-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HtGW6a6U5kAktPv5sbSTRSEm/i+5nNLRPYembGywRx2kdAqrvoldFCKfX46ll/tw LOvF3AXPT2tiCwkHMzL7Qg== 0000912057-00-000126.txt : 20020610 0000912057-00-000126.hdr.sgml : 20020610 20000103175800 ACCESSION NUMBER: 0000912057-00-000126 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991220 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20000104 DATE AS OF CHANGE: 20020607 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUIDEL CORP /DE/ CENTRAL INDEX KEY: 0000353569 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 942573850 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-10961 FILM NUMBER: 00500777 BUSINESS ADDRESS: STREET 1: 10165 MCKELLAR CT CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 8585521100 FORMER COMPANY: FORMER CONFORMED NAME: MONOCLONAL ANTIBODIES INC /DE/ DATE OF NAME CHANGE: 19910210 8-K 1 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): December 20, 1999 QUIDEL CORPORATION (Exact Name of Registrant as Specified in Charter) Delaware 0-10961 94-2573850 (State or Other Jurisdiction of (Commission (IRS Employer Incorporation) File Number) Identification No.) 10165 McKeller Court San Diego, CA 92121 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (858) 552-1100 Not Applicable (Former Name or Former Address, if Changed Since Last Report) ITEM 2. Acquisition or Disposition of Assets. Quidel Corporation closed a sale/leaseback of its corporate headquarters facility and real estate on December 20, 1999. The facility and real estate was sold for $15 million. Quidel will lease, from 10165 McKellar Court L.P., a California limited partnership and an investment partnership, the 73,000 square foot facility for fifteen years, with options to extend the lease for up to two additional five-year periods. The purchase price and lease terms were determined through arms-length negotiation in light of market conditions. The sale was an all cash transaction, netting Quidel approximately $7 million. Quidel is a limited partner holding approximately a 25% interest in the limited partnership that acquired the facility and real estate. The cash generated from selling the property will be used to reduce Quidel's debt, specifically the line of credit opened earlier in 1999 in connection with the acquisition of Metra Biosystems, Inc. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) EXHIBITS. -------- 10.6 Form of Purchase and Sale Agreement and Escrow Instructions The Schedules and Exhibits to the Purchase and Sale Agreement and Escrow Instructions are omitted from this filing in accordance with Item 601(b)(2) of Regulation S-K. Quidel agrees to supply any omitted Schedule or Exhibit to the Commission upon receipt of a request by the Commission - subject to a reservation of Quidel's right to request confidential treatment as to certain information under the Freedom of Information Act, the Privacy Act and the Commission's confidential treatment rules and regulations, all as in effect at the time of any such request. The omitted Schedules and Exhibits are captioned: Exhibit A - Description of Land Exhibit B - List of Personal Property Exhibit C - List of Operating Agreements Exhibit D - Trade Names and General Intangibles Relating to the Land or Improvements Exhibit E - Form of Deed Schedule 1 - Legal Description Exhibit F - Form of Bill of Sale 2 Schedule 1 - Legal Description Schedule 2 - Excluded Items Schedule 3 - Personal Property Exhibit G - Form of Assignment of Contracts Schedule 1 - Legal Description Schedule 2 - Contracts Exhibit H - Form of FIRPTA Certificate Exhibit J - The Improvements 10.7 Form of Single Tenant Absolute Net Lease The Schedules and Exhibits to the Single Tenant Absolute Net Lease are omitted from this filing in accordance with Item 601(b)(2) of Regulation S-K. Quidel agrees to supply any omitted Schedule or Exhibit to the Commission upon receipt of a request by the Commission - subject to a reservation of Quidel's right to request confidential treatment as to certain information under the Freedom of Information Act, the Privacy Act and the Commission's confidential treatment rules and regulations, all as in effect at the time of any such request. The omitted Schedules and Exhibits are captioned: Exhibit A - Land, Legal Description Exhibit B - Subordination Agreement Exhibit C - Estoppel Certificate Exhibit D - Excluded Items [Signature Page Follows] 3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. QUIDEL CORPORATION Date: January 3, 2000 By: /s/ Charles J. Cashion --------------------------------- Charles Cashion Senior Vice President, Corporate Operations, Chief Financial Officer and Secretary EXHIBIT INDEX
Exhibit Number Description ------ ----------- 10.6 Form of Purchase and Sale Agreement and Escrow Instructions 10.7 Form of Single Tenant Absolute Net Lease
4 EX-10.6 2 EXHIBIT 10.6 Exhibit 10.6 PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS THIS PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (this "AGREEMENT") is made as of November 30, 1999 (the "EFFECTIVE DATE"), by QUIDEL CORPORATION, a Delaware corporation, with a principal executive office at 10165 McKellar Court, San Diego, California 92121 ("SELLER"), and 10165 MCKELLAR COURT, L.P., a California limited partnership, with a principal executive office at 11440 W. Bernardo Court, Suite 280, San Diego, California 92127 ("PURCHASER"). W I T N E S S E T H: ARTICLE I PURCHASE AND SALE SECTION 1.1 AGREEMENT OF PURCHASE AND SALE. Subject to the terms and conditions hereinafter set forth, Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase from Seller, all of Seller's right, title and interest in and to the following: (a) that certain tract or parcel of land commonly known as 10165 McKellar Court, San Diego, San Diego County, California, and more particularly described in EXHIBIT A attached hereto and made a part hereof, together with all rights and appurtenances pertaining to such property, including any right, title and interest of Seller in and to relating to such property, easements, covenants, adjacent streets, alleys or rights-of-way relating to such property (the property described in clause (a) of this Section 1.1 being herein referred to collectively as the "LAND"); (b) the buildings, structures, fixtures and other improvements affixed to or located on the Land other than those listed in EXHIBIT J attached hereto (collectively, the "IMPROVEMENTS"); (c) any and all of Seller's right, title and interest in and to all tangible personal property listed on EXHIBIT B attached hereto (the property described in clause (c) of this Section 1.1 being herein referred to collectively as the "PERSONAL PROPERTY"); (d) any and all of Seller's right, title and interest in and to: (i) all assignable contracts and agreements (collectively, the "OPERATING AGREEMENTS") listed and described on EXHIBIT C attached hereto and made a part hereof, relating to the upkeep, repair, maintenance or operation of the Land, Improvements or Personal Property; (ii) all assignable existing warranties and guaranties (express or implied) issued to Seller by any contractor or manufacturer in connection with the Improvements or the Personal Property; (iii) all assignable existing permits, licenses, approvals and authorizations issued by any governmental authority in connection with the Property; and (iv) to the extent assignable, all trade names and general intangibles relating to the Land or Improvements listed and described on EXHIBIT D attached hereto (the property described in clause (d) of this Section 1.1 being sometimes herein referred to collectively as the INTANGIBLES"). SECTION 1.2 PROPERTY DEFINED. The Land and the Improvements are hereinafter sometimes referred to collectively as (the "REAL PROPERTY"). The Land, the Improvements, the Personal Property and the Intangibles are hereinafter sometimes referred to collectively as the "Property." SECTION 1.3 PURCHASE PRICE. Seller agrees to sell and Purchaser agrees to purchase the Property for the amount of Fifteen Million Dollars ($15,000,000.00) (the "PURCHASE PRICE"). SECTION 1.4 DEPOSIT. On or before two (2) business days after execution of this Agreement and delivery of a fully executed copy of this Agreement to Fidelity National Title Company (the "ESCROW AGENT"), having its office at 2763 Camino del Rio South, San Diego, California 92108, Attention: Nancy Kelley, Purchaser shall deposit with Escrow Agent, the sum of Fifty Thousand Dollars ($50,000.00) in good funds, either by certified bank or cashier's check or by federal wire transfer. The Escrow Agent shall hold the deposit in an interest-bearing account reasonably acceptable to Seller and Purchaser, in accordance with the terms and conditions of this Agreement. All interest on such sum shall be deemed income of Purchaser, and Purchaser and Seller shall share equally all costs and fees imposed on the deposit account. The deposit and all accrued interest (collectively, the "DEPOSIT") shall be distributed in accordance with the terms of this Agreement. SECTION 1.5 PAYMENT OF PURCHASE PRICE. On the business day of the Closing (as defined in Section 4.1 below) Purchaser shall deposit with Escrow Agent by cashier's check or wire transfer, a sum equal to the Purchase Price, as increased or decreased by prorations and adjustments as herein provided PLUS an amount equal to Purchaser's share of closing costs as provided herein, and LESS an amount equal to the Deposit. SECTION 1.6 DEPOSIT AS LIQUIDATED DAMAGES. FROM AND AFTER THE EXPIRATION OF THE INSPECTION PERIOD AND THE TITLE INSPECTION PERIOD, AS SUCH TERMS ARE DEFINED HEREINBELOW (THE "APPROVAL DATE"), IN THE EVENT THE SALE OF THE PROPERTY AS CONTEMPLATED HEREUNDER IS NOT CONSUMMATED SOLELY BY REASON OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF PURCHASER AND SELLER IS READY, WILLING AND ABLE TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT AND ALL CONDITIONS PRECEDENT TO CLOSING HAVE BEEN WAIVED OR SATISFIED, THEN THE DEPOSIT SHALL BE PAID TO AND RETAINED BY SELLER AS LIQUIDATED DAMAGES. THE PARTIES ACKNOWLEDGE THAT SELLER'S ACTUAL DAMAGES IN THE EVENT THAT THE SALE IS NOT CONSUMMATED WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. THEREFORE, BY SEPARATELY INITIALLING THIS SECTION 1.6 BELOW, THE PARTIES ACKNOWLEDGE THAT THE DEPOSIT HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES AND AS SELLER'S EXCLUSIVE REMEDY AGAINST PURCHASER IN THE EVENT THE CLOSING DOES NOT OCCUR AND AS SELLER'S SOLE AND EXCLUSIVE REMEDY AGAINST PURCHASER ARISING FROM SUCH FAILURE OF THE SALE TO CLOSE. IN ADDITION, PURCHASER SHALL PAY -2- ALL TITLE, SURVEY AND ESCROW CANCELLATION CHARGES. NOTWITHSTANDING THE FOREGOING, IN NO EVENT SHALL THIS SECTION 1.6 LIMIT THE DAMAGES RECOVERABLE BY EITHER PARTY AGAINST THE OTHER PARTY DUE TO (A) THE OTHER PARTY'S OBLIGATION TO INDEMNIFY SUCH PARTY, IF ANY, IN ACCORDANCE WITH THIS AGREEMENT, OR (B) THIRD PARTY CLAIMS. BY THEIR SEPARATELY INITIALING THIS SECTION 1.6 BELOW, PURCHASER AND SELLER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTOOD THE ABOVE PROVISION COVERING LIQUIDATED DAMAGES, AND THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION AT THE TIME THIS AGREEMENT WAS EXECUTED. Purchaser's Initials __________ Seller's Initials __________ SECTION 1.7 ESCROW AGENT. Escrow Agent shall hold and dispose of the Deposit in accordance with the terms of this Agreement. Seller and Purchaser agree that the duties of the Escrow Agent hereunder are purely ministerial in nature and shall be expressly limited to the safekeeping and disposition of the Deposit in accordance with this Agreement. Escrow Agent shall incur no liability in connection with the safekeeping or disposition of the Deposit for any reason other than Escrow Agent's misconduct or negligence. In the event that Escrow Agent shall be in doubt as to its duties or obligations with regard to the Deposit, or in the event that Escrow Agent receives conflicting instructions from Purchaser and Seller with respect to the Deposit, Escrow Agent shall not be required to disburse the Deposit and may, at its option, continue to hold the Deposit until both Purchaser and Seller agree as to its disposition, or until a final judgment is entered by a court of competent jurisdiction directing its disposition, or Escrow Agent may interplead the Deposit in accordance with the laws of the state in which the Property is located. Escrow Agent shall not be responsible for any interest on the Deposit except as is actually earned, or for the loss of any interest resulting from the withdrawal of the Deposit prior to the date interest is posted thereon. Escrow Agent shall execute this Agreement solely for the purpose of being bound by the provisions of Sections 1.4, 1.5, 1.6 and 1.7 hereof. ARTICLE II TITLE SECTION 2.1 TITLE INSPECTION PERIOD. During the period beginning upon the Effective Date and ending at 5:00 p.m. (local time at the Property) on the 45th day after the Effective Date (hereinafter referred to as the "TITLE INSPECTION PERIOD"), Purchaser shall have the right to review: (a) a current preliminary title report on the Real Property (the "PTR") issued by Fidelity National Title Company (the "TITLE COMPANY"), accompanied by copies of all documents referred to in the report; (b) copies of the most recent property tax bills for the Property; and (c) an ALTA survey of the Real Property prepared by a licensed surveyor (the "SURVEY"). Item (a) shall be obtained by Purchaser within five (5) days after the Effective Date. Item (c) shall be obtained by -3- Purchaser within thirty (30) days after the Effective Date. Item (b) shall be delivered by Seller to Purchaser within five (5) days after the Effective Date. SECTION 2.2 TITLE EXAMINATION. Purchaser shall notify Seller in writing (the "TITLE NOTICE") prior to the expiration of the Title Inspection Period which exceptions to title (including survey matters), if any, will not be accepted by Purchaser. If Purchaser fails to notify Seller in writing of its disapproval of any exceptions to title by the expiration of the Title Inspection Period, Purchaser shall be deemed to have approved the condition of title to the Real Property. If Purchaser notifies Seller in writing that Purchaser objects to any exceptions to title, Seller shall have two (2) business days after receipt of the Title Notice to notify Purchaser of either of the following: (a) that Seller will remove such objectionable exceptions from title on or before the Closing; or (b) that Seller elects not to cause such exceptions to be removed. If Seller fails to notify Purchaser within such two-business-day period, then Seller shall be deemed to have made an election under the foregoing clause (b). Notwithstanding the foregoing or any other provision of this Agreement, all monetary obligations disclosed in the PTR are to be satisfied by Seller. The procurement by Seller of a commitment for the issuance of the Title Policy (as defined in Section 2.5 hereof) or an endorsement thereto insuring Purchaser against any title exception which was disapproved pursuant to this Section 2.2 shall be deemed a cure by Seller of such disapproval. If Seller gives Purchaser notice under clause (b) above, Purchaser shall have three (3) business days after the date of such notice in which to notify Seller that Purchaser will nevertheless proceed with the purchase in accordance with the provisions of this Agreement and take title to the Property subject to such exceptions, or that Purchaser will terminate this Agreement. Purchaser's failure to respond within such three-business-day period shall be deemed an election to terminate this Agreement. If, despite Seller's election to eliminate any disapproved exception under clause (a) above, the exception has not been eliminated on or before the Closing, Purchaser, at its option and sole discretion, may either: (a) elect in writing to waive its prior disapproval; (b) if the exception represents a monetary obligation, instruct Escrow Holder to deduct from Seller's proceeds hereunder the amount necessary to satisfy the obligation and thereby eliminate the exception; or (c) treat the failure to eliminate the exception as a failure of a contingency under this Agreement, in which event the Escrow shall be cancelled and this Agreement shall be terminated. If this Agreement is terminated pursuant to the foregoing provisions of this paragraph, then neither party shall have any further rights or obligations hereunder (except for any indemnity obligations of either party pursuant to the other provisions of this Agreement), the Deposit shall be returned to Purchaser and each party shall bear its own costs incurred hereunder. SECTION 2.3 PRE-CLOSING "GAP" TITLE DEFECTS. Purchaser may, at or prior to Closing, notify Seller in writing (the "GAP NOTICE") of any objections to title: (a) raised by the Title Company between the expiration of the Title Inspection Period and the Closing; and (b) not disclosed by the Title Company or otherwise known to Purchaser prior to the expiration of the Title Inspection Period; provided that Purchaser must notify Seller of such objection to title within two (2) business days of being made aware of the existence of such exception. If Purchaser sends a Gap Notice to Seller, Purchaser and Seller shall have the same rights and obligations with respect to such notice as apply to a Title Notice under Section 2.2 hereof; provided, however, in no event shall the date of Closing be extended beyond December 31, 1999. -4- SECTION 2.4 PERMITTED EXCEPTIONS. The Property shall be conveyed subject to the following matters, which are hereinafter referred to as the "PERMITTED EXCEPTIONS": (a) those matters (including, without limitation, the exceptions disclosed in the PTR) that either are not objected to in writing within the time periods provided in Sections 2.2 or 2.3 hereof, or if objected to in writing by Purchaser, are those which Seller has elected not to remove or cure, or has been unable to remove or cure, and subject to which Purchaser has elected or is deemed to have elected to accept the conveyance of the Property; (b) the lien of all ad valorem real estate taxes and assessments not yet due and payable as of the date of Closing, subject to adjustment as herein provided; (c) local, state and federal laws, ordinances or governmental regulations, including but not limited to, building and zoning laws, ordinances and regulations, now or hereafter in effect relating to the Property; (d) items shown on the Survey and not objected to by Purchaser or waived or deemed waived by Purchaser in accordance with Section 2.2 or Section 2.3 hereof; (e) rights of tenants under leases affecting the Property, including the Lease dated as of the Closing between Seller and Purchaser; and (f) the lien of the deed of trust securing the Loan (as defined below). SECTION 2.5 CONVEYANCE OF TITLE. At Closing, Seller shall convey and transfer to Purchaser fee simple title to the Land and Improvements, by execution and delivery of the Deed (as defined in Section 4.2(a) hereof) and Escrow Agent shall obtain the irrevocable commitment of the Title Company to issue an ALTA Joint Protection Policy of Title Insurance (the "TITLE POLICY") covering the Real Property, in the full amount of the Purchase Price, subject only to the Permitted Exceptions ARTICLE III REVIEW OF PROPERTY SECTION 3.1 RIGHT OF PHYSICAL INSPECTION. During the period beginning upon the Effective Date and ending at 5:00 p.m. (local time at the Property) on December 20, 1999 (the "INSPECTION PERIOD"), Purchaser, its agents, employees, and independent contractors, shall have the right to make a physical inspection of the Real Property and perform an environmental assessment on the Property pursuant to the terms and conditions of this Agreement. Purchaser understands and agrees that any on-site inspections or environmental assessments of the Property shall occur at reasonable times agreed upon by Seller and Purchaser after reasonable prior written notice to Seller and shall be conducted so as not to interfere unreasonably with the use of the Property by Seller. Seller reserves the right to have a representative present during any such inspections. Purchaser shall promptly restore the Real