the Master
Lease) be used solely for office, manufacturing, warehouse, assembly of
research & development, and for no other purpose.

 

7.             (a)           In the event of Master Lease Termination (as
hereinafter defined) prior to the termination of the Sublease, Landlord shall
recognize the Master Lease as a direct lease between Landlord and Sublessee and
shall not disturb Sublessee’s possession of the Subleased Premises, and
Sublessee agrees to attorn to Landlord and to recognize Landlord as Sublessee’s
landlord under the Master Lease and the Sublessee as the tenant under the
Master Lease, upon the terms and conditions and at the rental rate specified in
the Master Lease.  Sublessee agrees to
execute and deliver at any time and from time to time, upon request of
Landlord, any instruments which may be necessary or appropriate to evidence
such attornment or assignment.  Landlord
shall not (i) be liable to Sublessee for any act, omission or breach of the
Sublease by Tenant, (ii) be subject to any offsets or defenses which Sublessee
might have against Tenant, (iii) be bound by any rent or additional rent which
Sublessee might have paid in advance to Tenant, or (iv) be bound to honor any
rights of Sublessee in any security deposit made with Tenant except to the
extent Tenant has turned over such security deposit to Landlord.  Tenant hereby agrees that in the event of
Master Lease Termination, Tenant shall immediately pay or transfer to Landlord
any security deposit, rent or other sums then held by Tenant.  Subject to subparagraph (c) below, in

 

2

 

the event of a Master Lease Termination, Sublessee
hereby covenants and agrees to make full and complete attornment to Landlord
(as substitute Sublessor and Sublessee) upon the terms, covenants and
conditions of the Master Lease so as to establish direct privity of estate and
contract between Landlord and Sublessee with the same force and effect as
though the Master Lease, were originally made directly between Landlord and
Sublessee.  Sublessee will thereafter
make all payments directly to Landlord.

 

(b)           “Master Lease
Termination” means any event, which by voluntary or involuntary act or by
operation of law, might cause or permit the Master Lease to be terminated,
expired, be cancelled, be foreclosed against, or otherwise come to an end,
including but not limited to (1) a default by Tenant under the Master Lease of
any of the terms or provisions thereof; or (2) the termination of Tenant’s
leasehold estate by dispossession proceeding, such as bankruptcy or otherwise,
or (3) an agreement (oral or written) between Landlord and Tenant to terminate
the Master Lease without Sublessee’s consent.

 

(c)           Notwithstanding
anything to the contrary contained in this Paragraph 7, Landlord and Tenant
hereby agree that Landlord and Tenant shall not amend, modify or terminate the
Master Lease without Sublessee’s consent. 
In the event of a Master Lease Termination, Tenant shall indemnify and
hold Sublessee harmless from any and all damages (including but not limited to
reasonable attorneys’ fees) suffered by Sublessee as a result of Sublessee
having to assume Tenant’s obligation under the Master Lease, including, without
limitation, the difference in rent between the Master Lease and the Sublease
and any obligations assumed by Sublessee under the Master Lease which were not
Sublessee’s responsibility under the Sublease.

 

(d)           Notwithstanding
anything to the contrary contained in Paragraph 7, Sublessee shall have the
right, but not the obligation, to cure any default by Tenant under the Master
Lease on Tenant’s behalf, subject to Tenant’s reimbursement of Sublessee’s
expenses as specified in Paragraph 16.1 of the Sublease.

 

(e)           In the event of
attornment hereunder, Landlord’s liability shall be limited to matters arising
during Landlord’s ownership of the Premises and as set forth herein, and in the
event that Landlord (or any successor owner) shall convey or dispose of the
Premises to another party, such party shall thereupon be and become landlord
hereunder and shall be deemed to have fully assumed and be liable for all
obligations of this Consent or the Sublease to be performed by Landlord which
first arise after the date of conveyance, including the return of any security
deposit, and Tenant shall attorn to such other party, and Landlord (or such
successor owner) shall, from and after the date of conveyance, be free of all
liabilities and obligations hereunder not then incurred.  The liability of Landlord to Sublessee for
any default by landlord under this Consent or the Sublease after such
attornment, or arising in connection with Landlord’s operation, management,
leasing, repair, renovation, alteration, or any other matter relating to the
Premises or the Sublease Premises, shall be limited to the interest of the
Landlord in the Premises (and proceeds thereof).

