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Exhibit 10.24  


 
 

SUBLEASE AGREEMENT    
    


        This SUBLEASE AGREEMENT ("Sublease") is entered into this 26th day of August, 2005, by and between
K2 INC., a Delaware corporation ("Sublessor") whose address is 5818 El Camino Real, Carlsbad, CA 92008 and ALPHATEC MANUFACTURING, INC., a
California corporation ("Sublessee") whose address is Suite 100, 2051 Palomar Airport Road, Carlsbad, California 92008
("Premises"). 


RECITALS  


        A.    MG
Palomar, LLC, a California limited liability company, as landlord ("Landlord"), and Sublessor, as tenant, entered into
a lease dated December 3, 2002 ("Master Lease"), with regard to the Premises. A copy of the Master Lease is attached hereto as  Exhibit "A".



        B.    Sublessor,
on July 29, 2005, agreed to sublease to Sublessee the entire Premises in accordance with the terms and conditions set forth in the Sublease Agreement,
dated as of July 29, 2005 (the "July Sublease") between the parties hereto. 



        C.    Sublessor
wishes to Sublease to Sublessee, and Sublessee wishes to Sublease from Sublessor, the entire Premises for the term beginning on August 1, 2006 and ending
on February 28, 2008 in accordance with the terms and conditions set forth hereinbelow. 


        NOW,
THEREFORE, Sublessor and Sublessee agree as follows: 


AGREEMENT  


        1.     Sublease. Sublessor subleases the Subleased Premises to Sublessee, and Sublessee subleases the Premises from Sublessor,
according to the terms and conditions of this Sublease. The provisions of the Master Lease (except Paragraphs 39, 52, 53, and 55) are incorporated herein as though Sublessor was landlord under
the Master Lease and Sublessee was tenant under the Master Lease. 


        2.     Term. The term ("Term") of this Sublease will begin on August 1,
2006 ("Commencement Date"), and will end on February 28, 2008, inclusive. 


        3.     Rent. Sublessee will pay Sublessor as rent ("Rent") for the Premises the
sum of (a) Thirty Two Thousand Two Hundred Forty-Three Dollars and Forty-Eight Cents ($32,243.48) for the term commencing on August 1, 2006 and ending on February 28, 2007,
inclusive, and (b) Thirty Three Thousand Two Hundred Ten Dollars and Seventy-Eight Cents ($33,210.78) for the term commencing on March 1, 2007 and ending on February 28, 2008,
inclusive, in each case, in advance, without notice, demand, offset, or counterclaim, on the first day of each month prior to the month such Rent shall be applicable to (e.g.. Rent for
August 2006 shall be payable July 1, 2006). Rent and any other sums due to Sublessor from Sublessee under this Sublease will be paid at the following address (unless written notice
provided of a change of address): 5818 El Camino Real, Carlsbad, CA 92008. If the Term of this Sublease begins on a day other than the first day of a month or ends on a day other than the last day of
a month, Rent will be prorated on a per diem basis. 


        4.     Acceptance of the Premises. Sublessee has accepted the Premises in its then present condition pursuant to the terms of the
July Sublease and hereby accepts the Premises in its present condition for the Term. Sublessor makes no representation or warranty as to its fitness for Tenant's intended use. Sublessor will not be
obligated to make any alterations or improvements to the Subleased Premises on account of this Sublease. Any signage shall be at Sublessee's sole cost and expense pursuant to the approval of Landlord. 



        5.     Security Deposit. Pursuant to the July Sublease, Sublessee has deposited with Sublessor the sum of Twenty Eight Thousand
Five Hundred Fifty-five and 00/100 Dollars ($28,555.00) that Sublessor 







 



will
hold in accordance with Paragraph 5 of the Master Lease (this sum will be held through the Term under the July Sublease and this Sublease). 


        6.     Other Charges. During the Term of this Sublease, Sublessee will pay to Sublessor "Lessee's Share" (as such term is defined
in the Master Lease) of any Operating Expense Increases payable by Sublessor pursuant to Paragraph 4.2 of the Master Lease. Such payments will be made as and when due under the Master Lease.
Sublessee shall also pay for all janitorial services. 


