STANDARD INDUSTRIAL LEASE

Exhibit 10.2

STANDARD INDUSTRIAL LEASE

(N ET )

CARLSBAD CORPORATE CENTER

H.G. FENTON PROPERTY COMPANY,

a California corporation

“Landlord”

and

ALPHATEC HOLDINGS, INC.,

a Delaware corporation

“Tenant”

The parties acknowledge that double underlined text and lined-through text are intentional changes in language and incorporated as a part of this Lease.

TABLE OF CONTENTS

EXHIBITS

A        Site Plan

B        Premises and Improvements to Premises

C        Rules and Regulations

D        Signage Criteria

E        Environmental Questionnaire

F        Guaranty Agreement (INTENTIONALLY OMITTED)

STANDARD INDUSTRIAL LEASE - NET

THIS STANDARD INDUSTRIAL LEASE - NET ( “Lease” ), dated for reference purposes only January 30, 2008, is made at San Diego, California, between H. G. FENTON PROPERTY COMPANY, a California corporation ( “Landlord” ), and ALPHATEC HOLDINGS, INC., a Delaware corporation ( “Tenant” ).

1. BASIC LEASE PROVISIONS . The words and figures set forth in this Section 1 are used as defined terms in this Lease.

1.1 Premises : The real property and improvements which are the subject of this Lease. The Premises consist of approximately 73,480 rentable square feet (rsf) as depicted on Exhibit A. The address for the Premises is 5830 El Camino Real, Carlsbad, California 92008.

1.2 Building : The single-story building addressed at 5830 El Camino Real, Carlsbad, California 92008.

1.3 Project : The two (2) Buildings in Phase 1 of the Business Park, including all appurtenances and common area thereto, located at 5818 and 5830 El Camino Real, Carlsbad, California, 92008, consisting of approximately 150,173 rsf.

1.4 Business Park : The planned industrial development of which the Project is a part. The Business Park consists of Parcel C of Minor Subdivision No. 98-11 in the City of Carlsbad, County of San Diego, State of California according to Parcel Map thereof No. 18416, filed in the Office of the County Recorder of San Diego County, on January 26, 2000 as File No. 2000-39031 of official records.

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1.13 Tenant’s Share of Operating Expenses :

1.14 Permitted Use : The premises shall be used and occupied as corporate offices, general offices, engineering, research and development, warehousing and distribution, and light manufacturing. Research and development use may include demonstrative surgical activities associated with the Tenant’s spinal and orthopedic surgical products, and for the storage and use of medical, biological and other materials incidental to such activities.

2. DEFINITIONS . The captions appearing in this Section 2 are used as defined terms in this Lease.

2.1 Additional Rent . All sums payable by Tenant hereunder other than Base Rent, including without limitation: Tenant’s Share of Operating Expenses; late charges; interest on past due amounts; attorneys’ fees; and reimbursements to Landlord of sums advanced by Landlord to cure any default or discharge any obligation of Tenant hereunder.

2.2 Base Rent . The basic monthly rent payable by Tenant for the use and occupancy of the Premises, in accordance with Section 5 of this Lease.

2.3 Business Day . Any weekday, Monday through Friday, except holidays on which United States post offices are closed.

2.4 Commencement Date . The first day of the Term, as determined in accordance with Section 4.1 below.

2.5 Common Areas . All areas and facilities outside the Premises and within the Building and Project that Tenant is permitted to use, as provided and designated by the Landlord from time to time for the general non-exclusive use of Landlord, Tenant and other tenants of the Building and Project and their respective employees, suppliers, shippers, customers, invitees, licensees or other visitors, including without limitation hallways, entryways, common rest rooms on multi-tenant floors, elevators, stairways, common pipes, conduits, wires and appurtenant equipment serving the Premises, parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways and landscaped areas; provided that Common Areas shall not include any portion of the Project currently leased or available for lease, which rentable areas shall be either maintained by the tenants thereof in accordance with maintenance obligations consistent with Section 8.1 of this Lease, or maintained by Landlord at its sole cost and expense and not as an Operating Expense of the Project.

2.6 Declaration . The recorded Declaration of Covenants, Conditions and Restrictions for the Business Park, as the same may be amended from time to time. A copy of the Declaration, if any, is available for review at the Landlord’s Office, and a copy will be provided to Tenant upon request.

2.7 Delivery of the Premises . The date of the inspection and acceptance (or deemed acceptance) of the Premises by Tenant, which shall not be less than ten (10) days following Landlord’s advance written notice to Tenant, accurately indicating that Landlord’s Work will be substantially completed on such date in accordance with Exhibit B attached hereto.

2.8 Hazardous Materials . Any and all materials or substances which have been determined to be a nuisance or dangerous, toxic or hazardous or a pollutant or contaminant, including but not limited to any hydrocarbon material, flammable explosives, asbestos, urea formaldehyde, radioactive materials or waste, or other hazardous, toxic, contaminating or polluting materials, substances or wastes, including, without limitation, any “hazardous substances”, “hazardous wastes”, “hazardous materials” or “toxic substances” under any Hazardous Materials Laws.

2.9 Hazardous Materials Laws . All federal, state and local laws, ordinances and regulations, including, but not limited to, the Federal Water Pollution Control Act (33 U.S.C. §1251, et seq.), Resource Conservation & Recovery Act (42 U.S.C. §6901, et seq.), Safe Drinking Water Act (42 U.S.C. §3000f, et seq.), Toxic Substances Control Act (15 U.S.C. §2601, et seq.), the Clean Air Act (42

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U.S.C. §7401, et seq.), Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601, et seq.), California H EALTH  & S AFETY C ODE (§25100, et seq., §39000, et seq.), California Safe Drinking Water & Toxic Enforcement Act of 1986 (California H EALTH  & S AFETY C ODE §25249.5, et seq.), California W ATER C ODE (§13000, et seq.), and other comparable federal, state or local law, regulation or interpretation thereof, whether currently in force or enacted in the future, together with any licenses, permits, plans or approvals generated pursuant to or as a result of any such law, which regulates or proscribes the use, storage, disposal, cleanup, transportation, release or threatened release into the environment or presence of Hazardous Materials.

2.10 Lease Year . A period of twelve consecutive full calendar months. The first Lease Year shall begin on the Commencement Date if the Commencement Date is the first day of a calendar month; otherwise, the first Lease Year shall begin on the first day of the first full calendar month after the month in which the Commencement Date occurs. Each succeeding Lease Year shall begin on the anniversary of the beginning of the first Lease Year. If Tenant should extend the Term pursuant to any extension option granted herein, the first day of the Extension Term shall also be deemed to be the first day of a Lease Year for all purposes of this Lease.

2.11 Tenant’s Work . The improvements and other work, if any, to be accomplished by Tenant in accordance with Exhibit B.

2.12 Landlord’s Delivery Work . All items of Landlord’s Work except those which Landlord reasonably cannot complete prior to the Commencement Date, e.g., Landlord’s Work that cannot be performed by Landlord until Tenant (i) provides Landlord with plans and specifications therefor, or (ii) obtains a building permit, or (iii) completes those items of Tenant’s Work that are necessarily completed prior to a particular item of Landlord’s Work.

2.13 Landlord’s Work . The improvements and other work, if any, to be accomplished by Landlord in accordance with Exhibit B.

2.14 Mortgage . Any mortgage, trust deed or other encumbrance, and all renewals, extensions or replacements thereof, now or hereafter imposed by Landlord upon the real property which includes the Premises.

2.15 Mortgagee . The holder of a Mortgage.

2.16 Operating Expenses . All costs incurred by Landlord, if any, for any of the following:

(a) The operation, repair and maintenance, in neat, clean and good order and condition of (i) the Common Areas of the Project, including without limitation all parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways, landscaped areas, striping, bumpers, and irrigation systems, common area lighting facilities, and fences and gates, consistent with other first class industrial/office projects in the Northern Coastal Market of San Diego County; (ii) fire detection in the Project, including sprinkler system maintenance and repair; and (iii) unless allocated directly to Tenant pursuant to Section 8.1(b), the Building’s heating, ventilation and air conditioning ( “HVAC” ) systems.