 

8.             In addition to
Landlord’s rights under Section 7 hereof, in the event Tenant is in default
under any of the terms and provisions of the Master Lease, Landlord may elect
to receive directly from Sublessee all sums due or payable to Tenant by
Sublessee pursuant to the Sublease,

 

3

 

and upon receipt of Landlord’s notice, Sublessee shall
thereafter pay to Landlord any and all sums becoming due or payable under the
Sublease and Tenant shall receive from Landlord a corresponding credit for such
sums against any payments then due or thereafter becoming due from Tenant.

 

9.             Sublessee hereby
acknowledges that it has read and has knowledge of all of the terms,
provisions, rules and regulations of the Master Lease and agrees not to do or
omit to do anything which would cause Tenant to be in breach of the Master
Lease.

 

10.           Notwithstanding the
terms of the Master Lease, Tenant hereby assigns to Sublessee Tenant’s right to
extend the term of the Master Lease pursuant to the two renewal options set
forth in Section 8 of the Addendum to the Master Lease on the same terms and
conditions as set forth therein. 
Landlord hereby consents to and agrees that Sublessee shall be entitled
to exercise Tenant’s right to extend the term of the Master Lease pursuant to
the two renewal options set forth in Section 8 of the Addendum to the Master
Lease on the same terms and conditions as set forth therein.  Further, Landlord and Tenant agree that the
tenancy created between Landlord and Subtenant during the lease term renewal
periods shall be governed by the terms and conditions contained in the Master
Lease, and that during said lease term renewal periods, Landlord and Subtenant
shall recognize the Master Lease as a direct lease between Landlord and
Sublessee.  In such event, Tenant shall
be released from all further liability under the Master Lease.

 

11.           Landlord and Tenant
hereby consent to Sublessee constructing the tenant improvements in a form and
manner substantially as attached hereto as Exhibit A (“Tenant
Improvements”) and hereby waive the requirement set forth in Section 7.3(b) of
the Master Lease for Sublessee to deliver a lien and completion bond or
additional Security Deposit to Landlord or Tenant in connection with the
construction of the Tenant Improvements.

 

12.           Landlord and Tenant
hereby acknowledge that prior to the commencement date of the Sublease,
portions of the Premises were damaged by flood (“Flood Damage”).  Landlord and Tenant hereby acknowledge and
agree that Sublessee’s only obligation to surrender the Premises to Tenant (or
Landlord, if applicable) on the expiration or termination date of the Sublease
is to surrender the Premises in as good condition as received on the
commencement date of the Sublease, wear and tear, casualty and condemnation
excepted, and that Sublessee shall have no obligation to repair or remediate
the Flood Damage or surrender the Premises on the termination or expiration of
the Sublease with the Flood Damage repaired or remediated.

 

13.           In the event of any
litigation between the parties hereto with respect to the subject matter
hereof, the unsuccessful party agrees to pay the prevailing party all costs,
expenses and reasonable attorney’s fees incurred therein by the successful
party, which shall be included as a part of the judgment therein rendered.

 

14.           This Consent Agreement
shall be binding upon and inure to the benefit of the parties’ respective
successors and assigns, subject to all agreements and restrictions contained in
the Master Lease, the Sublease and herein with respect to subleasing,
assignment, or other transfer.  The
agreements contained herein constitute the entire understanding between the
parties with respect to the subject matter hereof, and supersede all prior
agreements, written or

 

4

 

oral, inconsistent herewith.  No amendment, modification or change therein will be effective
unless Landlord shall have given its prior written consent thereto.  This Consent Agreement may be amended only
in writing, signed by all parties hereto.  This Consent Agreement may be executed in counterpart, and as so
executed shall be considered as one instrument.

