Exhibit 10.67

LEASE

LANDLORD:

 

Watson Land Company,

 

 

 

 

a California corporation

 

 

 

 

 

 

 

TENANT:

 

Hansen  Beverage Company,

 

 

 

 

a Delaware corporation

 

 

 

 

 

 

 

DATED:

 

October 13, 2006

 

 

THE SUBMISSION OF THIS DOCUMENT FOR EXAMINATION AND NEGOTIATION DOES NOT
CONSTITUTE AN OFFER TO LEASE, OR A RESERVATION OF, OR OPTION FOR, THE PREMISES;
THIS DOCUMENT BECOMES EFFECTIVE AND BINDING ONLY UPON EXECUTION AND DELIVERY
HEREOF BY LANDLORD.  NO ACT OR OMISSION OF ANY EMPLOYEE OR AGENT OF LANDLORD OR
OF LANDLORD’S BROKER SHALL ALTER, CHANGE OR MODIFY ANY OF THE PROVISIONS HEREOF.

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SINGLE TENANT INDUSTRIAL LEASE

THIS SINGLE TENANT INDUSTRIAL LEASE (“Lease”) is made and entered into as of
October 13, 2006 by and between Watson Land Company, a California corporation
(“Landlord”) and Hansen Beverage Company, a Delaware corporation (“Tenant”).

Landlord and Tenant mutually covenant and agree that Landlord, in consideration
of the rent payable by Tenant and the covenants and agreements to be kept,
observed and performed by Tenant, hereby rents and leases to Tenant, and Tenant
hereby takes and hires from Landlord, the “Premises” (as defined herein),
pursuant to the provisions of this Lease, subject to (i) all applicable zoning,
municipal, county, state and federal laws; (ii) covenants, conditions,
restrictions, reservations, easements, rights and rights-of-way of record; and
(iii) Performance Standards of Watson Land Company attached hereto as Exhibit A
and incorporated herein by reference. In the event of any conflict between the
provisions of this Lease and the provisions of the Performance Standards, the
provisions of this Lease shall govern.

ARTICLE I

Basic Lease Provisions

1.1           Description of Premises: “Premises”, as used herein, shall mean
and refer to the building generally described as Watson Land Company Building
Number 480, located at 1990 Pomona Road, Corona, California, 92880, consisting
of approximately 346,495 square feet, together with the exclusive right to use
the Tenant Yard Area depicted in the attached Exhibit B as provided herein.
Tenant acknowledges its understanding and awareness that, as of the date of this
Lease, the parcel of land on which the Building is located does not correspond
to the boundaries shown on the site plan attached hereto as Exhibit B. Landlord
intends to process a parcel map which will adjust the lot lines of the property
to separate the northern approximate 1.8 acres of the property into a separate
legal parcel which shall not be included as a part of the Premises or the Tenant
Yard Area. Tenant agrees to cooperate with Landlord, at no cost or expense to
Tenant, in the processing of such parcel map. Upon recordation of the parcel
map, Landlord and Tenant shall execute an amendment to this Lease to reflect the
separation of the 1.6 acre parcel from the original parcel.

1.2           Street Address of the Building: 1990 Pomona Road, Corona,
California.

1.3           Approximate Building Square Footage: 346,495 square feet,
consisting of approximately 320,839 square feet within a concrete tilt up
building and approximately 25,656 square feet within a metal building.

1.4           Lease Term: One Hundred Twenty (120) months beginning on March 1,
2007 (the “Commencement Date”) and ending on February 28, 2017 (the “Termination
Date”).

1.5           Extension Option: See Paragraphs 1 and 2 of the attached Lease
Rider Number 1.

1.6           Initial Minimum Rent: One Hundred Sixty Seven Thousand Five
Hundred Eighty Six and 00/100ths Dollars ($167,586.00). The Initial Minimum Rent
consists of Minimum Net, Net, Net Rent ($143,091.00) and initial Monthly Gross
Charges (Base Amount taxes, insurance, and landscape maintenance) totaling
$24,495.00 per month.

1.7           Periodic Rent Adjustments: See Paragraph 3 of the attached Lease
Rider Number 1.

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1.8                                 Annual Tax Base Amount: One Hundred Sixty
Five Thousand Seven Hundred Forty Four and 00/100ths Dollars ($165,744.00).

1.9                                 Annual Insurance Base Amount: One Hundred
Two Thousand and 00/100ths Dollars ($102,000.00).

1.10                           Initial Security Deposit: One Hundred Sixty Three
Thousand Nine Hundred Forty Two and 00/100ths Dollars ($163,942.00).

1.11                           Brokers: Cushman & Wakefield of California, Inc.
(Jeffrey Chiate and Richard Ellison, Brokers).

1.12                           Initial Improvement Work: See Paragraph 4 of the
attached Lease Rider Number 1.

1.13                           Exhibits and Riders: The following Exhibits and
Riders are attached to this Lease and made a part hereof:

Exhibit A - Performance Standards of Watson Land Company

Exhibit B - Outline of Building and Tenant Yard Area

Exhibit C - Intentionally Omitted

Exhibit D - Hazardous Material Certificate

Exhibit E - Form of Estoppel Certificate

Exhibit F - Initial Improvement Work

Lease Rider Number 1

1.14                           Mailing Addresses:

Landlord:                                             Watson Land Company

22010 Wilmington Avenue, Suite 400
Carson, California 90745

Tenant:                                                       Hansen Beverage
Company

1010 Railroad Street

Corona, CA 92882 until March 1, 2007 then,

1990 Pomona Road

Corona, CA 90040

Attn: Rodney Sacks

ARTICLE II

Condition of Premises

2.1                                 Tenant acknowledges that prior to the
execution of this Lease, Tenant has been furnished full access to, and has
inspected the Premises. Except as otherwise specifically provided in this
Article II, Tenant accepts the Premises in its present condition, state of
repair and operating order and in present “AS IS” condition. Tenant further
acknowledges that neither Landlord nor any real estate agent or broker
representing Landlord or Tenant has made any representation or warranty as to
the present or future suitability of the Premises for the conduct of Tenant’s
business. Tenant specifically acknowledges that Landlord makes no representation
or warranty with respect to any laws, codes, ordinances, rules or regulations
affecting the Premises including, without limitation, laws, codes ordinances,
rules or regulations relating to fire or life safety, or access by disabled
persons (collectively “Codes”) affecting the Premises or Tenant’s proposed use
of the Premises, and Tenant shall be responsible for determining the suitability
and conformity of the Premises with respect to such Codes, and Tenant shall be
responsible for making any necessary modifications to the Premises in order to
comply with such Codes. In the event that, as of the Commencement Date, the
Building is in violation of the requirements of Title III of the Americans with
Disabilities Act (“ADA”) applicable to the Building with respect to the use of
the Building for general warehouse, manufacturing and related office purposes
(but not for any use constituting a “public accommodation” under the ADA), for
any

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reason other than as a result of Tenant’s acts, specific use of the Premises, or
improvements or alterations made by or for Tenant, all as approved in advance by
Landlord, Landlord shall, at its sole cost and expense, cause the same to be
rectified at no cost to Tenant to the extent required by applicable law.

2.2                                 Landlord hereby grants to Tenant for the
benefit of Tenant and its employees, suppliers, shippers, contractors, customers
and invitees, during the “Lease Term” (as defined herein), the exclusive right
to use the Tenant Yard Area, subject to any rights, powers, and privileges
reserved by Landlord under the terms hereof or under the terms of the
Performance Standards governing the use of the Tenant Yard Area. The right
herein granted to use the Tenant Yard Area shall be deemed to include the right
to store any property, temporarily or permanently, in the Tenant Yard Area.

ARTICLE III

Term of Lease

3.1           The term of this Lease (the “Lease Term”) shall be the period set
forth in Item 1.4 of the Basic Lease Provisions. Subject to the terms and
conditions of this Lease, the Lease Term shall commence on the Commencement Date
and shall terminate on the Termination Date, which dates are specified in Item
1.4 of the Basic Lease Provisions.

3.2           Following the full execution and delivery of this Lease and
vacation of the Premises by the current tenant (estimated to be January 1, 2007)
and continuing until the Commencement Date (the “Early Occupancy Period”),
Tenant and its agents, employees, contractors, vendors, licensees, invitees and
representatives shall be permitted to enter the Premises for the purposes of
installing Tenant’s furniture, fixtures, utilities, telecommunication systems,
equipment, security systems and operating Tenant’s business. Tenant shall not be
obligated to pay Minimum Rent or any items designated as additional rent under
the Lease during the Early Occupancy Period, but any use or occupancy of the
Premises by Tenant during the Early Occupancy Period shall otherwise be subject
to, and in accordance with, the terms and conditions of this Lease. Tenant shall
be responsible for paying any utility charges for utility services furnished to
the Premises during the Early Occupancy Period. Landlord shall have no
responsibility for any damage, theft, destruction or injury to Tenant or any of
Tenant’s property as a result of Tenant’s presence or activities on, or use of,
the Premises during the Early Occupancy Period. Except to the extent caused by
Landlord’s negligence or willful misconduct, Landlord makes no representations
as to whether Tenant’s occupancy of the Premises during the Early Occupancy
Period will be in compliance with applicable building, safety or fire codes, and
Tenant shall be responsible for, and assumes the risk of any non-compliance.
Tenant shall indemnify and hold Landlord harmless from and against any loss,
cost, liability, claim or action arising out of or relating to Tenant’s use or
occupancy of the Premises during the Early Occupancy Period, except to the
extent caused by Landlord’s negligence or willful misconduct.

ARTICLE IV

Rent

4.1                                 Tenant agrees to pay to Landlord at the
office of Landlord or at such other place as may be designated by Landlord from
time to time, without any prior demand therefor and without any deduction or
setoff whatsoever, as minimum monthly rent (“Minimum Rent”), the sum specified
as the Initial Minimum Rent in Item 1.6 of the Basic Lease Provisions. Minimum
Rent shall be payable in advance on the first day of each calendar month of the
Lease Term.  If the Lease Term shall commence upon a day other than the first
day of a calendar month, then Tenant shall pay, upon the Commencement Date, a
pro rata portion of the Minimum Rent for the first fractional calendar month.
Minimum Rent payable by Tenant under this Lease is subject to adjustment in
accordance with the provisions of Paragraphs 2 and 3 of the attached Lease Rider
Number 1. Unless specifically designated otherwise in this Lease, all fees,

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charges, costs, expenses or other payments to be paid by Tenant to Landlord
pursuant to this Lease shall be deemed to be additional rent.

ARTICLE V

Taxes and Assessments

5.1                                 Tenant covenants and agrees to pay to
Landlord, as additional rent hereunder, the amount by which all real estate
taxes and assessments, and installments thereof which may be taxed, charged,
levied, assessed or imposed during any fiscal tax year occurring during the
Lease Term (and any extensions or renewals thereof) upon the Premises and the
parcel or parcels of land (or portions thereof) on which the Premises are
situated (the “Tax Parcels”), exceed the Annual Tax Base Amount specified in
Item 1.8 of the Basic Lease Provisions, but excluding any increases which are a
result of a sale by Landlord of its interest in the Premises or a transfer of
stock or other ownership interest in Watson Land Company that would constitute a
“change in ownership” under the applicable provisions of the California Revenue
and Taxation Code (as specifically provided in Paragraph 5.5, below) during the
first seven (7) years of the initial ten (10) year Lease Term. In the partial
fiscal tax year in which the Lease Term shall commence, and in the partial
fiscal tax year in which the Lease Term shall terminate, such taxes and
assessments and the Annual Tax Base Amount shall be prorated on a daily basis
(using a 365-day year), and Tenant’s payment obligations shall be computed
accordingly. If any assessments or taxes are levied or assessed against the Tax
Parcels which are payable or may be paid in monthly or more frequent
installments, Tenant shall be required to pay only such installments as shall
become due and payable during the Lease Term; provided however, if an assessment
or tax is imposed upon the Tax Parcels because of the acts or upon the request
of Tenant, then Tenant shall pay the total amount thereof in equal annual
installments during the Lease Term, on a date established by Landlord.

5.2                                 Tenant shall pay the amount of any taxes and
assessments which it is obligated to pay hereunder directly to Landlord within
fourteen (14) days after receipt of Landlord’s invoice therefor, Landlord
agrees, in turn, to promptly pay such taxes and assessments to the appropriate
taxing authority. If any lender whose loan is secured in whole or in part by a
lien upon the Premises (or any portion thereof) (“Landlord’s Lender”) requires
Landlord to impound real estate taxes and/or assessments on a periodic basis,
then Tenant agrees, upon receipt of written notice from Landlord, to pay to
Landlord on a periodic basis the sum required to satisfy the tax impound
requirement of Landlord’s Lender. Landlord shall impound the tax payments
received from Tenant in accordance with the requirements of Landlord’s Lender.