        7.     Parking. Sublessor agrees that during the Term of this Sublease, Sublessee will be entitled to non-exclusive
use of seventy six (76) vehicle parking spaces in the Project's parking facility at no additional charge to Sublessee. 


        8.     Services. Sublessor will not be obligated to provide any services to Sublessee. Sublessee's sole source of such services
is Landlord, pursuant to the Master Lease. Sublessor makes no representation about the availability or adequacy of such services. 


        9.     The Master Lease. This Sublease is subject to the Master Lease. The provisions of the Master Lease are applicable to this
Sublease as though landlord under the Master Lease were the Sublessor under this Sublease and tenant under the Master Lease were Sublessee under this Sublease; provided, however, that all
communications between Sublessee and Landlord shall be through Sublessor only. Sublessee has received a copy of the Master Lease. Sublessee will not cause or allow to be caused any default under the
Master Lease. Sublessee will indemnify Sublessor against any loss, liability, and expenses (including reasonable attorneys' fees and costs) arising out of any default under the Master Lease caused by
Sublessee, and Sublessor will indemnify Sublessee against any loss, liability, and expenses (including reasonable attorneys' fees and costs) arising out of any default under the Master Lease caused by
Sublessor. 


        10.   Consent of Landlord. In the event the Master Lease requires that Sublessor obtain the consent of Landlord to any
subletting by Sublessor then, this Sublease shall not be effective unless, within twenty (20) days of the date hereof, Landlord consents to this Sublease in writing. 



        11.   Subsequent Subleases, Assignments and Modifications. Sublessee shall not further sublet the Premises or any portion
thereof, nor assign, amend or modify this Sublease, without the express prior written consent of Sublessor, which consent may be withheld by Sublessor in its sole and absolute discretion.. Any
attempted further subletting of the Premises or assignment, amendment or modification of this Sublease without the express prior written consent of Sublessor shall be void ab initio and shall
constitute a material default by Sublessee under this Sublease. 


        12.   Attorneys' Fees. In the event suit is brought to enforce or interpret any part of this Agreement, the prevailing party
shall be entitled to recover as an element of his costs of suit, and not as damages, reasonable attorneys' fees to be fixed by the court. 


        13.   Executed Counterparts. This Agreement may be executed in one or more counterparts, all of which together shall constitute
a single agreement and each of which shall be an original for all purposes. 


[remainder
of page intentionally blank] 


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        IN
WITNESS WHEREOF, the parties hereto have caused this Sublease to be duly executed as of the day and year first above written. 



	
SUBLESSOR	
 	

SUBLESSEE
	
 K2 INC.,

a Delaware corporation	
 	

ALPHATEC MANUFACTURING, INC.,

a California corporation
	

By:	
 	

/s/  MONTE BAIER      
 Name:  Monte Baier

Title:    General Counsel	
 	

By:	
 	

/s/  RONALD G. HISCOCK      
 Name:  Ronald G. Hiscock

Title:    President and CEO




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CONSENT TO SUBLEASE AGREEMENT  


(Attach
copy of Consent to Sublease Agreement) 


4








  



 
 

Consent To Sublease Agreement    
    


        This Consent to Sublease Agreement (this "Agreement") is made as of September 14, 2005, by and among James C. Coxeter, as Trustee of the Coxeter Survivor's
Trust Created Under the Coxeter Family Trust dated April 30, 2003 ("Master Landlord"), K2 Inc., a Delaware corporation ("Sublandlord"), and Alphatec Spine, Inc. (f/k/a Alphatec
Manufacturing, Inc.), a California corporation ("Subtenant"). 


 
 

Recitals    
    


        This Agreement is made with regard to the following facts: 



        A.    MG
Palomar, LLC, a California limited liability company, as Lessor, and Sublandlord, as Lessee, entered into that certain Standard Multi-Tenant Office Lease-Gross and
Addenda dated as of December 3, 2002 (the "Master Lease"), for that certain space known as Suite 100 (the "Premises") on the first floor in the office building commonly known as 2051 Palomar
Airport Road, Carlsbad, California 92009 (the "Building"). 