(b) To the extent any of the following services are provided for the Project, such as trash disposal (provided, however that Tenant pay for trash disposal specific to its use of the Premises if such use results in a disproportionately heavy use of the trash facilities for the Project), janitorial service, security services, gardening, painting, plumbing, electrical, carpentry, window washing, Project identification and traffic signage and equipment rental expenses, and any other service to be provided by Landlord that is elsewhere in the Lease stated to be an item of Operating Expenses.

(c) Any deductible portion of an insured loss concerning any of the items or matters described in this Section.

(d) Premiums for any insurance policies maintained by Landlord pursuant to Section 11 below.

(e) Real Property Taxes to be paid by Landlord.

(f) Utilities not separately metered to Tenant or other tenants of the Project.

(g) Independent contractors for services (excluding capital improvements), and compensation (including employment taxes and fringe benefits) of all persons who perform regular and recurring duties connected with day-to-day operation, maintenance and repair of the Project, provided such compensation is commercially reasonable and if such persons provide services to the Project in addition to other building(s), such compensation shall be equitably allocated based on the amount of time such persons spend providing services to the Project and the other building(s).

(h) Maintenance and repair of roofs, building walls, foundations, and all sewer and water facilities, subject to the exclusion of capital improvements, repairs and replacements from Operating Expenses as provided below.

(i) A property management fee in the amount of fifteen percent (15%) of the preceding items of Operating Expenses.

(j) Dues and assessments payable to the Project’s property owners association (if any).

(k) Upon completion of the future common areas of the Business Park, the costs and expenses of operation and maintenance thereof.

The inclusion of the improvements, facilities and services set forth in the foregoing definition shall not be deemed Landlord’s representation that such improvements or facilities exist, nor shall it impose on Landlord any obligation either to have those improvements or facilities or to provide those services, unless the improvements or facilities already exist in the Project or Landlord

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already provides the services as of the Commencement Date, or unless Landlord has agreed to do so elsewhere in the Lease. Capital improvements, repairs and replacements, as defined by Generally Accepted Accounting Practice (GAAP), are not included in Operating Expenses, except (i) as otherwise provided in this Lease, or (ii) for those that directly reduce other Operating Expenses set forth in the following paragraph.

Notwithstanding anything to the contrary contained in this Section 2.16, the following items shall be excluded from the term “Operating Expenses”: (i) expenditures for capital improvements, repairs or replacements, as defined by generally accepted accounting principles (GAAP), made to the Premises or Project, except (a) as otherwise provided in this Lease, (b) for those that (and only to the extent that they) directly reduce other Operating Expenses as defined in this Section 2.16, (c) for replacements made during the Term of this Lease, but only to the extent required for normal maintenance and repair (specifically excluding structural replacements, required as a result of any casualty, replacements covered by warranty or required to repair any defect in the design or construction of the Premises or Project), and (d) those required to be made pursuant to any applicable law adopted after the date of Landlord’s Delivery of the Premises (provided, however, that the cost of any such capital expenditure shall be amortized on a straight-line basis over its useful life in accordance with GAAP); (ii) repairs or other work occasioned by fire, windstorm or other casualty for which Landlord is obligated to maintain insurance or as to which Landlord receives reimbursement from third parties (in each case to the extent of the reimbursed amounts actually received by Landlord pursuant to its diligent efforts to obtain reimbursement to which Landlord is contractually entitled); (iii) any expense for any other building or property owned by Landlord; (iv) costs incurred in renovating or otherwise improving or decorating or redecorating space for tenants in, or other occupants of, the Project, except as such relates to reasonable improvements, repair and/or maintenance of the Common Areas; (v) depreciation of any kind; (vi) except as otherwise provided in this Lease, costs incurred due to the violation by Landlord or any tenant (other than Tenant) of the terms and conditions of any lease pertaining to the Project or of any valid and applicable building code, regulation or law or incurred due to the Premises or any part of the Project being in violation of any such code, regulation or law (subject to the provisions of Section 7.3 of the Lease); (vii) except for the property management fee described in Section 2.16 (i) above, overhead and profit increments paid to subsidiaries or Affiliates (as defined below) of Landlord for services rendered with respect to the Project to the extent that the costs of such services materially exceed competitive costs for similar services rendered by persons or entities of similar skill, competence and experience, other than a subsidiary or Affiliate of Landlord (as used herein “Affiliate” means a person or entity controlling, controlled by, or under common control with Landlord, and “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such controlled person or entity); (viii) interest on debt or amortization payments on any Mortgage to which Landlord is a party which affects the Project, and rental under any ground or underlying lease or leases (except to the extent the same may be made to pay or reimburse, or may be measured by, Real Property Taxes), and Landlord’s points, fees and legal costs and expenses associated with any such Mortgage or underlying lease; (ix) costs of Landlord’s or its agent’s general corporate or partnership overhead and general administrative expenses which are generally not chargeable as Operating Expenses by owners of similar properties located in the Carlsbad industrial submarket under comparable leases to similar tenants; (x) any compensation paid to clerks, attendants or other persons in commercial concessions, if any, operated by Landlord at the Project; (xi) without limiting anything contained in clause (i) above, rentals and other related expenses, if any, incurred in leasing air conditioning systems, elevators or other equipment ordinarily considered to be of a capital nature, except equipment which is used in providing janitorial, repair or maintenance services which is not affixed to the Project; (xii) expenses legal or otherwise, incident to enforcement by Landlord of the terms of any other lease or occupancy agreement for the Project or in performing the obligation of any other tenant under its lease in the Project; (xiii) to the extent Landlord is actually reimbursed (but subject to Landlord’s diligent efforts to obtain reimbursement to which Landlord is contractually entitled at Landlord’s sole cost and expense), any expense for which Landlord is otherwise entitled to be or is actually reimbursed or indemnified (including reimbursement or indemnification by an insurer, warrantor or condemner); (xiv) any costs or expenses that are expressly designated as a Landlord’s cost or Landlord’s expense elsewhere in this Lease; (xv) any costs, expenses, fees or penalties relating to Landlord’s compliance or noncompliance with any Hazardous Materials Laws, rules, ordinances or regulations, now or hereinafter in force or effect, including but not limited to any laws, rules, ordinances or regulations relating to the disposal, handling or clean-up of Hazardous Materials or remedial or restoration work.; and (xvi) costs incurred in advertising, promotional and leasing activities for the Project, and costs and expenses incurred pursuant to any lease, sublease, sale or other conveyance of any interest of Landlord in the Project. Landlord shall use commercially reasonable efforts to make payments for goods and services in a timely manner to obtain the maximum possible discount. In the calculation of items constituting Operating Expenses, it is understood that no item shall be charged more than once.

2.17 Real Property Taxes . All general property and improvement taxes and all forms of assessment, special assessment or reassessment, license fee, license tax, business license tax, commercial rental tax, in lieu tax, levy, charge, penalty (to the extent not imposed as a result of Landlord’s negligence) or similar imposition, imposed by any authority having the direct power to tax, including any city, county, state or federal government, or any school, agricultural, lighting, drainage or other improvement or special assessment district thereof, or any agency or public body, as against any legal or equitable interest of Landlord in the Premises and all improvements thereon and thereto as they presently exist or as they may be expanded, developed, constructed or altered from time to time, including but not limited to: (a) any tax on Landlord’s rent, right to rent or other income from the Premises or all or any portion of the Project or as against Landlord’s business of leasing the Premises, but specifically excluding Landlord’s federal, state or city income, franchise, corporate, personal property, stock transfer, revenues, inheritance or estate taxes; (b) any assessments, taxes, fees, levies or charges in addition to, or in substitution, partially or totally, for any assessment, tax, fee, levy or charge previously included within the definition of real property tax before adoption of Proposition 13 by the voters of the State of California in the June 1978 election, it being acknowledged by Tenant and Landlord that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services that were before Proposition 13 provided without charge to property owners or occupants; and (c) any assessment, tax, fee, levy or charge upon this transaction or any document to which Tenant is a party which is imposed on the creation or transfer of an interest or an estate in the Premises. It is the intention of Tenant and Landlord that all new and increased assessments, taxes, fees, levies and charges, and all similar assessments, taxes, fees, levies and charges be included within the definition of Real Property Taxes for the purposes of this Lease. Real Property Taxes for the first year of the Term shall be calculated as if the Premises