 

15.           Notices required or
desired to be given hereunder shall be effective either upon personal delivery
or three (3) days after deposit in the United States mail, by certified mail,
return receipt requested, addressed to the Landlord at the address set forth
above, or to Tenant or Sublessee at the address of the Premises or of the
Sublease Premises, respectively.  Any
party may change its address for notice by giving notice in the manner
hereinabove provided.

 

16.           As a condition to the
effectiveness of Landlord’s consent to the Sublease, and whether or not
Landlord shall grant consent, Tenant shall pay Landlord’s review and processing
fees, as well as any reasonable legal fees incurred by Landlord in connection
with the proposed transfer, within thirty (30) days after written request by
Landlord.  Landlord’s acceptance of such
fees shall impose no duty on Landlord to approve to execute the Sublease.  Tenant shall also promptly pay Landlord any
share of bonus rents, or other items required under the Master Lease in
connection with subleases.

 

17.           Tenant and Sublessee
agree to indemnify and hold Landlord and Landlord’s Lender, Great Southern Life
Insurance Company, and their successors and assigns harmless from and against
any loss, cost, expense, damage or liability, including reasonable attorneys’
fees, incurred as a result of a claim by any person or entity (i) that it is
entitled to a commission, finder’s fee or like payment in connection with the
Sublease or (ii) relating to or arising out of the Sublease or any related
agreements or dealings, or (iii) in any way arising out of or related to
Sublessee’s use of the Premises, including but not limited to Sublessee’s use
or storage of hazardous or radioactive materials.  Additionally, Sublessee agrees to cause Tenant and Landlord to be
named as additional insureds on any and all policies of insurance required under
the Sublease, and to provide Tenant and Landlord with copies of said policies
upon request.

 

18.           Tenant agrees to hold
any and all payments due under the Sublease as a trust fund to be applied first
to the satisfaction of all of Tenant’s obligations under the Master Lease and
hereunder before using any part thereof for any other purpose.

 

19.           Tenant and Sublessee
have represented that the Sublease attached hereto as Exhibit B is a
true and complete copy of the Sublease, and agree that a true and complete copy
of each amendment thereto shall be delivered to Landlord within ten (10) days
after the execution and delivery thereof by the parties thereto, it being
understood that Landlord shall not be deemed to be a party to said Sublease or
any other amendment nor bound by any of the covenants or agreements thereof,
and that neither the execution and delivery of this Consent, nor the receipt by
Landlord of a copy Sublease or of a copy of any such amendment, shall be deemed
to change any provision of this Consent or to be a consent to, or an approval
by Landlord of any covenants or agreement contained in said Sublease or any
such amendment.

 

20.           Tenant has agreed to
give Landlord notice within ten (10) days following the date any one or more of
the following conditions arise:

 

5

 

(a)           The Sublease expires or
is terminated;

 

(b)           The rent due pursuant
to the Sublease is adjusted; or

 

(c)           The term of the
Sublease is modified.

 

21.           To the best of
Landlord’s knowledge, there is presently no default on the part of Tenant under
the Master Lease and the Master Lease is currently in full force and effect.

 

22.           Tenant has properly
paid all sums and performed all obligations which are required to be paid or
performed under the Master Lease on the part of Tenant as of the date hereof.

 

REMAINDER OF PAGE INTENTIONALLY BLANK

 

6

 

23.           Sublessee agrees to
give written notice to Tenant and Landlord within three (3) days of any
incident arising in any way from Sublessee’s use on the Premises of any
radioactive material where any state, local, or federal agency was notified, or
was required to be notified.  Further,
Sublessee agrees to provide Tenant and Landlord with copies of all policies and
procedures that Sublessee has in place for the handling, storage, use, and
disposal of any radioactive materials that may be used or stored on the
Premises, and to provide Tenant and Landlord with updates of those policies and
procedures upon request.  Additionally,
Sublessee agrees to provide Tenant and Landlord with copies of any inspection
or clearance reports produced for any governmental agencies, or at the request
of Sublessee, prior to or at vacation of the premises by Sublessee.