Property to its prior condition following any such inspections or assessments, at Purchaser's sole cost and expense. At Seller's option, Purchaser will furnish to Seller copies of any reports -5- received by Purchaser relating to any inspections of the Property. Purchaser agrees to protect, indemnify, defend and hold Seller harmless from and against any claim for liabilities, losses, costs, expenses (including reasonable attorneys fees), damages or injuries arising out of or resulting from the inspection of the Property by Purchaser or its agents or consultants, and notwithstanding anything to the contrary in this Agreement, such obligation to indemnify, defend and hold harmless shall survive Closing or any termination of this Agreement. SECTION 3.2 DOCUMENT INSPECTION. Seller shall make available (and copy if requested) all of the following to Purchaser within ten (10) days after the Effective Date to the extent that such items are in the possession of Seller or are reasonably obtainable by Seller: (a) copies of any environmental reports relating to the Property in Seller's possession; (b) a list and complete copies of all Operating Agreements, including any amendments and other documents pertaining hereto; (c) plans, permits, specifications and certificates of occupancy for the Real Property; (d) all other reports, surveys, or other information (including, without limitation, any notices with respect to the Property received from any governmental agency) in Seller's possession relating to the Property; (e) the last 12 months utility bills for the Real Property; and (f) existing insurance policies for the Property. SECTION 3.3 RIGHT OF TERMINATION. During the period beginning on the Effective Date and ending at 5:00 p.m. (local time at the Property) on December 20, 1999 (the "DUE DILIGENCE PERIOD"), if for any reason Purchaser, in its sole discretion, determines that the Property or any aspect thereof is unsuitable for Purchaser's acquisition, Purchaser shall have the right to terminate this Agreement by giving written notice thereof to Seller, and if Purchaser gives such notice of termination, this Agreement shall terminate. If this Agreement is terminated pursuant to the foregoing provisions of this paragraph, then neither party shall have any further rights or obligations hereunder (except for any indemnity obligations of either party pursuant to the other provisions of this Agreement), the Deposit shall be immediately returned to Purchaser without any action being necessary, and each party shall bear its own costs incurred hereunder. If Purchaser fails to give Seller a notice of termination prior to the expiration of the Due Diligence Period, Purchaser shall be deemed to have approved all aspects of the Property (except title and Survey, which shall be governed by Article II hereof) and to have elected to proceed with the purchase of the Property pursuant to the terms hereof. -6- ARTICLE IV CLOSING SECTION 4.1 TIME AND PLACE. The consummation of the transaction contemplated hereby (the "CLOSING") shall be consummated on or before December 31, 1999 through an escrow closing administered by Escrow Agent pursuant to joint instructions from Seller and Purchaser. At the Closing, Seller and Purchaser shall perform the obligations set forth in, respectively, Section 4.2 and Section 4.3 hereof, the performance of which obligations shall be concurrent conditions. The Closing shall be held at the offices of Escrow Agent set forth in Section 1.4. SECTION 4.2 SELLER'S OBLIGATIONS AT CLOSING. On or before two (2) days before Closing, Seller shall: (a) deliver to Escrow Agent a duly executed grant deed (the "DEED") in the form attached hereto as EXHIBIT E, conveying the Land and Improvements; (b) deliver to Purchaser a duly executed bill of sale (the "BILL OF SALE") in the form attached hereto as EXHIBIT F conveying the Personal Property; (c) deliver to Purchaser a duly executed assignment and assumption agreement (the "ASSIGNMENT OF CONTRACTS") in the form attached hereto as EXHIBIT G assigning Seller's interest in the Operating Agreements and the other Intangibles, to the extent assignable; (d) deliver such evidence as the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Seller; (e) deliver to Purchaser a certificate in the form attached hereto as EXHIBIT H duly executed by Seller stating that Seller is not a "foreign person" as defined in the Federal Foreign Investment in Real Property Tax Act of 1980; (f) deliver to Purchaser the Operating Agreements; (g) deliver such affidavits as may be customarily and reasonably required by the Title Company, in a form reasonably acceptable to Seller; (h) deliver to Purchaser possession and occupancy of the Property, subject to the Permitted Exceptions; (i) execute a closing statement acceptable to Seller; (j) deliver such additional documents as shall be reasonably required to consummate the transaction contemplated by this Agreement; and (k) deliver to Purchaser a lease in the form of EXHIBIT I attached hereto, duly executed by Seller. -7- SECTION 4.3 PURCHASER'S OBLIGATIONS AT CLOSING. Except as otherwise provided, on or before two (2) days before Closing, Purchaser shall: (a) deliver to Seller a duly executed Assignment of Contracts; (b) deliver such evidence as the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Purchaser; (c) deliver such affidavits as may be customarily and reasonably required by the Title Company, in a form reasonably acceptable to Purchaser; (d) execute a closing statement acceptable to Purchaser; (e) deliver such additional documents as shall be reasonably required to consummate the transaction contemplated by this Agreement; and (f) deliver to Seller a lease in the form of EXHIBIT I attached hereto, duly executed by Purchaser. SECTION 4.4 INTENTIONALLY OMITTED. SECTION 4.5 CLOSING COSTS. (a) Seller and Purchaser shall execute such returns, questionnaires and other documents as shall be required with regard to all applicable real property transaction taxes imposed by applicable federal, state or local law or ordinance. (b) Seller shall pay the fees of any counsel representing Seller in connection with this transaction. Seller shall also pay the following costs and expenses: (i) one-half of the escrow fee, if any, which may be charged by the Escrow Agent or Title Company; (ii) any imposed transfer tax, documentary stamp tax or similar tax which becomes payable by reason of the transfer of the Property (excluding, however, any sales tax in respect of the Personal Property); (iii) the fees for Seller's Broker; (iv) the title insurance premium for an ALTA standard form of owner's title policy; and (v) the cost of Seller's leasehold policy of title insurance. (c) Purchaser shall pay the fees of any counsel representing Purchaser in connection with this transaction. Purchaser shall also pay the following costs and expenses: (i) one-half of the escrow fee, if any, which may be charged by the Escrow Agent or Title Company; -8- (ii) any sales tax which becomes payable by reason of the transfer of the Personal Property; (iii) any loan fees or other fees associated with the Loan; (iv) the cost of any title policy required by the lender under the Loan ("LENDER") and the cost of any endorsements to either the owner's title policy or lender's title policy; and (v) the cost of the Survey. (d) All costs and expenses incident to this transaction and the closing thereof, and not specifically described above, shall be paid by the party incurring same. (e) The provisions of this Section 4.5 shall survive the Closing. SECTION 4.6 CONDITIONS PRECEDENT TO OBLIGATION OF PURCHASER. The obligation of Purchaser to consummate the transaction hereunder shall be subject to the fulfillment on or before the date of Closing of all of the following conditions, any or all of which may be waived by Purchaser in its sole discretion: (a) Seller shall have delivered all of the items required to be delivered pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 4.2 hereof; (b) all of the representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects as of the date of Closing; (c) Seller shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Seller as of the date of Closing; (d) Seller have entered into a Lease with Purchaser for the Property in the form attached hereto as EXHIBIT I; (e) the Title Company shall be prepared and irrevocably committed to issue to Purchaser the Title Policy; (f) the physical condition of the Property shall be substantially the same on the Closing Date as on the Effective Date, reasonable wear and tear excepted; (g) no proceeding shall have been commenced against Seller under the federal Bankruptcy Code or any state law for relief of debtors; (h) the financial condition of the Seller on the Closing Date shall not have changed in a material adverse manner from the Effective Date, as determined by Purchaser in its reasonable discretion; -9- (i) no moratorium, statute or regulation of any governmental agency or order or ruling of any court shall have been enacted, adopted, or issued which would have a material adverse affect on Purchaser's use or development of the Property; (j) Purchaser shall have obtained a loan to be secured by a first deed of trust on the Property in the approximate amount of $11,250,000.00 (the "LOAN") on rates and terms acceptable to Purchaser, in its sole discretion; and (k) Purchaser, in its sole discretion, shall have approved the Survey. SECTION 4.7 CONDITIONS PRECEDENT TO OBLIGATION OF SELLER. The obligation of Seller to consummate the transaction hereunder shall be subject to the fulfillment on or before the date of Closing of all of the following conditions, any or all of which may be waived by Seller in its sole discretion: (a) Purchaser shall have delivered all of the items required to be delivered pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 4.3 hereof; (b) All of the representations and warranties of Purchaser contained in this Agreement shall be true and correct in all material respects as of the date of Closing; (c) Purchaser shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Purchaser as of the date of Closing; (d) Purchaser shall have entered into a Lease with Seller for the Property in form of EXHIBIT I attached hereto; (e) Title Company shall be irrevocably committed to issue a leasehold policy of title insurance acceptable to Seller; (f) Seller shall have approved, in its reasonable discretion, the terms of commitment letter of Lender for the Loan within two (2) business days of its receipt from Purchaser; (g) The provisions of the documents evidencing the Loan shall be consistent with Lender's commitment letter; and (h) Seller shall have been able to pay off in full all existing loans encumbering the Property; provided, however, that in the event Closing does not occur due to non-satisfaction or non-waiver of this condition, Seller shall reimburse Purchaser, for all costs and expenses incurred by Purchaser in contemplation of the transactions and documents set forth herein, including, without limitation, costs associated with the Loan, preparation of this Agreement and the Lease, and reasonable attorneys' fees; provided that Seller's maximum reimbursement obligation hereunder shall be $250,000.00. -10- SECTION 4.8 CLOSE OF ESCROW. Provided that Escrow Agent has received the documents, instruments and funds described herein, provided that Escrow Agent has not received written notice from either Purchaser or Seller that this Agreement has been terminated or that any of the conditions to Closing set forth herein have not been satisfied or waived and provided further that the Title Company is able to deliver to Purchaser a commitment to issue the Title Policy and to Seller a commitment to issue Seller's leasehold policy, then Escrow Agent is authorized and instructed at 8:00 a.m. on the date of the Closing to: (a) Record the Deed with the San Diego County Recorder; and (b) Deliver the Purchase Price to Seller, as increased or decreased by prorations and adjustments as provided herein and less Seller's share of closing costs. ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 5.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby makes the following representations and warranties to Purchaser as of the Effective Date, each of which representations and warranties shall be deemed to have been made again as of the Closing: (a) ORGANIZATION AND AUTHORITY. Seller has been duly organized and is validly existing under the laws of the State of Delaware. Seller has the full right and authority to enter into this Agreement and to transfer all of the Property and to consummate or cause to be consummated the transaction contemplated by this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on Seller's part. The person(s) signing this Agreement on behalf of Seller is(are) authorized to do so; (b) PENDING ACTIONS. To Seller's actual knowledge, there are no actions, suits, arbitrations, unsatisfied orders or judgments, government investigations or proceedings pending against Seller or the Property which, if adversely determined, could individually or in the aggregate affect the Property or use thereof, or Seller's ability to perform hereunder; (c) OPERATING AGREEMENTS. To Seller's actual knowledge, the Operating Agreements are all of the agreements concerning the post Closing operation and maintenance of the Property which will impose financial obligations upon Purchaser; (d) CONDEMNATION. No condemnation proceedings are pending or, to Seller's actual knowledge, threatened against the Property; (e) VIOLATIONS. To Seller's actual knowledge, there are no uncured violations of any federal, state or local law relating to the use or operation of the Property which would adversely affect the Property or use thereof; (f) LEASES. There are no leases affecting the Property other than as contemplated hereby; -11- (g) ENVIRONMENTAL. To Seller's actual knowledge there has not been any release of hazardous substances on or beneath the Real Property in violation of any federal, state or local law, and Seller has received no written notice of any violation of claimed violation of any law, rule, or regulation relating to hazardous substances (as used in this clause (g), "hazardous substances" shall have the meaning set forth in Section 25359.7 of the California Health and Safety Code); (h) LIEN OR ENCUMBRANCES. To Seller's actual knowledge, title to the Property is not subject to any liens or encumbrances (including mechanics' liens) including, without limitation, liens or claims for delinquent taxes, and security agreements and pledges, except for those exceptions to title shown in the PTR or the other Permitted Exceptions; (i) NO AGREEMENTS. Except for agreements terminable at will without penalty or premium or as specified in this Agreement (including, without limitation, the Permitted Exceptions), Seller has not entered into any agreements or understandings concerning the Property by which Purchaser would be bound following the Closing; (j) TAXES. To Seller's actual knowledge, there are no taxes, assessments (special, general or otherwise) or bonds of any nature assessed against the Property, or any portion thereof, except as disclosed in the PTR; (k) UTILITIES. To Seller's actual knowledge, all utilities for servicing the Property are being provided and paid current. SECTION 5.2 KNOWLEDGE DEFINED. References to the "knowledge or awareness" of Seller shall be deemed to include the present and actual knowledge of all corporate officers of Seller (after due internal inquiry of Seller by said officers) whose primary work involves or is associated with ownership, operation or maintenance of the Property, and Seller's "written notice" shall be deemed to include notices sent to the attention of one or more of said persons. SECTION 5.3 SURVIVAL OF SELLER'S REPRESENTATIONS AND WARRANTIES. The representations and warranties of Seller set forth in Section 5.1 hereof as updated as of the Closing in accordance with the terms of this Agreement, shall survive Closing for a period of twelve (12) months following the Closing. SECTION 5.4 COVENANTS OF SELLER. (a) MAINTENANCE OF PROPERTY. Seller hereby covenants with Purchaser that from the Effective Date hereof until the Closing or earlier termination of this Agreement, Seller shall maintain the Property in good repair, reasonable wear and tear excepted, and in a manner generally consistent with the manner in which Seller has maintained the Property prior to the date hereof; (b) NOTIFICATION OF SUBSEQUENT EVENTS. If, prior to Closing, the Seller becomes aware of any event which would have a material adverse effect on the condition or operation of the Property as a whole, the Seller will immediately notify the Purchaser of such event. -12- SECTION 5.5 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby makes the following representations and warranties to Seller as of the Effective Date, which representations and warranties shall be deemed to have been made again as of the Closing: (a) ORGANIZATION AND AUTHORITY. Purchaser has been duly organized and is validly existing under the laws of the State of California. Purchaser has the full right and authority to enter into this Agreement and to consummate or cause to be consummated the transaction contemplated by this Agreement. The execution, delivery, and performance of this Agreement have been duly authorized by all necessary action on Purchaser's part. The person(s) signing this Agreement on behalf of Purchaser is(are) authorized to do so; and (b) PENDING ACTIONS. To Purchaser's knowledge, there is no action, suit, arbitration, unsatisfied order or judgment, government investigation or proceeding pending against Purchaser which, if adversely determined, could individually or in the aggregate materially interfere with the consummation of the transaction contemplated by this Agreement. ARTICLE VI DEFAULT SECTION 6.1 DEFAULT BY PURCHASER. In the event the sale of the Property as contemplated hereunder is not consummated solely due to Purchaser's default hereunder, Seller, as its sole remedy, shall be entitled pursuant to Section 1.6 hereof to terminate this Agreement and receive the Deposit as liquidated damages for the breach of this Agreement. SECTION 6.2 DEFAULT BY SELLER. In the event the sale of the Property as contemplated hereunder is not consummated due to Seller's default hereunder, Purchaser shall be entitled, in addition to all other remedies available at law or in equity, to: (a) receive the return of the Deposit, which return shall operate to terminate this Agreement; (b) enforce specific performance of Seller's obligation to convey the Property to Purchaser in accordance with the terms of this Agreement, it being understood and agreed that the remedy of specific performance shall not be available to enforce any other obligation of Seller under this Agreement; or (c) collect damages in the amount of all of Purchaser's costs incurred in connection with the proposed transaction contemplated by this Agreement. ARTICLE VII RISK OF LOSS SECTION 7.1 RISK OF LOSS. Any risk of loss to the Property shall be borne by Seller until the Closing. If prior to the Closing there are instituted any proceedings, whether judicial, administrative, or otherwise, which relate to the taking of any material portion of the Property by eminent domain or the Property is destroyed or materially damaged in whole or in part, Purchaser shall have the right to terminate this Agreement by giving Seller written notice within five (5) business days after it has received notice of such eminent domain proceeding or destruction of the Property. Upon any termination pursuant to this Section 7.1, the parties shall proceed as if this Agreement had been terminated pursuant to Section 3.3 hereof. If Purchaser -13- does not terminate this Agreement, then at the Closing, Seller shall assign to Purchaser all of its right, title, and interest in any proceeds or award arising out of such taking or destruction. ARTICLE VIII COMMISSIONS SECTION 8.1 BROKERAGE COMMISSIONS. With respect to the transaction contemplated by this Agreement, Seller represents that its sole broker is CB Richard Ellis ("SELLER'S BROKER"). Each