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and related improvements were fully assessed. If at any time during the Term the laws concerning the methods of real property taxation prevailing at the commencement of the Lease Term are changed so that a tax or excise on rents or any other tax, however described, is levied or assessed against Landlord as a substitution in whole or in part for any real property taxes, then Real Property Taxes shall include, but not be limited to, any such assessment, tax, fee, levy or charge allocable to or measured by the area of the Premises or the rent payable hereunder, including, without limitation, any gross income tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof. With respect to any assessments that may be levied against or upon the Premises, the Building or all or any portion of the Project and that under the laws then in force may be evidenced by improvement or other bonds, or may be paid in annual installments, there shall be included within the definition of Real Property Taxes with respect to any tax fiscal year only the amount currently payable on such tax, bond or assessment, including interest, for such tax fiscal year or the current annual installment for such tax fiscal year. Notwithstanding anything to the contrary set forth in this Lease, “Real Property Taxes” shall not include (i) any excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance or succession taxes, estate taxes, federal and state income taxes, and other taxes to the extent applicable to Landlord’s general or net income (as opposed to rents or receipts), (ii) taxes on tenant improvements in any space in the Project based upon an assessed level in excess of the assessed level for which Tenant is directly responsible under this Lease, or (iii) penalties incurred as a result of Landlord’s negligence, inability or unwillingness to make payments of, and/or to file any tax or informational returns with respect to, any real property taxes, when due. In the event Landlord receives a refund or other return of Taxes (including any award received as a result of Landlord’s successful protest of the amount of Taxes) for which Tenant previously paid, then such refunded amount (plus any interest corresponding to such amount to the extent received from the taxing authority, less Landlord’s costs incurred in procuring such refund) shall be applied to reduce the amount of Taxes for the Lease Year in which such refunded amount is received prior to calculating the actual Taxes for such Lease Year, or if received after the expiration or earlier termination of this Lease shall be refunded to Tenant within thirty (30) days following receipt of such refund from the taxing authority.

3. PREMISES .

3.1 Lease of Premises . In consideration of the rent and covenants set forth below, Landlord hereby leases the Premises to Tenant, and Tenant hires the Premises from Landlord, for the term, at the rental, and upon all of the conditions set forth herein. Except as otherwise provided herein, this Lease is subject to: (i) all covenants, conditions, restrictions, easements, mortgages, deeds of trust, rights of way, reciprocal easement agreements to which Landlord is a party which affect the Project and all other matters now or hereafter affecting the Project or the Premises; and (ii) all zoning laws, ordinances and building codes now or hereafter affecting the Project or the Premises. Landlord represents and warrants that no part of the Project or the Premises is subject to a leasehold interest.

3.2 Landlord’s Reserved Rights . Landlord reserves to itself the absolute rights, without interfering with Tenant’s quiet enjoyment of the Premises: (i) to the use of the roof, the exterior-surfaces of exterior walls and subterranean areas beneath the Premises, and (ii) to install, use, maintain and replace equipment, machinery, pipes, conduits and wiring located within the Premises which serve other parts of the Project, in a manner and in locations that do not unreasonably interfere with Tenant’s use of the Premises.

3.3 Condition of Premises . Tenant acknowledges that except to the extent expressly set forth in this Lease or in a written addendum or amendment hereto, neither Landlord nor its agents have made (i) any promise to alter, remodel or otherwise improve, or (ii) any representation or warranty with respect to the condition of, the Premises, the Building or any part of the Project or improvements thereon or therein. Tenant’s taking possession of the Premises shall be deemed acceptance of the Premises by Tenant, and shall be deemed conclusively to establish that the Premises are in good and satisfactory condition as of the date Tenant takes possession. Subject to the completion of any Landlord’s Work, Tenant accepts possession of the Premises in their current, “as is”, condition, and acknowledges that it has inspected the Premises before signing this Lease and is fully aware of the condition of the Premises. Notwithstanding the foregoing, and prior to Landlord’s Delivery of the Premises, Landlord shall inspect any existing HVAC system (consisting of any air distribution duct work, compressors and any other related components or equipment); electrical system (consisting of wall and floor outlets, fluorescent lighting and distribution panel[s]); and plumbing system (consisting of water supply, sinks, drains, restroom facilities, water heater[s] and sprinkler system, if any) collectively “Existing Utility Systems” located in or on the Premises to ensure that each Existing Utility System and any related components are in proper working order and condition. If one or more Existing Utility System does not have a remaining useful life of at least the initial Term of this Lease, each such system shall be replaced by Landlord prior to the Delivery of the Premises at landlord’s sole cost and expense and not as part of the initial Tenant improvements costs. In addition Landlord shall ensure that the Premises are thoroughly cleaned and free of all prior occupants and their personal property by the date of Delivery of the Premises.

3.4 Rights in Common Areas . Landlord grants to Tenant and to Tenant’s employees, invitees and licensees a non-exclusive license during the Term to use the Common Areas, subject to the terms and conditions of this Lease. Tenant acknowledges that others, including without limitation Landlord and other tenants of the Building and Project, and their respective employees, invitees and visitors, and other persons authorized by Landlord, will also be entitled to use the Common Areas. Without advance notice to Tenant and without any liability to Tenant in any respect, Landlord shall have the right to:

(a) Establish and enforce reasonable rules and regulations concerning the maintenance, management, use and operation of the Common Areas.

(b) Close off any of the Common Areas to the extent reasonably required in the opinion of Landlord and its counsel to prevent a dedication of any of the Common Areas or the accrual of any rights by any person or the public to the Common Areas, provided such closure does not deprive Tenant of the substantial benefit and enjoyment of the Premises, its parking rights and reasonable access to the Premises.

(c) Temporarily close any of the Common Areas for maintenance, alteration or improvement purposes.

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(d) Select, appoint or contract with any person for the purpose of operating and maintaining the Common Areas, subject to such terms and at such rates as Landlord deems reasonable and proper.

(e) Change the size, use, shape or nature of any portions of the Common Areas, provided such change does not deprive Tenant of the reasonable benefit and enjoyment of the Premises, its parking rights or reasonable access to the Premises. So long as Tenant is not thus deprived of the reasonable use and benefit of the Premises, Landlord will also have the right at any time to change the arrangement or location of, or both, or to regulate or eliminate the use of, any concourse, parking spaces, garage, or any elevators, stairs, toilets or other public conveniences in the Project, without incurring any liability to Tenant or entitling Tenant to any abatement of rent, and such action will not constitute an actual or constructive eviction of Tenant.

(f) Erect one or more additional buildings on the Common Areas, expand the existing buildings or other buildings to cover a portion of the Common Areas, convert Common Areas to a portion of the Building or other buildings, or convert any portion of such other buildings to Common Areas, provided that such conversion does not result in the reduction of Tenant’s parking rights or alter access to the Premises. Upon erection of any additional buildings or change in the Common Areas, the portion of the Project upon which buildings or structures have been erected will no longer be deemed to be a part of the Common Areas. In the event of any such changes in the size or use of the Common Areas of the Project, Landlord shall make an appropriate adjustment in the Building’s or any other buildings’ pro rata share of exterior Common Areas of the Project as appropriate, and a corresponding adjustment to Tenant’s Share of Operating Expenses.

3.5 Measurement of Premises . Landlord hereby represents and warrants that, absent any improvement or addition to the Premises during the Term or any extension thereto, the rentable area set forth in Section 1.1 above shall not increase during the term or any extension thereto.

4. TERM; DELIVERY OF PREMISES .

4.1 Term . The Term shall be for the number of months set forth at Section 1.5 above, beginning on the Commencement Date and ending on the Expiration Date. Notwithstanding the foregoing, if Delivery of the Premises has not occurred by the estimated date set forth in Section 1.6(c) above, then the Delivery of the Premises shall occur on the date that Landlord’s delivery obligations set forth in Section 3.3 above are satisfied. Landlord shall not be liable for any damage incurred by Tenant as a result of any delay in Delivery of the Premises, and this Lease shall not thereby become void or voidable during such period; provided, however that the Commencement Date shall be delayed as required for Tenant to have at least one hundred twenty (120) days to perform Tenant’s Work between the Delivery of the Premises and the Commencement Date.