 

IN WITNESS WHEREOF, the
following parties have executed this Consent to Sublease as of the date first
written above.

 

	
  LANDLORD:

  
	
   

  
	
  Bill Young and
  Judi Young

  
	
   

  
	
   

  
	
  /s/ Bill Young

  	
   

  
	
  Bill Young

  
	
   

  
	
   

  
	
  /s/ Judi Young

  	
   

  
	
  Judi Young

  
	
   

  
	
   

  
	
  TENANT:  REMEC, Inc.

  
	
   

  
	
   

  
	
  /s/ Thomas H. Waechter

  	
   

  
	
  By:  Thomas H. Waechter, President and Chief
  Operating Officer

  
	
   

  
	
   

  
	
  SUBLESSEE:  Digirad, Inc.

  
	
   

  
	
   

  
	
  /s/ David M. Sheehan

  	
   

  
	
  By:  David M. Sheehan, President and Chief
  Executive Officer

  

 

7

 

EXHIBIT “D”

 

DIGIRAD’S FUNCTIONAL BLOCKPLAN 10/20/03

 

[Graphic]

 

8

 

EXHIBIT E

 

	
  Remec Systems
  Furniture

  	
   

  	
  Conducted by Jason
  Battenfield — Office Furniture Outlet 9/8/2003

  
	
  Inventory

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Tayco Panel
  Inventory

  	
   

  	
  All Panels are 66” tall

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Panel Width

  	
   

  	
  Qty

  	
   

  	
   

  
	
   

  	
   

  	
  36”

  	
   

  	
  3

  	
   

  	
   

  
	
   

  	
   

  	
  48”

  	
   

  	
  31

  	
   

  	
   

  
	
   

  	
   

  	
  60”

  	
   

  	
  53

  	
   

  	
  six are in a different fabric

  
	
   

  	
   

  	
  72”

  	
   

  	
  20

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tayco Overhead Bin

  	
   

  	
  36” wide

  	
   

  	
  43

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mavarick Desk with
  Return

  	
   

  	
  Left

  	
   

  	
  26

  	
   

  	
  Desks are free-standing

  
	
   

  	
   

  	
  Right

  	
   

  	
  20

  	
   

  	
  Desks are free-standing

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mavarick Bookcases

  	
   

  	
  Height

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  48”

  	
   

  	
  2

  	
   

  	
   

  
	
   

  	
   

  	
  60”

  	
   

  	
  6

  	
   

  	
   

  
	
   

  	
   

  	
  72”

  	
   

  	
  12

  	
   

  	
  one damaged

  

 

9<Page>

                                                                   EXHIBIT 10.29

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE SECURITIES LAW,
AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 AND AN EXEMPTION
UNDER APPLICABLE STATE LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

                            WARRANT TO PURCHASE STOCK

Corporation:                 Digirad Corporation
Number of Shares:            42,490
Class of Stock:              Series E Preferred Stock
Initial Exercise Price:      $3.036
Issue Date:                  July 31, 2001
Expiration Date:             July 31, 2006

                  THIS WARRANT CERTIFIES THAT, for the agreed upon value of
$1.00 and for other good and valuable consideration, SILICON VALLEY BANK
("Holder") is entitled to purchase the number of fully paid and nonassessable
shares of the class of securities (the "Shares") of the corporation (the
"Company") at the initial exercise price per Share (the "Warrant Price") all as
set forth above and as adjusted pursuant to Article 2 of this Warrant, subject
to the provisions and upon the terms and conditions set forth in this Warrant.

ARTICLE 1.        EXERCISE.

                  1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.

                  1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as
specified in Section 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant to Section 1.3.

                  1.3 FAIR MARKET VALUE. If the Shares are traded in a public
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not traded in a public
market, the Board of Directors of the Company shall determine fair market value
in its reasonable good faith judgment.