5.3                                 Tenant shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures, furnishings, equipment
and all other personal property of Tenant located on the Premises or elsewhere.
Whenever 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 personal property shall
be assessed with Landlord’s real property, Tenant shall pay to Landlord the
taxes attributable to Tenant within fourteen (14) days after receipt of a
written statement from Landlord setting forth the taxes applicable to Tenant’s
property.

5.4                                 As used herein, the term “real estate taxes”
shall include any form of real estate tax or assessment, general, special,
ordinary or extraordinary, and any license fee, commercial rental tax, rental
excise tax, improvement bond or bonds, levy or tax (other than income taxes)
imposed on the Tax Parcels by any authority having the direct or indirect power
to tax, including any city, state or the federal government, or any school,
agricultural, sanitary, fire, street, drainage, water or other improvement
district thereof, as against any legal or equitable interest of Landlord in the
Premises or in the Tax Parcels, as against Landlord’s right to rent or other
income therefrom, and as against Landlord’s business of leasing the Premises.
The term “real estate taxes” shall, subject to the provisions of Paragraph 5.5,
below, also include any tax, fee, levy, assessment or charge (i) in substitution
of, partially or totally, any tax, fee, levy, assessment or charge hereinabove
included within the definition of “real property tax”;

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or (ii) the nature of which was hereinbefore included within the definition of
“real property tax”; or (iii) which is imposed as a result of a sale or
transfer, either partial or total, of Landlord’s interest in the Premises or
which is added to a tax or charge previously included within the definition of
real property tax by reason of such sale or transfer; or (iv) which is imposed
by reasons of this transaction, any modifications or changes hereto, or any
transfers hereof.

5.5                                 In the event of a sale by Landlord of its
interest in the Premises or a transfer of stock or other ownership interest in
Watson Land Company that would constitute a “change in ownership” under the
applicable provisions of the California Revenue and Taxation Code during the
first seven (7) years of the initial ten (10) year Lease Term, Tenant shall have
no obligation to pay any increase in real estate taxes which result from such
sale. Nothing contained in this Paragraph 5.5 shall limit Tenant’s obligation to
pay any other increases in real estate taxes, including, without limitation,
inflation factor adjustments as provided in Section 51 of the California Revenue
and Taxation Code and changes in the manner or method of computing or imposing
taxes pursuant to applicable law.

ARTICLE VI

Utility Charges

6.1                                 Tenant shall contract for, in Tenant’s name,
and shall pay or cause to be paid, all charges for gas, electricity, heat,
air-conditioning, water, power, telephone, sewer, trash collection and waste
removal and/or disposal, security or guard service, alarm systems, or other
service, and any taxes, levies or excises thereon, used, rendered or supplied to
Tenant in connection with the Premises; and for all connection and closing
charges, and any tax or excise thereon; and for any governmental service or
service subject to governmental regulation, however described, furnished to the
Premises during the Lease Term and during any other period in which Tenant uses
or occupies the Premises. Landlord shall not be liable to Tenant for any loss,
injury, damage, disruption of business or any other harm resulting from any
interruption of utility services to the Premises, unless such interruption
results solely from the gross negligence or willful misconduct of Landlord.

ARTICLE VII

Hold Harmless

7.1                                 Tenant covenants and agrees that Landlord
shall not during the Lease Term or to any extent whatsoever be liable,
responsible, or in any way be accountable for any loss, injury, death or damage
to persons or property which at any time may be suffered or sustained by Tenant
or by any person whomsoever who may at any time be using, occupying or visiting
the Premises, or be in, on, or about the same, whether such loss, injury, death
or damage shall be caused by or in any way result from or arise out of any act,
omission or negligence of Tenant or of any occupant, subtenant, visitor or user
of any portion of the Premises or from fire, steam, electricity, water, rain,
act of God, or from breakage or leakage or any defect in any pipes, sprinklers,
or plumbing, electrical or heating and air conditioning systems or fixtures, or
from any other cause. Tenant hereby releases Landlord and agrees to indemnify,
defend, hold and save Landlord free and harmless of, from, and against any and
all claims, losses, costs, liabilities, expenses or damages whatsoever arising
out of or related to any use or occupancy of the Premises by Tenant or any of
Tenant’s agents, employees, invitees or contractors (collectively “Losses”),
including attorneys’ fees and costs on account of any such Losses, except for
any Losses resulting solely from the gross negligence or willful misconduct of
Landlord.

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ARTICLE VIII

Insurance

8.1                                 Landlord shall, throughout the Lease Term,
keep the Buildings and Landlord’s improvements which may from time to time be
upon or a part of the Premises (but not Tenant’s personal property, fixtures or
equipment) insured against all risks (as the term “all risk” is used in the
insurance industry), and against earthquake and flood risks, in such form and
with such policy limits as Landlord may determine from time to time, so as to
provide adequate protection of Landlord’s ownership interests in the Premises at
a reasonable cost. Notwithstanding the foregoing, Landlord shall not be required
to maintain any insurance which becomes unavailable, or which becomes
commercially unreasonable for landlords to carry, in the Southern California
insurance marketplace. In the event of any insured loss, Tenant shall be liable
to Landlord for any deductible amount claimed by the insurance carrier. Landlord
shall also obtain and maintain “rental value insurance” covering one year’s rent
(Minimum Rent, real estate taxes, insurance premiums and landscape maintenance
charges) payable under this Lease. Tenant covenants and agrees to pay to
Landlord, as additional rent hereunder, the amount by which the annual premiums
and related fees for the insurance specified in this Paragraph 8.1 exceed the
Annual Insurance Base Amount specified in item 1.9 of the Basic Lease
Provisions. Such amount shall be paid by Tenant to Landlord within fourteen (14)
days after receipt by Tenant of Landlord’s statement of the cost thereof. In the
insurance policy year in which the Lease Term shall commence and in the
insurance policy year in which it shall terminate, such insurance premiums and
the Annual Insurance Base Amount shall be prorated on a daily basis (using a
365-day year), and Tenant’s payment obligations shall be computed accordingly.
If Landlord’s Lender requires the impounding of insurance premiums on a periodic
basis, Tenant shall pay the amount by which the annual premiums and related fees
exceed the Annual Insurance Base Amount to Landlord on a periodic basis as
required by Landlord’s Lender. Such insurance shall have attached thereto such
form of lender’s loss payable endorsement as Landlord’s Lender may require.

8.2                                 Landlord and Tenant agree that if the
Building or any improvements at any time forming a part of the Premises shall be
damaged or destroyed by risks insured against under Paragraph 8.1, or if any of
Tenant’s machinery, fixtures, furniture, merchandise or other property, real or
personal, are damaged or destroyed from any cause covered by a property policy
obtained by Tenant, then and to the extent allowable and without invalidating
such insurance, and whether or not such damage or destruction was caused by the
negligence of the other party, neither party shall have any liability to the
other nor to any insurer of the other for or in respect of such damage or
destruction. If obtainable, each party shall require all policies of fire or
other insurance carried by such party during the Lease Term upon the Premises or
contents of the Building to include a provision whereby the insurer designated
therein shall waive its right of subrogation against the other party.

8.3                                 During the entire Lease Term, Tenant, at
Tenant’s sole cost and expense, shall procure and maintain in full force and
effect personal injury and property damage liability insurance with a combined
single limit of not less than Five Million Dol­lars ($5,000,000). Such insurance
may be evidenced by a Primary Policy or a combination of a Primary Policy and an
Umbrella or Excess Liability Policy. Tenant’s liability insurance shall be
primary and any liability insurance maintained by Landlord shall not be
contributory. Landlord shall be named as an additional insured under the General
Liability policy, and a policy endorsement so naming Landlord shall be furnished
to Landlord. All such insurance shall insure the performance by Tenant of the
indemnity provisions of Article VII of this Lease. The limits of said policies
shall not limit the liability of Tenant under this Lease. In the event that
either party hereto shall at any time deem the limits of such liability
insurance then carried to be insufficient, the parties shall endeavor to agree
upon the proper and reasonable limits for such insurance then to be carried. If
the parties shall be unable to agree thereon, the proper and reasonable limits
for such insurance then to be carried shall be determined by an impartial third
person knowledgeable of insurance risk matters selected by the parties, or
should they be unable to agree upon a selection by an impartial third person
such third person shall be chosen by the Presiding Judge of the Superior Court
of Los Angeles County upon

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application by either party made after five (5) days written notice to the other
party of the time and place of application. The decision of such impartial third
person as to such limits then to be carried shall be binding upon the parties.
Such insurance shall be carried with the limits as agreed upon or determined
pursuant to this Paragraph until such limits shall again be changed pursuant to
the provisions of this Paragraph. The expenses of such determination shall be
borne equally between Landlord and Tenant.

8.4                                 All of the insurance provided by Tenant
under this Article VIII and all renewals thereof shall be issued by such good,
responsible and standard companies rated at least A:Class XII in the current
edition of Best’s Insurance Guide, and authorized to do business in California.
The policy or policies of insurance provided for in Paragraph 8.1 hereof shall
be payable to Landlord, or jointly to Landlord and Landlord’s Lender, and Tenant
agrees to endorse any check to the order of Landlord which might be made payable
jointly to Landlord and Tenant by the insurance company. Tenant agrees to
immediately comply with any request of the insurance carrier providing insurance
described in Paragraph 8.1 if the failure to comply therewith will cause
cancellation of such insurance. All policies provided by Tenant shall expressly
provide that the policy shall not be canceled or altered without thirty (30)
days’ prior written notice to Landlord. Neither Landlord nor Tenant shall do or
permit to be done anything which will invalidate the insurance policies provided
for in this Article VIII. Upon the issuance or renewal of the liability
insurance policy described in this Article VIII, or upon commencement of the
Lease Term if such policy is then in force or effect, Tenant shall have its
insurance carrier furnish Landlord with a Certificate of said insurance. If
requested in writing by Landlord, Tenant shall reproduce and forward to Landlord
a true copy of any insurance policy described in this Lease and obtained by
Tenant. Tenant shall obtain such fire insurance and other insurance on Tenant’s
machinery, fixtures, furniture and other property, real or personal, as Tenant
deems appropriate, and with which Landlord shall not otherwise be concerned.

ARTICLE IX

Repairs and Maintenance

9.1                                 Landlord shall maintain and repair the
foundation and exterior walls of the Premises at its own cost and expense,
provided, however, that if any maintenance or repair work for the foundation and
exterior walls of the Premises is required as a result of any negligence or
willful misconduct of Tenant or any of Tenant’s agents, employees, shippers,
customers, invitees or contractors, such work shall be at Tenant’s sole cost and
expense. Tenant shall maintain and repair the exterior paint and roof of the
Premises. Landlord shall repair and replace the entire roof of the Building and
shall provide Tenant with the benefit of at least a ten (10) year warranty for
the new roof. To the extent that roof repairs are covered by the roof warranty,
Tenant shall receive the benefit of such warranty. Further, Tenant shall
maintain and repair the asphalt paving and the concrete paving of the Tenant
Yard Area. Tenant shall keep all other portions and components of the Premises
(including, without limitation, all plumb­ing, HVAC systems, electrical and
lighting systems, ceilings, plate glass and skylights) in working order, good
condition and repair during the Lease Term and any Extended Term. Without
limiting the generality of the foregoing, Tenant shall perform all maintenance
detailed in Paragraph K (mechanical service controls) of the Performance
Standards of Watson Land Company attached hereto as Exhibit A. Tenant shall
promptly replace any portion of the Premises or system or equipment in the
Premises which cannot be repaired to its condition as of the Commencement Date
hereof, regardless of whether the benefit of such replacement extends beyond the
Lease Term or any Extended Term. Tenant shall maintain the Premises in an
orderly and operative condition, ordinary wear and tear excepted (but provided
that all components of the building shall at all times be kept in working
order). Landlord shall maintain the exterior landscaping for the Premises in
accordance with Landlord’s then-prevailing landscape maintenance standards, and
the amount by which the cost of such landscape maintenance work exceeds the
Annual Landscape Base Amount of Twenty Six Thousand One Hundred Ninety Six and
00/100ths Dollars ($26,196.00) shall be paid by Tenant to Landlord as additional
rent. Such payments shall be made by Tenant within

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ten (10) days following Tenant’s receipt of an invoice from Landlord. Tenant
waives the provisions of any law permitting Tenant to make repairs at Landlord’s
expense.