4.2 Delivery of the Premises . Upon completion of Landlord’s Work, the parties shall jointly inspect the Premises. If any defects in Landlord’s Work exist at the time of such inspection, Tenant shall notify Landlord thereof in writing of such defects in accordance with the Punchlist Items list below; provided, however, that Delivery of the Premises to Tenant shall be delayed only if the existence of any such defects would materially adversely affect Tenant’s occupancy of the Premises, in which case the date of Delivery of the Premises shall be the date upon which Landlord notifies Tenant that such defects have been substantially corrected. Tenant shall notify Landlord of any defects in the condition of the Premises which are inconsistent with landlord’s delivery obligations (“Punchlist Items”) that do not impair Tenant’s ability to utilize the Premises for the purposes permitted hereunder within thirty (30) days after Tenant takes possession of the Premises, which Punchlist Items shall be repaired or corrected by Landlord, at Landlord’s sole cost and expense, no later than thirty (30) days after notice thereof (with the Commencement Date delayed day-for-day for any repairs or corrections that exceed such 30-day period). Landlord makes no representation or warranty as to the nature, quality, or suitability for Tenant’s business of the Tenant Improvements, the Project, the Building, or the Premises, and Tenant shall have no rights against Landlord by reason of such matters or any claimed deficiencies therein. Notwithstanding the foregoing or anything to the contrary contained herein, Landlord shall, at its sole cost and expense (and as not part of Operating Expenses, other than as set forth in Section 8.4 herein) and throughout the initial Term and any option term (if applicable), repair any structural and/or latent design or construction defects in the original construction of the Project of which Landlord has notice or that Landlord discovers. If Tenant shall fail to provide Landlord with a list of Punchlist Items within the period set forth above, Landlord’s compliance with its delivery obligations shall be deemed to have been satisfied on the date the Delivery of the Premises shall have occurred.

4.3 Termination for Non-Commencement . Notwithstanding the foregoing, in the event that Delivery of the Premises has not occurred within six months after the Commencement Date set forth in Section 1.6(a), then for a period of thirty (30) days after the expiration of such six month period either party not in default hereunder may cancel and terminate this Lease, without any liability to the other party, upon written notice to the other party; provided, however, that if such written notice of termination is not delivered by either party within the 30-day period, the foregoing right to terminate this Lease shall itself terminate and be of no further force or effect.

4.4 Memorandum of Commencement Date . Following the Commencement Date, Landlord shall prepare and forward to Tenant two copies of a written Memorandum of Commencement Date, signed by Landlord, confirming the Commencement Date. Within ten (10) business days after receipt thereof, Tenant shall sign and return one copy of the Memorandum of Commencement Date, indicating either Tenant’s agreement with the matters set forth therein or any areas of disagreement. Tenant’s failure to return a copy of the Memorandum of Commencement Date within such ten-business day period shall be conclusively deemed Tenant’s agreement with all matters set forth therein. Any dispute or disagreement on Tenant’s part as to the Commencement Date set forth in such memorandum shall, at the election of either party, be submitted to final, binding arbitration in San Diego, California under the Commercial Arbitration Rules of the American Arbitration Association.

4.5 Early Access . For the purpose of Tenant completing Tenant’s Work, as set forth in Exhibit B, and subject to the terms and conditions of this Section 4.5, Landlord agrees to grant Tenant (or Tenant’s designated contractor or service person) access to the Premises prior to the Delivery of the Premises as long as such access does not interfere with or delay the performance of Landlord’s work required to satisfy the requirements for the Delivery of the Premises (the “Early Access Period”). Any delays in the

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completion of the Landlord’s work required for the satisfaction of the Delivery of the Premises conditions set forth in Section 3.3 above attributable to Tenant’s activities in the Premises during the Early Access Period shall accelerate the Delivery of the Premises and the Commencement Date by one day for each day of such Tenant delays. Unless Landlord otherwise agrees thereto in writing, Tenant shall have no right to occupy all or any part of the Premises prior to Delivery of the Premises. Such Early Access Period shall not advance the Commencement Date or the Expiration Date, but such access shall be subject to all provisions of this Lease, excluding payment of monthly Base Rent, Tenant’s Share of Operating Expenses and Tenant’s payment of any applicable utility charges for such Early Access Period preceding the Delivery of the Premises. From the Delivery of the Premises until the Commencement Date (the “Early Occupancy Period”), Tenant shall have unrestricted access to the Premises in order to perform Tenant’s Work. Tenant shall have no right to occupy all or any part of the Premises during the Early Occupancy Period other than to perform the Tenant’s Work. Such Early Occupancy Period shall not advance the Commencement Date or the Expiration Date; but such access shall be subject to all provisions of this Lease, excluding payment of monthly Base Rent, Tenant’s Share of Operating Expenses (but subject to Tenant’s payment of any applicable utility charges for such Early Occupancy Period preceding the Commencement Date). Tenant’s early access to and occupancy of the Premises shall also be subject to the following terms and conditions:

(a) Prior to any such access, Tenant shall have delivered to Landlord a certificate(s) of insurance for all insurance required to be maintained by Tenant hereunder, as further described in Section 11.

(b) Tenant’s access to the Premises during the Early Access Period shall not interfere with the completion of Landlord’s Work (if any).

(c) Without limiting anything contained herein, Tenant’s access and completion of Tenant’s Work and any occupancy of the Premises prior to the Commencement Date shall be subject to Tenant’s indemnification obligations set forth in Sections 8.6(b), 12.2, 20.3, 23.19 and elsewhere herein.

5. RENT .

5.1 General . From and after the Commencement Date, Tenant agrees to pay Landlord, in advance, on the first day of each and every calendar month during the Term, Base Rent and Additional Rent as specified in this Section. Payment of all such rent shall be without offset or demand, shall be in lawful money of the United States of America and shall be made at the address set forth for Landlord herein or at such other place as Landlord may direct.

5.2 Base Rent . Base Rent shall initially be in the amount per month set forth in Section 1.8, subject to abatement of a portion thereof as provided in Section 25 below.

5.3 Annual Adjustment to Base Rent . Base Rent shall be increased each Lease Year during the Term in accordance with the schedule set forth in Section 1.10.

5.4 Operating Expenses . The parties intend that, subject only to the specific exceptions set forth herein, this Lease be absolutely net to Landlord. Accordingly, in addition to Base Rent and subject to the provisions of this Section, Tenant shall pay, as Additional Rent, Tenant’s Share of Operating Expenses incurred by Landlord during each calendar year of the Term, pursuant to the following terms and conditions:

(a) Landlord shall provide to Tenant, at or before the Commencement Date, a good faith estimate of Tenant’s Share of Operating Expenses that Landlord anticipates will actually be incurred for the calendar year in which the Commencement Date occurs. Landlord shall also provide to Tenant, as soon as possible following the first day of each succeeding calendar year, a good faith estimate of Tenant’s Share of Operating Expenses with respect to such succeeding calendar year of the Term.

(b) Each annual estimate of Tenant’s Share of Operating Expenses determined by Landlord pursuant to this Section shall be divided into twelve (12) equal monthly installments. Tenant shall pay to Landlord such monthly installment of Tenant’s Share of Operating Expenses with each monthly payment of Base Rent. In the event the estimated amount of Tenant’s Share of Operating Expenses has not yet been determined for any calendar year, Tenant shall pay the monthly installment in the estimated amount determined for the preceding calendar year until the estimate for the current calendar year has been provided to Tenant, at which time Tenant shall pay any shortfall for the preceding months of the calendar year and shall thereafter make the monthly installment payment in accordance with the current estimate.