        B.    All
right, title, and interest of MG Palomar, LLC, in and to the Master Lease, the Premises, and the Building were duly assigned and transferred by MG Palomar, LLC, to
Gold Pointe B, LLC, a California limited liability company, as of January 23, 2004. 



        C.    All
right, title, and interest of Gold Pointe B, LLC, in and to the Master Lease, the Premises, and the Building were duly assigned and transferred by Gold Pointe B, LLC,
to James C. Coxeter, as Trustee of the Coxeter Survivor's Trust Created Under the Coxeter Family Trust dated April 30, 2003 (the Master Landlord), as of October 4, 2004; and the Master
Landlord now duly holds all right, title, and interest in and to the Master Lease, the Premises, and the Building, formerly held by Gold Pointe B, LLC, and by MG Palomar, LLC, before it. 


        D.    Under
the terms of Paragraph 12 of the Master Lease, Sublandlord has requested Master Landlord's consent to the Sublease Agreement dated August 26, 2005,
between Sublandlord and Subtenant (the
"Sublease"), which would sublease to Subtenant the Premises, as more particularly described in the Sublease (the "Subleased Premises"). A copy of the Sublease is attached to this Agreement as
Exhibit A. 


        E.    Master
Landlord is willing to consent to the Sublease on the terms and conditions contained in this Agreement. 




        NOW,
THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for valuable consideration, the receipt and sufficiency of which are acknowledged by the
parties, the parties agree as follows: 


        1.    Master Landlord's Consent.    Master Landlord consents to the Sublease. This consent is granted only on the
terms and conditions stated in this Agreement. Master Landlord is not bound by any of the terms, covenants, or conditions of the Sublease. The Sublease is subject and subordinate to the Master Lease.
If there is a conflict between this Agreement and the Sublease, the terms, conditions, and obligations of this Agreement shall control. 


        2.    Limits of Consent.    Neither the Sublease nor this Agreement will: 



        (a)   release
Sublandlord from any liability, whether past, present or future, under the Master Lease; 


        (b)   alter
the primary liability of Sublandlord to pay the Rent and perform all of Lessee's obligations under the Master Lease (including the payment of all bills rendered by
Master Landlord for charges incurred by Subtenant for services and materials supplied to the Subleased Premises); 



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        (c)   be
construed as a waiver of Master Landlord's right to require its prior written consent to any proposed assignment or subletting after the date hereof by Sublandlord
under the Master Lease or Subtenant under the Sublease, or as a consent to any portion of the Premises being used or occupied by any other party; 


        (d)   grant
any rights to Subtenant greater than those rights granted to Sublandlord under the Master Lease; 


        (e)   be
deemed consent to any other assignment or subletting; 


        (f)    be
construed as consent by Master Landlord to a term in the Sublease beyond the term of the Master Lease; 


        (g)   require
Master Landlord to recognize Subtenant in the event of a default in the Master Lease by Sublandlord; 


        (h)   enlarge
or in any manner increase Master Landlord's obligations or duties under the Master Lease; 


        (i)    create
obligations or costs to Master Landlord with regard to the Sublease; 



        (j)    require
Master Landlord to proceed in any action under the Master Lease or this Agreement against either Sublandlord or Subtenant without first exhausting Master
Landlord's remedy against the other; or 


        (k)   modify,
waive, amend, or otherwise affect any provision of the Master Lease. 




        Master
Landlord may consent to subsequent subleases and assignments of the Sublease or any amendments or modifications to the Sublease without notifying Sublandlord or anyone else liable
under the Master Lease, including any guarantor of the Master Lease, and without obtaining their consent. 


        No
such action by Master Landlord will relieve those persons from any liability to Master Landlord or otherwise with regard to the Premises. 


        3.    Relationship with Master Landlord.    


        3.1.    Assignment of Sublandlord's Interest to Master Landlord.    Sublandlord assigns and transfers to Master
Landlord Sublandlord's interest in the Sublease and all rentals and income arising from the Sublease, subject to the terms of this section 3. Master Landlord, by consenting to the Sublease,
agrees that, until Sublandlord defaults in performing its obligations under the Master Lease, Sublandlord may receive, collect, and enjoy the rents accruing under the Sublease. 