9.2                                 All of Tenant’s obligations to maintain and
repair the Premises shall be accomplished at Tenant’s sole expense. If Tenant
fails to maintain and repair the Premises, Landlord may, at its election, notify
Tenant of Tenant’s obligation to undertake such repair and maintenance work. If
Tenant fails to commence such work within fourteen (14) days of receipt of such
notice Landlord may enter the Premises and perform any such work on behalf of
Tenant. In the event of an emergency Landlord may enter the Premises and perform
such repair and maintenance on behalf of Tenant. In any such case, Tenant shall
reimburse Landlord for all reasonable costs so incurred immediately upon demand,
together with interest thereon at the “Lease Interest Rate” (as defined in
Paragraph 26.25, below). Landlord’s right to perform maintenance and repair work
pursuant to this Paragraph 9.2 shall not be deemed to create any obligation on
the part of Landlord to do so, and shall not in any way limit Landlord’s
remedies under this Lease. Any design or construction work undertaken by or at
the direction of Tenant which affects the Premises or any improvements
constituting a part of the Premises (including, without limitation, any repair
work, maintenance work, tenant improvement work or restoration work) shall be
performed by duly qualified and properly licensed and insured design
professionals or contractors (as the case may be) reasonably satisfactory to
Landlord. Tenant shall submit the names of any such design professionals and
contractors to Landlord prior to the commencement of any construction work on
the Premises. If Landlord, acting reasonably and in good faith, disapproves of
any design professional or contractor selected by Tenant, Tenant shall select a
new design professional or contractor reasonably satisfactory to Landlord.

9.3                                 Upon the expiration or sooner termination of
this Lease, Tenant shall surrender the Premises to Landlord, broom clean and in
the same condition as received, except for ordinary wear and tear which Tenant
is not otherwise obligated to remedy under any provision of this Lease. Any
damage to, or deterioration of, the Premises shall be deemed not to be ordinary
wear and tear if the same could have been prevented by good maintenance
practices. In addition, Landlord may require Tenant to remove any alterations,
additions or improvements to the Premises (whether or not made with Landlord’s
consent) prior to the termination of the Lease and to restore the Premises to
its prior condition, or Landlord may perform such removals and restorations
itself, all at Tenant’s expense. All alterations, additions and improvements
which Landlord has not required Tenant to remove or which Tenant has not elected
to remove, as provided herein, shall become Landlord’s property and shall be
surrendered to Landlord upon the expiration or sooner termination of the Lease,
except that Tenant may remove any of Tenant’s machinery or equipment which can
be removed without damage to the Premises. If, whether in violation of this
Lease or pursuant to Landlord’s permission (which may be granted or withheld in
Landlord’s sole and absolute discretion), Tenant installs any “Underground
Storage Tanks” (as defined herein) on the Premises, Tenant shall, at its sole
cost and expense, remove any such Underground Storage Tanks immediately upon the
request of Landlord, the expiration or sooner termination of this Lease, or the
order of any governmental authority, whichever occurs first. Notwithstanding any
provisions of this Lease to the contrary, such Underground Storage Tanks shall
at all times be and remain the property of Tenant. As used herein, the term
“Underground Storage Tank” means any one or combination of tanks, including all
pipes, sumps, valves and other equipment connected thereto, which are used for
the storage of petroleum products, hydrocarbon substances or fractions thereof,
or other Hazardous Materials, and which are located wholly or partially beneath
the surface of the ground. Tenant shall repair, at Tenant’s expense, any damage
to the Premises caused by the removal of any such machinery or equipment.

9.4                                 Tenant shall not, without the prior written
approval of Landlord, make any additions, alterations, changes or improvements
to the Premises, or any portion thereof. Any request for approval of additions,
alterations, changes or improvements shall be presented to Landlord in writing,
accompanied by detailed drawings and specifications. No addition, alteration,
change or improvement shall be made which will weaken the structural strength,
lessen the value of, interfere with, or make inoperable any portion of the
Premises or the “building service equipment”, or

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change the architectural appearance of the Premises. All approved additions,
alterations, changes and improvements shall be made in workmanlike manner, in
full compliance with all laws and ordinances applicable thereto. Except for any
Underground Storage Tanks, which shall, at all times be and remain the property
of Tenant, all such additions, alterations, changes and improvements shall
become a part of the Premises, and become the property of Landlord when
installed; and, unless Landlord shall require removal thereof as required
pursuant to Paragraph 16.2, all such improvements, including all building
service equipment improvements (but specifically excluding any Underground
Storage Tanks), shall remain in and be surrendered as a part of the Premises
upon the expiration or sooner termination of this Lease. Tenant shall furnish
Landlord with a set of “as built” drawings which accurately set forth the nature
and extent of improvements made by Tenant to the Premises. Tenant and any
assignee or sublessee of Tenant shall obtain Landlord’s prior written consent
before any signs are installed on the Premises. Such signs shall remain the
property of Tenant or any assignee or sublessee who installs the same and they
shall be removed from the Premises at the expiration or sooner termination of
the Lease Term. Any damage arising out of or resulting from the installation,
placement or removal of such signs shall be repaired by Tenant at Tenant’s sole
cost and expense. The term “building service equipment” shall include, without
limitation, equipment and property ordinarily necessary or convenient for the
operation and utilization of a building, such as heaters, air conditioners,
solar panels, power panels, transformers, light fixtures, sprinklers, suspended
ceilings, plumbing fixtures, walls, cabinets, doors, floor coverings, fixtures,
fencing, emission or pollution control facilities, security and alarm systems,
dock levelers, and utility services such as gas, electricity, water, steam,
telephone, sewer and other similar services used in connection with the
foregoing items. Building service equipment shall also include any related power
installations, plumbing installations, pollution control installations,
sprinkler installations, energy conservation installations, and security
installations, including wiring, conduits, ducts, lines, pipes and meters for
the transportation, distribution, measuring and/or disposal thereof. Building
service equipment shall also include installations affixed to the Building which
serve machinery and equipment, including, without limitation, crane ways, dust
collectors, paint booths, buss ducting, power panels and related power
installations.

9.5                                 Tenant shall have the right, without
Landlord’s prior approval, to install within the Building Tenant’s equipment,
trade fixtures, furniture and furnishings (hereinafter collectively called
“Tenant’s Equipment”). Under no circumstances, however, shall Underground
Storage Tanks be installed on the Premises. However, Tenant shall notify
Landlord in writing and Tenant shall obtain Landlord’s prior written approval
before the installation of heavy equipment, or heavy trade fixtures in the
Building, and prior to placing any load on the roof or attaching any load to the
walls or the underside of the roof of the Building. Tenant shall not install any
of Tenant’s Equipment in such manner to weaken the structural strength of the
Buildings, interfere with, or make inoperable any portion of the Premises or the
building service equipment. If Tenant makes any addition, alteration, change, or
improvement to the Premises described in Paragraph 9.4 without Landlord’s
consent, or if Tenant installs any of Tenant’s Equipment in violation of this
Paragraph 9.5, then Tenant shall, upon receipt of written notice from Landlord,
promptly remove, replace, or otherwise correct such installations in such manner
as Landlord shall reasonably require and direct, and Tenant shall reimburse
Landlord, on demand and as additional rent, for all architect’s, engineer’s and
legal fees incurred by Landlord in connection with such installations. If Tenant
or any person with whom Tenant is engaged in business causes any damage to the
Premises, structural or otherwise, Tenant assumes all risk of such damage and
Tenant shall, upon demand, promptly repair all such damage to the reasonable
satisfaction of Landlord. Tenant shall promptly repair any damage to the
Premises arising from the installation, use, and removal of Tenant’s Equipment;
and Tenant shall restore the Premises to a clean and orderly condition and
appearance, state of repair, ordinary wear and tear excepted, and operating
order with all remaining improvements thereon in a good, safe, fully operable
condition and in full compliance with all Codes, ordinary wear and tear
excepted.  If Tenant fails to perform any act or obligation required of Tenant
under this Paragraph 9.5, Landlord shall have the right, but not the obligation,
after fourteen (14) days’ written notice to Tenant specifying the action
required by Tenant, to enter upon the Premises and perform such act or
obligation. In

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that event, Tenant agrees to pay Landlord, as additional rent within fourteen
(14) days of receipt of Landlord’s invoice, for all costs incurred by Landlord
in performing Tenant’s act or obligation.

9.6                                 Landlord shall not be obligated to maintain
or to make any repairs, replacements, or renewals of any kind, nature or
description whatsoever to the Premises, except as specifically provided in
Paragraphs 9.1, 12.1, 13.3 and Exhibit A of this Lease.

9.7                                 Tenant shall comply with and abide by all
federal, state, county, municipal and other governmental statutes, ordinances,
laws, and regulations affecting the Premises, the improvements thereon, the
business to be conducted therein and thereon by Tenant, or any activity or
condition on or in the Premises. Without limiting the generality of the
foregoing, Tenant shall comply with all environmental laws and laws relating to
“Hazardous Materials” (as defined herein) affecting the Premises, the
improvements therein, the business conducted thereon by Tenant, or any activity
or condition on or in the Premises. Tenant shall not install, place, construct
or maintain any Underground Storage Tanks on the Premises. Any and all Hazardous
Materials and their containers which are brought upon the Premises by, at the
direction of, or with the consent or approval of Tenant shall, at all times,
remain the property of Tenant. Tenant warrants that Tenant’s business and all
activities to be performed by Tenant in, on or about the Premises shall comply
with such statutes, ordinances, laws and regulations; and Tenant agrees to
change any such activity or install necessary equip­ment, safety devices,
pollution control systems, or other installations at any time during the Lease
Term to so comply therewith. If, during the Lease Term, Landlord or Tenant is
required to convert or replace the HVAC system serving the Premises in order to
comply with federal, state or local statutes, laws, ordinances, rules or
regulations concerning the use of chlorofluorocarbons (including, without
limitation, Freon), Landlord shall, to the extent necessary to comply with such
laws, pay the costs of any such conversion or replacement, including, without
limitation, the purchase and installation of new equipment, and the alteration
of existing HVAC equipment in the Premises to accommodate any new equipment.

9.8                                 Tenant shall not cause or permit any
“Hazardous Material” (as hereinafter defined) to be brought upon, kept, used,
stored, discharged or released (collectively “used”) in or about the Premises
during the Lease Term, without the prior written consent of Landlord, in its
sole and absolute discretion. If Tenant breaches the obligations stated in the
preceding sentence, or if any Hazardous Material used on the Premises during the
Lease Term results in contamination of the Premises or any adjacent property,
then Tenant shall indemnify, defend and hold Landlord harmless from any and all
claims, judgments, damages, penalties, fines, costs, liabilities or losses
(including, without limitation, diminution in value of the Premises and/or
adjacent property, damages for the loss or restriction on use of rentable or
usable space or of any amenity of the Premises and/or adjacent property, damages
arising from any adverse impact on marketing of the Premises and/or adjacent
property, and sums paid in settlement of claims, attorneys’ fees, consultant
fees and expert fees) which arise during or after the Lease Term or any Extended
Term as a result of Hazardous Material so used. This indemnification of Landlord
by Tenant includes, without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision because of Hazardous Material present in the soil or
ground water on or under the Premises and/or adjacent property. Without limiting
the fore­going, if any Hazardous Material is used on the Premises during the
Lease Term and results in any contamination of the Premises and/or adjacent
property, Tenant shall promptly take all actions at its sole expense as are
necessary to return the Premises and/or adjacent property to the condition
existing prior to the use of any such Hazardous Material on the Premises and/or
adjacent property; provided that Landlord’s approval of such actions shall first
be obtained, which approval shall not be unreasonably withheld so long as such
actions would not potentially have any material adverse long-term or short-term
effect on the Premises or adjacent property. As used herein, the term “Hazardous
Material” means any petroleum products or other hydrocarbon substances (and
fractions thereof) and any hazardous or toxic substance,

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material or waste which is or becomes regulated by any local governmental
authority, the State of California or the United States Government. Upon
expiration or earlier termination of this Lease, Tenant shall duly execute and
deliver to Landlord a certificate (the “Hazardous Material Certificate”) in the
form of Exhibit D attached hereto, and, if requested by Landlord, Tenant shall
cause a properly licensed and qualified environmental consultant reasonably
acceptable to Landlord to conduct an environ­mental audit of the Premises, and
to deliver a copy of the completed environmental audit to Landlord. The scope
and detail of such environmental audit shall be reasonably determined by
Landlord based on all relevant facts and circumstances then existing. If any
environmental audit recommends or suggests that additional testing be conducted,
Landlord may require that such additional testing be conducted, at Tenant’s
expense.  In the event Tenant shall fail to so deliver the Hazardous Material
Certificate or to conduct such an environmental audit, such failure shall,
without further notice or the passage of time constitute a default under the
Lease and, without in any way limiting or impairing Landlord’s remedies against
Tenant, shall entitle Landlord to retain the entire security deposit held by
Landlord to be applied toward payment of the cost of assessing the presence of
Hazardous Material on the Premises and/or adjacent property, and toward payment
of all loss, cost, liability, damage and expense of Landlord arising as a result
of any such contamination and toward such other costs and expenses of Landlord
as Landlord may designate in its sole discretion. If, at any time during the
Lease Term or upon the termination or earlier expiration of the Lease, Landlord
reasonably believes that the Premises or any adjacent property has been
contaminated as a result of Hazardous Materials which were used on or about the
Premises during the Lease Term, Landlord may require Tenant, at Tenant’s sole
cost and expense, to conduct an environmental audit (in accordance with the
above described criteria) to evaluate the presence of any Hazardous Materials on
the Premises and to cleanup, remediate, and otherwise mitigate the effects of
the presence of any such Hazardous Materials on the Premises, or Landlord may,
if it so elects, undertake such an environmental audit and any such cleanup,
remediation or mitigation work on behalf of Tenant, at Tenant’s sole cost and
expense. In any event, any such environmental audit and any cleanup, remediation
or mitigation work shall be performed by qualified environmental professionals
acceptable to Landlord. Nothing contained herein shall be deemed or construed to
limit the liability of Tenant to Landlord hereunder for the breach of any
covenant of Tenant under this Paragraph 9.8.