(c) Within sixty (60) days following the end of each calendar year of the Term, and within sixty (60) days following the Expiration Date, Landlord shall determine and provide to Tenant a statement setting forth the amount of Operating Expenses actually incurred with respect to such calendar year (or portion of the calendar year occurring prior to the Expiration Date). In the event that Tenant’s Share of such actual Operating Expenses exceeds the sum of the monthly installments actually paid by Tenant for such calendar year, Tenant shall pay the difference to Landlord, within thirty (30) days following receipt of such statement. In the event the sum of such installments exceeds Tenant’s Share of such Operating Expenses actually incurred, the difference shall be applied as a credit to future installments of Tenant’s Share of Operating Expenses, except that the amount of any overpayment for that portion of the calendar year preceding the Expiration Date shall be delivered to Tenant along with such statement.

(d) Upon written request of Tenant, Landlord shall provide an accounting of the Operating Expenses for the preceding calendar year. Landlord shall keep at its home office in the County of San Diego, full, accurate and separate books of account with backup documentation of Operating Expenses for a period of three full years after the end of each calendar year, which Tenant shall have the right to examine and copy at no expense to Landlord, at reasonable times and upon reasonable notice. Tenant shall have the right, upon twenty (20) days’ prior notice to Landlord, not more frequently than annually and at Tenant’s sole cost and expense, to conduct an audit of Landlord’s books and records regarding such Operating Expenses to confirm the accuracy of Landlord’s accounting; provided, however, that such audit shall not unreasonably interfere with the conduct of Landlord’s business.

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5.5 Late Charges . Tenant acknowledges that late payment by Tenant to Landlord of Base Rent or Additional Rent due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which is extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Landlord by the terms of any mortgage or deed of trust covering the Premises. Therefore, if any payment of Base Rent or Additional Rent is not paid within five (5) days after the date due, Tenant shall pay to Landlord ten percent (10%) of the amount due or Two Hundred Fifty Dollars ($250.00), whichever is greater; provided that upon the first such failure in any Lease Year such late charge shall not accrue until five (5) days after Tenant’s receipt of notice that the overdue payment was not received when due and a statement that a late charge will be due five (5) days from the delivery of such notice if the overdue amount is not paid. The parties agree that such late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of the late payment by Tenant. The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord’s other rights and remedies hereunder or at law and shall not be construed as limiting Landlord’s remedies in any manner.

6. SECURITY DEPOSIT . Subject to Tenant’s right to deliver one or more Letters of Credit to Landlord in accordance with Section 27 below, Tenant shall pay to Landlord, within five business days of the date that the Premises is delivered to the Tenant, a security deposit in the amount (or if a security deposit is currently held by Landlord, then any additional amount as the case may be) set forth at Section 1.11 ( “Security Deposit” ). Subject to the provisions of Section 27, the Security Deposit shall be held by Landlord as security for the faithful performance by Tenant of all of the terms, covenants and conditions of this Lease to be kept and performed by Tenant. If Tenant defaults with respect to any provision of this Lease, including, but not limited to, the provisions relating to the payment of rent, Landlord may (but shall not be required to) use, apply or retain all or any part of the Security Deposit for the payment of any rent or any other sum in default, or for the payment of any other amount which Landlord may spend or become obligated to spend by reason of Tenant’s default or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant’s default. If any portion of the Security Deposit is so used or applied, Tenant shall, upon demand therefor, deliver cash to Landlord in an amount sufficient to restore the Security Deposit to its original amount, and Tenant’s failure to do so shall be a material breach of this Lease. Landlord shall not be required to keep the Security Deposit separate from its general funds, and Tenant shall not be entitled to interest thereon. If Tenant shall fully and faithfully perform every provision of this Lease to be performed by it, the Security Deposit or any balance thereof shall be returned to Tenant (or at Landlord’s option, to the last assignee of Tenant’s interests hereunder) at the expiration of the Term, provided that Landlord may retain the Security Deposit until such time as any amount due from Tenant under this Lease has been determined and paid in full.

7. USE .

7.1 Permitted Use . The Premises shall be used and occupied only for the purposes and activities set forth in Section 1.14 above, and for no other uses or purposes whatsoever. If any governmental license or permit shall be required for the proper and lawful conduct of Tenant’s business or other activity carried on in the Premises, or if a failure to procure such a license or permit might or would in any way affect Landlord or the Project, then Tenant, at Tenant’s expense, shall (i) duly procure and thereafter maintain such license or permit and submit the same for inspection by Landlord, (ii) install and pay for any improvements, changes or alterations in the Premises, required by any governmental authority, as a result of its proposed use of the Premises or its manner of operation, and (iii) at all times, comply with the requirements of each such license or permit. Tenant warrants that it has investigated whether its proposed use of the Premises and its proposed manner of operation will comply with, and Tenant assumes the risk that its proposed use of the Premises and its proposed manner of operation are and will continue to be in compliance with, all applicable governmental land use approvals, laws and regulations, including without limitation all zoning laws regulating the use of and enjoyment of the Premises. Tenant agrees that under no circumstances shall Tenant be released in whole or in part from any of its obligations under this Lease as a result of any governmental authority’s disallowing or limiting Tenant’s proposed use of the Premises or its manner of operation.

7.2 Condition of Premises . Landlord warrants to Tenant, but without regard either to any Tenant’s Work or to the use for which Tenant will use the Premises, that as of the date of Delivery of the Premises, neither the Premises nor Tenant’s manufacturing, storage and distribution of medical devices from the Premises violates the Declaration or, any other covenants or restrictions of record in effect on the date of this Lease, or the laws, rules or regulations enforced by any governmental authority. In the event it should be determined that this warranty has been violated, then after written notice from Tenant, Landlord shall promptly, at its sole cost and expense, rectify any such violation. In the event Tenant does not give Landlord any such written notice of violation within three (3) months after the date that Tenant has been notified by a governmental authority that the Premises is not in compliance with an applicable law rule or regulation, the correction of such violation shall thereafter be Tenant’s obligation, to be performed at Tenant’s sole cost and expense. The foregoing warranty shall be of no force or effect if, prior to the date of this Lease, Tenant was the owner or occupant of the Premises, in which event Tenant shall correct any such violation, whenever determined to exist, at Tenant’s sole cost and expense.

7.3 Compliance With Requirements . Subject to Section 7.2 above, Tenant shall, at Tenant’s expense, promptly comply with all applicable statutes, ordinances, rules, regulations, and requirements of any fire insurance underwriters or rating bureaus, now in effect or which may hereafter come into effect during the Term, whether or not they reflect a change in policy from that now existing, relating in any manner to the Premises and the occupation and use by Tenant of the Premises. Tenant shall not use or permit the use of the Premises in any manner that will tend to create waste or a nuisance or shall tend to disturb other occupants of the Project. Without limiting the generality of the foregoing, Tenant shall, at its sole cost and expense, comply promptly with all Hazardous Materials Laws and with all environmental laws and ordinances applicable to the conduct of Tenant’s business, including all air quality and air pollution regulations of the regional air pollution control district. If at any time it reasonably appears to Landlord that Tenant is not fulfilling its obligations under this Section, Landlord may cause to be performed, at Tenant’s sole cost, an audit or inspection of the Premises to evaluate Tenant’s compliance herewith.

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7.4 Compliance With Americans With Disabilities Act . The parties acknowledge that the design and construction of certain areas of the Building and/or the Common Areas and Premises may not presently be in compliance with Title III of the Americans With Disabilities Act ( “ADA” ) and other applicable laws and regulations that relate to access by the disabled or handicapped. For any non-compliance that exists prior to the Commencement Date, Landlord shall be responsible, at its sole expense, for any necessary alterations or improvements to the Building or the Common Areas to the extent necessary to correct any such non-compliance. Landlord agrees that no cost or expense related to such alterations or improvements shall be included in Operating Expenses. After the Commencement Date, Tenant shall be responsible for compliance with the ADA and related statutes with respect to any alterations or improvements to the Premises made by Tenant and the operation of any businesses conducted from the Premises; provided, however, that any design and construction items that were not in compliance with ADA and other applicable laws and regulations as of the Commencement Date shall continue to be Landlord’s responsibility. In the event of any changes to the ADA or other applicable statutes, or any rules or regulations promulgated pursuant thereto, that become effective after the Commencement Date of this Lease, Tenant shall be responsible, at its sole expense, for any necessary alterations or improvements to the Premises, and Landlord shall be responsible for any necessary alterations or improvements to the Building or any Common Areas; provided, however, that Landlord’s costs and expenses incurred in connection with any such alterations or improvements shall be conclusively deemed to be Operating Expenses, notwithstanding the classification of such costs and expenses as capital items and shall be amortized in accordance with generally accepted accounting practice; provided, however, that Landlord shall not include in Operating Expenses amortization of any ADA cost incurred solely for improvements to the leased premises of another tenant in the Project.