        3.2.    Effect of Sublandlord Default Under Master Lease.    If Sublandlord defaults in the performance of its
obligations to Master Landlord, under section Paragraph 13 of the Master Lease (whether or not Master Landlord terminates the Master Lease), Master Landlord may, in connection with section
Paragraph 13 of the Master Lease, at its option by notice to Sublandlord, do either of the following: 



        (a)   Terminate
the Sublease; or 


        (b)   Elect
to receive and collect, directly from Subtenant, all rent and any other sums owing and to be owed under the Sublease, as further set forth in section 3.3,
below. 




        3.3.    Master Landlord's Election to Receive Rents.    Master Landlord will not, as a result of the Sublease, or as a
result of the collection of rents or any other sums from Subtenant under section 3.2(b), above, be liable to Subtenant for any failure of Sublandlord to perform any obligation of Sublandlord
under the Sublease. Sublandlord irrevocably authorizes and directs Subtenant, on receipt of any written notice from Master Landlord stating that a default exists in the performance of Sublandlord's
obligations under the Master Lease, to pay to Master Landlord the rents and any other 


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sums
due and to become due under the Sublease. Sublandlord agrees that Subtenant has the right to rely on any such statement from Master Landlord, and that Subtenant will pay those rents and other
sums to Master Landlord without any obligation or right to inquire as to whether a default exists and despite any notice or claim from Sublandlord to the contrary. Sublandlord will not have any right
or claim against Subtenant for those rents or other sums paid by Subtenant to Master Landlord. Master Landlord will credit Sublandlord with any rent received by Master Landlord under this assignment,
but the acceptance of any payment on account of rent from Subtenant as the result of a default by Sublandlord will not: (a) be an attornment by Master Landlord to Subtenant or by Subtenant to
Master Landlord; (b) be a waiver by Master Landlord of any provision of the Master Lease; or (c) release Sublandlord from any liability under the terms, agreements, or conditions of the
Master Lease. No payment of rent by Subtenant directly to Master Landlord, regardless of the circumstances or reasons for that payment, will be deemed an attornment by Subtenant to Master Landlord in
the absence of a specific written agreement signed by Master Landlord to that effect. 


        3.4.    Master Landlord's Election of Subtenant's Attornment.    In the event the Master Lease is terminated prior to
the expiration of the term of the Sublease, Master Landlord shall have the right, pursuant to notice to Subtenant, to succeed to Sublandlord's interest in the Sublease and cause Subtenant to attorn to
Master Landlord. Master Landlord will assume the obligations of Sublandlord under the Sublease from the time of the exercise of the option, but Master Landlord will not be: 



        (a)   liable
for any rent paid by Subtenant to Sublandlord more than one month in advance, or any security deposit paid by Subtenant to Sublandlord; 


        (b)   liable
for any act or omission of Sublandlord under the Master Lease or for any default of Sublandlord under the Sublease which occurred prior to the Master Landlord's
assumption; 


        (c)   subject
to any defenses or offsets that Subtenant may have against Sublandlord which arose prior to Master Landlord's assumption; or 


        (d)   bound
by any changes or modifications made to the Sublease without the written consent of Master Landlord. 




        3.5    Indemnity.    Subtenant shall hold Master Landlord harmless to the same extent as required by Lessee in
Paragraph 8.7 of the Master Lease. 


        3.6    Expiration of Master Lease Term.    Unless previously terminated pursuant to the terms of the Master Lease, the
term of the Master Lease shall expire on February 28, 2008. The Option, as defined in Paragraph 39.1 of the Master Lease, is personal to K2 Inc. and cannot be assigned or
exercised by anyone other than K2 Inc. The Option can only be exercised while K2 Inc. is in full possession of the Premises and without the intention of thereafter assigning or
subletting. 


        3.7    No Right to Holdover.    There is no right to retain possession of the Premises or any part thereof beyond the
expiration or termination of the Master Lease. In the event that either Sublandlord or Subtenant fail to vacate the Premises at the expiration or termination of the Master Lease the then Base Rent, as
that term is defined in the Master Lease, shall, pursuant to Paragraph 26 of the Master Lease, increase to 150% of the Base Rent applicable immediately preceding the expiration or termination
and Sublandlord and Subtenant shall both remain liable for all payments due under the Master Lease until the holdover is terminated. 