9.9                                 On or before the fifteenth (15th) day of
each calendar year during the Lease Term (the “Disclosure Dates”), Tenant shall
disclose to Landlord in writing the common and chemical names and the quantities
of all Hazardous Materials which were stored, used or disposed of on the
Premises during the preceding calendar year. Tenant shall immediately notify
Landlord of Tenant’s receipt of any notice, citation or other communication
received by Tenant relating to the presence, storage, use or release of any
Hazardous Materials in, on or about the Premises.

9.10                           Landlord shall have the right, but not the duty,
to inspect the Premises at any time during regular business hours to determine
whether Tenant is complying with the requirements of this Lease. If Tenant is
not in compliance with the requirements of the provisions of this Lease relating
to Hazardous Materials, Landlord shall have the right, but not the obligation,
to immediately enter upon the Premises to remedy any condition caused by
Tenant’s failure to comply with the requirements of this Lease. Landlord shall
use reasonable efforts to minimize interference with Tenant’s business as a
result of any such entry by Landlord but shall not be liable for any
interference caused thereby.

9.11                           Any failure of Tenant to comply with the
provisions of Paragraphs 9.7, 9.8 and 9.9 of this Lease shall be a material
default under this Lease, enabling Landlord to exercise any of the remedies set
forth in this Lease.

9.12                           Tenant acknowledges its understanding and
awareness that the Building was constructed prior to 1979, and that some
asbestos-containing materials may have been used in the construction of the
Building. Tenant acknowledges its receipt of an “Asbestos Disclosure Letter”
from Landlord, a copy of which is incorporated herein by reference. Tenant
acknowledges its awareness that the release

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of asbestos fibers can present a serious health risk, and Tenant agrees that it
shall not undertake any activities on the Premises which might disturb or
release asbestos-containing materials without implementing appropriate safety
procedures.

ARTICLE X

Inspection of Premises by Landlord

10.1                           Tenant agrees that Landlord and the authorized
representatives of Landlord shall have the right to enter the Premises at all
reasonable times during usual business hours, but with reasonable prior notice,
or at any time in the case of an emergency with prior notice to Tenant (or a
good faith attempt at giving prior notice, given then existing facts and
circumstances) for the purpose of (a) inspecting same; and (b) making such
repairs or reconstruction to the Premises required by or permitted to be made by
Landlord, and (c) performing any work therein that may be necessary by reason of
Tenant’s default under the provisions of this Lease. Nothing herein shall imply
any duty of Landlord to do any work which, under the provisions of this Lease,
Tenant is required to perform and the performance thereof by Landlord shall not
constitute a waiver of Tenant’s default in failing to perform the same. Landlord
may, during the progress of any work on the Premises, keep and store upon the
Tenant Yard Area, all necessary materials, tools and equipment. Landlord shall
not in any event be liable for any inconvenience, annoyance, disturbance, loss
of business, or other damage sustained by Tenant while making such repairs or
the performance of any such work on the Premises, or on account of bringing
materials, supplies and equipment into or through the Premises during the course
thereof. In the event Landlord makes any repairs or maintenance which Tenant has
failed to do or perform, the cost thereof shall constitute additional rent and
shall be paid to Landlord within fourteen (14) days of receipt of Landlord’s
invoice.

10.2                           Landlord is hereby given the right during usual
business hours with reasonable prior notice to Tenant to enter the Premises and
to exhibit the same for purposes of sale or mortgage, and during the last six
(6) months of the Lease Term to exhibit the same to any prospective tenant with
reasonable prior notice to Tenant.

ARTICLE XI

Mechanics’ Liens

11.1                           Tenant covenants and agrees to keep ail of the
Building, the Premises and any parcel of land on which the Premises is situated
free and clear of and from any and all mechanics’, materialmen’s and other liens
for work or labor done, services performed, materials, appliances,
transportation or power contributed, used or furnished or to be used in or about
the Premises for or in connection with any operations of Tenant, any
alterations, improvements, repairs or additions, which Tenant may make or permit
or cause to be made, or any work or construction by, for or permitted by Tenant
on or about the Premises; and at all times Tenant shall promptly and fully pay
and discharge any and all claims upon which any such lien may or could be based;
and Tenant shall save and hold Landlord and all of the Premises free and
harmless of and from any and all such liens and claims of liens and suits or
other proceedings pertaining thereto. Tenant, or any subtenant, assignee or
other occupant of the Premises covenants and agrees to give Landlord written
notice not less than ten (10) days in advance of the commencement of any
construction, alteration, addition, improvements or repair to the Premises in
order that Landlord may post an appropriate notice of Landlord’s
non-responsibility.

11.2                           No mechanics’ or materialmen’s liens or
mortgages, deeds of trust, or other liens of any character whatsoever created or
suffered by Tenant shall in any way or to any extent affect the interest or
rights of Landlord in the Premises or any parcel of land on which any portion of
the Premises is located, or attach to or affect Landlord’s title to or rights in
the Premises or any parcel of land on which any portion of the Premises is
located.

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11.3                           Tenant shall have the right to contest any
mechanic’s lien or other lien claim filed against the Premises provided that
Tenant gives Landlord written notice of such contest, Tenant diligently
prosecutes such contest, at all times effectually stays or prevents any official
or judicial sale of the Premises or any parcel of land on which any portion of
the Premises is located under execution or otherwise, and pays or otherwise
satisfies any final judgment adjudging or enforcing such contested lien and
thereafter procures record satisfaction or release thereof. If requested in
writing by Landlord, Tenant shall furnish to Landlord a surety bond issued by a
surety company acceptable to Landlord in an amount not less than one and
one-half times the amount of any such mechanic’s lien or other lien claim filed
against the Premises.

ARTICLE XII

Damage or Destruction of Premises

12.1                           In the event the buildings or other structures on
the Premises are damaged or destroyed, then so long as the cost of repairing
such damage or destruction is fully covered by insurance policies carried by the
Landlord (except for deductible amounts, which shall be paid by Tenant subject
to the limitation on the deductible amounts as provided in Paragraph 8.1),
Landlord shall repair and restore such improvements then owned by Landlord (but
not any of Tenant’s trade fixtures, furnishings or equipment) to their condition
existing prior to said damage or destruction, and this Lease shall continue in
full force and effect. Any damage or destruction of the type described above is
referred to herein as an “Insured Loss.” The proceeds of insurance maintained
pursuant to Paragraph 8.1 shall be used to pay the cost and expense of repairing
and rebuilding the Premises.

12.2                           In the event the Building is damaged or
destroyed, and the cost of repairing such damage or destruction is not fully
covered by insurance policies carried by Landlord (an “Uninsured Loss”), then so
long as the portion of the cost of repairing such damage or destruction which is
not covered by the insurance policies carried by Landlord does not exceed Two
Hundred Fifty Thousand Dollars ($250,000) (the “Cap Amount”)(excluding
deductible amounts), then Landlord shall promptly make payment of its share
thereof and repair such damage or destruction to the Building. Landlord shall
repair and restore the improvements then owned by Landlord (but not any of
Tenant’s trade fixtures, furnishings or equipment) to their condition existing
prior to said damage or destruction, and this Lease shall continue in full force
and effect. In the event of an Uninsured Loss in which the portion of the cost
of repairing such damage or destruction which is not covered by insurance
policies carried by Landlord exceeds the Cap Amount, Landlord and Tenant shall
each have the right to terminate this Lease upon thirty (30) days written notice
to the other.  However, if a party has elected to terminate this Lease pursuant
to this Paragraph 12.2, the other party may prevent termination of the Lease
pursuant to this Paragraph 12.2 by paying the entire amount by which the cost of
repairing such Uninsured Loss exceeds the Cap Amount.

12.3                           The Minimum Rent payable by Tenant pursuant to
the provisions of Paragraph 4.1, together with Tenant’s payment obligations for
real estate taxes, insurance premiums and landscaping expenses, shall abate in
the proportion that the part of the Premises rendered unusable to Tenant bears
to the whole thereof, from the date of the damage or destruction through the
time required by Landlord to repair and rebuild the Premises. Except for
abatement of such Minimum Rent and payment obligations for real estate taxes,
insurance premiums and landscaping expenses, if any, Tenant shall have no claim
against Landlord by reason of any damage, destruction, repair or rebuilding of
the Premises.

12.4                           Upon the occurrence of any damage or destruction
to the Premises, Landlord shall, within twenty (20) days following the date of
occurrence of such damage or destruction, provide to Tenant a written notice of
Landlord’s reasonable and good faith estimate of the time required to complete
the repair and restoration (“Landlord’s Time Estimate”).  If Landlord reasonably
estimates that such repair and restoration will take more than one hundred
eighty (180) days to complete (measured from the date of issuance of necessary
building permits for the repair and

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restoration work) either Landlord or Tenant may elect to terminate this Lease
(effective as of the date of such damage or destruction) upon written notice to
the other, which notice shall be given, if at all, within thirty (30) days
following the date of Tenant’s receipt of Landlord’s Time Estimate. Landlord
agrees that it shall use diligent efforts to obtain the necessary building
permits at the earliest possible date. Once such notice has been delivered and
the thirty (30) day response period has expired, neither party shall have the
right to terminate this Lease as a result of the occurrence of such damage or
destruction, regardless of the actual time necessary to complete such repair and
restoration work, but Landlord agrees that it shall use its reasonable efforts
to complete the restoration work in a timely manner.

12.5                           If the Premises are materially damaged or
destroyed during the last year of the Lease Term, either Landlord or Tenant may
at such party’s option, cancel and terminate this Lease as of the date of
occurrence of such damage by giving written notice to the other party of the
electing party’s election to do so within thirty (30) days after the date of
occurrence of such damage (the “Damage Notice”). However, if Tenant possesses an
option to extend the Lease Term and the time within which Tenant may exercise
such option has not expired, and if Tenant validly exercises such option within
twenty (20) days after Tenant’s receipt of the Damage Notice, then Landlord’s
election to terminate this Lease pursuant to this Paragraph 12.4 shall be void
and of no effect. In such event, the repair and restoration of the Premises
shall be governed by the other applicable provisions of this Article XII. For
the purposes of this Paragraph 12.4, the Premises shall be deemed to have been
“materially damaged” if, in Landlord’s reasonable judgment, the cost to repair
such damage is greater than the then-applicable “Damage Threshold Amount”. For
the purposes of this Paragraph 12.5, the Damage Threshold Amount shall mean Five
Hundred Thousand Dollars if the damage occurs with twelve (12) months remaining
in the Lease Term, and the Damage Threshold Amount shall decrease by Fifty
Thousand Dollars each month thereafter (i.e., Four Hundred Fifty Thousand
Dollars [$450,000] if the damage occurs with eleven (11) months remaining in the
Lease Term; Four Hundred Thousand Dollars if the damage occurs with ten (10)
months remaining in the Lease Term, and so on). All other applicable provisions
of this Article XII shall apply to any damage occurring during the last year of
the Lease Term.

12.6                           Tenant waives the provisions of any statutes
which relate to termination of leases when the Premises are destroyed; and
Tenant agrees that such event shall be governed by the terms of this Lease and
not by any such statute.

ARTICLE XIII

Condemnation

13.1                           If title to all or any portion of the Premises
shall be taken by any public or quasi-public use or authority under any statute
or by right of eminent domain, or by private purchase in lieu thereof, then the
rights of the parties to share in the condemnation award or purchase price
thereby resulting shall be governed by the provisions of this Article XIII.