party hereto agrees that if any person or entity, other than the Seller's Broker, makes a claim for brokerage commissions or finder's fees related to the sale of the Property by Seller to Purchaser, and such claim is made by, through or on account of any acts or alleged acts of said party or its representatives, said party will protect, indemnify, defend and hold the other party free and harmless from and against any and all loss, liability, cost, damage and expense (including reasonable attorneys' fees) in connection therewith. The provisions of this paragraph shall survive Closing or any termination of this Agreement. ARTICLE IX INDEMNITY SECTION 9.1 INDEMNIFICATION BY SELLER. From and after the Closing, Seller shall indemnify and hold Purchaser, its affiliates, members and partners, and the partners, shareholders, officers, directors, employees, representatives and agents of each of the foregoing harmless from and against any and all liability, costs, fees, expenses, damages, deficiencies, interest and penalties (including, without limitation, reasonable attorneys' fees and disbursements) (collectively, "LOSSES") arising out of, or in any way relating to (i) any breach of any representation or warranty of Seller contained in this Agreement or in any Schedule, certificate, instrument or other document delivered pursuant hereto, (ii) any breach of any covenant of Seller contained in this Agreement, and (iii) any event, act, or omission on the part of Seller relating to the Property and arising prior to the Closing notwithstanding when the claim for the Loss is asserted. The obligations of this Section 9.1 shall survive the Closing. SECTION 9.2 INDEMNIFICATION BY PURCHASER. From and after the Closing, Purchaser shall indemnify and hold Seller, its affiliates and shareholders, and the partners, shareholders, officers, directors, employees, representatives and agents of each of the foregoing harmless from and against any and all Losses arising out of, or in any way relating to (i) any breach of any representation or warranty of Purchaser contained in this Agreement or in any Schedule, certificate, instrument or other document delivered pursuant hereto, (ii) any breach of any covenant of Purchaser contained in this Agreement, and (iii) any event, act, or omission on the part of Purchaser relating to the Property and arising after the Closing. The obligations of this Section 9.2 shall survive the Closing. -14- ARTICLE X MISCELLANEOUS SECTION 10.1 CONFIDENTIALITY. Except when required to disclose by applicable law, including public company reporting requirements (it being understood by the parties that Seller, as a public company, may need to disclose the transaction contemplated hereby upon the execution of this Agreement), each party and its representatives shall hold in strictest confidence all data and information obtained with respect to the Property or the transaction contemplated hereunder, whether obtained before or after the execution and delivery of this Agreement and whether or not marked "confidential," and shall not disclose the same to others; provided, however, that it is understood and agreed that the parties may disclose such data and information to their employees, lenders, consultants, accountants and attorneys provided that such persons agree to treat such data and information confidentially. In the event this Agreement is terminated or Purchaser fails to perform hereunder, Purchaser shall promptly return to Seller any statements, documents, schedules, exhibits or other written information obtained from Seller in connection with this Agreement or the transaction contemplated herein. The provisions of this Section 10.1 shall survive Closing or any termination of this Agreement. SECTION 10.2 PUBLIC DISCLOSURE. Except when required to disclose by applicable law, including public company reporting requirements (it being understood by the parties that Seller, as a public company, may need to disclose the transaction contemplated hereby upon the execution of this Agreement), prior to the Closing, any release to the public of information with respect to the sale contemplated herein or any matters set forth in this Agreement will be made only in the form reasonably approved in writing by Purchaser and Seller. The provisions of this Section 10.2 shall survive the Closing or any termination of this Agreement. SECTION 10.3 ASSIGNMENT. Subject to the provisions of this Section 10.3, the terms and provisions of this Agreement are to apply to and bind the permitted successors and assigns of the parties hereto. Purchaser may not assign its rights under this Agreement without first obtaining Seller's written approval, which approval may not be unreasonably withheld. In the event Purchaser intends to assign its rights hereunder: (a) Purchaser shall send Seller written notice of its request at least ten (10) business days prior to Closing, which request shall include the legal name and structure of the proposed assignee, as well as any other information that Seller may reasonably request; and (b) Purchaser and the proposed assignee shall execute an assignment and assumption of this Agreement in form and substance satisfactory to Seller. SECTION 10.4 NOTICES. Any notice pursuant to this Agreement shall be given in writing by: (a) personal delivery; (b) reputable overnight delivery service with proof of delivery;(c) United States Mail, postage prepaid, registered or certified mail, return receipt requested; or (d) legible facsimile transmission, sent to the intended addressee at the address set forth below, or to such other address or to the attention of such other person as the addressee shall have designated by written notice sent in accordance herewith, and shall be deemed to have been given upon receipt or refusal to accept delivery, or, in the case of facsimile transmission, as of the date of the facsimile transmission provided that an original of such facsimile is also sent to the intended addressee by means described in clauses (a), (b) or (c) above. Unless changed in -15- accordance with the preceding sentence, the addresses for notices given pursuant to this Agreement shall be as follows: If to Seller: QUIDEL CORPORATION 10165 McKellar Court San Diego, California 92121 Attention: Charles J. Cashion Telephone No. 858-552-7962 Telecopy No. 858-646-8016 with a copy to: Gibson Dunn & Crutcher Jamboree Plaza, 4 Park Plaza Irvine, California 92614-8557 Attention: Teresa J. Farrell, Esq. Telephone No. (949) 451-3800 Telecopy No. (949) 451-4220 If to Purchaser: 10165 MCKELLAR COURT, L.P. 11440 W. Bernardo Court, Suite 208 San Diego, California 92127 Attention: Alan D. Gold Telephone No. 858-485-9840 Telecopy No. 858-485-9843 with a copy to: Seltzer Caplan Wilkins & McMahon 750 B Street, Suite 2100 San Diego, California 92101 Attention: David J. Dorne, Esq. Telephone No. 619-685-3003 Telecopy No. 619-685-6806 SECTION 10.5 MODIFICATIONS. This Agreement cannot be changed orally, and no executory agreement shall be effective to waive, change, modify or discharge it in whole or in part unless such executory agreement is in writing and is signed by the parties against whom enforcement of any waiver, change, modification or discharge is sought. SECTION 10.6 ENTIRE AGREEMENT. This Agreement, including the exhibits and schedules hereto, contains the entire agreement between the parties hereto pertaining to the subject matter hereof and fully supersedes all prior written or oral agreements and understandings between the parties pertaining to such subject matter. SECTION 10.7 FURTHER ASSURANCES. Each party agrees that it will execute and deliver such other documents and take such other action, whether prior or subsequent to Closing, as may be reasonably requested by the other party to consummate the transaction contemplated by this Agreement. The provisions of this Section 10.7 shall survive Closing. -16- SECTION 10.8 COUNTERPARTS. This Agreement may be executed in counterparts, all such executed counterparts shall constitute the same agreement, and the signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart. SECTION 10.9 FACSIMILE SIGNATURES. In order to expedite the transaction contemplated herein, telecopied signatures may be used in place of original signatures on this Agreement. Seller and Purchaser intend to be bound by the signatures on the telecopied document, are aware that the other party will rely on the telecopied signatures, and hereby waive any defenses to the enforcement of the terms of this Agreement based on the form of signature. SECTION 10.10 SEVERABILITY. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall nonetheless remain in full force and effect; provided that the invalidity or unenforceability of such provision does not materially adversely affect the benefits accruing to any party hereunder. SECTION 10.11 APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Furthermore, substantial obligations under this Agreement are to be performed in San Diego, California. The parties select San Diego, California as the proper and sole venue for any action filed to enforce, construe, or interpret this Agreement. Purchaser and Seller agree that the provisions of this Section 10.11 shall survive the Closing or any termination of this Agreement. SECTION 10.12 NO THIRD-PARTY BENEFICIARY. The provisions of this Agreement and of the documents to be executed and delivered at Closing are and will be for the benefit of Seller and Purchaser only and are not for the benefit of any third party, and accordingly, no third party shall have the right to enforce the provisions of this Agreement or of the documents to be executed and delivered at Closing. SECTION 10.13 CAPTIONS. The section headings appearing in this Agreement are for convenience of reference only and are not intended, to any extent and for any purpose, to limit or define the text of any section or any subsection hereof. SECTION 10.14 CONSTRUCTION. The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto. SECTION 10.15 ATTORNEYS' FEES. In the event of any dispute, arbitration, action, or other proceeding brought by either party against the other under this Agreement, the prevailing party shall be entitled to recover all costs and expenses incurred in connection with such dispute, arbitration, action, or other proceeding, including, without limitation, the fees and costs of its attorneys, whether or not such dispute, arbitration, action, or other proceeding proceeds to formal resolution or judgment. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the Effective Date. -17- SELLER: QUIDEL CORPORATION, a Delaware corporation By: /s/ Andre de Bruin ------------------------------------------ Name: Andre de Bruin ---------------------------------------- Title: President and Chief Executive Officer ---------------------------------------- By: /s/ Charles J. Cashion ------------------------------------------ Name: Charles J. Cashion ---------------------------------------- Title: Senior Vice President ---------------------------------------- [SIGNATURES CONTINUED ON THE NEXT PAGE] -18- PURCHASER: 10165 MCKELLAR COURT, L.P., a California limited partnership By: SCIMED PROP II, LLC, a California limited liability company, its General Partner By: /s/ Alan D. Gold -------------------------- Alan D. Gold, Member The undersigned acknowledges receipt of this Agreement and agrees to act as Escrow Agent pursuant to the terms hereof. ESCROW AGENT: FIDELITY NATIONAL TITLE COMPANY By: /s/ Thomas W. Ahern ------------------------------ Name: Thomas W. Ahern ----------------------------- Title: Escrow Officer ---------------------------- -19- EXHIBIT I LEASE [SEE EXHIBIT 10.7 TO THIS FILING] EX-10.7 3 EXHIBIT 10.7 Exhibit 10.7 SINGLE TENANT ABSOLUTE NET LEASE Dated: December 20, 1999 Between 10165 MCKELLAR COURT, L.P., A CALIFORNIA LIMITED PARTNERSHIP (LANDLORD) and QUIDEL CORPORATION, A DELAWARE CORPORATION (TENANT) SINGLE TENANT LEASE This SINGLE TENANT ABSOLUTE NET LEASE ("LEASE") is made as of December 20, 1999 ("EFFECTIVE DATE"), between 10165 McKELLAR COURT, L.P., a California limited partnership ("LANDLORD"), and QUIDEL CORPORATION, a Delaware corporation ("TENANT"), who agree as follows: RECITALS: This Lease is executed by Landlord and Tenant in contemplation of the following facts and circumstances: A. Landlord is the owner of the real property commonly known as 10165 McKellar Court, San Diego, California, and more particularly described on Exhibit "A" attached hereto ("LAND"), upon which Land is a building of approximately 72,863 square feet ("BUILDING"). The Land and the Building may hereafter be referred to collectively as the "PREMISES." B. Tenant desires to lease from Landlord, and Landlord is willing to lease to Tenant, the Premises upon the terms and conditions contained herein. 1. DEFINITIONS. The terms defined in this paragraph, for all purposes of this Lease, shall have the meanings herein specified. Terms defined elsewhere in this Lease shall have the meanings as defined thereunder. 1.1 "APPLICABLE LAW" shall mean all federal, state, county, municipal and other governmental statutes, laws, rules, orders, permits, licenses, regulations, ordinances, judgments, decrees, directions and injunctions affecting the Premises or any portion thereof or the use or occupancy thereof, whether now or hereafter enacted or in force, whether ordinary or extraordinary, foreseen or unforeseen. 1.2 "CLAIMS" shall mean any and all liabilities (statutory or otherwise), obligations, claims, demands, damages, penalties, causes of action, costs, expenses (including attorneys' fees and expenses), losses and injuries arising from the subject matter of an indemnity granted herein. 1.3 "DEFAULT RATE" shall mean the greater of (i) ten percent (10%) per annum, or (ii) five percent (5%) per annum plus the discount rate of the Federal Reserve Bank situated nearest the Premises; provided, however, in no event shall the Default Rate exceed the maximum interest rate permitted under applicable law. 1.4 "HVAC" shall mean all heating, ventilation and air conditioning equipment and all equipment and fixtures related thereto. 1.5 "LEASE COMMENCEMENT DATE" shall be the Effective Date. 1.6 "LEASE TERM" shall mean the period commencing with the Lease Commencement Date and ending after the term described in Paragraph 4.1. 1.7 "LENDER" shall mean any lender whose loan is secured by a deed of trust on any part of the Premises. 1.8 "RENT" shall include all Monthly Rent, Additional Rent and all other sums of any and every sort payable hereunder to Landlord by Tenant. 1.9 "SECURITY DEPOSIT" shall be $100,000.00. 1.10 "SUBTENANT" shall mean any tenant, assignee, subtenant, licensee, concessionaire or other occupant of the Premises (other than Tenant); and the term "sublease" shall mean any lease, assignment, sublease, license or other agreement for the use or occupancy of any such space (other than this Lease). 1.11 "TAKING" shall mean a taking or voluntary conveyance of title to or any interest in all or any part of the Premises, or the right to use all or any part thereof, pursuant to, as a result of, or in lieu or in anticipation of, the exercise of the right of condemnation, expropriation or eminent domain; and upon such a Taking the Premises, or such part thereof, shall be deemed to have been "taken." 1.12 "TAXES" shall mean all government impositions including, without limitation, property tax costs consisting of real and personal property taxes and assessments (including amounts due under any improvement bond upon the Premises or the Building, including the parcel or parcels of real property upon which the Building is located or assessments levied in lieu thereof) imposed by any governmental authority or agency on the Premises or improvements thereon, any tax on or measured by gross rentals received from the rental of space in the Building, or tax based on the square footage of the Premises or the Building as well as any parking charges, utilities surcharges, or any other costs levied, assessed or imposed by, or at the direction of, or resulting from statutes or regulations, or interpretations thereof, promulgated by any federal, state, regional, municipal or local government authority in connection with the use or occupancy of the Building or the parking facilities serving the Building; any tax on this transaction or this Lease; provided, however, that "Taxes" shall in no event include any franchise or income tax or any tax based on net rentals received from the rental of space in the Building. 2. FUNDAMENTAL LEASE PROVISIONS. Initial Lease Term: 15 years from Lease Commencement Date Monthly Rent: Initially $121,462.62, subject to annual adjustments pursuant to Paragraph 5 Security Deposit: $100,000.00 Address for Notices: To Landlord: 10165 McKELLAR COURT, L.P. c/o Bernardo Property Advisors, Inc. 11440 W. Bernardo Court, Suite 208 San Diego, California 92127 With a copy to: David J. Dorne, Esq. SELTZER CAPLAN WILKINS & McMAHON 750 B Street, Suite 2100 San Diego, California 92101 To Tenant: QUIDEL CORPORATION 10165 McKellar Court San Diego, California 92121 Attention: Charles J. Cashion With a copy to: Teresa Farrell, Esq. GIBSON DUNN & CRUTCHER Jamboree Plaza, 4 Park Plaza Irvine, California 92614-2127 In the event of any conflict between any Fundamental Lease Provision and the balance of this Lease, the latter shall control. 3. AGREEMENT TO LEASE. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises, under the terms and conditions of this Lease. 4. TERM. 4.1 LEASE TERM. The initial Lease Term shall begin as of the Lease Commencement Date and shall continue until fifteen (15) years after the Lease Commencement Date unless sooner terminated or renewed as provided in this Lease. Provided that no Default has occurred and is continuing at the time Tenant elects to extend the Lease Term, Tenant, at its sole option, may extend the Lease Term for two (2) additional periods of five (5) years each (individually, an "EXTENSION PERIOD"), subject to all the provisions of this Lease. All references in this Lease to "LEASE TERM" shall be considered to include both the initial term of this Lease and any properly executed Extension Period, and all references to termination or to the end of the Lease Term shall be considered to mean the termination or end of the initial term of this Lease or any exercised Extension Period, as the case may be. 4.2 PROCEDURE TO EXTEND TERM. Tenant may exercise its option with respect to the Extension Period by complying with the following procedure: At least one year before the last day of the Lease Term (the "EXERCISE PERIOD"), Tenant shall deliver written notice to Landlord setting forth Tenant's irrevocable election to exercise the option to extend. Extension Periods are not assignable separate and apart from this Lease. 4.3 TENANT'S DEFAULT. Notwithstanding the foregoing, if a Default has occurred and is continuing at the time Tenant elects to extend the Lease Term, Tenant shall have no right to extend the Lease Term as herein provided, and Landlord shall be free to lease the Premises to any other party or parties. Furthermore, nothing in this Paragraph 4.3 shall increase or extend the Exercise Period. 5. RENT; SECURITY DEPOSIT. 5.1 MONTHLY RENT. 5.1.1 Tenant shall pay the Rent to Landlord during the Lease Term, commencing as of the Lease Commencement Date, without deduction, setoff, prior notice or demand. Tenant shall pay the Rent in advance on the first day of each calendar month during the Lease Term. Rent for any partial months will be prorated based upon the number of days in the month, and will be paid in advance on the first day of each month. 5.1.2 Upon the Lease Commencement Date, Tenant shall pay to Landlord the Rent due and payable for the first full calendar month of the Lease Term. If the Lease Commencement Date is not on the first day of a calendar month, Tenant shall pay to Landlord the prorated Rent for the first partial month of the Lease Term. 5.1.3 All Rent payable hereunder shall be paid to Landlord in lawful money of the United States of America which shall be legal tender at the time of payment at Landlord's office or to such other person or at such other place as Landlord from time to time may designate in writing. 