        4.    Consideration for Sublease.    Sublandlord and Subtenant represent and warrant that there are no additional
payments of rent or any other consideration of any type which has been paid or is payable by Subtenant to Sublandlord in connection with the Sublease, other than as disclosed in the Sublease. 


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        5.    General Provisions.    


        5.1.    Brokerage Commission.    Sublandlord and Subtenant agree that Master Landlord will not be liable for any
brokerage commission or finder's fee in connection with the consummation of the Sublease or this Agreement. Sublandlord and Subtenant will protect, defend, indemnify, and hold Master Landlord harmless
from any brokerage commission or finder's fee in connection with the consummation of the Sublease or this Agreement, and from any cost or expense (including attorney fees) incurred by Master Landlord
in resisting any claim for any such brokerage commission or finder's fee. The provisions of this section 5.1 shall survive the expiration or earlier termination of the Sublease and this
Agreement. 


        5.2.    Notice.    Any notice that may or must be given by any party under this Agreement will be delivered
(i) personally, (ii) by certified mail, return receipt requested, or (iii) by a nationally recognized overnight courier, addressed to the party to whom it is intended. Any notice
given to Master Landlord, Sublandlord or Subtenant shall be sent to the respective address set forth on the signature page below, or to such other address as that party may designate for service of
notice by a notice given in accordance with the provisions of this Section 5.2. A notice sent pursuant to the terms of this Section 5.2 shall be deemed delivered (A) when delivery
is attempted, if delivered personally, (B) three (3) business days after deposit into the United States mail, or (C) the day following deposit with a nationally recognized
overnight courier. 


        5.3.    Controlling Law.    The terms and provisions of this Agreement will be construed in accordance with, and will
be governed by, the laws of the State of California. 


        5.4.    Entire Agreement; Waiver.    This Agreement constitutes the final, complete and exclusive statement between
the parties to this Agreement pertaining to the terms of Master Landlord's consent to the Sublease, supersedes all prior and contemporaneous understandings or agreements of the parties, and is binding
on and inures to the benefit of their respective heirs, representatives, successors and assigns. No party has been induced to enter into this Agreement by, nor is any party relying on, any
representation or warranty outside those expressly set forth in this Agreement. Any agreement made after the date of this Agreement is ineffective to modify, waive, or terminate this Agreement, in
whole or in part, unless that agreement is in writing, is signed by the parties to this Agreement, and specifically states that agreement modifies this Agreement. 


        5.5.    Word Usage.    Unless the context clearly requires otherwise, (a) the plural and singular numbers will
each be deemed to include the other; (b) the masculine, feminine, and neuter genders will each be deemed to include the others; (c) "shall," "will," "must," "agrees," and "covenants" are
each mandatory; (d) "may" is permissive; (e) "or" is not exclusive; and (f) "includes" and "including" are not limiting. 


        5.6.    Captions.    Captions to the sections in this Agreement are included for convenience only and do not modify
any of the terms of this Agreement. 


        5.7.    Capitalized Terms.    All terms spelled with initial capital letters in this Agreement that are not expressly
defined in this Agreement will have the respective meanings given such terms in the Master Lease. 



        5.8.    Partial Invalidity.    If any term, covenant, or condition in this Agreement is, to any extent, held by a
court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement, or the application of that term, covenant, or condition to persons or circumstances other than those as
to which it is held to be invalid or unenforceable, will not be affected by that invalidity or unenforceability, and all other terms, covenants, and conditions of this Agreement will be valid and
enforceable to the fullest extent permitted by law. 


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        5.9.    Waiver of Jury Trial; Attorney Fees.    If any party commences litigation against any other party for the
specific performance of this Agreement, for damages for the breach hereof or otherwise for enforcement of any remedy hereunder, the parties waive any right to a trial by jury and, in the event of any
commencement of litigation, the prevailing party shall be entitled to recover from the applicable party such costs and reasonable attorney fees as may have been incurred. 