7.5 Rules and Regulations . Tenant shall at all times comply with the Declaration and with the rules and regulations for the Project. A copy of the rules and regulations in existence on the date of this Lease is attached hereto as Exhibit C, but Landlord reserves the right to reasonably amend the rules and regulations at any time by giving notice of amendment to Tenant, if Landlord determines such amendments to be to the best interests of the Building and its tenants. Tenant shall not be bound by any such amended rules and regulations until Tenant has received a written copy thereof. Landlord agrees that the rules and regulations shall be enforced in a uniform and non-discriminatory manner; provided, however, that Landlord shall not be liable to Tenant for Landlord’s failure to enforce the rules and regulations against any other tenants of the Project.

8. MAINTENANCE, REPAIRS AND ALTERATIONS .

8.1 Tenant’s Obligations .

(a) Tenant shall keep and maintain in good, sanitary order, condition, and repair (including replacement of parts and equipment if necessary) the non-structural portions of the Premises and every part thereof and any and all appurtenances thereto wherever located, including, without limitation, the interior surfaces of the exterior wall, the exterior and interior portion of all doors, door frames, door checks, windows (including window sashes, casements and frames), plate glass, storefront, Tenant’s signs, all plumbing and sewage facilities within the Premises (including free flow up to the main sewer line), fixtures, heating and air conditioning, and electrical systems exclusively serving the Premises (whether or not located in the Premises), fire sprinkler system, walls, floor and ceilings, and all other repairs, replacements (exclusive of replacements of capital items), renewals and restorations, interior and exterior, ordinary and extraordinary, foreseen and unforeseen, and all other work performed, and additions, alterations, and improvements installed by or on behalf of Tenant. Any glass in the Premises broken during the Term shall promptly be replaced by Tenant with glass of the same quality, size and kind. Subject to force majeure delays, if Tenant shall fail to replace same within seventy-two (72) hours after such glass is broken, Landlord shall have the right, but shall not be obligated, to replace such glass, in which event Tenant shall, promptly upon demand therefor by Landlord, reimburse Landlord for expenses incurred by Landlord in connection therewith.

(b) Landlord shall maintain the HVAC system of the Premises through a maintenance contract which will be procured by Landlord, and shall be subject to (i.e. not duplicative of) the manufacturer’s standard warranty for the HVAC system. Tenant hereby covenants and agrees that if, in accordance with Section 3.3, Landlord installs new heating, ventilating and air conditioning units as part of Landlord’s Work which have a warranty for not less than five (5) years on such HVAC system from the manufacturer thereof and assigns such warranty to Tenant (or agrees to enforce same for the benefit of Tenant), Tenant shall reimburse Landlord, upon demand and as Additional Rent, for Landlord’s costs of the HVAC maintenance contract (or Tenant’s equitable share of such costs, if such maintenance contract covers HVAC system(s) not serving the Premises). The parties acknowledge that throughout the initial Term and any Extension Term, subject to warranty coverage of such parts and components, which shall be promptly submitted and diligently asserted by Landlord, Tenant shall be responsible for payment to Landlord within thirty (30) days following Landlord written request and an invoice providing reasonable detail of the repair and part or component affected, as Additional Rent, of any part or component that may need repair or replacement for the HVAC System(s) which serve only the Premises.

(c) Tenant shall, at Tenant’s sole cost and expense, comply with all laws, rules, orders, ordinances, directions, regulations and legal requirements of federal, state, county or municipal governmental authorities now or hereafter affecting or applying to the Premises, including, without limitation, the Americans With Disabilities Act.

8.2 Condition on Termination . On the last day of the Term, or on any sooner termination, Tenant shall surrender the Premises to Landlord in the same condition as received, subject to ordinary wear and tear, damage due to casualty, loss or alteration due to casualty, and any alterations to the Premises made by Landlord pursuant to its rights under Section 3 above, or alterations made as part of Tenant’s Work, as required to comply with applicable laws or otherwise not required to be removed by landlord in accordance with Section 8.6 below, “warehouse clean” and free of debris. Any damage or deterioration of the Premises shall not be deemed ordinary wear and tear if the same could have been prevented by good maintenance practices. Tenant shall repair any damage to the Premises occasioned by the installation or removal of Tenant’s trade fixtures, alterations, furnishings and equipment, and shall leave all air lines, power panels, electrical distribution systems, lighting fixtures, HVAC systems, plumbing and fencing in good operating condition.

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8.3 Landlord’s Rights . If Tenant fails to perform Tenant’s obligations under Section 8.1 or 8.2 or under any other provision of this Lease, Landlord may enter the Premises after five (5) business days’ prior written notice to Tenant (except in the case of emergency, in which case no notice shall be required) and perform such obligations on Tenant’s behalf and put the Premises in good order, condition and repair, and the cost thereof together with interest thereon from the date incurred at the maximum rate then allowed by law shall be due and payable as Additional Rent to Landlord together with Tenant’s next Base Rent installment; provided that if Tenant is reasonably attempting to perform such obligations and such performance cannot be completed in a commercially-reasonable manner during such five-business day period, Tenant shall have such additional time as is reasonably required to perform such obligations.

8.4 Landlord’s Obligations . Except for any Landlord’s Work set forth in Exhibit B and Sections 13 and 14 relating to damage and condemnation, the parties intend that Landlord shall have no obligation whatsoever to repair and maintain the non-structural components of the Premises or the equipment therein. Notwithstanding the foregoing, Landlord shall keep in good condition and repair the foundations, exterior walls, structural condition of interior bearing walls, and roof of the Building (and to keep all of the foregoing watertight at all times), as well as operate, maintain and repair all Common Areas of the Project in a first class manner comparable to other Class A industrial/office projects in the Carlsbad market, and all costs and expenses incurred by Landlord in connection therewith shall be included within Operating Expenses, subject to the exclusions contained in Section 2.16 above. Landlord shall have no obligation to make repairs under this Section until a reasonable time after receipt of written notice from Tenant of the need for such repairs.

8.5 Waiver; Self Help . Subject to Tenant’s self help rights expressly provided in this Section 8.5, Tenant expressly waives all rights to make repairs at the expense of Landlord or deduct any amounts from rent as provided in any statute or law in effect during the Term of this Lease, including its rights under the provisions of §1941 and §1942 of the C IVIL C ODE of the State of California. Notwithstanding any provision in this Lease to the contrary, if Landlord shall fail to commence any repair obligations required under Section 8.4 above within thirty (30) days following Tenant’s written request for such repairs and thereafter complete such repairs with commercially reasonable due diligence, then Tenant may elect to make such repairs by complying with the following provisions of this 8.5. Before making any such repair, and following the expiration of the applicable period set forth above, Tenant shall deliver to Landlord a notice for the need for such repair (“Self Help Notice”), which notice shall specifically advise Landlord that Tenant intends to exercise its self-help rights hereunder. Should Landlord fail, within five (5) business days following receipt of the Self-Help Notice (or within two (2) business days following written notice in the event of necessary emergency repairs), to commence the necessary repair (or to make other reasonable arrangements), then Tenant shall have the right to make such repair on behalf of Landlord so long as such repair is performed in strict compliance with all applicable laws and restrictions of record and the total cost of such repair does not exceed an amount equal to two (2) months of Tenant’s then-current Base Rent. Any sums expended by Tenant pursuant to the provisions of this Paragraph 8.5 without Landlord’s express written prior consent shall be at Tenant’s risk. Landlord agrees that Tenant will have access to areas of the Building outside the Premises to the extent necessary to perform the work contemplated by this Section 8.5. In the event Tenant properly takes such action in accordance with this Section 8.5, Tenant may utilize the services of any qualified contractor which normally and regularly performs similar work in comparable buildings in the area of the Project. Tenant shall provide Landlord with a reasonably detailed invoice together with reasonable supporting evidence of the costs reasonably and actually incurred in performing such repairs. Landlord shall either reimburse Tenant for the reasonable costs of such repairs plus a fifteen percent (15%) administration fee within thirty (30) days following receipt of Tenant’s invoice for such costs or deliver a written objection stating with specificity the reasons Landlord disputes Tenant’s actions or the costs incurred. If Landlord delivers to Tenant, within such thirty (30) day period, a written objection to the payment of such invoice, setting forth Landlord’s reasons for its claim that such action did not have to be taken by Landlord pursuant to the terms of this Lease or that the charges are excessive (in which case Landlord shall pay the amount it contends would not have been excessive if the only objection is to the costs incurred), then Tenant shall not be entitled to offset any amount from rent, but as Tenant’s sole remedy, the dispute shall be resolved by arbitration in accordance with Section 28 of this Lease. Tenant shall be responsible for obtaining any necessary governmental permits before commencing the repair work. Tenant shall be liable for any damage, loss or injury resulting from said work.