                                       1

<Page>

                  1.4 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after
Holder exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.

                  1.5 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor.

                  1.6 ASSUMPTION ON SALE, MERGER, OR CONSOLIDATION OF THE
COMPANY.

                      1.6.1    "ACQUISITION".  For the purpose of this
Warrant, "Acquisition" means any sale, license, or other disposition of all
or substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.

                      1.6.2    ASSUMPTION OF WARRANT. Upon the closing of any
Acquisition, the successor entity shall assume the obligations of this
Warrant, and this Warrant shall be exercisable for the same securities, cash,
and property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the
record date for the Acquisition and subsequent closing. The Initial Exercise
Price and/or number of Shares shall be adjusted accordingly.

ARTICLE 2.        ADJUSTMENTS TO THE SHARES.

                  2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or
pays a dividend on its common stock (or the Shares if the Shares are securities
other than common stock) payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
or if the Shares are securities other than common stock, subdivides the Shares
in a transaction that increases the amount of common stock into which the Shares
are convertible, then upon exercise of this Warrant, for each Share acquired,
Holder shall receive, without cost to Holder, the total number and kind of
securities to which Holder would have been entitled had Holder owned the Shares
of record as of the date the dividend or subdivision occurred. If the
outstanding shares are combined or consolidated, by reclassification or
otherwise, into a lesser number of shares, the Initial Exercise Price shall be
proportionately increased.

                  2.2 RECLASSIFICATION, EXCHANGE, COMBINATIONS OR SUBSTITUTION.
Upon any reclassification, exchange, substitution, or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant, Holder shall be entitled to receive, upon
exercise or conversion of this Warrant, the number and kind of securities and
property that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such

                                       2

<Page>

an event shall include any automatic conversion of the outstanding or
issuable securities of the Company of the same class or series as the Shares
to common stock pursuant to the terms of the Companys* of Incorporation upon
the closing of a registered public offering of the Company's common stock.
The Company or its successor shall promptly issue to Holder a new Warrant for
such new securities or other property. The new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Initial Exercise Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.

*CERTIFICATE

                  2.3 ADJUSTMENTS FOR DILUTING ISSUANCES. The *provisions set
forth for the Shares in the Company's Certificate of Incorporation relating to
the above in effect as of the Issue Date may not be amended, modified or waived,
without the prior written consent of Holder unless such amendment, modification
or waiver affects Holder in the same manner as they affect all other
shareholders of the same series of shares granted to the Holder.

*CONVERSION PRICE ADJUSTMENTS

                  2.4 NO IMPAIRMENT. The Company shall not, by amendment of its
Certificate of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment.

                  2.5 FRACTIONAL SHARES. No fractional Shares shall be issuable
upon exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company, shall
eliminate such fractional share interest by paying Holder the amount computed by
multiplying the fractional interest by the fair market value of a full Share.

                  2.6 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the
Warrant Price, the Company shall promptly notify Holder in writing, and, at the
Company's expense, promptly compute such adjustment, and furnish Holder with a
certificate of its Chief Financial Officer setting forth such adjustment and the
facts upon which such adjustment is based. The Company shall, upon written
request, furnish Holder a certificate setting forth the Warrant Price in effect
upon the date thereof and the series of adjustments leading to such Warrant
Price.

ARTICLE 3.        REPRESENTATIONS AND COVENANTS OF THE COMPANY.

                  3.1      REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to the Holder at follows:

                           (a)      The initial Warrant Price referenced on the
first page of this Warrant is not greater than (i) the price per share at which
the Shares were last issued in an arms-

                                       3

<Page>

length transaction in which at least $500,000 of the Shares were sold* (ii)
the fair market value of the Shares as of the date of this Warrant.

*OR

                           (b)      All Shares which may be issued upon the
exercise of the purchase right represented by this Warrant, and all securities,
if any, issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.

                           (c)      The Capitalization Table* previously
provided to Holder remains true and complete as of the Issue Date.