        5.10.    Liability for Master Landlord's Attorney and Administrative Fees.    Sublandlord and Subtenant shall be
jointly and severally liable for the payment of Master Landlord's actual attorney fees incurred in reviewing, preparing, and negotiating the Sublease and this Agreement, whether or not Master Landlord
provides its consent to the proposed Sublease. Additionally, Sublandlord and Subtenant shall be jointly and severally liable for the payment of Master Landlord's administrative fee, not to exceed
$500, for Master Landlord to review and consent to this Sublease and this Agreement. Payment of the attorney fees and administrative fees called for pursuant to this paragraph within ten
(10) days following the receipt of an invoice for such fees shall be a condition of Master Landlord's consent to the Sublease. 


[remainder
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        IN
WITNESS WHEREOF, the parties have executed this Consent to Sublease Agreement as of the date first shown above. 



	Master Landlord:	 	 
	

 	
 	

          
 James C. Coxeter,

as Trustee of the Coxeter Survivor's Trust

Created Under the Coxeter Family Trust dated April 30, 2003	
 	

 
	
Master Landlord Address:	
 	

 
	

 	
 	

J.C. Coxeter Enterprises, Inc.

642 Oakhaven Avenue

Brea, CA 92823	
 	

 
	
Sublandlord:	
 	

 
	

 	
 	

K2 Inc.

A Delaware corporation	
 	

 
	

 	
 	

By:	
 	

          
 Name:

Title:	
 	

 
	
Sublandlord Address:	
 	

 
	

 	
 	

K2 Inc.

5818 El Camino Real

Carlsbad, CA 92008	
 	

 
	
Subtenant:	
 	

 
	

 	
 	

Alphatec Spine, Inc.

(f/k/a Alphatec Manufacturing, Inc.)

a California corporation	
 	

 
	

 	
 	

By:	
 	

          
 Name:

Title:	
 	

 
	
Subtenant Address:	
 	

 
	

 	
 	

Alphatec Spine, Inc.

2051 Palomar Airport Road, Suite 100

Carlsbad, CA 92009	
 	

 




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EXHIBIT A
  [Attach the Sublease]    
    







EXHIBIT "A"

MASTER LEASE  


(Attach
copy of Master Lease) 








  




[LOGO] 


 
 

STANDARD MULTI-TENANT OFFICE LEASE—GROSS
  AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION    
    


1.    Basic Provisions ("Basic Provisions")    


        1.1    Parties:    This Lease ("Lease") dated for reference purposes only
December 3, 2002 is made by and between MG Palomar, LLC ("Lessor") and K2, Inc., a Delaware Corporation
("Lessee") (collectively the "Parties" or individually a
"Party") 


        1.2(a)    Premises:    That certain portion of the Project (as defined
below) known as Suite Numbers(s) 100, first (1st) floor(s); consisting of approximately 19,863 (see addendum) rentable square feet and approximately            useable square
feet ("Premises"). The Premises are located at: 2051 Palomar Airport Road, in the City of Carlsbad, County of San Diego, State of
California with zip code 92009. In addition to Lessee's rights to use and occupy the Premises as hereinafter specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in Paragraph 27 below) as hereinafter specified but shall not have any rights to the roof the exterior walls, the area above the dropped ceilings or the utility raceways of the building
containing the Premises ("Building") or to any other buildings in the Project. The Premises, the Building, the Common Areas, the land upon which they are
located, along with all other buildings and improvements thereon, are herein collectively referred to as the 'Project'. The Project consists of
approximately 210,688 rentable square feet. (See also Paragraph 2) 


        1.2(b)    Parking:    Eighty (80) unreserved and N/A reserved
vehicle parking spaces at a monthly cost of $N/A per unreserved space and $N/A per reserved space. (See Paragraph 2.6) 


        1.3    Term:    Five (5) years and zero (0) months
("Original Term") commencing ("Commencement Date") and ending February 28, 2008
("Expiration Date"). (See also Paragraph 3) 


        1.4    Early Possession:    February 1, 2003 or upon SUBSTANTIAL
COMPLETION of Tenant Improvements, whichever is later ("Early Possession Date"). (See also Paragraphs 3.2 and 3.3) 



        1.5    Base Rent:    $30,787.65 per month ("Base
Rent"), payable on the first (1st) day of each month commencing March 1, 2003. (See also Paragraph 4) 


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



        1.6    Lessee's Share of Operating Expense
Increase:    9 and 43/100 percent (9.43%) ("Lessee's Share") Lessee's Share has been calculated by dividing the
approximate rentable square footage of the Premises by the total approximate square footage of the rentable space contained in the Project and shall not be subject to revision except in connection
with an actual change in the size of the Premises or a change in the space available for lease in the Project. 