13.2                           Should all or such portion of the Premises be
taken in such a manner as to materially interfere with Tenant’s use and
occupancy thereof, then this Lease shall terminate as of the date that
possession of said Premises or part thereof shall be taken. Landlord shall be
entitled to (a) any amount paid for the taking of Landlord’s fee interest in the
Premises, (b) any severance damages included in the award, (c) any amount paid
for the taking of the Premises except that paid for any improvements made to the
Premises by Tenant which remain the property of Tenant, and (d) any amount which
represents the present worth of rent payments to be made in the future under the
provisions of this Lease; and none of Landlord’s interests in the above shall be
subject to any diminution or apportionment whatsoever. Tenant shall be entitled
to compensation paid under condemnation for the taking of any improvements made
to the Premises by Tenant which remain the property of Tenant and for moving
expenses and business interruption to the extent such claims are allowed and
awarded by the condemning authority.

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13.3                           In the event of a partial taking of the Premises
which does not materially interfere with Tenant’s continued use and occupancy of
the Premises and there remains sufficient area of the Premises for the continued
use of Tenant, then this Lease shall terminate only as to the part so taken, as
of the date that possession of such part of the Premises is taken, and the
Minimum Rent herein provided for shall be reduced in proportion as the square
footage of Building floor area taken bears to the total Building floor area
existing before such taking. In the event of a partial taking, Landlord agrees
to replace or repair the Building to substantially equivalent condition as
existed when the Lease Term commenced, and without regard to improvements made
by Tenant, by reinstalling plumbing, electrical, wiring, walls and paving, if
necessary, so that the Building shall be completely operable and an integral
whole, but at a cost to Landlord not to exceed the condemnation award received
by Landlord. In the event of such partial taking, Landlord shall be entitled to
receive all amounts described in the second sentence of Paragraph 13.2; and none
of Landlord’s interest in the above shall be subject to any diminution or
apportionment whatsoever. Tenant shall be entitled to compensation paid under
condemnation for the taking of any improvements made to the Premises by Tenant
which remain the property of Tenant.

13.4                           Landlord and Tenant agree to execute all
documents and assignments necessary to carry out this Article XIII in the event
of condemnation or purchase in lieu thereof.

ARTICLE XIV

Use Of Premises - Assignments

14.1                           Tenant shall have the right to use the Premises
for warehousing, repacking, and general office purposes in compliance with all
applicable laws and regulations, including, without limitation, environmental
laws and laws relating to Hazardous Materials; and Tenant agrees such use shall
comply with all applicable laws and regulations in effect when this Lease Term
commences and as may be amended or newly enacted during the Lease Term. Tenant
shall not use the Premises for the retail sale of property or for any other use
not specifically permitted pursuant to this Paragraph 14.1. Tenant shall not
conduct nor permit to be conducted any auction or auction sale at the Premises.
Tenant’s use of the Premises is subject to limitations imposed by the Watson
Land Company Performance Standards and the limitations contained in this Lease.
Tenant covenants and agrees that it shall not permit any of its employees,
agents, contractors, vendors or shippers to park, stage or store trucks,
automobiles, trailers or other vehicles on any of the public streets in the
general vicinity of the Premises or the industrial or business park in which the
Premises are located. Any violation of this restriction shall constitute a
default under this Lease.

14.2                           Tenant shall not assign, sublet or otherwise
transfer this Lease, or Tenant’s interest in and to the Premises, nor enter into
any license or concession agreements with respect thereto, without first
procuring the written consent of Landlord, which may not be unreasonably
withheld or delayed. Any such attempted or purported assignment, subletting,
transfer or license or concession agreement (collectively “Transfer”) without
Landlord’s prior written consent shall be void and of no force and effect, and
shall not confer any interest or estate in the purported transferee (the
“Transferee”) and shall, at Landlord’s option, constitute an incurable default
under this Lease. Tenant shall have no right to mortgage, hypothecate or
otherwise encumber its leasehold estate in the Premises or its rights under this
Lease, and Landlord and Tenant specifically agree that any such mortgage,
hypothecation or encumbrance by Tenant is strictly and absolutely prohibited. If
Tenant is a corporation, unincorporated association, trust or partnership, the
sale, assignment, transfer or hypothecation of any stock or other ownership
interest of such entity which from time to time in the aggregate exceeds fifty
percent (50%) shall be deemed an assignment subject to the provisions of this
Article XIV, but a public offering of Tenant’s stock, or the sale of Tenant’s
stock on a recognized stock exchange shall not be deemed a “Transfer” requiring
Landlord’s consent. Landlord agrees that, in the event of a proposed Transfer to
an “Affiliate” (as defined herein), Landlord will not withhold its consent to
such Transfer so long as (i) such Affiliate’s use of the Premises is in
conformance with Paragraph 14.1; (ii) such

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Affiliate’s use of the Premises will not result in any material increase in the
potential risk to Landlord arising out of or relating to Hazardous Materials;
and (iii) such Transfer will not cause any portion of the amounts received by
Landlord pursuant to this Lease or any sublease to fail to qualify as “rents
from real property” within the meaning of Section 856(d) of the Internal Revenue
Code, or which could cause any other income received by Landlord to fail to
qualify as income described in Section 856(c)(2) of the Internal Revenue Code.
As used herein, the term “Affiliate” shall mean any corporation for which fifty
percent (50%) or more of the voting stock (i) is owned by Tenant; or (ii) is
owned, directly or indirectly, by a corporation owning more than fifty percent
of the voting stock of Tenant. Any transfer of stock or other ownership interest
of Tenant which is made with the purpose or which has the practical effect of
circumventing the Transfer restrictions imposed under this Article XIV shall be
deemed to be a Transfer requiring Landlord’s consent. The consent of Landlord
required hereunder shall not be unreasonably withheld; however, a condition
precedent to any consent to a Transfer shall be Tenant’s agreement to pay to
Landlord as rent any costs and expenses incurred by Landlord for review and
consultation by Landlord’s legal counsel, securing credit reports,
administrative overhead and the like. Notwithstanding the foregoing, Landlord
and Tenant agree that, in determining whether to reasonably consent to a
proposed transfer, (i) it shall not be unreasonable for Landlord to withhold its
consent to any Transfer if a proposed Transferee’s anticipated or proposed use
of the Premises involves the generation, storage, use, treatment or disposal of
any Hazardous Material; and (ii) that Landlord may consider, among other things,
any or all of the following factors:

14.2.1                  The reputation of the Transferee (including any
principals, partners or shareholders of such assignee, subtenant to Transferee),
including, without limitation, the Transferee’s reputation for dishonesty,
criminal conduct or unethical business practices;

14.2.2                  The financial capacity of the proposed Transferee to
perform its obligations under this Lease;

14.2.3                  Whether the business experience and quality of business
operations of the proposed Transferee is comparable to that of Tenant;

14.2.4                  The credit history of the proposed Transferee;

14.2.5                  The intended use of the Premises by the proposed
Transferee, and Landlord’s assessment of the impact of such use upon the
Premises and neighboring properties;

14.2.6                  Whether the proposed Transferee’s use of the Premises
will involve the generation, storage, use, treatment or disposal of any
Hazardous Materials, or will in any way increase any potential risk or liability
to Landlord arising out of or relating to Hazardous Materials.

14.3                           Notwithstanding any permitted Transfer, Tenant
shall at all times remain directly, primarily and fully responsible and liable
for the payment of rent and for compliance with all obligations under the terms,
provisions and covenants of this Lease. All Transfer agreements shall expressly
provide that, in the event of a default by Tenant under this Lease, the
Transferee covenants and agrees with Landlord, contemporaneously with receipt of
written notice from Landlord that Tenant is in default of this Lease, and for so
long as such default continues, but not for a period of time in excess of the
term of the Transfer, to accept Landlord as Landlord of Transferee, to attorn to
Landlord as Landlord, to thereafter perform all duties and responsibilities
under the Transfer agreement directly to Landlord for Landlord’s sole benefit,
and to cure any default of Tenant under this Lease. Upon the occurrence of any
default by Tenant, if the Premises or any part thereof are then sublet,
Landlord, in addition to any other remedies herein provided or provided by law,
may at its option collect directly from such subtenant all rents becoming due to
Tenant under such sublease and apply such rent against any sums due to Landlord
from Tenant hereunder, and no such collection shall be construed to constitute a
novation or release of Tenant from the

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further performance of Tenant’s obligations under this Lease. Any sale,
assignment, transfer or hypothecation of Tenant’s interest under this Lease, and
any proposed subletting or occupancy of the Premises not in compliance with this
Article XIV shall be void and shall, at the option of Landlord exercisable by
notice to Tenant, terminate this Lease.

14.4                           Should Tenant desire to make a Transfer of the
Premises, Tenant shall give not less than ninety (90) days’ prior written notice
thereof to Landlord setting forth the name of the proposed Transferee, the term,
use, rental rate and other relevant particulars of the proposed Transfer,
including, without limitation, evidence satisfactory to Landlord that the
proposed Transferee will not use, store or dispose of any Hazardous Materials in
or on the Premises, and that the proposed Transferee will immediately occupy and
thereafter use the Premises for the entire term of the Lease or the sublease (as
the case may be). Such notice shall be accompanied, in the case of a sublease,
by a copy of the proposed sublease, and in the case of any Transfer, any
documents or financial information Landlord may require in order to make a
determination as to the suitability of the Transferee.

14.5                           Landlord shall have the right to condition its
consent to any subletting or assignment upon payment by Tenant to Landlord of
fifty percent (50%) of all “Transfer Consideration” (as defined herein) received
or to be received, directly or indirectly, by Tenant on account of such
subletting or assignment. For the mutual benefit of Landlord and Tenant, Tenant
shall secure Transfer Consideration from any such assignee, sublessee or
transferee which is generally equivalent to then-current market rent, but in no
event shall Tenant’s monetary obligations to Landlord, as set forth in this
Lease, be reduced. Such Transfer Consideration shall be paid to Landlord at the
same time or times as the same is paid to or used by Tenant. “Transfer
Consideration” shall mean (i) in the case of a sublease, any consideration paid
or given, directly or indirectly, by the sublessee to Tenant pursuant to the
sublease for the use of the Premises, or any portion thereof, over and above the
rent, however denominated, in this Lease, payable by Tenant to Landlord for the
use of the Premises (or portion thereof), prorating as appropriate the amount
payable by Tenant to Landlord under this Lease if less than all of the Premises
is sublet, and (ii) in the case of an assignment, the gross amount of any
consideration paid or given, directly or indirectly, by the assignee to Tenant
in exchange for entering into the assignment. Notwithstanding anything contained
in this Lease to the contrary, Tenant shall not (i) sublet or assign the
Premises or this Lease on any basis such that the rent or other amounts to be
paid by the sublessee or assignee thereunder would be based, in the whole or in
part, on the income or profits derived by the business activities of the
sublessee or assignee; (ii) furnish or render any services to the sublessee or
assignee or operate the Premises so subleased or assigned; (iii) sublet or
assign the Premises or this Lease to any person that Tenant or Landlord owns,
directly or indirectly (by applying the constructive ownership rules set forth
in Section 856(d)(5) of the Internal Revenue Code [the “Code”]), provided,
however, that the restriction contained in this item (iii) shall not apply to an
assignment of this Lease to an Affiliate of Tenant if no Transfer Consideration
arises and if Landlord does not own, directly or indirectly (as described
above), an interest in such assignee; or (iv) sublet or assign the Premises or
this Lease in any other manner which could cause any portion of the amounts
received by Landlord pursuant to this Lease or any sublease to fail to qualify
as “rents from real property” within the meaning of Section 856(d) of the Code,
or which could cause any other income received by Landlord to fail to qualify as
income described in Section 856(c)(2) of the Code.

14.6                           In addition to Landlord’s right of approval
pursuant to Paragraph 14.2, above, and Landlord’s right to share in Transfer
Consideration pursuant to Paragraph 14.5, above, Landlord shall have the option,
in the event of any proposed Transfer, to cancel this Lease as to the affected
portion of the Premises as of the effective date of the Transfer set forth in
Tenant’s notice. The option shall be exercised, if at all, by Landlord giving
Tenant written notice thereof within sixty (60) days following Landlord’s
receipt of Tenant’s written request. Upon any such cancellation, Tenant shall
pay to Landlord all amounts, as estimated by Landlord, payable by Tenant to such
termination date with respect to that portion of any obligations, costs or
charges

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which are the responsibility of Tenant under this Lease and allocable to the
affected portion of the Premises. Further, upon any such cancellation Landlord
and Tenant shall have no further obligations or liabilities to each other with
respect to the affected portion of the Premises, except with respect to
obligations or liabilities which have accrued as of such cancellation date (in
the same manner as if such cancellation date were the date originally fixed for
the expiration of the Lease Term, or Extended Term, as the case may be). Without
limitation, Landlord may lease the affected portion of the Premises to the
prospective Transferee, without liability to the Tenant. Landlord’s failure to
exercise said cancellation right as herein provided shall not be construed as
Landlord’s consent to the proposed Transfer.