8.6 Alterations and Additions .

(a) Except as provided in paragraph 8.6(d) below, Tenant shall not, without Landlord’s prior written consent which shall not be unreasonably withheld, make any alterations, improvements, additions, or Utility Installations in, to or about the Premises. Tenant shall make no change or alteration to the exterior of the Building without Landlord’s prior written consent, which consent may be withheld for any reason in Landlord’s sole discretion and which may at Landlord’s discretion be conditioned upon Tenant’s providing Landlord, at Tenant’s sole cost and expense, a lien and completion bond in an amount equal to one and one-half (1  ¹ / 2 ) times the cost of the work. As used in this Section, the term “Utility Installations” shall mean carpeting, window coverings, air lines, power panels, electrical distribution systems, lighting fixtures, space heaters, air conditioning, plumbing and fencing. Landlord may require at the time of giving its consent to any alterations, improvements, additions or Utility Installations to the Premises requested by Tenant that Tenant remove, prior to the expiration of the Term, any or all of such requested alterations, improvements, additions or Utility Installations (provided that Tenant shall not be required to remove any alterations, improvements, additions or Utility Installations that are made by Tenant as part of the original Tenant Improvements), and following such removal Tenant shall repair any damage to the Premises or the Common Areas caused by such removal. With the exception of Cosmetic Alterations (as defined in Section 8.6(d) below), should Tenant make any alterations, improvements, additions or Utility Installations without the prior approval of Landlord, Landlord may, at any time during the Term of this lease, require that Tenant remove any or all of the same.

(b) Except for improvements to be accomplished by Landlord at its expense, if any, Tenant shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Tenant at or for use in the Premises, which claims are or may be secured by any mechanic’s or materialmen’s lien against the Building or any interest therein. Tenant shall give Landlord not less than ten days’ notice prior to the commencement of any work in the Premises, and Landlord shall have the right to post notices of non-responsibility in or on the Premises or the Building as provided by law. If Tenant shall, in good faith, contest the validity of any such lien, claim or demand, then Tenant shall, at its sole expense, defend itself and Landlord against the same and shall pay and satisfy any adverse judgment that may be rendered thereon before the enforcement thereof against the Landlord or the Building, upon the

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condition that if Landlord shall require, Tenant shall furnish to Landlord a surety bond satisfactory to Landlord in an amount equal to one and one-half (1  ¹ / 2 ) times the amount of such contested lien, claim or demand, indemnifying Landlord against liability for such claim or lien and for all costs of defense thereof, of obtaining the release of any lien, and of making the Building free from the effect of such lien or claim. In addition, Landlord may require Tenant to pay Landlord’s attorneys’ fees and costs in participating in such action if Landlord shall decide it is in Landlord’s best interest to do so. In any event, Landlord may pay the lien claim prior to the enforcement thereof, in which event Tenant shall reimburse Landlord in full, including attorneys’ fees for any such expense, as Additional Rent, with the next due rents.

(c) All alterations, improvements, additions and Utility Installations (exclusive of all trade fixtures of Tenant) which may be made on the Premises, shall be the property of Landlord and shall remain upon and be surrendered with the Premises at the expiration of the Lease term, unless Landlord requires their removal as a condition contained in Landlord’s written consent. Notwithstanding the provisions of this Section 8.6, Tenant’s machinery and equipment (other than Utility Installations), other than that which is affixed to the Premises so that it cannot be removed without material damage to the Premises or the Building, shall remain the property of Tenant and may be removed by Tenant subject to the provisions of Section 8.2.

(d) Notwithstanding anything to the contrary contained herein, Tenant may make changes to the Premises (the “Pre-Approved Alterations”) without Landlord’s consent, provided that the aggregate cost of any such Pre-Approved Alterations does not exceed (i) Twenty-Five Thousand and No/100 Dollars ($25,000.00) per work of alteration, or (ii) Seventy-Five Thousand and No/100 Dollars ($75,000.00) in the aggregate in any twelve (12) month period, and further provided that such Pre-Approved Alterations do not (i) require any structural or other substantial modifications to the Premises, (ii) require any changes to, nor adversely affect, the systems and equipment of the Building, and (iii) affect the exterior appearance of the Building. Tenant shall give Landlord at least ten (10) business days prior notice of such Pre-Approved Alterations, which notice shall be accompanied by reasonably adequate evidence that such changes meet the criteria contained in this paragraph 8.6(d). Unless Tenant requests Landlord’s determination of whether such Pre-Approved Alterations be removed upon Tenant’s surrender of the Premises at the time such alterations are made, and Landlord waives the requirement for their removal at the time such request is made, such Pre-Approved Alterations shall be removed as part of Tenant’s surrender obligations.

9. TAXES .

9.1 Real Property Taxes . Landlord shall pay all Real Property Taxes with respect to the Building and the Project, which shall be included in Operating Expenses. If the Premises are separately assessed, or included within an assessor’s parcel that does not encompass the entire Project, Landlord shall adjust Tenant’s Share of Operating Expenses as it relates to Real Property Taxes, to reflect the proportion between the area of the Premises and the total area of the assessor’s parcel encompassing the Premises. Tenant may, upon the receipt of prior written approval of Landlord, such approval not to be unreasonably withheld, contest any Real Estate Taxes against the Project and attempt to obtain a reduction in the assessed valuation of the Project for the purpose of reducing any such tax assessment. In the event Landlord approves, and upon the request of Tenant, but without expense or liability to Landlord, Landlord shall cooperate with Tenant and execute any document which may be reasonably necessary and proper for any proceeding. If a tax reduction is obtained, there shall be a subsequent reduction in Tenant’s Real Estate Taxes for such year, and any excess payments by Tenant shall be refunded by Landlord, without interest, when all refunds to which Landlord is entitled from the taxing authority with respect to such year have been received by Landlord. In the event Landlord desires to contest any Real Estate Taxes, Tenant agrees to cooperate with Landlord and execute any document which may be reasonably necessary and proper for any proceeding, at no cost to Tenant. Tenant shall not be liable for increases in Real Estate Taxes attributable to additional improvements to expand the rentable area of the Project.

9.2 Personal Property Taxes . Tenant shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Tenant contained in the Premises or elsewhere. When possible, Tenant shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Landlord. If any of Tenant’s said personal property shall be assessed with Landlord’s real property, Tenant shall pay to Landlord the taxes attributable to Tenant within ten days after a receipt of a written statement setting forth the taxes applicable to Tenant’s property.