5.1.4 The initial Monthly Rent shall be $121,462.62. Effective each year during the Lease Term (including any Extension Period) on the anniversary of the first day of the calendar month following the month in which the Lease Commencement Date occurs (the "ADJUSTMENT DATE"), Monthly Rent shall be increased by two percent (2%) of its then current amount. 5.2 ADDITIONAL RENT. Tenant shall pay to Landlord (unless otherwise expressly required hereunder to pay directly to a third party), as additional rent ("ADDITIONAL RENT"), all sums of money of any and every sort required to be paid by Tenant under this Lease, whether or not the same are designated as Additional Rent. If such amounts or charges are not paid at the time provided in this Lease, they shall nevertheless be collectible as Additional Rent with the next installment of Monthly Rent thereafter falling due, but nothing herein contained shall be deemed to suspend or delay the payment of any amount of money or charge at the time the same becomes due and payable hereunder, or limit any other remedy of Landlord. Tenant acknowledges that this is an absolute net lease to Landlord. As such, Tenant shall pay, as Additional Rent, all costs and expenses relating to the Premises, except as otherwise expressly provided under this Lease. 5.3 LATE PAYMENT. If Tenant shall fail to pay, when the same is due and payable (after giving effect to any applicable notice and cure period), any Rent, such unpaid amounts shall bear interest at the Default Rate from the date due to the date of payment. Tenant further acknowledges that late payment of Monthly Rent will cause Landlord to incur certain costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impractical to determine with certainty. For this reason, in addition to interest, if Tenant shall fail to pay (which for purposes of this paragraph, "pay" shall mean actual receipt of the payment by Landlord) any installment of Monthly Rent by the tenth day of the calendar month for which such installment is due, a late charge equal to six percent (6%) of the overdue installment of Monthly Rent automatically shall be due without further notice, and shall be in addition to all other sums due. The Parties agree that this additional late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. 5.4 NO RIGHT TO SETOFF. Tenant shall pay to Landlord, throughout the Lease Term, the Rent and other sums payable hereunder, free of any charges, assessments, deductions or reductions of any kind, and without abatement, deduction or setoff except as otherwise expressly provided for herein. 5.5 PAYMENT OF SECURITY DEPOSIT. Concurrently with the execution of this Lease, Tenant shall deliver to Landlord the Security Deposit. This amount shall be deposited by Landlord into a segregated, interest-bearing bank account (with interest accruing for the benefit of Tenant) in a federally insured bank or savings institution, and shall be held for the faithful performance of all of the provisions and conditions of this Lease to be kept and performed by Tenant hereunder. 5.6 USE OF SECURITY DEPOSIT. During the continuance of a Default hereunder, Landlord may use or retain all or any part of the Security Deposit for the payment of any Monthly Rent or any other sum in default, or for the payment of any amount which Landlord may spend or become obligated to spend by reason of Tenant's Default. Landlord also may apply the Security Deposit toward costs incurred to repair damages to the Premises or to clean the Premises upon termination of this Lease. If any portion of the Security Deposit is so applied or used prior to termination of this Lease, Tenant shall, within five (5) days after written notice thereof, deposit an additional amount with Landlord sufficient to restore the Security Deposit to the amount set forth above, and Tenant's failure to do so shall constitute a breach of this Lease. If Tenant shall fully and faithfully perform every provision of this Lease to be performed by Tenant, the Security Deposit (including interest thereon), or the balance thereof, shall be returned to Tenant (or, at Landlord's option to the last assignee of Tenant's interest hereunder) at the expiration of the Lease, subject to the provisions of Paragraph 27. 6. USE. 6.1 POSSESSION AND USE. Landlord shall deliver possession of the Premises to Tenant as of the Lease Commencement Date. During the Lease Term, the Premises and every part thereof shall be kept by the Tenant in a clean and wholesome condition, free of any noises or activities which constitute any nuisance. Tenant shall comply with all Applicable Law in all respects and at all times during the Lease Term. 6.2 PERMITTED USE. Tenant shall use the Premises for the purposes of biological, chemical and medical research and development use and related manufacturing, warehouse and distribution use and administrative office use (and only for such purposes) (the "PERMITTED USE"). Tenant shall keep the Premises in a neat, clean and orderly condition. 7. TAXES ON PREMISES. 7.1 PAYMENT OF REAL PROPERTY TAXES. Commencing with the Lease Commencement Date and continuing for each calendar year, or tax year at Landlord's option (such "tax year" being a period of twelve (12) consecutive calendar months for which the applicable taxing authority levies or assesses Taxes), for the balance of the Lease Term, Tenant shall pay to Landlord the amount of all Taxes levied and assessed for any such year upon the Premises. Such sum for any partial year of the Lease Term shall be prorated on the basis of the number of days of such partial year. Payment shall be made in the following manner: Tenant shall pay to Landlord the amount of all Taxes levied and assessed upon the Premises including improvements and the underlying realty for any calendar year, or at Landlord's option any tax year, within thirty (30) days after Landlord gives notice to Tenant of the amount of such Taxes payable by Tenant (or not less than 20 days prior to delinquency, whichever is later). Landlord also shall provide Tenant with a copy of the applicable Tax bill or Tax statement from the taxing authority. Notwithstanding the foregoing, if applicable law allows such Taxes to be paid in installments, then Tenant may make such payments to Landlord in installments, provided that each such installment shall be payable to Landlord not less than fifteen (15) days prior to the date upon which payment of the applicable installment to the taxing authority becomes delinquent. In addition to any other amounts due from Tenant to Landlord, if Tenant fails to pay the Taxes to Landlord as herein required, Tenant shall pay to Landlord the amount of any interest, penalties or late charges imposed for late payment. Notwithstanding anything to the contrary herein except Paragraph 7.4, so long as Tenant is not in Default hereunder, Tenant shall pay all Taxes directly to the appropriate taxing authority under the same manner and subject to the provisions set forth in this Paragraph 7.1 (as if the governmental authority were "Landlord"). Tenant shall provide to Landlord verification (reasonably acceptable to Landlord) of said payment within five (5) days of payment. 7.1.1 If the Premises are separately assessed, Tenant shall have the right, by appropriate proceedings, to protest or contest in good faith any assessment or reassessment of Taxes, any special assessment, or the validity of any Taxes or of any change in assessment or tax rate; provided, however, that prior to any such challenge Tenant must either (a) pay the taxes alleged to be due in their entirety and seek a refund from the appropriate authority, or (b) post bond in an amount sufficient to insure full payment of the Taxes. In any event, upon a final determination with respect to such contest or protest, Tenant shall promptly pay all sums found to be due with respect thereto. In any such protest or contest, Tenant may act in its own name, and at the request of Tenant, Landlord shall cooperate with Tenant in any way Tenant may reasonably require in connection with such contest or protest, including signing such documents as Tenant reasonably shall request, provided that such cooperation shall be at no expense to Landlord and shall not require Landlord to attend any appeal or other hearing. Any such contest or protest shall be at Tenant's sole expense, and if any penalties, interest or late charges become payable with respect to the Taxes as a result of such contest or protest, Tenant shall pay the same. 7.1.2 If Tenant obtains a refund as the result of Tenant's protest or contest and subject to Tenant's obligation to pay Landlord's costs (if any) associated therewith, Tenant shall be entitled to such refund to the extent it relates to the Premises during the Lease Term. 7.2 PERSONAL PROPERTY TAXES. Tenant shall be solely responsible for the payment of any and all taxes levied upon personal property and trade fixtures located upon the Premises and shall pay the same at least ten (10) days prior to delinquency. 7.3 OTHER TAXES. If at any time during the Lease Term under the laws of the United States Government, state, county or city, or any political subdivision thereof in which the Premises are situated, a tax or excise on rent or any other tax however described is levied or assessed by any such political body against Landlord on account of rentals payable to Landlord hereunder, such tax or excise shall be considered "Taxes" for the purposes of this Paragraph 7, excluding, however, from such tax or excise any amount assessed against Landlord as state or federal income tax. 7.4 TAX AND INSURANCE ESCROWS. To the extent Landlord is required by Lender, Tenant shall timely pay all tax and insurance impound payments due on the Premises. 8. CONDITION OF PREMISES. 8.1 CONDITION OF PREMISES. Tenant has determined to lease the Premises after a full and complete investigation and examination thereof. Tenant accepts the Premises and all other rights under this Lease "as is." Landlord shall not be required to furnish any services or facilities or to make any repairs or alterations in or to the Premises throughout the Lease Term. Tenant acknowledges that Tenant is the prior owner and occupant of the Premises and as such is fully aware of the current condition of the Premises. 8.2 NO WARRANTIES. Landlord has not made and makes no representations or warranties to Tenant of any kind regarding the Premises, including, without limitation, any representation or warranty regarding the physical condition of the Premises, its suitability for Tenant's intended use, or the availability of utilities or sewer to the Premises. 9. ALTERATIONS AND IMPROVEMENTS. 9.1 CONSTRUCTION REQUIREMENTS. Any alterations or improvements to the Premises of any kind by Tenant, the cost of which exceeds $150,000 or which materially alters, affects, or modifies Building systems (including, without limitation, mechanical, electrical, plumbing, or HVAC systems), structural components, or the exterior of the Building shall be subject to satisfaction of each of the following conditions: 9.1.1 ARCHITECTURAL REVIEW. Prior to commencement of any work, Tenant shall submit its proposed final plans and specifications to Landlord for Landlord's consent, which consent shall not be unreasonably withheld, delayed or conditioned. Landlord agrees to respond to Tenant's proposed final plans and specifications within fifteen (15) days after its receipt of such final plans and specifications. Landlord's failure to approve or disapprove within said 15 days shall be deemed approval. 9.1.2 CODE COMPLIANCE. Tenant shall comply with all Applicable Law and Tenant shall obtain all required permits and approvals, including, but not limited to, any necessary grading permits, building permits, zoning and planning requirements and approvals from any and all necessary governmental agencies and bodies. 9.1.3 INSURANCE. Tenant shall deliver to Landlord certificates of insurance evidencing that Tenant or the general contractor has obtained builder's all-risk risk insurance in an amount not less than $3,000,000. Tenant also shall deliver to Landlord evidence of worker's compensation insurance coverage for all persons employed in connection with the construction and with respect to whom death or personal injury claims could be asserted against Landlord or the Premises. Tenant also shall deliver to Landlord evidence that Tenant has paid or caused to be paid all premiums for the insurance described in this paragraph. Tenant shall maintain or cause to be paid all premiums required to maintain and keep in force all insurance described in this paragraph at all times during which the construction is in progress. 9.1.4 CONSTRUCTION REQUIREMENTS. Once any work of construction has begun, Tenant shall prosecute with reasonable diligence the same to conclusion. All construction shall be performed in a good and workmanlike manner, shall comply with all Applicable Law and shall be completed in conformance with the plans and specifications approved by Landlord. 9.1.5 NOTICE OF CONSTRUCTION; MECHANICS' LIENS. Landlord and its representatives shall have the right to go upon and inspect the Premises at all reasonable times upon reasonable prior notice and shall have the right to post and keep posted thereon notices of nonresponsibility, or such other notices which Landlord may deem to be proper for the protection of Landlord's interest in the Premises; provided, however, that such rights shall not unreasonably interfere with Tenant's use or possession of the Premises. Before the commencement of any work which might result in any lien, Tenant shall give to Landlord written notice of its intention to do so in sufficient time to enable the posting of such notices. Subject to Tenant's right to contest any Claim or lien, Tenant shall keep the Premises and the Building free and clear of any and all liens and encumbrances which may arise at any time in connection with the improvement of the Premises by Tenant or its agents and contractors. Subject to Tenant's right to contest any Claim or lien, Tenant shall pay and discharge all expenses incurred by Tenant for the services of mechanics and for the cost of goods and materials supplied by materialmen, and Tenant shall indemnify and hold harmless Landlord and the Premises from and against any Claims by such mechanics or materialmen for labor or services performed or goods supplied at the request of Tenant. Furthermore, subject to Tenant's right to contest any Claim or lien, Tenant shall, at its cost and expense, remove all such mechanics liens by bond or otherwise within twenty (20) working days after the filing thereof. If Tenant desires to contest any Claim or lien, it shall be entitled to do so on the condition that Tenant first shall either (1) furnish Landlord a bond of a responsible corporate surety approved by Landlord in such amount as is sufficient to cause discharge of the lien of record, and conditioned on the discharge of the lien, or (2) furnish Landlord with other assurances satisfactory to Landlord that Landlord will be protected from the effect of such Claim or lien. If a final judgment establishing the validity or existence of a lien for any amount is entered, Tenant shall pay and satisfy the same at once. If Tenant shall not have paid, as and when required by this Paragraph 9.1.5, any charge for which a mechanic's lien claim and suit to foreclose the lien have been filed, or if Tenant shall not have given Landlord security to protect the Premises and Landlord against such Claim or lien as required by this Paragraph 9.1.5, Landlord, upon five (5) days' notice to Tenant, may (but shall not be required to) pay said lien or Claim including any costs, in which event the amount so paid, together with reasonable attorneys' fees incurred in connection therewith, shall be immediately due and owing from Tenant to Landlord. Tenant shall pay the same to Landlord together with interest on the full amount thereof at the Default Rate from the date of Landlord's payment until paid. If any Claims or liens are filed against the Premises or, if any action affecting title to the Premises is commenced, the party receiving notice of such lien or action shall forthwith give the other party written notice thereof. 9.1.6 NOTICE OF COMPLETION. Upon completion of any construction, Tenant shall file or cause to be filed a notice of completion. Tenant hereby appoints Landlord as Tenant's attorney-in-fact solely for the purpose of filing the notice of completion if Tenant fails to do so after the construction has been substantially completed. 9.1.7 AS-BUILT PLANS. On completion of any construction, Tenant shall give Landlord notice of all changes in plans or specifications made during the course of the work and, at the same time and in the same manner, shall supply Landlord with "as built" drawings accurately reflecting all such changes. 9.1.8 OWNERSHIP OF IMPROVEMENTS. All improvements and fixtures (excluding Tenant's trade fixtures and the items listed on EXHIBIT "D" attached hereto) existing on the Premises as of the Effective Date, including (without limiting the generality of the foregoing) all wallcover, carpeting, flooring, built-in cabinet work, paneling and the like, all electrical, mechanical, and plumbing equipment and related ducts, shafts, and conduits, all exterior venting fume hoods, walk-in freezers and refrigerators, clean-rooms, climatized rooms, and electrical panels shall be the property of Landlord and shall remain upon, and be surrendered with the Premises, as a part thereof, at the end of the Lease Term. In the event that Tenant desires to make any alterations, additions or improvements upon the Premises during the Lease Term, Tenant shall submit to Landlord proposed final plans therefor, together with a request (the "Identification Notice") that Landlord identify to Tenant in writing which of the proposed alterations, additions or improvements Landlord elects to remain property of Tenant to be removed by Tenant at the end of the Lease Term (each a "Tenant-Owned Alteration"). If Landlord fails to respond in writing to the Identification Notice (or fails to designate in writing a proposed alteration, addition or improvement as a Tenant-Owned Alteration) within fifteen (15) days after Landlord's receipt of the Identification Notice, then Landlord shall be deemed to have elected to have any proposed alteration, addition or improvement not expressly designated as a Tenant-Owned Alteration within such fifteen (15) day period become property of Landlord (each a "Landlord-Owned Alteration"). If Tenant thereafter elects to make such proposed alterations, additions or improvements, then (a) all Landlord-Owned Alterations shall become property of Landlord and shall remain upon, and be surrendered with, the Premises, as a part thereof, at the end of the Lease Term, and (b) all Tenant-Owned Alterations shall remain the property of Tenant and shall be removed by Tenant at or prior to the end of the Lease Term. Tenant shall repair all damage resulting from its removal of Tenant-Owned Alterations, and restore the affected area to the condition existing prior to installation of Tenant-Owned Alterations. Nothing in the foregoing shall be construed to imply that Tenant's Equipment or other property of Tenant may become the property of Landlord. All articles of personal property, business and trade fixtures, machinery and equipment, furniture and movable partitions owned by Tenant or installed by Tenant at its expense in the Premises shall be and remain the property of Tenant and may be removed by Tenant at any time during the term of this Lease, provided that removal of the same shall not materially affect or damage the Building's electrical, mechanical, or plumbing systems. Any items of Tenant's improvements which are paid for by Landlord shall belong to Landlord and shall not be regarded as paid for by Tenant. If Tenant shall fail to remove all of its effects from the Premises upon termination of this Lease for any cause whatsoever, Landlord, at its option, upon written notification to Tenant, may remove the same in any manner that Landlord shall choose and store said effects without liability to Tenant for loss thereof. In such event, Tenant agrees to pay Landlord upon demand any and all expenses reasonably incurred in such removal, including court costs and reasonable attorneys' fees and storage charges on such effects, for any length of time that the same shall be in Landlord's possession. If Tenant shall fail to remove all of its effects from the Premises upon termination of this Lease, Landlord, at its option, without notice, may sell said effects, or any of the same, at private sale and without legal process, for such price as Landlord may obtain and apply the proceeds of such sale upon the amounts due under this Lease from Tenant to Landlord and upon the expense incident to the removal and sale of said effects. 