14.7                           This Lease shall not be assignable by operation
of law, except that if Tenant is a natural person, this Lease shall be binding
upon and inure to the benefit of the estate of Tenant.

14.8                           If this Lease is assigned to any person or entity
pursuant to the provisions of the “Revised Bankruptcy Act” (Title 11 of the
United States Code; 11 U.S.C. §101 et seq.), any and all monies or other
consideration payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord, and shall not constitute property of Tenant or
of the estate of Tenant within the meaning of the Revised Bankruptcy Act. Any
and all monies or other considerations constituting Landlord’s property under
this Article XIV not paid or delivered to Landlord shall be held in trust for
the benefit of Landlord and shall be promptly paid or delivered to Landlord. Any
person or entity to which this Lease is assigned pursuant to the provisions of
the Revised Bankruptcy Act shall be deemed without further act or deed to have
assumed all of the obligations arising under this Lease on and after the date of
such assignment.

14.9                           Landlord shall have the right to sell, transfer,
delegate or assign any of its rights or obligations under this Lease.

ARTICLE XV

Event of Default

15.1                           Tenant shall be in default under this Lease if:

15.1.1  Tenant shall fail to make any payment of Minimum Rent, any additional
rent payable hereunder, or any other monetary obligation required of Tenant
under this Lease (including, without limitation, restoration of any security
deposit as required under this Lease) and such failure shall continue for seven
(7) days after Tenant’s receipt of written notice (which notice shall be in lieu
of, and not in addition to any notice required pursuant to California Code of
Civil Procedure Sections 1161 or 1161(a), as amended); from Landlord that said
rent or monetary obligation is due and payable as provided in this Lease; or

15.1.2  Tenant shall neglect or fail to perform or observe any of the covenants
herein contained on Tenant’s part to be performed or observed, and Tenant shall
fail to remedy the same within thirty (30) days after Landlord shall have given
to Tenant written notice specifying such neglect or failure (provided, however,
that if the performance or observance of any such covenant reasonably requires
more than thirty (30) days to perform, Tenant shall not be in default under this
Lease as a result of its failure to perform or observe any such covenant within
such thirty (30) day period, so long as Tenant has commenced the actions
necessary to perform or observe such covenant within such thirty (30) day
period, and is diligently pursuing such cure to completion); or

15.1.3  Tenant shall abandon the Premises and such abandonment shall continue
for a period of fourteen (14) consecutive days during which Minimum Rent for the
Premises has remained unpaid; or

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15.1.4      Tenant repeatedly fails to comply with the restrictions contained in
Paragraph 14.1 of this Lease prohibiting on-street parking.

15.2                           In the event of any uncured default by Tenant,
and without any further notice or demand, Landlord shall have the right at
Landlord’s election, then or at any time thereafter, to:

15.2.1      Terminate this Lease, which shall terminate Tenant’s right to the
use, occupancy and possession of the Premises, and Tenant shall immediately
surrender possession of the Premises to Landlord; or

15.2.2      Re-enter and take possession of the Premises or any part thereof as
provided by law, in which event this Lease shall terminate effective when
Landlord takes possession; or

15.2.3      Continue this Lease in effect and enforce any or all rights and
remedies of Landlord under this Lease, including the right to recover Minimum
Rent, additional rent and charges equivalent to rent (sometimes collectively
referred to herein as “rent”) as they become due under this Lease, for so long
as Landlord does not terminate Tenant’s right to possession of the Premises; or

15.2.4      Seek any legal or equitable relief permitted by law.

15.3                           If Landlord terminates this Lease as provided in
subparagraphs 15.2.1 or 15.2.2 hereof, Landlord shall have the right to recover
from Tenant:

15.3.1      The worth, at the time of the award, of the unpaid rent that had
been earned at the time of termination of this Lease; and

15.3.2      The worth, at the time of the award, of the amount by which the
unpaid rent that would have been earned after the date of termination of this
Lease until the time of award exceeds the amount of the loss of rent that Tenant
proves could have been reasonably avoided; and

15.3.3      The worth, at the time of the award, of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of the loss of rent that Tenant proves could have been reasonably
avoided; and

15.3.4      Any other amount necessary to compensate Landlord for all detriment
proximately caused by Tenant’s breach or which in the ordinary course of things
would be likely to result therefrom; such as, the cost of recovering possession
of the Premises, expenses of reletting including attorney’s fees and any real
estate commissions paid or payable, necessary repair, restoration, renovation,
or alteration of the Premises, and care and safekeeping of the Premises.

“The worth, at the time of the award,” as used in subparagraphs 15.3.1 and
15.3.2 of this paragraph, is to be computed by allowing interest at the Lease
Interest Rate in effect when each installment of rent referred to in said
subparagraphs became payable. “The worth, at the time of the award,” as referred
to in subparagraph 15.3.3 of this paragraph, is to be computed by discounting
the amount at the discount rate of the Federal Reserve Bank of San Francisco at
the time of the award, plus one percent (1%).

15.4                           If Tenant shall breach this Lease and abandon the
Premises, this Lease shall continue in full force and effect for so long as
Landlord does not terminate Tenant’s right to possession of the Premises, and
Landlord may enforce all of its rights and remedies under this Lease, including
but not limited to the right to recover rent and charges equivalent to rent as
they become due under this Lease. For the purposes of this Paragraph 15.4 and
Paragraph 15.2, the following acts by Landlord shall not constitute a
termination of Tenant’s right to possession of the Premises: (i) maintenance or
preservation of the Premises, (ii) efforts to relet the Premises, or (iii) the

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appointment of a receiver upon initiative of Landlord to protect Landlord’s
interest under the Lease.

15.5                           In the event Landlord re-enters and takes
possession of the Premises following an uncured breach of this Lease, Landlord
may at Landlord’s option require Tenant to remove from the Premises any of
Tenant’s property located therein. If Tenant fails to do so, Landlord shall not
be responsible for the care or safekeeping thereof and may remove any of the
same from the Premises and place the same in storage in a public warehouse at
the cost, expense and risk of Tenant with authority to the warehouseman to sell
the same in the event that Tenant shall fail to pay the costs of transportation
and storage, all in accordance with the rules and regulations applicable to the
operation of a public warehouseman’s business. Landlord may, at Landlord’s
election, dispose of said property pursuant to the provisions of Sections 1980
through 1991 of the California Civil Code. In any and all such cases of
re-entry, Landlord may make any repairs in, to or upon the Premises which may be
necessary, desirable or convenient, and Tenant hereby waives any and all claims
for damages which may be caused or occasioned by such reentry or any of the
aforesaid acts of Landlord or by reason of any loss or destruction or damage to
any property in or about the Premises or any part thereof.

15.6                           Tenant further covenants and agrees that if
Landlord fails or neglects for any reason to take advantage of any of the terms
hereof provided for the termination of this Lease or for the termination or
forfeiture of the estate hereby leased, or if Landlord, having the right to
declare this Lease terminated or the estate hereby leased terminated or
forfeited, shall fail so to do, any such failure or neglect of Landlord shall
not be or be deemed or be construed to be a waiver of any provisions for the
termination of this Lease continuing to exist or for the termination or
forfeiture of the estate hereby leased subsequently arising, or as a waiver of
any of the covenants, terms or conditions of this Lease or of the prompt
performance thereof by Tenant. None of the covenants, terms or conditions of
this Lease can be waived by conduct of the parties or by estoppel; any claim or
waiver must be in writing and signed by both parties.

ARTICLE XVI

Surrender of Premises

16.1                           Upon any termination of this Lease, whether by
lapse of time, cancellation pursuant to an election provided for herein,
forfeiture, or otherwise, Tenant shall immediately surrender possession of the
Premises and all buildings and improvements on the same (excepting those
improvements which Landlord shall have required Tenant to remove therefrom
pursuant to Paragraph 9.3 hereof) to Landlord in a clean and orderly condition
and appearance, state of repair and operating order, and with all such
improvements thereon in a good, safe, operable condition, and in full compliance
with all Federal, State and local laws, rules, regulations and ordinances
(including, without limitation, any laws, rules, regulations and ordinances
relating to Hazardous Materials) and each provision of this Lease, including
without limitation the provisions of Article IX hereof. If possession is not
immediately surrendered, Landlord may, with process of law, enter the Premises
and repossess the same and expel Tenant or any subtenant or occupant therefrom.
Landlord shall hold the Premises after any such re-entry free of any right,
privilege or estate of Tenant and without any duty or obligation to Tenant in
respect of any subsequent reletting or disposition of the Premises. If Tenant’s
business operations on the Premises or uses of the Premises involve any
generation, storage, use, treatment or disposal of any Hazardous Material,
Tenant shall be responsible for removing any such Hazardous Materials from the
Premises and for decontaminating the Premises and any neighboring properties
affected by such Hazardous Materials.

16.2                           Upon the termination of this Lease, Tenant, if
not in default hereunder at the time, shall have the right to remove, and if
directed so to do by Landlord shall remove, from the Premises, all of Tenant’s
machinery, equipment (excluding building service equipment), trade fixtures,
signs, furniture, furnishings,

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supplies and inventory then installed or in place in, on or about the Premises.
Except as hereinafter expressly set forth, such removal shall be completed prior
to the expiration or earlier termination of this Lease; provided, however, if
Tenant is in default of this Lease at such time, then Tenant may not remove the
foregoing items of property from the Premises; and Landlord shall have a lien
thereon as security against loss or damage resulting from Tenant’s default.
Tenant shall make all repairs to the Premises required because of such removal
and Tenant shall restore the Premises to their condition as existed when the
Lease Term commenced ordinary wear and tear excepted. If this Lease shall
terminate at any time other than the time herein fixed as the expiration of the
Lease Term, and occurring not due to a default by Tenant, then Tenant, if not in
default hereunder at the time, shall have a reasonable time thereafter to effect
the removal of the foregoing items, not to exceed thirty (30) days. Tenant shall
pay Minimum Rent and items designated in this Lease as additional rent to
Landlord on a per diem basis during the time such removal is taking place.

16.3                           If any of Tenant’s machinery, equipment, trade
fixtures, signs, furniture, furnishings, supplies and inventory remain on the
Premises after the end of the term hereof or time allowed to remove the same,
such property shall be deemed abandoned by Tenant and it shall become the
property of Landlord without any claim therein of Tenant should Landlord so
elect.

16.4                           Upon termination of this Lease, Tenant shall
surrender the Premises in a “broom-clean” condition, with all refuse and debris
removed therefrom, and with all electrical, plumbing, heating and air
conditioning installations in a good, safe and fully operable condition, and
prior to such termination, Tenant shall fill or repair any holes or openings
made by Tenant in the walls, roof or floor of the building, remove any
protuberance, and perform any maintenance or repairs required of Tenant by this
Lease. Nothing contained in this Paragraph 16.4 shall be deemed to limit
Tenant’s repair and maintenance obligations pursuant to Article IX of this
Lease. If directed so to do by Landlord, Tenant shall also remove any
improvements, additions or alterations made to the Premises by Tenant and
thereafter restore the Premises to their original condition, even though such
improvements by the terms of this Lease become a part of the Premises and the
property of Landlord.

ARTICLE XVII

Delays - Extensions of Time

17.1                           The time within which Landlord or Tenant is
obligated herein to construct, repair or rebuild any building, improvement or
other structure shall be extended and the performance excused when the delay is
occasioned by the other party (such as failure to promptly give required
approvals, or installation of machinery and equipment during construction which
interferes with or delays the contractor); or by strikes, threats of strikes or
lockouts; blackouts, war, threats of war, bombing, insurrection, riot or
invasion; acts of God, calamities, civil commotions, violent action of the
elements or fire; action, inaction or delayed action of any governmental agency;
regulations or laws of any national, state or local governmental authority;
unavailability of materials at reasonable prices, delays in delivery of
materials by suppliers or weather conditions which impair or delay construction;
or other matters or things, whether similar or dissimilar to the foregoing,
beyond the reasonable control of the obligated party. Delayed action by a
governmental agency shall be deemed to occur if a grading and foundation only
permit is not issued within twenty-one (21) days after drawings and
specifications for such permit are filed for plan check with the appropriate
governmental agency, or if a building permit is not issued within forty-five
(45) days after drawings, specifications, and engineering calculations for such
permit are filed for plan check with such governmental agency.