*DATED AS OF ______________

                  3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any
time (a) to declare any dividend or distribution upon its common stock, whether
in cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event, the Company shall
give Holder (1) at least 10 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 10 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.

                  3.3 REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED. The
Company agrees that the Shares or, if the Shares are convertible into common
stock of the Company, such common stock, shall be subject to the registration
rights set forth in the Company's Amended and Restated Investors' Rights
Agreement dated November 10, 2000 or similar agreement. The provisions set forth
in the Company's Investors' Right Agreement or similar agreement relating to the
above in effect as of the Issue Date may not be amended, modified or waived
without the prior written consent of Holder unless such amendment, modification
or waiver affects Holder in the same manner as they affect all other
shareholders of the same series of shares granted to the Holder.*

*THE CONSENT, IF ANY, REQUIRED OF COMPANY'S EXISTING SIGNATORIES TO THE
INVESTORS' RIGHTS AGREEMENT WITH RESPECT TO THE FOREGOING REGISTRATION RIGHTS
SHALL BE OBTAINED, AND EVIDENCE

                                       4

<Page>

THEREOF SATISFACTORY TO HOLDER PROVIDED, WITHIN 30 DAYS OF THE ISSUE DATE.
THE FAILURE TO SO OBTAIN AND PROVIDE SUCH CONSENT WITHIN SUCH 30 DAYS SHALL
CONSTITUTE AN EVENT OF DEFAULT UNDER THE LOAN AND SECURITY AGREEMENT BETWEEN
COMPANY AND HOLDER OF APPROXIMATE EVEN DATE HEREWITH. ALTERNATIVELY, HOLDER
WILL BE MADE A PARTY TO THE INVESTORS' RIGHTS AGREEMENT OR SIMILAR AGREEMENT.
IN EITHER EVENT, SUCH CONSENT OR AGREEMENT MAKING HOLDER A PARTY TO THE
INVESTORS' RIGHTS AGREEMENT WILL PROVIDE THAT THE SHARE LIMITATION SET FORTH
IN SECTION 2.3 OF THE INVESTORS' RIGHTS AGREEMENT WILL NOT BE APPLICABLE TO
THE HOLDER.

ARTICLE 4.        REPRESENTATIONS WARRANTIES OF THE HOLDER. The Holder
represents and warrants to the Company as follows:

                  4.1 PURCHASE FOR OWN ACCOUNT. Except for transfers to Holder's
affiliates, this Warrant and the securities to be acquired upon exercise of this
Warrant by the Holder will be acquired for investment for the Holder's account,
not as a nominee or agent, and not with a view to the public resale or
distribution within the meaning of the 1933 Act, and the Holder has no present
intention of selling, granting any participation in, or otherwise distributing
the same. If not an individual, the Holder also represents that the Holder has
not been formed for the specific purpose of acquiring this Warrant or the
Shares.

                  4.2 DISCLOSURE OF INFORMATION. The Holder has received or has
had full access to all the information it considers necessary or appropriate to
make an informed investment decision with respect to the acquisition of this
Warrant and its underlying securities. The Holder further has had an opportunity
to ask questions and receive answers from the Company regarding the terms and
conditions of the offering of this Warrant and its underlying securities and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to the Holder or to which the
Holder has access.

                  4.3 INVESTMENT EXPERIENCE. The Holder understands that the
purchase of this Warrant and its underlying securities involves substantial
risk. The Holder: (i) has experience as an investor in securities of companies
in the development stage and acknowledges that the Holder is able to fend for
itself, can bear the economic risk of such Holder's investment in this Warrant
and its underlying securities and has such knowledge and experience in financial
or business matters that the Holder is capable of evaluating the merits and
risks of its investment in this Warrant and its underlying securities and/or
(ii) has a preexisting personal or business relationship with the Company and
certain of its officers, directors or controlling persons of a nature and
duration that enables the Holder to be aware of the character, business acumen
and financial circumstances of such persons.