9.2 LANDLORD NOT RESPONSIBLE. Landlord's approvals as required by this Lease shall not make Landlord responsible for the improvement with respect to which an approval is given or the construction thereof, and Tenant shall indemnify, defend (by counsel reasonably acceptable to Landlord), and hold Landlord and the Premises harmless from and against any Claims arising out of or in connection with any construction in, on or about the Premises or any labor dispute arising in connection therewith. 10. UTILITIES AND SERVICES. 10.1. TENANT'S RESPONSIBILITY. Tenant shall be responsible for bringing all utility and other services to the Premises, at Tenant's sole cost and expense. All such utility services shall be separately metered, and Tenant shall pay all costs therefor, including, without limitation, connection charges and billing deposits. Tenant shall pay (directly to the provider and prior to delinquency) for all water, gas, electricity, sewer, telephone, cable television and other utilities which may be furnished to the Premises during the term of this Lease. 10.2 LANDLORD NOT RESPONSIBLE. Landlord shall not be liable in damages or otherwise for any failure or interruption of any utility service or other services being furnished the Premises, and no such failure or interruption shall entitle Tenant to terminate this Lease, abate Rent, or be relieved from any obligation or the operation of any covenant or agreement under this Lease. 11. MAINTENANCE AND REPAIRS. 11.1 MAINTENANCE AND REPAIR OF THE PREMISES. 11.1.1 Tenant, at its sole cost and expense, shall maintain and keep the Premises, all improvements thereon, and all appurtenances thereto, including but not limited to sidewalks, parking areas, curbs, roads, driveways, lighting standards, landscaping, sewers, water, gas and electrical distribution systems and facilities, drainage facilities, and all signs, both illuminated and non-illuminated that are now or hereafter on the Premises, in good condition and in a manner consistent with the Permitted Use. Tenant shall make all repairs, replacements and improvements including, without limitation, all structural, roof, HVAC, plumbing, and electrical repairs, replacements and improvements required and shall keep the same free and clear from all rubbish and debris. All repairs made by Tenant shall be at least equal in quality to the original work, shall be made only by a licensed, bonded contractor approved in advance by Landlord; provided, however, that such contractor need not be bonded or approved by Landlord if the non-structural alterations, repairs, additions or improvements to be performed do not exceed Twenty-Five thousand Dollars ($25,000) in value. Landlord may impose reasonable restrictions and requirements with respect to such repairs. Tenant shall not take or omit to take any action, the taking or omission of which shall cause waste, damage or injury to the Premises. Tenant shall indemnify, defend (by legal counsel acceptable to Landlord) and hold harmless Landlord from and against any and all Claims arising out of the failure of Tenant or Tenant's Agents to perform the covenants contained in this paragraph. "Tenant's Agents" shall be defined to include Tenant's officers, employees, agents, contractors, invitees, customers and subcontractors. 11.1.2 Tenant shall maintain the lines designating the parking spaces in good condition and paint the same as often as may be necessary, so that they are easily discernable at all times; resurface the parking areas as necessary to maintain it in good condition; paint any exterior portions of the Building as necessary to maintain them in good condition; maintain the roof in good condition; and to take all reasonable precautions to insure that the drainage facilities of the roof are not clogged and are in good operable condition at all times. 11.1.3 Tenant shall at all times during the term of this Lease, and at Tenant's expense, maintain the exterior of the Building, the parking areas, landscaping and all other portions of the Premises visible from the surrounding streets in a commercially reasonable condition, and shall maintain sightly screens, barricades or enclosures around any waste or storage areas. 11.1.4 Tenant hereby waives any applicable law, statute, or ordinance relating to a landlord's duty to maintain the Premises in a tenantable condition, and all other rights of Tenant under any law, statute or ordinance now or hereafter in effect authorizing Tenant to make repairs at Landlord's expense. 11.1.5 There shall be no abatement of Rent and no liability of Landlord by reason of any injury to or interference with Tenant's business arising from the making of any repairs, alterations or improvements in or to any portion of the Premises, or in or to improvements, fixtures, equipment and personal property therein. 11.2 LANDLORD'S RIGHT TO MAINTAIN. During the Lease Term, Landlord shall not be required to maintain or make any repairs or replacements of any nature or description whatsoever to the Premises. Tenant hereby expressly waives the right to make repairs at the expense of Landlord as provided for in any statute or law in effect at the time of execution of this Lease, or in any other statute or law which hereafter may be enacted. Notwithstanding the foregoing, if Tenant shall fail, after reasonable notice, to maintain or to commence and thereafter to proceed with diligence to make any repair required of it pursuant to the terms of this Lease, Landlord, without being under any obligation to do so and without thereby waiving such Default, may so maintain or make such repair and may charge Tenant for the cost thereof. Any expense reasonably incurred by Landlord in connection with the making of such repairs may be billed by Landlord to Tenant monthly, or immediately, at Landlord's option, and shall be due and payable within ten (10) days after such billing, or at Landlord's option, may be deducted from the security deposit. 11.3 LANDLORD'S RIGHT OF ENTRY FOR REPAIRS. Landlord and Landlord's agents shall have the right to enter upon the Premises, or any part thereof, for the purpose of performing any repairs or maintenance Landlord is permitted to make pursuant to this Lease, and of ascertaining the condition of the Premises or whether Tenant is observing and performing Tenant's obligations hereunder, all without unreasonable interference from Tenant or Tenant's Agents. Except for emergency maintenance or repairs, the right of entry contained in this paragraph shall be exercisable at reasonable times, at reasonable hours and on reasonable notice. 11.4 RESERVE ACCOUNT. Tenant shall comply with all requirements of Lender regarding maintenance of a reserve account, to provide for future replacements to improvements and fixtures within the Premises (the "RESERVE ACCOUNT"). The Reserve Account shall remain the property of Tenant, but disbursements from the Reserve Account shall be made only by joint check executed by Landlord and Tenant upon the mutual consent of Landlord and Tenant, which consent shall not be unreasonably withheld. Landlord shall, within ten (10) days after receipt of a written request, either sign any such check or convey in writing to Tenant any objections to signing the check, and shall thereafter diligently work with Tenant to resolve any differences with regard to the disbursement. Notwithstanding the foregoing, if Tenant, pursuant to the Lease, is required to make certain repairs, improvements, or replacements to the Premises but fails to do so within the time allowed hereunder (subject to any applicable cure period), then Landlord, as provided under the Lease, may make such repairs, improvements, or replacements, and may disburse funds from the Reserve Account, without Tenant's consent or signature on the disbursement check(s), to pay for the cost of the repairs, improvements, or replacements. Any amount in the Reserve Account remaining at the expiration of the Lease shall remain the property of Tenant. 12. ADVERTISING SIGNS. Tenant may construct and maintain reasonable signage on the Premises. Such construction and maintenance shall comply with all Applicable Law. Notwithstanding anything to the contrary herein, signage on the Premises as of the Effective Date shall be deemed approved by Landlord. 13. FIXTURES AND PERSONAL PROPERTY. 13.1 REMOVAL OF FIXTURES. Except as provided in Paragraphs 9.1.8 or 13.2 herein, Tenant shall not remove any fixtures belonging to Landlord from the Premises without Landlord's prior written consent (not to be unreasonably withheld, conditioned or delayed); provided, however, Tenant shall have the right to sell or dispose of any existing building machinery, equipment or fixtures subject to this Lease which may have become obsolete or unfit for use or which are no longer useful, necessary or profitable in the conduct of Tenant's business, so long as (i) the Premises retain its primary use consistent with the Permitted Use, and (ii) Tenant shall have substituted or promptly shall substitute for the property so removed from the Premises other building machinery, equipment or fixtures not necessarily of the same character but at least of equal quality in the performance of the particular function in question as that of the property so removed unless, in Tenant's reasonable opinion, the property so removed was performing an obsolete function and replacement thereof is not necessary or appropriate to maintain the operation or character of the Premises or its overall value without impairment. Tenant shall give Landlord written notice of each material fixture removed by Tenant. All built-ins and fixtures installed in or attached to the Premises by Tenant must be new or like new when so installed or attached. 13.2 TRADE FIXTURES AND PERSONAL PROPERTY. Any trade fixtures, equipment, stock, inventory, machines (other than HVAC or other built-in machines or machinery, as provided in Paragraph 9.1.8), signs and other personal property of Tenant not permanently affixed to the Premises ("Tenant's Equipment") shall remain the property of Tenant. Landlord agrees that Tenant shall have the right, at any time, and from time to time, to remove any and all of Tenant's Equipment which it may have stored or installed in the Premises. Tenant, at its sole cost and expense, immediately shall repair any damage occasioned to the Premises by reason of the removal of Tenant's Equipment and, upon the last day of the Lease Term or upon earlier termination of this Lease, shall leave the Premises in a neat and clean condition, free of debris, and in as good a condition as that existing on Lease Commencement Date, reasonable wear and tear excepted, with all HVAC and other Building systems in good and operable condition. 13.3 TAXES ON TRADE FIXTURES AND PERSONAL PROPERTY. Tenant shall pay before delinquency all taxes, assessments, license fees and public charges levied, assessed or imposed upon its business operation, as well as upon its trade fixtures, leasehold improvements (including, but not limited to, those Tenant is allowed or required to make in accordance with the provisions of this Lease), merchandise and other personal property in, on or upon the Premises. If any such items of property are assessed together with property owned by Landlord, then, and in such event, such assessment shall be equitably divided between Landlord and Tenant. 13.4 OWNERSHIP OF TENANT'S EQUIPMENT. All Tenant's Equipment shall be and remain the property of Tenant during the Lease Term. Tenant shall bear all costs and expenses incurred in installing, removing, storing or disposing of Tenant's Equipment pursuant to this paragraph and Paragraph 27 and shall repair at its expense all damage to the Premises caused by the installation and removal thereof, whether effectuated by Tenant or Landlord (as provided in Paragraph 27). 14. TENANT'S COVENANT. Tenant covenants and agrees that as to its leasehold estate and use and occupancy of the Premises, Tenant and all persons in possession or holding under Tenant shall conform to and shall not violate any Applicable Law. 15. INDEMNITY - WAIVER OF SUBROGATION. 15.1 INDEMNIFICATION. Tenant shall indemnify, defend, and hold Landlord and its agents, employees, directors, officers, managers, members, partners, affiliates, independent contractors, and property managers (collectively, "LANDLORD'S AGENTS" or "AGENTS") harmless from and against any and all claims, demands, liability, loss or damage, whether for injury to or death of persons or damage to real or personal property, arising out of or in connection with the Premises, Tenant's use of the Premises, any activity, work, or other thing done, permitted, or suffered by Tenant in or about the Building, or arising from any reason or cause whatsoever in connection with the use or occupancy of the Premises by any party during the term of this Lease. This indemnification by Tenant shall include indemnity for the acts or omissions of Landlord and Landlord's Agents to the fullest extent allowed by law. Tenant shall further indemnify, defend, and hold Landlord and Landlord's Agents harmless against and from any and all claims arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the terms of this Lease or arising from any act or negligence of Tenant or any officer, agent, employee, guest, or invitee of Tenant, and from and against all costs, attorney's fees, expenses, and liabilities incurred as a result of any such claim or any action or proceeding brought thereon. In any case, action, or proceeding brought against Landlord or Landlord's Agents by reason of any such claim, Tenant, upon notice from Landlord, shall defend the same at Tenant's expense by counsel reasonably satisfactory to Landlord. Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property or injury to persons in, upon, or about the Premises from any cause arising prior to the later of the termination of this Lease or the date Tenant is no longer in possession of the Premises (except for such damage or injury caused by Landlord's or its Agents' willful misconduct or gross negligence), and Tenant hereby waives all claims in respect thereof against Landlord and Landlord's Agents. Tenant's obligation to indemnify under this paragraph shall include attorney's fees, investigation costs, and other reasonable costs, expenses, and liabilities incurred by Landlord and Landlord's Agents. If the ability of Tenant to use the Premises or the Building is interrupted for any reason, Landlord and Landlord's Agents shall not be liable to Tenant for any loss or damages occasioned by such loss of use, except to the extent such loss or damages is caused by Landlord's or its Agents' willful misconduct or gross negligence. 15.2 LIMITATION ON LANDLORD LIABILITY. Neither Landlord nor Landlord's Agents shall be liable for loss or damage to any property by theft or otherwise, or for any injury to or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, or rain which may leak from any part of the Building or from the pipes, appliances, or plumbing works therein or from the roof, street, or subsurface or from any other place resulting from dampness or any other cause whatsoever, unless caused by or due to the gross negligence or intentional acts of Landlord or Landlord's Agents. Except as otherwise provided herein, neither Landlord nor Landlord's Agents, shall be liable for interference with the light or other rights or loss of business by Tenant, nor shall Landlord or Landlord's Agents be liable for any latent defect in the Premises or in the Building. Tenant shall give prompt notice to Landlord in case of fire or accidents in the Premises or in the Building or of material defects therein or in the fixtures or equipment belonging to Landlord. 15.3 WAIVER OF SUBROGATION. Landlord and Tenant hereby waive any rights each may have against the other on account of any loss or damage occasioned to Landlord or Tenant, as the case may be, their respective property or the Premises, caused by or resulting from risks insured against under any policies carried by the parties; provided, however, that this paragraph shall be inapplicable if it would have the effect, but only to the extent that it would have the effect, of invalidating any insurance coverage of Landlord or Tenant. To the extent available, the parties shall cause each insurance policy obtained by it hereunder to provide a waiver of subrogation. Tenant's insurer shall either waive subrogation rights against Landlord or, if Tenant's insurance company does not waive the right of subrogation against Landlord and its insurance company, Tenant shall (a) maintain during the Lease Term fire and commercial liability coverage with respect to the Premises, and (b) pay to Landlord upon demand Landlord's cost incurred in securing fire and commercial liability insurance protecting Landlord upon the destruction of Tenant's property. 16. INSURANCE. 16.1 PROPERTY INSURANCE. During the Lease Term, Tenant shall keep and maintain, or cause to be kept and maintained, at Tenant's sole cost and expense, a policy or policies of insurance on the Premises insuring the same against loss or damage by the following risks: fire and extended coverage, vandalism, malicious mischief, plate glass and sprinkler leakage (if sprinklers are required in the Building under applicable building code provisions, or are installed by Tenant in the absence of such requirement) in amounts at all times sufficient to prevent Landlord or Tenant from becoming a co-insurer under the terms of the applicable policies, but in any event in an amount payable there-under not less than Full Replacement Value of the Premises. The term "Full Replacement Value" shall mean actual replacement cost, including changes required by new building codes or ordinances (exclusive of the cost of excavation, foundations and footings). Such insurance shall show, as a loss payee in respect of the Premises, Landlord, Tenant and any mortgagee of Landlord required to be named pursuant to its mortgage documents, as their interests may appear. 16.2 COMPREHENSIVE LIABILITY INSURANCE. During the Lease Term, Tenant shall keep and maintain, or cause to be kept and maintained, at Tenant's sole cost and expense, a policy or policies of comprehensive general public liability insurance, showing, as an additional insured in respect of the Premises, Landlord, Tenant, any management company retained by Landlord to manage the Premises, and any mortgagee of Landlord required to be named pursuant to its mortgage documents. Such policy shall insure against any and all Claims for injuries to persons, loss of life and damage to property occurring upon, in or about the Premises (including coverage for liability caused by independent contractors of Tenant or Subtenant working in or about the Premises), with minimum coverage in an amount not less than a Five Million Dollars ($5,000,000) combined single limit with respect to all bodily injury, death or property damage in any one accident or occurrence. In the event of a Claim relating to the Premises, the amount of any deductible or self-insured retention and/or any award in excess of the policy limits shall be the sole responsibility of Tenant. The insurance shall include (i) personal injury insurance with endorsement deleting the employee liability exclusions, and employee liability insurance, (ii) a broad form contractual liability endorsement insuring Tenant's indemnity obligation under Paragraph 15.1, (iii) a products liability coverage endorsement, (iv) a boiler and machinery liability endorsement, and (v) a products completed operations coverage endorsement. 