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ARTICLE XVIll

Attorneys’ Fees

18.1                           In the event that either Landlord or Tenant
brings any action or proceeding against the other for possession of the Premises
or for the recovery of any sum due hereunder, or because of the breach of any
covenant, condition or provision hereof, or for any other relief against the
other, declaratory or otherwise, including appeals therefrom, and whether being
an action based upon a tort or contract, then the prevailing party to this Lease
in any such proceeding shall be paid reasonable attorneys’ fees and costs of
such action or proceeding which shall be enforceable whether or not such action
or proceeding, is prosecuted to final judgment, and including an allowance for
attorneys’ fees for appeals and rehearings. In addition to the foregoing award
of attorneys’ fees to the prevailing party, the prevailing party in any such
lawsuit shall be entitled to its attorneys’ fees incurred in any post-judgment
proceedings to collect or enforce the judgment. This provision is separate and
several and shall survive the merger of this Lease into any judgment on this
Lease. Should Landlord be made a party to any suit or proceeding brought by a
third party, arising by reason of Tenant’s use or occupancy of the Premises and
not being a dispute essentially between Landlord and Tenant, then Tenant shall
defend Tenant and Landlord therein, at Tenant’s sole cost and expense, and shall
hold Landlord free and harmless from any claim, loss, liability, duty or
obligation therein, including any attorneys’ fees of Landlord. As used here, the
term “attorneys’ fees” means the full costs of legal services performed in
connection with the matters involved, calculated on the basis of usual fees
charged by an attorney performing those services.

ARTICLE XIX

Statement of Lease

19.1                           Tenant shall, at any time and from time to time
during the Lease Term (or any Extended Term), upon not less than ten (10) days’
prior written notice from Landlord, execute, acknowledge and deliver to Landlord
a written certificate substantially in the form attached hereto as Exhibit E,
certifying: (i) that this Lease represents the entire agreement between Landlord
and Tenant, and is unmodified and in full force and effect (or, if modified,
stating the nature of such modification and certifying that this Lease, as so
modified, is in full force and effect); (ii) the dates to which Minimum Rent and
other charges or additional rent have been paid in advance, if any; (iii) the
Commencement Date and Termination Date of the Lease Term; (iv) whether Tenant
has assigned, subleased or otherwise transferred the Premises, this Lease or any
interest of Tenant therein; (v) the then-current amount of Minimum Rent and any
Security Deposit paid by Tenant to Landlord under this Lease; (vi) the date upon
which, and the amount or method by which, Minimum Rent, additional rent or other
charges payable under this Lease will next be adjusted or increased (if at all);
(vii) that there are no options to extend the term of this Lease, or if any such
options exist, describing any such options and stating the terms and conditions
upon which any such options may be exercised; (viii) that there are no rights of
first refusal to purchase the Premises or lease additional space contiguous to
the Premises, or if any such rights of first refusal exist, stating the terms
and conditions upon which the same may be exercised; (ix) that to the best
knowledge of Tenant there are not any uncured defaults on the part of Landlord
under this Lease, and that Tenant has no right of offset, counterclaim or
deduction against Minimum Rent or other payment obligations of Tenant under this
Lease, or specifying such defaults if any are claimed together with the amount
of any offset, counterclaim or deduction alleged by Tenant; and (x) that
Landlord has fully performed each and all of its construction, repair and
maintenance obligations (if any), as required under this Lease, except as may be
specifically set forth in said statement (if applicable), and that Tenant,
subject to any such stated exception(s), accepts the Premises in their present
condition.

19.2                           In addition to the certificate required pursuant
to Paragraph 19.1, above, Landlord shall have the right to require Tenant to
execute a statement or certificate in a form requested by an existing or
potential purchaser, lender or other

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party which may acquire the Premises or hold a security interest in the Premises
(or the real property or Building of which the Premises are a part), or any
other certificate or form as may be reasonably requested by Landlord.

19.3                           Any such certificate or statement referred to in
this Article XIX may be relied upon by any such existing or potential purchaser,
lender, other secured party, and Tenant’s failure or refusal to execute and
deliver such statement within such time shall, at the option of Landlord,
constitute a material default under this Lease, and in the former event, shall
be conclusive and binding upon Tenant that: (a) this Lease is in full force and
effect, without modification, except as may be represented by Landlord; (b)
there are no uncured defaults in Landlord’s performance and that Tenant has no
right of offset, counterclaim or deduction against Minimum Rent or other payment
obligations under this Lease; and (c) no more than one (1) months’ Minimum Rent
or other payment obligations under this Lease has been paid in advance.

19.4                           If Landlord desires to finance, refinance, or
sell all or any portion of the real property of which the Building or the
Premises are a part, Tenant hereby agrees to deliver to any lender or purchaser
designated by Landlord such financial statements and other documents and
instruments of Tenant as may be reasonably required by any such lender or
purchaser. Such statements shall include the last three (3) years’ financial
statements of Tenant. All such financial statements and other information shall
be received by Landlord and any such lender or purchaser in confidence (except
for disclosures to auditors and regulatory authorities, and except for other
disclosures required by law), and shall be used only for the purposes herein set
forth.

19.5                           Tenant acknowledges and agrees that Tenant’s
obligation to provide such certificates or statements constitutes a material
inducement to Landlord to execute this Lease, and Tenant shall provide Landlord
with such certificates and statements within ten (10) days following Tenant’s
receipt of Landlord’s written request therefor.

ARTICLE XX

Rights Reserved by Landlord

20.1                           Landlord expressly reserves all rights in and
with respect to the land hereby leased not inconsistent with Tenant’s use of the
Premises as provided in this Lease, including (without in any way limiting the
generality of the foregoing) all rights to the subsurface of the land more than
five (5) feet below ground level, except where building improvements extend more
than five (5) feet below ground level; and all rights to the airspace more than
fifty (50) feet above the roof of any building; and the rights to enter upon the
Premises for itself or to give easements to others for the purpose of
installing, using, maintaining, renewing and replacing such overhead or
underground water, oil, gas, sewer drainage, and other pipe lines, and
telephone, electric, power, television and other lines, cables and conduits as
Landlord may deem desirable in connection with the development or use of any
other property in the neighborhood of the Premises, whether owned by Landlord or
not, all of which pipelines, lines and conduits shall be buried to a sufficient
depth or raised to a sufficient height so as not to interfere with the use or
stability of the Premises.

ARTICLE XXI

Covenant of Quiet Enjoyment

21.1                           Landlord does hereby covenant, promise and agree
to and with Tenant that Tenant, for so long as it is not in default hereof and
is in compliance with all of the terms and conditions of this Lease, shall and
may at all times peaceable and quietly have, hold, use, occupy and possess the
Premises throughout the term of this Lease, subject to all of the terms and
conditions of this Lease, without any molestation or eviction by Landlord or any
persons claiming by or through Landlord.

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ARTICLE XXII

Recordation

22.1                           Neither this Lease nor a short form of memorandum
of this Lease shall be recorded in the office of any county recorder without
Landlord’s express written consent.  In the event of any such recordation,
Tenant shall be solely responsible for any documentary transfer taxes or other
taxes relating to or arising out of any such recordation.

ARTICLE XXIII

Subordination

23.1                           This Lease and Tenant’s rights hereunder are and
will remain subject and subordinate to any ground lease, mortgage, deed of trust
or any other hypothecation for security now or hereafter placed upon the real
property of which the Premises are a part (the “Property”), and to all
increases, renewals, modifications, consolidations, replacements, and extensions
thereof (collectively referred to as the “Mortgage”). If the holder of a
Mortgage becomes the owner of the Property by reason of foreclosure or
acceptance of a deed in lieu of foreclosure, at such holder’s election Tenant
will be bound to such holder or its successor-in-interest under all terms and
conditions of this Lease, and Tenant will be deemed to have attorned to and
recognized such holder or successor as Landlord’s successor-in-interest for the
remainder of the Lease Term or any extension thereof. The foregoing is
self-operative and no further instrument of subordination and/or attornment will
be necessary unless required by Landlord or the holder of a Mortgage, in which
case Tenant will, within fourteen (14) days after written request, execute and
deliver without charge any documents reasonably required by Landlord or such
holder in order to confirm the subordination and attornment set forth above. No
indemnification obligation of Landlord under this Lease shall be assumed by or
binding upon any such Mortgage holder. Should the holder of a Mortgage request
that this Lease and Tenant’s rights hereunder be made superior, rather than
subordinate, to the Mortgage, then Tenant will, within fourteen (14) days after
written request, execute and deliver without charge such agreement as may be
reasonably required by such holder in order to effectuate and evidence such
superiority of the Lease to the Mortgage. If Landlord has made an assignment of
rents and leases to the Mortgage holder, Tenant agrees to be comply with any
provisions of such assignment requiring the payment of rents to the Mortgage
holder.

23.2                           If Tenant fails to execute and deliver any
documents as and when required above, such failure will constitute a default
under this Lease, entitling Landlord to the same rights and remedies as if such
default were with respect to non-payment of Minimum Rent. With respect to each
Mortgage that may encumber the Property at or after the commencement of the
Lease Term, Landlord agrees that promptly following its receipt of written
request by Tenant, Landlord will request the holder of the Mortgage to grant
Tenant a “non-disturbance agreement,” in the usual form used by such holder. The
term “non-disturbance agreement” as used herein means, in general, an agreement
that as long as Tenant is not in default under this Lease, this Lease will not
be terminated if such holder acquires title to the Property by reason of
foreclosure proceedings or acceptance of a deed in lieu of foreclosure, provided
that Tenant attorns to such holder in accordance with such holder’s
requirements. Except for making such written request, Landlord will be under no
duty or obligation hereunder, nor will the failure or refusal of such holder to
grant a non-disturbance agreement render Landlord liable to Tenant, or affect
this Lease in any manner.

ARTICLE XXIV

Security Deposit

24.1                           As security for the faithful performance of the
terms, covenants, conditions and provisions of this Lease, as well as to
indemnify Landlord from any damages, costs, expenses, real estate brokerage
commissions or attorneys’ fees which

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Landlord may incur or suffer by reason of any default by Tenant, Tenant hereby
agrees to deposit with Landlord, upon execution of this Lease, the sum set forth
in Item 1.10 of the Basic Lease Provisions. If the Minimum Rent shall, from time
to time, increase during the term of this Lease, Tenant shall thereupon deposit
with Landlord additional security deposit so that the amount of security deposit
held by Landlord shall at all times bear the same proportion to current Minimum
Rent as the original security deposit bears to the original Minimum Rent set
forth in Item 1.6 of the Basic Lease Provisions. Landlord shall not be required
to keep said deposit separate from its general accounts. No interest shall be
paid by Landlord to Tenant on said deposit, and no trust relationship is created
between Landlord and Tenant with respect to the security deposit.

24.2                           In the event Tenant shall be in default hereof at
any time prior to the end of the term hereof, then Landlord may apply all or any
portion of the security deposit in payment of Landlord’s costs, expenses,
damages, real estate broker’s commissions, and attorneys’ fees in enforcing the
terms, covenants, conditions and provisions hereof. Nothing herein contained
shall be construed to mean that the recovery of damages by Landlord against
Tenant shall be limited to the sum of the security deposit. In the event any
portion or all of the security deposit is applied by Landlord in accordance with
the foregoing, then Tenant shall immediately deposit with Landlord additional
sums so that the security deposit in the hands of Landlord shall be at all times
not less than the sum of the deposit herein provided for.

24.3                           Should the Lease Term and the occupancy of the
Premises by Tenant fail to commence through no fault of Tenant, then Landlord
shall return the security deposit and any prepaid rent then possessed by
Landlord to Tenant within thirty (30) days after such event occurs. If this
Lease should terminate for any reason other than the default of Tenant, Landlord
shall return the security deposit to Tenant promptly after Landlord’s inspection
of the Premises and confirmation that the Premises are surrendered in the
condition as required under the terms of this Lease.

ARTICLE XXV

Holding Over

25.1                           If Tenant remains in possession of all or any
portion of the Premises after the expiration of the Lease Term or any extension
or renewal hereof, such holding over shall not operate to extend or renew this
Lease but shall be construed as a tenancy from month-to-month which may be
terminated by Landlord upon three (3) days’ prior written notice if Tenant is
then in default of this Lease, or by either party upon at least thirty (30)
days’ prior written notice directed to the end of a calendar month. Such
month-to-month tenancy by Tenant shall be subject to all the terms and
provisions of this Lease, except that the Minimum Rent payable during the period
of holding over shall be one hundred twenty five percent (125%) of the average
monthly Minimum Rent payable by Tenant during the last twelve (12) months of the
Lease Term or any extension or renewal thereof. Any options, rights, or
privileges granted to Tenant, if any, to extend the Lease Term, to acquire the
Premises, or re-lease the same, shall not be applicable during said period of
holding over.

ARTICLE XXVI

General

26.1                           Remedies Cumulative. The specific remedies to
which Landlord may resort under the terms of this Lease are cumulative and are
not intended to be exclusive of any other remedies or means of redress to which
Landlord may be lawfully entitled in case of any breach or threatened breach by
Tenant of any provision of this Lease.