                  4.4      ACCREDITED INVESTOR STATUS. The Holder is an
"accredited investor" within the meaning of Regulation D promulgated under the
1933 Act.

ARTICLE 5.        MISCELLANEOUS.

                  5.1      TERM: This Warrant is exercisable in whole or in
part at any time and from time to time on or before the Expiration Date.

                                       5

<Page>

                  5.2 LEGENDS. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:

                  THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                  OF 1933, AS AMENDED OR UNDER ANY APPLICABLE STATE LAWS, AND
                  MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
                  EFFECTIVE REGISTRATION THERE OF UNDER SUCH ACT AND AN
                  EXEMPTION UNDER APPLICABLE STATE LAW OR PURSUANT TO RULE 144
                  OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
                  CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
                  REQUIRED.

                  5.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant
and the Shares issuable upon exercise of this Warrant (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) may not
be transferred or assigned in whole or in part without compliance with
applicable federal and state securities laws by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, as reasonably requested by the Company). The Company shall not require
Holder to provide an opinion of counsel if the transfer is to an affiliate of
Holder or if there is no material question as to the availability of current
information as referenced in Rule 144(c), Holder represents that it has complied
with Rule 144(d) and (e) in reasonable detail, the selling broker represents
that it has complied with Rule 144(f), and the Company is provided with a copy
of Holder's notice of proposed sale.*

*5.3.A. RIGHTS OF STOCKHOLDERS. SUBJECT TO SECTIONS 2.1 AND 3.2 OF THIS WARRANT,
THE HOLDER SHALL NOT BE ENTITLED TO VOTE OR RECEIVE DIVIDENDS OR BE DEEMED THE
HOLDER OF SERIES E PREFERRED STOCK OR ANY OTHER SECURITIES OF THE COMPANY THAT
MAY AT ANY TIME BE ISSUABLE ON THE EXERCISE HEREOF FOR ANY PURPOSE, NOR SHALL
ANYTHING CONTAINED HEREIN BE CONSTRUED TO CONFER UPON THE HOLDER, AS SUCH, ANY
OF THE RIGHTS OF A STOCKHOLDER OF THE COMPANY OR ANY RIGHT TO VOTE FOR THE
ELECTION OF DIRECTORS OR UPON ANY MATTER SUBMITTED TO STOCKHOLDERS AT ANY
MEETING THEREOF, OR TO GIVE OR WITHHOLD CONSENT TO ANY CORPORATE ACTION (WHETHER
UPON ANY RECAPITALIZATION, ISSUANCE OF STOCK, RECLASSIFICATION OF STOCK, CHANGE
OF PAR VALUE, OR CHANGE OF STOCK TO NO PAR VALUE, CONSOLIDATION, MERGER,
CONVEYANCE, OR OTHERWISE) OR TO RECEIVE NOTICE OF MEETINGS, OR TO RECEIVE
DIVIDENDS OR SUBSCRIPTION RIGHTS OR OTHERWISE UNTIL THE WARRANT SHALL HAVE BEEN
EXERCISED AND THE SHARES OF SERIES E PREFERRED STOCK PURCHASABLE UPON THE
EXERCISE HEREOF SHALL HAVE BEEN ISSUED, AS PROVIDED HEREIN.

5.3.B. MARKET STAND-OFF AGREEMENT. Each Holder hereby agrees that it shall not,
to the extent requested by the Company and an underwriter of Common Stock (or
other securities) of the Company, sell or otherwise transfer or dispose (other
than to those donees who agree to be similarly bound) of any shares of Series E
Preferred Stock and/or Common Stock issued upon the conversion or exercise of
this Warrant during a reasonable and customary period of time, as agreed to by
the Company and the underwriters, not to exceed 180 days, following the
effective

                                       7

<Page>

date of a registration statement of the Company filed under the Securities
Act; provided, however, that:

(a)      such agreement shall be applicable only to the first such registration
         statement of the Company which covers shares (or securities) to be sold
         on its behalf to the public in an underwritten offering; and

(b)      all officers and directors of the Company, all holders of at least one
         percent (1%) of the issued and outstanding securities of the Company
         and all other persons with registration rights (whether or not pursuant
         to this Agreement) enter into similar agreements.