16.3 OTHER INSURANCE. 16.3.1 In addition to all other insurance required to be carried by Tenant, Tenant, throughout the Lease Term, shall provide and keep in force at Tenant's sole cost and expense: (a) Such further insurance against such other hazards and risks and in such amounts as the holder of any first mortgage or first deed of trust lien may require under to the terms of such superior liens, to the extent such insurance is commercially attainable; (b) Rental value insurance with respect to the Premises, covering risk of loss of rental due to the occurrence of any of the hazards described above in Paragraph 16.1, in an amount not less than the aggregate requirements for the period of eighteen (18) months following the occurrence of the casualty for Rent and premiums on the insurance required to be carried pursuant to this Paragraph 16; (c) Workman's Compensation insurance to the full extent required under the law of the State of California; (d) Insurance on Tenant's equipment, personal property and other contents in, on or about the Premises insuring against loss or damage by all risks referred to in Paragraph 16.1 in amounts equal to ninety percent (90%) of their full replacement value; (e) During the period of construction of the Building and any other construction, Builder's All Risk Insurance with Completed Operations Coverage; and (f) Other insurance required by Landlord, including, without limitation, earthquake and environmental remediation, in types and amounts consistent with commercially reasonable practice. 16.4 INSURERS; PRIMARY INSURANCE. All policies of insurance provided for herein shall be on an occurrence and claims made basis and shall be issued by insurance companies with a general policy holder's rating of not less than A- and a financial rating of not less than Class V as rated in the most current available "Best's" Insurance Reports. Such insurance companies shall be qualified to do business in the State of California. All such policies shall be issued in the names of Landlord, Tenant, and Lender (or its successors and assigns), and shall be for the mutual and joint benefit and protection of Landlord, Tenant and Landlord's first mortgagee or beneficiary. All public liability and property damage policies shall contain a provision that Landlord, although named as an insured, nevertheless shall be entitled to recovery under said policies for any loss occasioned to it, its servants, agents and employees by reason of the negligence of Tenant. As often as any such policy shall expire or terminate, renewal or additional policies shall be procured and maintained by Tenant in like manner and to like extent. All policies of insurance must contain a provision that the company writing said policy will give to Landlord thirty (30) days notice in writing in advance of any cancellation or lapse or the effective date of any reduction in the amounts of insurance. All public liability, property damage and other casualty policies shall be written as primary policies, not contributing with and not in excess of coverage which Landlord may carry. Tenant shall, upon request from Landlord from time to time, immediately deliver to Landlord copies of all insurance policies (including the declarations pages) in effect with respect to Tenant's business and the Premises. 16.5 BLANKET POLICY. Notwithstanding anything to the contrary contained within this Paragraph 16, Tenant's obligations to carry the insurance provided for herein may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Tenant; provided, however, that Landlord and Lender shall be named as an additional insured thereunder as their interests appear, the coverage afforded Landlord will not be reduced or diminished by reason of the use of such blanket policy of insurance, and the requirements set forth herein are otherwise satisfied. 16.6 DEDUCTIBLES. The deductible amounts, if any, with respect to all insurance which Tenant is required to maintain hereunder shall not exceed $25,000 per claim or occurrence. The amount of the deductibles, if any, within this limitation shall be a business decision by Tenant; under no circumstances shall Landlord be required to reimburse Tenant for the amount of any deductible incurred by Tenant in connection with any insured event, except to the extent the event resulting in the claim was caused or contributed to by Landlord's or Landlord's Agents' gross negligence or willful misconduct. 16.7 CERTIFICATES. Upon the execution and delivery of this Lease and thereafter not less than thirty (30) days prior to the expiration dates of the expiring policies theretofor maintained, Tenant shall deliver to Landlord certificates of insurance with respect to the policies of insurance required by this Lease or duplicate originals of all such policies. Landlord, upon reason-able notice, may inspect and copy any policies of insurance, and any records relating thereto kept and maintained by Tenant. 16.8 NO SEPARATE INSURANCE. Tenant shall not take out separate insurance with respect to the Premises, concurrent in form or contributing in the event of loss with that required to be furnished by Tenant under this Lease, unless Landlord, and such other persons required to be named as insureds as provided in this Lease, are also included therein as named insureds, respectively, with loss payable as provided in this Lease. Tenant immediately shall notify Landlord of the taking out of any such separate insurance and shall deliver a certificate or certificates therefor to Landlord. 16.9 ADJUSTMENT IN THE EVENT OF LOSS. Except as otherwise provided herein, all insurance proceeds payable with respect to any damage or destruction to the Premises (but not with respect to Tenant's personal property, it being understood that insurance proceeds allocable to Tenant's personal property shall be payable directly to Tenant) shall be payable to Landlord and Tenant, jointly, to be held in an interest bearing account. If Tenant undertakes to repair said damage in accordance with Paragraph 17 below, the proceeds shall be made available to Tenant and used to fund the reconstruction. In all other events, the proceeds shall be the sole property of Landlord except otherwise expressly provided herein. Tenant shall be entitled to compromise, adjust or settle, with Landlord's approval, any and all claims with respect to the Premises. Each party agrees to execute and deliver to the other party such releases, endorsements and other instruments as the other party reasonably may require in order to compromise, adjust or settle any insurance claim which such other party shall be entitled to compromise, adjust or settle pursuant to this paragraph and to enable the other party or its designee to collect such insurance proceeds as are payable in respect of such claim. 16.10 PRORATION UPON TERMINATION. If any of the insurance required to be carried by Tenant hereunder is still in effect at the termination of this Lease, Landlord may elect to terminate such insurance, or Landlord shall reimburse Tenant for the pro rata portion of the premium paid by Tenant for such insurance based upon the number of days remaining unexpired in such insurance. 17. DAMAGE OR DESTRUCTION. 17.1 TENANT'S DUTY TO REBUILD. 17.1.1 If the Premises are damaged or destroyed during the Lease Term, within a period of ninety (90) days thereafter, Tenant shall commence repair, reconstruction and restoration of the Premises and prosecute the same diligently to completion at Tenant's sole cost and expense whether or not the insurance proceeds shall be sufficient for the purpose, but subject to Landlord making available to Tenant any insurance proceeds for such repair, reconstruction or restoration paid out to Landlord by the insurer. This Lease shall continue in full force and effect, and Tenant's duty to rebuild shall exist without regard to whether the damage or destruction is covered by insurance. 17.1.2 Notwithstanding Paragraph 17.1.1 hereof, in the event of a total destruction of the Premises during the last two (2) years of the Lease Term, or the last year with respect to any Extension Period, as the case may be, Landlord and Tenant each shall have the option to terminate this Lease upon giving written notice to the other of exercise thereof within thirty (30) days after such destruction, in which case this Lease shall cease and terminate as of the date of destruction, and provided that, in the event of such termination by either Landlord or Tenant, Tenant shall pay to Landlord the fair market value of the Premises less the fair market value of the Land (to the extent such amount exceeds Landlord's insurance proceeds received from the destruction). For purposes of this Paragraph 17.1.2, "total destruction" shall be deemed a damage or destruction to an extent that the cost of repair is at least fifty percent (50%) of the then full replacement cost of the Premises as of the date of destruction. 17.2 RECONSTRUCTION. In the event of any reconstruction of the Premises pursuant to this Paragraph 17, the construction by Tenant shall be subject to, and conducted in accordance with, the provisions of Paragraph 9 above. 17.3 TERMINATION. In the event of termination pursuant to this Paragraph 17, all right to compromise, adjust or settle any insurance claim shall be in Landlord, and all proceeds from Tenant's insurance shall be disbursed and paid to, and be the property of, Landlord, except to the extent such proceeds are allocable to the equipment, fixtures or other personal property of Tenant. 17.4 NO ABATEMENT. In the event of repair, reconstruction or restoration as herein provided, the Monthly Rent which Tenant is required to pay to Landlord under this Lease shall not be abated. Tenant shall continue the operation of its business on the Premises during any such period to the extent reasonably practicable from the stand-point of prudent business management, and obligation hereunder to pay Additional Rent shall remain in full force and effect. Except as otherwise provided herein, Tenant shall not be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises, Tenant's personal property or any inconvenience or annoyance occasioned by such damage, repair, reconstruction or restoration. Tenant hereby waives any statutory or common law rights of termination or abatement of rent which may arise by reason of any partial or total destruction of the Premises. 18. ASSIGNMENT AND SUBLETTING. 18.1 NO ASSIGNMENT. Tenant shall neither voluntarily nor by operation of law assign, sell, encumber, pledge or otherwise transfer all or any part of Tenant's leasehold estate hereunder, or permit any other person (excepting Tenant's agents and employees) to occupy the Premises or any portion thereof, without Landlord's prior written consent, which consent shall be solely within Landlord's absolute discretion. Consent by Landlord to one or more assignments of this Lease or to one or more sublettings of the Premises shall not constitute a waiver of Landlord's right to require consent to any subsequent assignment, subletting or other transfer. If Tenant is a corporation, unincorporated association or partnership, the transfer, assignment or hypothecation of any stock or interest in such corporation, association or partnership in the aggregate in excess of twenty-five percent (25%) of all outstanding stock or interests, or liquidation thereof, shall be deemed an assignment within the meaning and provisions of this paragraph. The foregoing sentence shall not apply to any corporation or partnership which is a reporting company under the Securities Exchange Act of 1934 (the "1934 Act"). The sale of all or substantially all of the assets of Tenant shall be deemed an assignment within the meanings and provisions of this paragraph. The foregoing sentence shall not apply to a sale to an entity with a net worth, as designated in its most recent financial statement (no older than 3 months), equal to or greater than Tenant's net worth on the Effective Date. Tenant shall reimburse Landlord for all of Landlord's reasonable costs and attorneys' fees incurred in conjunction with the processing and documentation of any required consent to assignment, subletting, transfer, change of ownership or hypothecation of this Lease or Tenant's interest in and to the Premises. Notwithstanding the foregoing, Tenant shall have the right, without the consent of Landlord, to assign its rights and obligations pursuant to this Lease to its parent, subsidiary or affiliate, provided that Tenant remains obligated under the Lease. For purposes of this Paragraph, the term "subsidiary" shall mean and refer to any subsidiary of Tenant in which Tenant owns eighty percent (80%) or more of the voting stock of such subsidiary. For purposes of this Paragraph, the term "affiliate" shall mean and refer to any entity in which Tenant or parent of Tenant owns eighty percent (80%) or more of the voting stock or ownership interest of such entity. 18.2 CONSENT REQUIRED. Landlord's consent may be based upon a determination that the same type, class, nature and quality of business, services, management and financial soundness of ownership shall exist after the proposed assignment or subletting and, provided further, that each and every covenant, condition and obligation imposed upon Tenant by this Lease and each and every right, remedy and benefit afforded Landlord by this Lease and the underlying purpose of this Lease is not thereby impaired or diminished. The determination by Landlord as to whether consent will be granted in any specific instance may be based on, without limitation, the following factors, which shall be solely in Landlord's discretion: (a) whether the transferee's use of the Premises will be compatible with the provisions of this Lease; (b) the financial capacity of the transferee; (c) the business reputation of the transferee; (d) the quality and type of the business operations of the transferee; and (e) the business experience of the proposed transferee. This list of factors is not intended to be exclusive, and Landlord may rely on such other basis for judgment as may apply from time to time. 18.3 PROCEDURE TO OBTAIN CONSENT. If Tenant desires at any time to assign this Lease or to sublet the Premises or any portions thereof, it first shall notify Landlord of its desire to do so and shall submit in writing to Landlord (i) the name and legal composition of the proposed subtenant or assignee; (ii) the nature of the proposed subtenant's or assignee's business to be carried on in the Premises; (iii) the terms and provisions of the proposed sublease or assignment and all transfer documents relating to the proposed transfer; and (iv) such reasonable business and financial information as Landlord may request concerning the proposed subtenant or assignee. Any request for Landlord's approval of a sublease or assignment shall be accompanied with a check in such reasonable amount as Landlord shall advise for the cost of review and preparation, including reasonable attorneys' fees, of any documents relating to such proposed transfer. The provisions and conditions of any proposed sublease or assignment must not be inconsistent with any provision of this Lease, and must address all matters contained in this Lease. In addition, the transferee must expressly assume all of the obligations of Tenant under this Lease. Notwithstanding the assumption of the obligations of this Lease by the transferee, no subletting or assignment, even with the consent of Landlord, shall relieve Tenant of its continuing obligation to pay the rent and perform all the other obligations to be performed by Tenant hereunder, absent Landlord's written release. The obligations and liability of Tenant hereunder shall continue notwithstanding the fact that Landlord may accept rent and other performance from the transferee. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any assignment or subletting. 18.4 ADVERTISING. In no event shall Tenant display on or about the Premises any signs for the purpose of advertising the Premises for assignment, subletting or other transfer of rights. 18.5 WRITING REQUIRED. Each permitted assignment or sublease shall be consummated by an instrument in writing executed by the transferor and transferee in form satisfactory to Landlord. Each assignee and subtenant shall agree in writing for the benefit of the Landlord herein to assume all obligations of Tenant hereunder, including the payment of all amounts due or to become due under this Lease directly to the Landlord. One executed copy of such written instrument shall be delivered to the Landlord. 18.6 TRANSFER PREMIUMS. If Tenant assigns or sublets its rights under this Lease, Tenant shall pay to Landlord as Additional Rent, after Tenant has recovered any relevant leasing commissions, costs of tenant improvements and other expenses of the assignment or sublease, one-half (1/2) of all such excess consideration due and payable to Tenant from said assignment or sublease to the extent said consideration exceeds the Rent or a pro rata portion of the Rent, in the event only a portion of the Premises is sublet. 19. NO ENCUMBRANCE. Without Landlord's prior written consent, Tenant shall not mortgage, encumber or hypothecate its interest in this Lease, the Premises or the Building, and any attempt by Tenant to do so shall be a default hereunder, and at Landlord's option, shall terminate this Lease. 20. HAZARDOUS MATERIALS. 20.1 HAZARDOUS MATERIALS. Tenant shall not use, store, dispose of or permit to remain on the Premises, the Building, the Land, or any adjacent property other than in the normal course of business and in compliance with all applicable laws, any solid, liquid or gaseous matter or any combination thereof, which is or may become, hazardous, toxic or radioactive including, but not limited to, any substance, gas, or waste, which is included in the definition of "hazardous substance," "toxic substance," "hazardous waste," or "toxic waste" under any federal, state, or local law, ordinance, or regulation, including those materials identified in Sections 66680 through 66685 of Title 22 of the California Administrative Code, Division 4, Chapter 30 (as may be amended from time to time) or any material which, if discharged, leaked or emitted or permitted to be discharged, leaked or emitted into the atmosphere, the ground or any body of water, does or may (i) pollute or contaminate the same, or (ii) adversely affect (A) the health or safety of persons, whether on the Premises or anywhere else, (B) the condition, use or enjoyment of the Premises or anywhere else, or (C) the Premises, the Building or any of the improvements thereon (all of the foregoing collectively referred to herein as "HAZARDOUS MATERIALS"). 20.2 TESTING. At reasonable times and upon reasonable prior notice, prior to the expiration or earlier termination of the Lease Term, Landlord shall have the right to conduct (a) not more frequently than annually, a hazardous waste investigation of the Premises and (b) if Landlord has reasonable cause to believe that any contamination exists on, in, under, or around the Building or the Premises, such other tests of the Premises and the Building as Landlord may deem necessary or desirable to demonstrate whether contamination has occurred as a result of Tenant's use of the Premises. Tenant shall be solely responsible for and shall defend, indemnify and hold the Landlord, its Agents and contractors harmless from and against any and all Claims, arising out of or in connection with any removal, clean up, restoration and materials required hereunder to return the Premises and any other property of whatever nature to their condition existing prior to the time of any such contamination, except for Claims caused by Landlord's or its Agents' gross negligence or willful misconduct. Tenant shall pay for the cost of the annual investigation and other tests of the Premises. 