26.2                           Successors and Assigns. The covenants and
agreements herein contained shall bind and inure to the benefit of Landlord, its
successors and assigns, and Tenant, its successors and assigns, subject to the
provisions of this Lease.

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26.3                           Payments and Interest. Except as otherwise
specifically provided in this Lease, each covenant, agreement or stipulation by
a party hereto shall be performed at such party’s own cost and expense, and
without cost or expense to the other party. Any monetary obligations due from
Tenant to Landlord which are not paid when due shall bear interest from the due
date until paid to Landlord at the Lease Interest Rate. Such interest shall be
paid at the time of payment of the principal obligation as a condition of remedy
of such principal obligation. Any check tendered by Tenant which is dishonored
by the drawee bank shall not constitute payment of any obligation under this
Lease. If any check tendered by Tenant is dishonored by the drawee bank, then
the checks for all payment obligations of Tenant under this Lease for the next
twelve months shall be in the form of cashiers’ checks drawn on a major bank
with offices located throughout the state of California.

26.4                           Late Charge. Tenant acknowledges that late
payment of Minimum Rent and items designated in this Lease as additional rent
will cause Landlord to incur costs and suffer damages not contemplated by this
Lease, the exact amount of which will be impracticable to ascertain. Such costs
and damages include, but are not limited to, late charges which may be imposed
on Landlord by the terms of any trust deed covering the Premises; additional
administrative duties of Landlord’s personnel in determining delinquent rents
and attempts to collect such rents by reasonable means other than litigation;
additional accounting and budgetary duties of Landlord’s personnel; possible
adverse effects on Landlord’s credit rating resulting from impairment of
Landlord’s cash flow; and attorneys’ fees resulting from consultations with
counsel. Accordingly, if any installment of Minimum Rent or items designated as
additional rent are not received by Landlord within ten (10) days after the same
are due, Tenant shall pay Landlord, as additional rent, a late charge equal to
three percent (3%) of such overdue amount. Landlord and Tenant agree that such
late charge represents a fair, equitable, and reasonable estimate of the costs
and damages Landlord will incur because of Tenant’s late payment.

26.5                           Late Payments and Impounds. Intentionally
deleted.

26.6                           Notices. Any notice or demand required or
permitted by law or by any of the provisions of this Lease shall be in writing.
All notices or demands by either party shall be deemed to have been properly
given upon delivery when served personally; two (2) business days after being
deposited with the U.S. Postal Service when sent by registered or certified
mail, postage prepaid; or by noon on the business day following the day of
deposit with an overnight express carrier when sent by overnight express
service, such as Federal Express. Notices from Landlord to Tenant shall be given
to Tenant at the address as stated in Paragraph 1.14 of the Basic Lease
Provisions. Notices or demands to Landlord shall be given to Landlord at 22010
Wilmington Avenue, Suite 400, Carson, California 90745. Either party hereto may
change the place to which notices are to be given by advising the other party in
writing.

26.7                           Captions. The headings or captions of Articles in
this Lease are for convenience and reference only, and they in no way define,
limit or describe the scope or intent of this Lease or the provisions of such
Articles.

26.8                           Pronouns and Singular/Plural. Feminine or neuter
pronouns shall be substituted for those masculine form or vice versa, and the
plural shall be substituted for the singular number of vice versa, in the place
or places herein where the context may require such substitution or
substitutions.

26.9                           Time of Essence. Time is hereby declared to be of
the essence of this Lease and of each and every covenant, term, condition or
provision hereof.

26.10                     Reasonable Consent. Unless otherwise provided in this
Lease, whenever the consent or approval of Landlord or Tenant is required by the
provisions of this Lease, such consent or approval shall not be unreasonably
withheld or delayed.

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26.11                     Fair Meaning. The language in all parts of this Lease
shall be in all cases construed as a whole according to its fair meaning, and
not strictly for nor against either Landlord or Tenant.

26.12                     Entire Agreement. This Lease contains all of the
agreements of the parties hereto with respect to any matter covered or mentioned
in this Lease, and no prior agreement or understanding pertaining to any such
matter shall be effective for any purpose. No provision of this Lease may be
amended or added to except by an agreement in writing signed by the parties
hereto or their respective successors in interest.

26.13                     No Accord and Satisfaction. No payment by Tenant or
receipt by Landlord of a lesser amount than that stipulated herein for Minimum
Rent, additional rent or any other charge shall be deemed to be other than on
account of the earliest stipulated Minimum Rent, additional rent or other charge
then due, nor shall any endorsement or statement on a check or letter
accompanying any check or payment be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to rights to recover
the balance of such Minimum Rent, additional rent, or other charges or pursue
any other remedy in this Lease, at law or in equity.

26.14                     Choice of Law. This Lease shall be governed by and
construed pursuant to the laws of the State of California.

26.15                     Non-Discrimination. Tenant herein covenants by and for
itself, its heirs, executors, administrators and assigns, and all persons
claiming under or through it; and this Lease is made and accepted upon and
subject to the following conditions: That there shall be no discrimination
against or segregation of any person or group of persons, on account of race,
color, creed, national origin, or ancestry in the leasing, subleasing,
transferring, use, occupancy, tenure or enjoyment of the Premises, nor shall the
Tenant itself, or any person claiming under or through it, establish or permit
any such practice or practices of discrimination or segregation with reference
to the selection, location, number, use or occupancy of tenant’s, lessees,
sublessees or vendees on the Premises.

26.16                     Counterparts. This Lease may be executed in several
counterparts, each of which shall constitute an original.

26.17                     Corporate Resolution. If Tenant is a corporation,
Tenant shall deliver to Landlord, contemporaneously with delivery of this Lease
executed by Tenant, a certified copy of a resolution of Tenant’s Board of
Directors authorizing the execution of this Lease and naming the representatives
authorized to execute this Lease on behalf of Tenant.

26.18                     Reimbursements to Landlord. If Tenant, or any third
party on behalf of Tenant or with whom Tenant is engaged or contemplates
engaging in business, requests that Landlord review or approve any drawings,
specifications or engineering calculations respecting any improvements Tenant
intends to install in the Premises or execute any agreement or written
instrument; and if Landlord refers such matter to any architect, engineer,
surveyor or other professional or administrative personnel of Landlord or to
legal counsel for review and advice to Landlord, then Tenant agrees to reimburse
Landlord as additional rent for all professional fees and costs incurred by
Landlord at the actual cost thereof for persons not in the direct employ of
Landlord, and at the rate of Seventy-Five Dollars ($75.00) per hour for all time
spent by professional and administrative persons in the direct employ of
Landlord. If Tenant requests that Landlord consent to an assumption and/or
assignment of this Lease or a subletting of the Premises to a third party for
which Landlord’s written consent is required, Tenant agrees to reimburse
Landlord, as additional rent, for all time spent by Landlord’s administrative
and professional personnel, in reviewing the proposed form of all legal
documents submitted by Tenant and preparing necessary additional legal
documents, in evaluating the investigating the credit worthiness of the proposed
assignee or subtenant, in inspecting the Premises to determine if the same is in
the condition and state of repair as required by this Lease, in reviewing
drawings and

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specifications for any additional improvements to be made to the Premises, and
for any other action required in the reasonable judgment of Landlord. Landlord
shall be reimbursed at the rate of Seventy-Five Dollars ($75.00) per hour for
the time spent by its administrative and professional personnel, (or in the
amount of One Thousand Dollars ($1,000.00), whichever is greater), and at the
actual cost of professional fees and costs incurred by Landlord for persons not
in the direct employ of Landlord, for each such request made by Tenant. The
hourly fee payable to Landlord’s administrative and professional personnel under
this Paragraph shall be increased by two percent (2%) on each anniversary date
of the commencement of the term of this Lease.

26.19                     No Guard Service. Tenant hereby acknowledges that the
rent payable to Landlord hereunder does not include the cost of guard service or
other security measures, and that Landlord shall have no obligation whatsoever
to provide any such service or measures. Tenant assumes all responsibility for
the protection of Tenant, its agents and invitees from acts of third parties.

26.20                     Brokers. Tenant represents and warrants to Landlord
that Tenant has had no dealings with any real estate broker, finder or other
person with respect to this Lease in any manner, excepting only the brokers
specifically named in Item 1.11 of the Basic Lease Provisions. Tenant hereby
indemnifies and holds Landlord harmless from any liability or claim that may be
asserted against Landlord by any broker, finder or person with whom Tenant has
purportedly dealt whose name is not inserted in Item 1.11 of the Basic Lease
Provisions.

26.21                     Brokerage Commission. Tenant acknowledges its
understanding that Landlord has paid a real estate brokerage commission for
securing Tenant’s tenancy at the Premises for the term of this Lease. If Tenant
defaults under this Lease and discontinues paying the rent specified herein,
Tenant shall, within thirty (30) days of such event, reimburse Landlord for the
unamortized portion of such brokerage commission pursuant to the following
formula:

Total amount of brokerage commission

 

x

 

Number of months of unexpired lease term

 

Number of months of lease term

 

26.22                     Limitation of Liability. Tenant hereby agrees that, in
the event of any actual or alleged failure, breach or default hereunder by
Landlord, Tenant’s sole and exclusive remedy shall be against and shall be
satisfied from the Landlord’s equity interest in the Premises. Tenant agrees
that the obligations of Landlord under this Lease do not constitute personal
obligations of the individual directors, officers or shareholders of Landlord,
and Tenant shall not seek recourse against the individual directors, officers or
shareholders of Landlord or any of their personal assets for satisfaction of any
liability with respect to this Lease.

26.23                     Parking. Tenant shall instruct and require that
Tenant’s employees, agents, visitors and business invitees park motor vehicles
within the Tenant Yard Area; and such employees, agents, visitors and invitees
shall not park on the streets. If there is insufficient parking area included in
the Tenant yard Area for parking of such motor vehicles, Tenant shall use its
best efforts to obtain off-street parking privileges on other properties in the
vicinity of the Premises.

26.24                     Lease Reviewed. Landlord and Tenant have carefully
read and reviewed this Lease and each term and provision contained herein, and
each of them has referred this Lease to its own legal counsel for review and
advice as to the legal consequences of this Lease. Landlord and Tenant
acknowledge their informed and voluntary consent thereto. Landlord and Tenant
further agree that, at the time this Lease is executed, the terms of this Lease
are commercially reasonable and effectuate the intent and purpose of Landlord
and Tenant with respect to the Premises.

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26.25                     Financial Statements. As a material inducement to
Landlord’s execution of this Lease, Tenant hereby represents and warrants that
Tenant has furnished to Landlord true, complete, current and unqualified audited
financial statements of Tenant and any guarantor of Tenant for the last three
(3) years prepared in accordance with generally accepted accounting principles
in a manner consistently applied in each case. Throughout the Lease Term, Tenant
shall, within ten (10) days following Landlord’s request, provide Landlord with
Tenant’s then-current financial statements. Landlord shall maintain such
financial statements in confidence, except for disclosure to prospective
purchasers of the Premises and prospective lenders whose loans would be secured
in whole or in part by this Lease or the Premises. Throughout the Lease Term,
Tenant will furnish to Landlord prompt notice of (i) any material obligation or
material adverse development with respect to the business, financial condition
or results of operations of Tenant; and (ii) any default under this Lease or any
event, the occurrence or nonoccurrence of which constitutes, or which with the
giving of notice or the passage of time or both would constitute, a default
under Lease.

26.26                     Lease Interest Rate. As used in this Lease, the “Lease
Interest Rate” shall be a rate equal to two percent (2%) per year in excess of
the “Reference Rate” most recently announced by Bank of America, Los Angeles
from time to time, provided however that if Bank of America ceases to announce
such Reference Rate, then such rate shall be a rate comparable to such Reference
Rate; and provided further, however, that in no event shall the Lease Interest
Rate exceed the highest lawful rate of interest permissible by law.

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and year first above written.

“LANDLORD”

 

“TENANT”

 

 

 

Watson Land Company,

 

Hansen Beverage Company,

a California corporation

 

a Delaware corporation

 

 

 

 

 

 

/s/ Bruce A. Choate

 

/s/ Rodney C. Sacks

Signature

 

Signature

 

 

 

President/CEO

 

Chairman

Title

 

Title

 

 

 

Bruce A. Choate

 

Rodney C. Sacks

Printed Name

 

Printed Name

 

 

 

10-18-06

 

10-15-06

Date

 

Date

 

 

 

 

 

 

/s/ Kirk R. Johnson

 

 

Signature

 

Signature

 

 

 

Executive Vice President

 

 

Title

 

Title

 

 

 

Kirk R. Johnson

 

 

Printed Name

 

Printed Name

 

 

 

10-18-06

 

 

Date

 

Date

 

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