In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the shares of Series E Preferred Stock and/or
Common Stock issued upon the conversion or exercise of this Warrant held by
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such reasonable and customary period.

                  5.4 TRANSFER PROCEDURE. Subject to the provisions of Section
5.3, Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) to Silicon Valley Bancshares, or The
Silicon Valley Bank Foundation, or to any affiliate of Holder at any time
without prior notice to Company; PROVIDED, HOWEVER , if Holder transfers this
warrant to any other transferee, Holder will give the Company notice of the
portion of the Warrant being transferred with the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). The
Company may refuse to transfer this Warrant to any person who directly competes
with the Company unless the Company's stock is publicly traded.

                  5.5 NOTICES. All notices and other communications from the
Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first-class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company or
the Holder, as the case may be, in writing by the Company or such holder from
time to time. All notices to the Holder shall be addressed as follows:

                  Silicon Valley Bank
                  Attn: Treasury Department
                  3003 Tasman Drive, HG 110
                  Santa Clara, CA 95054

                  5.6 WAIVER. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.

                  5.7      ATTORNEY'S FEES. In the event of any dispute between
the parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party all
costs incurred in such dispute, including reasonable

                                       7

<Page>

                  5.8 AUTOMATIC CONVERSION UPON EXPIRATION. In the event that,
upon the Expiration Date, the fair market value of one Share (or other security
issuable upon the exercise hereof) as determined in accordance with Section 1.3
above is greater than the Exercise Price in effect on such date, then this
Warrant shall automatically be deemed on and as of such date to be converted
pursuant to Section 1.2 above as to all Shares (or such other securities) for
which it shall not previously have been exercised or converted, and the Company
shall promptly deliver a certificate representing the Shares (or such other
securities) issued upon such conversion to the Holder.

                  5.9      GOVERNING LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to its principles regarding conflicts of law.

                                       "COMPANY"
                                       Digirad Corporation

                                       By:          /s/ Scott Huennekens
                                             -----------------------------
                                       Name:        R. Scott Huennekens
                                             -----------------------------
                                                     (Print)
                                       Title:      Chairman of The Board,
                                                   President or Vice President

                                       By:          /s/ Gary JG Atkinson
                                             -----------------------------
                                       Name:        Gary JG Atkinson
                                             -----------------------------
                                               (Print)
                                       Title:  Chief Financial Officer,
                                               Secretary, Assistant Treasurer
                                               or Assistant Secretary

                                       "HOLDER"
                                       Silicon Valley Bank

                                       By:     /s/ illegible
                                             -----------------------------
                                       Name:        ILLEGIBLE
                                             -----------------------------
                                       Title:       Senior Vice President
                                             -----------------------------

                                       8

<Page>

                                   APPENDIX I

                               NOTICE OF EXERCISE

                  1.      Holder elects to purchase ________ shares of the
Common/Series _____ Preferred [strike one] Stock of ________ pursuant to the
terms of the attached Warrant, and tenders payment of the purchase price of
the shares in full.

                  1.       Holder elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised for ________ of the Shares covered by the Warrant.

                  [Strike paragraph that does not apply.]

                  2.       Please issue a certificate or certificates
representing the shares in the name specified below:

                                --------------------------------------------
                           Holders Name

                                --------------------------------------------

                            --------------------------------------------
                           (Address)

                  3. The undersigned represents it is acquiring the shares
solely for its own account and not as a nominee for any other party and not with
a view toward the resale or distribution except in compliance with applicable
securities laws.

                                       HOLDER:

                                       ---------------------------------------

                                       By:
                                          ------------------------------------
                                       Name:
                                            ----------------------------------
                                       Title:
                                             ---------------------------------

-------------------------
         (Date)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00063-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00063-of-00352.parquet"}]]