20.3 DUTY TO DISPOSE. Tenant shall not keep any trash, garbage, waste or other refuse on the Premises except in sanitary containers and shall regularly and frequently remove the same from the Premises. Tenant shall keep all incinerators, containers or other equipment used for the storage or disposal of such matter in a clean and sanitary condition. Tenant shall properly dispose of all sanitary sewage and shall not use the sewage disposal system of the Building (i) for the disposal of anything except sanitary sewage, or (ii) for disposal of sewage in excess of the lesser of the amount (A) reasonably contemplated by the uses permitted under this Lease, or (B) permitted by any governmental entity. 20.4 HAZARDOUS MATERIALS LAWS. Tenant, at Tenant's own cost and expense, shall comply with all existing and any hereinafter enacted federal, state or local laws pertaining to or governing Hazardous Materials laws. Tenant, at Tenant's own cost and expense, shall make all submissions to, provide all information to and comply with all requirements of any appropriate governmental authority ("AUTHORITY") under all federal, state or local laws pertaining to or governing Hazardous Materials. In particular, Tenant shall comply with all laws relating to the storage, use and disposal of Hazardous Materials. Should any Authority require that a clean up or remediation plan be prepared or that a clean up or any other remediation action be undertaken because of any spills or discharges of Hazardous Materials at the Premises or on the Premises or any adjacent property that occur during the Lease Term or after expiration of the Lease Term as a result of Tenant's use of the Premises, then Tenant, at Tenant's own expense, shall prepare and submit the required plans and financial assurances and carry out the approved plans. At no expense to Landlord, Tenant promptly shall provide all information requested by Landlord for preparation of affidavits required by Landlord or for Landlord's own information, to determine the applicability of the Hazardous Materials laws to the Premises and shall execute affidavits promptly when requested to so by Landlord. 20.5 TENANT INDEMNIFICATION. Tenant shall indemnify, defend and hold harmless Landlord and Landlord's Agents from and against (i) Claims in connection with or arising out of any release, spill or discharge of Hazardous Materials due to, contributed to or caused by the activities of Tenant, Tenant's Agents, third parties who have trespassed on the Premises during the Lease Term or parties in contractual relationship with Tenant or any of them (but excluding any Claims arising out of the migration of Hazardous Materials from adjacent properties to the Premises for which Hazardous Materials or migration Tenant is not responsible); and (ii) all Claims arising out of Tenant's failure to provide all information, make all submissions and take all steps required by any Authority, under any federal, state or local laws pertaining to or governing Hazardous Materials laws or any other environmental law. Tenant's obligations and liabilities under this paragraph shall survive the expiration or earlier termination of this Lease. Without limiting the foregoing, if the release, spill, leakage, or discharge of any Hazardous Materials on or in the Premises or the Building or any adjacent property, caused or permitted by Tenant results in any contamination of the Premises or the Building or any adjacent property, Tenant shall promptly take all actions at its sole expense as are necessary to return the Premises or the Building or any adjacent property, to the condition existing prior to the time of such contamination, provided that Landlord's approval of such action shall first be obtained, which approval shall not unreasonably be withheld, delayed or conditioned so long as such actions would not potentially have any material adverse long-term or short-term effect on the Premises or the Building. Notwithstanding the foregoing, the indemnification herein shall not apply to the initial introduction of Hazardous Materials on or to the Premises by anyone other than the Tenant from and after the date that Tenant is neither the "Tenant" hereunder nor in possession of the Premises ("Tenant Relinquishment Date"); provided, however, that the Tenant shall bear the burden of proof that the initial introduction of such Hazardous Materials (i) occurred subsequent to the Tenant Relinquishment Date, (ii) did not occur as a result of any act or inaction of the Tenant, and (iii) did not occur as a result of a continuing migration or release of any Hazardous Materials initially introduced, stored, or manufactured on the Premises prior to the Tenant Relinquishment Date. 20.6 OBLIGATION TO REMEDIATE UPON EXPIRATION OF LEASE. Tenant shall surrender the Premises at the expiration or earlier termination of this Lease free of any Hazardous Materials or contamination and free and clear of all judgments, liens or encumbrances relating thereto and, at its own cost and expense, shall repair all damage and clean up or perform any remedial action necessary relating to any Hazardous Materials or contamination caused by Tenant's operation. Tenant, at its sole cost and expense, shall, following Landlord's request, remove any alterations or improvements that may be contaminated or contain Hazardous Materials. 21. CONDEMNATION. 21.1 TERMINATION OF LEASE. If the Premises or any portion thereof are Taken under the power of eminent domain, or sold by Landlord under the threat of the exercise of such power, this Lease shall terminate as to the part so Taken as of the date that the condemning authority takes possession. This Lease shall remain in full force and effect with respect to the remaining portion of the Premises. If more than fifty percent (50%) of the square footage of the Building is taken or sold under such threat, either Landlord or Tenant may terminate this Lease as of the date that the condemning authority takes possession by delivery of written notice of such election within twenty (20) days after such party has been notified of the Taking or, in the absence thereof, within twenty (20) days after the condemning authority shall have taken possession. Notwithstanding the foregoing, Tenant's right to terminate this Lease under the preceding sentence is contingent upon all leasehold mortgages (if any) of Tenant being paid in full. 21.2 RENT REDUCTION; TENANT'S OBLIGATION TO REPAIR. If this Lease is not terminated by Landlord or Tenant, it shall remain in full force and effect as to the portion of the Premises remaining; provided, however, that the Monthly Rent shall be reduced by the proportion that the floor area of the Building taken bears to the original floor area of the Building. In such event Tenant, at Tenant's sole cost and expense, but subject to the availability of condemnation proceeds therefor, shall restore the Premises to a complete unit of like quality and character, except as to size, as existed prior to the date on which the condemning authority took possession. 21.3 AWARD. All awards for the Taking of any part of the Premises or proceeds from the sale made under the threat of the exercise of the power of eminent domain (other than the portions of such award expressly attributed by the governmental authority to the diminution in value of the leasehold estate which portion shall be the property of Tenant) shall be the property of Landlord, whether made for the Taking of the fee, or as severance damages; provided, however, that Tenant shall be entitled to any award which is made for damage to Tenant's trade fixtures and removable personal property and to a portion of the award necessary to restore the Premises as provided in Paragraph 21.2 above. 22. DEFAULT PROVISIONS. 22.1 EVENTS OF DEFAULT. The occurrence of any of the following shall constitute a default hereunder ("Default"): 22.1.1 The failure of Tenant to pay or cause to be paid when past due, within five (5) days after notice, any Rent, monies or other charge required by this Lease to be paid by Tenant; 22.1.2 The abandonment or vacation of the Premises by Tenant for a period in excess of sixty (60) days during any single twelve (12) month period; 22.1.3 Any default (after expiration of any applicable notice and cure period) by Tenant under the terms of any leasehold mortgage; 22.1.4 The failure of Tenant, within thirty (30) days after notice, to do or cause to be done any act required by this Lease, or the failure to observe and perform any other provision of this Lease to be observed or performed by Tenant, other than payment of Rent, monies or charges required by this Lease. If a cure cannot be made within thirty (30) days, Tenant shall have an additional reasonable amount of time necessary to complete the cure using its diligent and best efforts. Notwithstanding the foregoing, if any such failure on the part of Tenant affects the health or safety of others, or would result in the destruction of property, Tenant shall immediately begin to cure and shall use its diligent and best efforts in pursuing said cure to completion; 22.1.5 Tenant's causing or permitting, without the prior written consent of Landlord, any act for which this Lease requires Landlord's prior consent, or if this Lease prohibits such act; 22.1.6 Any act of bankruptcy caused, suffered or permitted by Tenant or, if Tenant is a partnership, any general partner of Tenant. For purposes of this Lease, an "act of bankruptcy" shall include the following: (i) any general assignment or general arrangement for the benefit of creditors; (ii) the filing of any petition by or against Tenant to have Tenant adjudged a bankrupt, or a petition for reorganization or arrangement under any law relating to bankruptcy, unless such petition is filed against Tenant and the same is dismissed within ninety (90) days; (iii) the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease; or (iv) the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease. 22.2 RIGHTS OF LANDLORD. Upon the occurrence, and during the continuance, of any Default, and in addition to any or all other rights or remedies of the Landlord hereunder or by law, Landlord, without further notice or demand of any kind to Tenant or any other person, shall have the following rights and remedies: 22.2.1 Landlord has the remedy described in California Civil Code Section 1951.4 (Landlord may continue this Lease in effect after Tenant's breach and abandonment and recover rent as it becomes due, if Tenant has right to sublet or assign, subject only to reasonable limitations). Landlord may continue this Lease in full force and effect and enforce all Landlord's rights and remedies under this Lease, including the right to recover the Rent as it becomes due and any other amount necessary to compensate Landlord for all detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which, in the ordinary course of things, would be likely to result therefrom. Landlord may sue monthly, annually or after such equal or unequal periods as Landlord desires for such amounts due. 22.2.2 Landlord (whether Landlord elects to continue this Lease in effect or terminate this Lease and Tenant's right to possession hereunder) may reenter the Premises or take possession pursuant to legal proceedings or pursuant to any notice provided by law, and thereafter collect rent from existing sub-tenants of the Premises, if any, and(or) relet the Premises, in whole or in part, to third parties for Tenant's account at such rent and upon such conditions and for such term as Landlord sees fit. Tenant shall pay to Landlord all costs actually and reasonably incurred in reletting the Premises or improvements thereon, including, without limitation, broker's commissions, repairs, expenses of remodeling required by the reletting and like costs. Landlord may do all other acts necessary to maintain or preserve the Premises as Landlord deems reasonable and necessary, including removal of all persons and property, which property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant. If Landlord shall elect to so relet, rentals received by Landlord from such reletting shall be applied in the following order: (i) to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord; (ii) to the payment of any cost of such reletting; (iii) to the payment of the cost of any alterations and repairs; (iv) to the payment of Rent due and unpaid hereunder; (v) to the payment of any obligations of Tenant under any leasehold mortgage; and (vi) the residue, if any, shall be held by Landlord and applied in payment of future Rent as the same may become due and payable hereunder. If reletting results in the actual payment of rentals at less than the Rent payable during that month by Tenant as required hereunder, Tenant shall pay such deficiency to Landlord from time to time immediately upon demand therefor by Landlord. 22.2.3 Landlord, by written notice to Tenant, may terminate this Lease and Tenant's right to possession of the Premises. No act by Landlord other than giving written notice to Tenant shall terminate this Lease. Acts of maintenance, reletting, or the appointment of a receiver on Landlord's initiative shall not terminate this Lease. If Landlord elects to terminate this Lease, Landlord may recover all of the following: (a) The worth at the time of award of the unpaid Rent which had been earned at the time of termination. "Worth at the time of award" shall be computed by allowing interest to accrue at the Default Rate from the first day a breach occurs. (b) 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 Tenant proves could have been reasonably avoided. "Worth at the time of award" shall be determined by allowing interest at the Default Rate from the first day a breach occurs. (c) The worth at the time of award of the amount by which the unpaid Rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Tenant proves could be reasonably avoided. "Worth at the time of award" shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank situated nearest the Premises at the time of award plus one percent (1%). (d) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of events would be likely to result therefrom including, but not limited to, expenses of reletting, attorneys' fees, costs of alterations and repairs, recording fees, filing fees and any other expenses customarily resulting from obtaining possession of Premises and releasing. (e) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law. 22.2.4 If Tenant shall be in Default in the observance or performance of any term or covenant on Tenant's part to be observed or performed under this Lease, Landlord may perform (but is not obligated to do so) the same for the account of Tenant, and if Landlord makes expenditures or incurs any obligation for the payment of money thereby, including, but not limited to, attorneys' fees in instituting, prosecuting or defending any action or proceeding, such sums paid or obligations incurred, with interest thereon at the Default Rate, shall be deemed to be Additional Rent hereunder and shall be paid by Tenant to Landlord (without offset) immediately upon demand therefor. 22.2.5 Landlord, where permitted by applicable law, may seek to restrain any breach or threatened breach of any of Tenant's obligations hereunder and/or may exercise any and all rights and remedies of a secured party under applicable law with respect to any property in which Landlord is granted a security interest under this Lease or otherwise. 22.3 CUMULATIVE REMEDIES. Any right or remedy of Landlord under this Lease and any other right or remedy that Landlord may have at law, in equity or otherwise upon any Default or breach of any of the Tenant's obligations hereunder shall be distinct, separate and cumulative rights or remedies and no right or remedy, whether exercised or not, shall be deemed to be in exclusion of any other. 22.4 DETERMINING RENT ON DEFAULT; WAIVER; SECURITY INTEREST. 22.4.1 For all purposes of this Paragraph 22, Rent, except Monthly Rent, shall be computed on the basis of the amount thereof accruing during the highest twelve (12) month period in the immediately preceding sixty (60) month period, except that if it becomes necessary to compute such Rent before a sixty (60) month period has occurred, then Rent shall be computed on the basis of the amount accruing during such shorter period. 22.4.2 The waiver by Landlord of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition on any subsequent breach by Tenant. The acceptance of Rent hereunder by Landlord after any such breach shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such Rent. No covenant, term or condition of this Lease or breach thereof by Tenant shall be deemed to have been waived by Landlord unless such waiver is in a writing executed by Landlord. 22.5 CURING OF DEFAULT. Notwithstanding any other provision of this Paragraph 22, if an event of Default, other than for the payment of Rent or other monies owing from Tenant to Landlord hereunder, is of such a nature that the same cannot be cured upon demand by Landlord as specified in any written notice relating thereto, then such event of Default shall be deemed to be cured if Tenant upon such notice shall have commenced to cure such Default and shall continue thereafter with all due diligence to so cure and does so complete the same within a reasonable period of time. 22.6 LANDLORD'S DEFAULT. If Landlord shall neglect or fail to perform or observe any of the covenants, provisions or conditions contained in this Lease on its part to be performed or observed within thirty (30) days after written notice of default (or if more than thirty (30) days shall be required because of the nature of the default, if Landlord shall fail to proceed diligently to cure such default after written notice thereof), Landlord shall be responsible to Tenant for any foreseeable and unavoidable damages sustained by Tenant as a result of Landlord's breach. 22.7 TENANT'S RIGHT TO PERFORM. If, after such notice to Landlord and Assignee, if any, Landlord and Assignee shall fail to cure such default as provided herein, Tenant shall have the right, but not the obligation, to cure any such default at Landlord's sole cost and expense including in such expenditure all costs and attorneys' fees incurred to cure such default or breach of Lease. Tenant shall have no right to terminate this Lease for any such default by Landlord unless otherwise specifically provided in this Lease. 22.8 ABATEMENT. Except as expressly otherwise provided herein, Landlord and Tenant hereby waive the provisions of any statutes, regulations, ordinances, or court decisions which relate to the abatement of rent or termination of leases when leased property is damaged or destroyed and agree that such event shall be exclusively governed by the terms of this Lease. 23. LIMITATION OF LANDLORD'S LIABILITY. If Landlord is in default of this Lease, and as a consequence, Tenant recovers a money judgment against Landlord, the judgment shall be satisfied only out of the proceeds of sale received on execution of the judgment and levy against the right, title, and interest of Landlord in the Premises, and out of rent or other income from the Premises receivable by Landlord or out of the consideration received by Landlord from the sale or other disposition of all or any part of Landlord's right, title, and interest in the Premises. Neither Landlord nor Landlord's Agents shall be personally liable for any deficiency except to the extent liability is based upon willful and intentional misconduct. If Landlord is a partnership, joint venture, or limited liability company, the partners or members of such partnership or limited liability company, as the case may be, shall not be personally liable and no partner or member of Landlord (or of any affiliated entity) shall be sued or named as a party in any suit or action, or service of process be made against any partner or member of Landlord (or of any affiliated entity), except as may be necessary to secure jurisdiction of the partnership, joint venture, or limited liability company or to the extent liability is caused by willful and intentional misconduct. If Landlord is a corporation, the shareholders, directors, officers, employees, and/or agents of such corporation shall not be personally liable and no shareholder, director, officer, employee, or agent of Landlord shall be sued or named as a party in any suit or action, or service of process be made against any shareholder, director, officer, employee or agent of Landlord, except as may be necessary to secure jurisdiction of the corporation. No partner, member, shareholder, director, employee, or agent of Landlord (or of any affiliated entity) shall be required to answer or otherwise plead to any service of process and no judgment will be taken or writ of execution levied against any partner, shareholder, director, employee, or agent of Landlord. 