10. UTILITIES . Landlord represents that the Premises is improved with separately metered connections for the distribution of water, gas and electricity to the Premises, and such systems and the sanitary sewer systems of the Premises are in good working order. Tenant shall be solely responsible for, and shall arrange for, any costs associated with Tenant’s required upgrades to the existing utilities systems of the Premises and Tenant shall promptly pay all charges for any utility used upon or furnished to the Premises. In the event any such utility is not separately metered from Common Area utilities, Tenant shall pay its share of the cost thereof, as equitably determined by Landlord, as Additional Rent, as part of Operating Expenses. In this regard, Tenant acknowledges and agrees that if Tenant’s use of the Premises results in a disproportionately heavy use of water or other commonly metered utilities, then Landlord, at Landlord’s discretion, and in a reasonable and equitable manner, may adjust Tenant’s Share of Operating Expenses to reflect such disproportionately heavy use. Landlord does not warrant that any services Landlord supplies will not be interrupted, e.g., because of accidents, repairs, alterations, improvements or any reason beyond the reasonable control of Landlord, and no such interruption (unless attributable to Landlord’s sole active negligence or willful misconduct) shall: (i) be considered an eviction or disturbance of Tenant’s use and possession of the Premises; (ii) entitle Tenant to terminate this Lease; (iii) make Landlord liable to Tenant for damages; (iv) abate Base Rent, Additional Rent or any other sums due hereunder; or (v) relieve Tenant from performing its obligations hereunder.

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11. INSURANCE .

11.1 Liability Insurance–Tenant . Prior to the earlier of the Commencement Date or Tenant’s occupancy of the Premises, Tenant, at its own expense, shall obtain from and shall thereafter keep in force commercial general liability insurance applying to the use and occupancy of the Premises, or any areas adjacent thereto, and the business operated by Tenant or any other occupant on the Premises. Such insurance shall:

(a) be with a good and solvent insurance company authorized to do business in the State of California, having a minimum rating of A-:X in Best’s Insurance Guide;

(b) include broad form contractual liability coverage specifically insuring all of Tenant’s indemnity obligations under this Lease;

(c) have a minimum combined single limit of at least $1,000,000 for any one occurrence and $2,000,000 aggregate;

(d) be written to apply to all bodily injury, property damage, personal injury and other covered loss, however occasioned, occurring during the policy term, and afford coverage for all claims based on acts, omissions, injury and damage, which claims occurred or arose (or the onset of which occurred or arose) in whole or in part during the policy period;

(e) provide for severability of interests or a cross-liability provision or endorsement;

(f) be evidenced by a certificate of insurance naming Landlord as additional insured and provide that coverage is primary and non-contributing with any insurance carried by Landlord; and

(g) be endorsed to delete any liquor liability exclusion if Tenant will sell liquor on the Premises.

(h) include an endorsement stating that the policy limits apply “per location” if Tenant has more than one location;

(i) be endorsed to provide that it shall not be canceled without thirty (30) days prior written notice to Landlord.

(j) In addition, Tenant shall maintain automobile liability insurance with limits of not less than $1,000,000 per occurrence for any owned, non-owned or hired automobile exposures of the Tenant, if applicable.

Such insurance may be furnished by Tenant under a blanket policy, provided that such blanket policy references the Premises and guarantees that a minimum limit equal to the insurance amounts required by this Lease will be available specifically for the Premises. Deductible amounts under Tenant’s insurance policies shall be and remain the obligation of the Tenant, and Tenant agrees to use commercially reasonable efforts to ensure that no policy of insurance under this Section 11.1 shall provide for a deductible in excess of Ten Thousand Dollars ($10,000). The policy limits herein specified shall be increased from time to time upon written demand from Landlord, if circumstances reasonably justify such increases. Tenant shall furnish Landlord with a certificate of such insurance prior to the first to occur of the Commencement Date or Tenant’s Occupancy of the Premises, and, whenever requested, shall satisfy Landlord that such policy is in full force and effect. In the event Tenant fails to provide or keep in force any of the insurance required pursuant to this Section 11, then Landlord, in its discretion and without waiving any of its rights under this Lease, may provide such insurance, in which event the cost thereof shall be payable by Tenant to Landlord as Additional Rent on the first day of the calendar month immediately following demand therefor from Landlord.

11.2 Liability Insurance–Landlord . Landlord shall obtain and keep in force during the Term commercial general liability insurance, insuring against liability for injury to or death of persons and loss of or damage to property occurring in or on the Common Areas. Landlord’s liability insurance shall be in amount of not less than $2,000,000 combined single limit per occurrence for bodily and personal injury and property damage.

11.3 Property Insurance–Landlord .

(a) Landlord shall maintain in full force and effect at all times a standard policy or policies insuring against “all risk” perils (also known as “special perils”) covering the Building and other improvements owned by Landlord in the Project in an amount at least sufficient to avoid the effects of coinsurance provisions of the policy or policies ( i.e. , not less than ninety percent [90%] of the actual replacement cost of the Building and other improvements, without deduction for depreciation and excluding foundations, excavation costs and the cost of underground flues, pipes and drains, if such costs are properly excludable under coinsurance requirements). Such insurance shall be subject to commercially-reasonable deductible amounts, and shall include (i) a standard form of lender’s loss payable endorsement, issued to the holder or holders of a mortgage or deed of trust secured in whole or in part by the Building and the other property on which the insured improvements are located; (ii) at Landlord’s sole option, coverage for flood or earthquake or both; and (iii) rental income insurance equal to Base Rent and Operating Expenses for up to one year. In addition, Landlord shall obtain and keep in force during the Term such other insurance as Landlord deems advisable.

(b) Tenant shall pay for any increase in the property insurance of the Building or such other building or buildings if the increase is caused by Tenant’s acts, omissions, use or occupancy of the Premises. Tenant shall not do or permit to be done anything which shall invalidate the insurance policies referred to in this Section 11.3. If Tenant does or permits anyone under Tenant’s control to do anything in the Premises or about the Project in violation of this Lease, or if Tenant’s unusual activities or occupancy requirements in the Premises, and any such activities increase the cost of the insurance policies referred to in this Section 11.3, then Tenant shall within thirty (30) days after demand therefor by Landlord reimburse Landlord for any additional premiums attributable to any act or omission or operation of Tenant causing such increase in the cost of insurance. Landlord shall deliver to Tenant a written statement setting forth the amount of any such insurance cost increase and showing in reasonable detail the manner in which it has been computed.

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11.4 Property Insurance–Tenant . Tenant shall pay for and shall maintain in full force and effect at all times, a standard policy insuring against “all risk” perils (also known as “special perils”), covering all exterior glass, whether plate or otherwise, and all interior glass, stock in trade, merchandise, trade fixtures, equipment and other personal property located in the Premises and used by Tenant in connection with its business. Tenant shall furnish Landlord with a duly executed certificate evidencing such coverage at the commencement of the Term and not less than thirty (30) days before the expiration of the term of such coverage.

11.5 Waiver of Subrogation . Each party hereby waives any and all rights of recovery against the other party hereto and its officers, agents, employees, or representatives, and Tenant hereby waives any rights it may have against any trust deed holder, for the loss, damage, or injury to property arising from any event which is covered by insurance against fire, vandalism, malicious mischief, and extended coverage, and such other perils as are from time to time included in the “all risk” insurance policy(ies) carried by Landlord and Tenant pursuant to this Section 11, provided that such waiver shall apply only to the extent of any recovery by the injured party under such insurance. In the event the other party is a self-insurer (as may be permitted herein), such waiver shall be to the limit of that insurance required to be carried hereunder. Each party hereto, on behalf of its respective insurance companies hereby waives, to the extent of any recovery under any such insurance policies, any right of subrogation that one may have against the other, and Tenant, on behalf of its insurance companies, hereby waives any right of subrogation which such insurer may have against any trust deed holder. Each party hereto shall cause its respective insurance policies to contain endorsements evidencing such waivers of subrogation. The foregoing releases and waivers of subrogation shall be operative only so long as same shall neither preclude the obtaining of insurance nor diminish, reduce or impair the liability of any insurer. In the event that a waiver of subrogation cannot be obtained, the other party is relieved of the obligation to obtain a waiver of subrogation rights with respect to the particular insurance involved.

12. WAIVER AND INDEMNITY .

12.1 Waiver and Exemption of Landlord From Liability . Tenant hereby agrees that except for damage or injury resulting from Landlord’s sole active negligence or willful misconduct, Landlord shall not be liable for injury to Tenant’s business or any loss of income, including damage to the goods, wares, merchandise or other property of Tenant or of Tenant’s employees, invitees, customers, or any other person in or about the Premises, or the Common Areas. Landlord shall not be liable, except when the damage or injury is a result of Landlord’s sole active negligence