24. SUBORDINATION-ATTORNMENT. 24.1 TENANT TO GIVE EVIDENCE OF SUBORDINATION. Upon written request of Landlord, or any mortgagee or deed of trust beneficiary, Tenant in writing shall subordinate its rights hereunder to the lien of any mortgage or deed of trust now or hereafter in force against the land and buildings comprised of the Premises of which the Premises are a part, and upon any building hereafter placed upon the Premises, and to all advances made or hereafter to be made upon the security thereof; provided that Tenant obtains a non-disturbance agreement acceptable to Tenant from any such mortgagee or deed of trust beneficiary. Said subordination shall be in the form of the document attached hereto as EXHIBIT "B," or a reasonable equivalent requested by Landlord and satisfactory to Tenant. 24.2 ATTORNMENT. If any proceedings are brought for foreclosure, or in the event of the exercise of the power of sale under any mortgage or deed of trust made by or to which the Landlord is subject covering the Premises, Tenant shall attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as the Landlord under this Lease; provided, however, that the purchaser shall acquire and accept the Premises subject to this Lease. 24.3 EXECUTION OF DOCUMENTS BY TENANT. Tenant, upon request of any party in interest, shall duly execute in recordable form such instruments and certificates as are necessary to carry out the intent of this Paragraph 24. 25. QUIET POSSESSION. Subject to the provisions and matters referred to in Paragraph 14 of this Lease, Tenant, upon paying the Rent and performing the covenants and conditions of this Lease, may quietly have, hold and enjoy the Premises during the Lease Term. 26. MISCELLANEOUS. 26.1 CAPTIONS AND TERMS. The captions to all paragraphs of this Lease are for convenience only, are not a part of this Lease, and do not in any way limit or amplify the terms and provisions of this Lease. The masculine pronoun used herein shall include the feminine or the neuter as the case may be, and the use of the singular shall include the plural when appropriate. 26.2 OBLIGATIONS OF SUCCESSORS. Each of the provisions hereof are to be construed as covenants and agreements as though the words importing such covenants and agreements were used in each separate paragraph hereof, and all of the provisions hereof shall bind and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and assigns (subject to any restrictions on assignment). 26.3 NO JOINT VENTURE. Nothing contained in this Lease shall be deemed or construed as creating a partnership, joint venture or any other relationship between the parties hereto other than Landlord and Tenant according to the provisions contained herein, or cause Landlord to be responsible in any way for the debts or obligations of Tenant or any other party. 26.4 AUTHORITY OF TENANT. If Tenant is a corporation, the persons executing this Lease on behalf of Tenant hereby covenant and warrant that they have the authority to enter into this Lease, that Tenant is a corporation in good standing in the state of its origination, all steps have been taken prior to the date hereof to qualify Tenant to do business in the state of California, all franchise and corporate taxes have been paid to date, and that all future forms, reports, fees and other documents necessary to comply with applicable laws will be filed when due. 26.5 NO RIGHT OF REDEMPTION. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being lawfully evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the premises by reason of a Default by Tenant hereunder. 26.6 HOLDING OVER. If Tenant remains in possession of the Premises (a) after the expiration of the Lease Term without executing a new lease, or (b) after Landlord has declared a forfeiture by reason of a Default by Tenant, then such holding over shall be construed as a tenancy at sufferance from month-to-month, subject to all the conditions, provisions and obligations of this Lease insofar as they are applicable to a month-to-month tenancy, except that the Monthly Rent shall be one hundred fifty percent (150%) of the Monthly Rent last paid, payable monthly in advance. Not-withstanding the foregoing, if Tenant fails to vacate the Premises and fulfill all of its obligations hereunder at the end of the Lease Term, Tenant also shall be liable for all damages incurred by Landlord by reason of the latter's inability to deliver possession of the Premises or any portion thereof to any other person. 26.7 BROKERS. Tenant and Landlord each warrants and represents that it has had no dealings with any real estate brokers or agents in connection with the negotiation of this Lease, and it knows of no other real estate broker or agent who is entitled to a commission in connection with this Lease. Tenant and Landlord each shall defend, indemnify and hold the other harmless from and against any and all Claims by any person for any finder's fees or brokerage fees incurred as a result of any action by such indemnifying party. 26.8 NON-MERGER. There shall be no merger of this Lease, or of the leasehold estate created hereby, with the fee estate in and to the Premises by reason of the fact that this Lease, or the leasehold estate created hereby, or any interest in either thereof, may be held directly or indirectly by or for the account of any person who shall own the fee estate in and to the Premises, or any portion thereof, and no such merger shall occur unless and until all persons at the time having any interest in the fee estate and all persons having any interest in this Lease or the leasehold estate, shall join in a written instrument effecting such merger. 26.9 RECORDATION OF LEASE. Neither Landlord nor Tenant shall record this Lease or any other document relating to this Lease without the prior written consent of the other party. 26.10 NOTICES. No notice, request, demand, instruction or other document to be given hereunder to any party shall be effective for any purpose unless personally delivered to the person or delivered by reputable overnight courier, to the addresses set forth in Paragraph 2 above. Notice shall be deemed to have been given when received, if by personal delivery, or the next business day after the date of the courier's receipt of mailing, if by reputable overnight courier. Notice shall not be deemed given unless and until, under the preceding sentence, notice shall be deemed given to all addressees to whom notice must be sent. The addresses and addressees for the purpose of this paragraph may be changed by giving written notice of such change in the manner herein provided for giving notice. Unless and until such written notice is received, the last address and addressee as stated by written notice, or provided herein if no written notice of change has been sent or received, shall be deemed to continue in effect for all purposes hereunder. 26.11 ATTORNEYS' FEES. If any action or proceeding (judicial or nonjudicial) is commenced to enforce or interpret this Lease, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs, together with all other costs and fees incurred by it in attempting to enforce the other party's obligations and/or to protect its rights under this Lease, whether or not such action or proceeding proceeds to judgment. 26.12 NO OTHER AGREEMENTS. This Lease and the letter agreement of even date herewith from Landlord to Tenant ("Side-Letter") regarding, among other things, property management fees and the Security Deposit represents the entire agreement between the parties hereto and supersedes any and all previous written or oral agreements or discussions between said parties and any other person or legal entity concerning the transactions contemplated herein. There are no representations, warranties or agreements except as specifically set forth in this Lease or the Side-Letter or to be set forth in the instruments or other documents delivered or to be delivered hereunder. 26.13 AMENDMENTS. No change in or addition to, or waiver or termination of this Lease, or any part hereof, shall be valid unless in writing and signed by or on behalf of the party charged therewith. 26.14 NO THIRD-PARTY BENEFIT. The parties acknowledge and agree that the provisions of this Lease are for the sole benefit of Landlord and Tenant, and not for the benefit, directly or indirectly, of any other person or entity, except as otherwise expressly provided herein. 26.15 EXHIBITS. Each of the Exhibits attached hereto is hereby incorporated herein by this reference. 26.16 SEVERABILITY. If any one or more of the provisions of this Lease are held to be invalid, illegal or unenforceable in any respect or for any reason, the validity, legality and enforceability of such provision or provisions in every other respect and of the remaining provisions of this Lease shall not in any way be impaired. 26.17 GOVERNING LAW/JURISDICTION. This Lease shall, in all respects, be interpreted, enforced and governed by and under the laws of the State of California. 26.18 VENUE. The parties hereby expressly acknowledge and agree that if an action is brought with respect to this Lease, sole and proper venue for such action shall be in San Diego County, California. 26.19 TIME. Time is hereby expressly made of the essence with respect to each and every term and condition of this Lease. 26.20 ENTRY BY LESSOR. 26.20.1 INSPECTION. Tenant shall permit Landlord and Landlord's agents to enter the Premises at all reasonable times after reasonable notice for the purpose of inspecting the same and for the purpose of exercising any of its other rights or performing any of its obligations under this Lease. 26.20.2 SALE OR LEASE OF PREMISES. Landlord may at any time place on or about the Premises any ordinary "For Sale" signs, and at any time within one (l) year prior to the expiration of this Lease, place on or about the Premises any usual or ordinary "For Lease" signs. Landlord may enter the Premises at reasonable times upon reasonable prior notice during the Lease Term to show the Premises to prospective tenants, lenders, investors, or purchasers. In exercising its rights under this Paragraph 26.20.2, Landlord shall not unreasonably interfere with Tenant's use or occupancy of the Premises. 26.20.3 WAIVER. Landlord shall be permitted to enter upon the Premises in accordance with the terms hereof for any of the purposes stated herein without any liability to Tenant for any loss of occupation or quiet enjoyment resulting therefrom, except resulting from Landlord's or its Agents' gross negligence or willful misconduct, and Tenant hereby waives any claim for abatement of rent or for damages for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment, or any other loss occasioned thereby. 26.21 ESTOPPEL CERTIFICATES. Tenant shall at any time during the Lease Term, within ten (10) days after written request from Landlord, execute and deliver to Landlord a statement in writing in the form of the document attached hereto as EXHIBIT "C," or any reasonable equivalent requested by Landlord, certifying that this Lease is unmodified and in full force and effect or, if modified, stating the nature of such modification. Tenant's statement shall include such other details as may be reasonably requested by Landlord. Any such statement may be relied upon conclusively by any existing or prospective purchaser or lender. Tenant's failure to deliver such statements within such time shall be conclusive upon Tenant that this Lease is in full force and effect, except to the extent any modification has been represented in writing by Landlord to such prospective purchaser or lender, that there are no uncured defaults in Landlord's performance, and that not more than one month's rent has been paid in advance. 26.22 NO SURRENDER. Except to the extent expressly provided for herein, no event or occurrence during the Lease Term, whether foreseen or unforeseen, however extraordinary, shall permit Tenant to surrender or terminate this Lease or shall relieve Tenant from any of its obligations hereunder, and Tenant waives any rights now or hereafter conferred upon it by statute or otherwise, except any rights set forth herein, to surrender or terminate this Lease or to claim any abatement or suspension of Rent or other sums payable hereunder on account of any such event or occurrence. 26.23 CONSENT OF LANDLORD AND TENANT. Whenever Landlord or Tenant is required to give its consent or approval to any action on the part of the other, such consent or approval shall not be unreasonably withheld, conditioned or delayed, unless otherwise expressly provided. In the event of failure to give any such consent, the other party hereto shall be entitled to specific performance at law and shall have such other remedies as are reserved to it under this Lease; provided, however that in no event shall Landlord or Tenant be responsible in monetary damages for such failure to give consent unless said consent is withheld maliciously or in bad faith. 26.24 BINDING EFFECT. This Lease shall not be effective until fully executed by both Landlord and Tenant. 26.25 COVENANTS AND CONDITIONS. Each provision and obligation set forth in this Lease to be performed by Tenant shall be deemed both a covenant and a condition. 26.26 FURNISHING OF FINANCIAL STATEMENTS AND TENANT'S REPRESENTATIONS. To induce Landlord to enter into this Lease, Tenant agrees that it shall promptly furnish to Landlord, from time to time, upon Landlord's written request, the most recent audited year-end financial statements reflecting Tenant's current financial condition. Tenant represents and warrants that all financial statements, records and information furnished by Tenant to Landlord in connection with this Lease are true, correct and complete in all respects. 26.27 ABSOLUTE NET LEASE. This Lease shall be deemed and construed to be an "absolute net lease" and, except as herein expressly provided, the Landlord shall receive all payment required to be made by Tenant, free from all charges, assessments, impositions, expenses, deductions of any and every kind or nature whatsoever. Landlord shall not be required to furnish any services or facilities or to make any repairs, replacements, or alterations of any kind in or on the Premises, except as otherwise specifically required herein. Tenant shall receive all invoices and bills relative to the Premises and, except as otherwise provided herein, shall pay for all expenses directly to the person or company submitting a bill without first having to forward payment for the expenses to Landlord. Tenant shall at Tenant's sole cost and expense be responsible for the management of the Premises, shall maintain the landscaping, parking lot and shall make all additional repairs and alterations as required to maintain the property in good condition. 26.28 INTERPRETATION. This Lease has been negotiated at arm's length and between persons sophisticated and knowledgeable in the matters dealt with in this Lease. In addition, each party has been represented by experienced and knowledgeable legal counsel. Accordingly, any rule of law (including California Civil Code ss. 1654) or legal decision that would require interpretation of any ambiguities in this Lease against the party that has drafted it is not applicable and is waived. The provisions of this Lease shall be interpreted in a reasonable manner to effect the purpose and intent of the parties to this Lease. 26.29 WAIVER OF JURY TRIAL AND COUNTERCLAIMS. THE PARTIES HERETO SHALL AND THEY HEREBY DO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND OR ANY CLAIM OF INJURY OR DAMAGE. 27. END OF TERM. 27.1 SURRENDER OF PREMISES. 27.1.1 Upon the expiration of the Lease Term or earlier termination hereof through the exercise of any option to terminate this Lease granted herein (collectively referred to as the "Surrender Date"), title to the Building and the Premises shall be vested in Landlord. Thereupon, Tenant shall peaceably and quietly vacate the entire Premises, including the Building (a) in good order, condition and repair, except for normal wear and tear; and (b) free and clear of all lettings, occupancies, agreements, easements, encumbrances or other liens other than those to which this Lease was subject on the Lease Commencement Date and those caused, created by or consented to in writing by Landlord or otherwise permitted by the terms hereof. 27.1.2 Notwithstanding the exercise by either party of any option contained herein to terminate this Lease, any unsatisfied obligations of Tenant accruing on or prior to the Surrender Date and the indemnification provisions of Tenant contained in Paragraphs 15.1 and 20 shall survive the Surrender Date (except that the obligations with respect to Paragraph 15.1, only, shall terminate eighteen (18) months after the Surrender Date), unless excused as of the Surrender Date by the provisions elsewhere contained in this Lease. 27.2 RE-ENTRY BY LANDLORD. Upon the Surrender Date, Landlord, without further notice, may enter upon, re-enter, possess and repossess itself of the Premises, by summary proceedings, ejectment or otherwise, may dispossess and remove Tenant and all other persons and property from the Premises, and may have, hold and enjoy the Premises and the right to receive all Rent and other income of and from the same. As used in this Lease, the words "enter" and "re-enter" are not restricted to their technical legal meanings. 27.3 TENANT'S EQUIPMENT. Any of Tenant's Equipment or other personal property which shall remain on the Premises after the Surrender Date and the removal of Tenant from the Premises, at the option of Landlord, may be deemed to have been abandoned by Tenant or any Subtenant and either may be retained by Landlord as its property or be disposed of, without accountability, in such manner as Landlord may see fit. However, Landlord also shall have the right to require Tenant to remove any such equipment or other personal property at any time after the Surrender Date and the removal of Tenant from the Premises at Tenant's own cost and expense and to repair any damage to the Premises resulting from such removal. From and after the Surrender Date, Landlord shall not be responsible for any loss or damage occurring to any property owned by Tenant or any Subtenant. 27.4 SURVIVAL. The provisions of this Paragraph 27 shall survive the Surrender Date. 28. ACKNOWLEDGEMENT OF RESPONSIBILITY. Tenant acknowledges and agrees that Tenant, as the legal owner of the Property immediately prior to the execution of this Lease, is solely responsible for the payment of all Taxes, utility charges, maintenance costs, and any other operating expense due and payable and pertaining to the Premises as of the Effective Date (the "Prior Expenses"). Tenant shall indemnify and hold harmless Landlord from and against all Claims arising out of or related to the Prior Expenses. 29. MANAGEMENT FEE. If and when required by Landlord, Tenant shall pay to Landlord, as Additional Rent, a monthly fee to cover costs of property management services in an amount not to exceed three percent (3%) of the Monthly Rent due from Tenant, whether or not Landlord incurs fees payable to any third party to provide such services and without regard to the actual costs incurred by Landlord for such services. TENANT: LANDLORD: QUIDEL CORPORATION, 10165 McKELLAR COURT, L.P., a Delaware corporation a California limited partnership By: /s/ Andre de Bruin By: SCIMED PROP II, LLC ------------------------------------ a California limited liability President or Vice President company, General Partner By: /s/ Charles J. Cashion By: /s/ Alan D.gold ------------------------------------ --------------------------------- Secretary, Assistant Secretary, Alan D. Gold, Member Treasurer, or Assistant Treasurer -----END PRIVACY-ENHANCED MESSAGE-----