        1.7    Base Rent and Other Monies Paid Upon Execution:    



        (a)   Base Rent: $30,787.65 for the period March 1 through 31, 2003. 


        (b)   Security Deposit: $34,641.07. ("Security Deposit"). (See also
Paragraph 5) 


        (c)   Parking: $N/A for the period N/A. 


        (d)   Other: $N/A for N/A. 


        (e)   Total Due Upon Execution of this Lease: $65,428.72. 




        1.8    Agreed Use:    General administrative offices. (See also
Paragraph 6) 


        1.9    Base Year; Insuring Party.    The Base Year is 2003. Lessor is the
"Insuring Party". (See also Paragraph 4.2 and 8) 


        1.10    Real Estate Brokers:    (See also Paragraph 15) 



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



	ý
	BRE
Commercial / NAI — Joe Anderson/Mark Emerick represents Lessor exclusively ("Lessor's
Broker")



	ý
	BRE
Commercial / NAI — Mark Emerick/ Andy Melzer represents Lessee exclusively ("Lessee's
Broker"); or 




o                            represents both Lessor and
Lessee ("Dual Agency") 



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




        1.11    Guarantor:    The obligations of the Lessee
under this Lease shall be guaranteed by N/A ("Guarantor"). (See also Paragraph 37) 


        1.12    Business Hours for the Building:    N/A a.m. to N/A p.m., Mondays
through Fridays (except Building Holidays) and N/A a.m. to N/A p.m on Saturdays (except Building Holidays). "Building Holidays" shall mean the
dates of observation of New Year's Day, Presidents Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day. Christmas Day and N/A. 


        1.13    Lessor Supplied Services.    Notwithstanding the provisions of
Paragraph 11.1 Lessor is NOT obligated to provide the following: 


	ý
	Janitorial
services



	o
	Electricity



	o
	Other
(specify): 



        1.14    Attachments    Attached hereto are the
following all of which constitute a part of this Lease: 



	BF
          
Initials	 	 	 	JR
          
Initials




1







 
	ý
	an
Addendum consisting of Paragraphs 51 through 57:



	ý
	a
plot plan depicting the Premises; Exhibit B



	ý
	a
current set of the Rules and Regulations; Exhibit C



	ý
	a
Work Letter; Exhibit A



	o
	a
janitorial schedule;



	ý
	other
(specify): Option(s) to Extend Addendum 



2.    Premises.    



        2.1    Letting.    Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of size set
forth in this Lease, or that may have been used in calculating Rent, is an approximation which the Parties agree is reasonable and any payments based thereon are not subject to revision whether or not
the actual size is more or less Note: Lessee is advised to verify the actual size prior to executing this Lease. 



        2.2    Condition.    Lessor shall deliver the Premises to Lessee in a
clean condition on the Commencement Date or the Early Possession Date, whichever first occurs ("Start Date"), and warrants that the existing electrical,
plumbing, fire sprinkler, lighting, heating ventilating and air conditioning systems ("HVAC"), and all other items which the Lessor is obligated to
construct pursuant to the Work Letter attached hereto, if any, other than those constructed by Lessee, shall be in good operating condition on said date. 



        2.3    Compliance.    Lessor
warrants that the improvements comprising the Premises and the Common Areas comply with the building codes that were in effect at the time that each such improvement, or portion thereof, was
constructed, and also with all applicable laws, covenants or restrictions of record, regulations, and ordinances ("Applicable
Requirements") in effect on the Start Date. Said warranty does not apply to the use to which Lessee will put the Premises, modifications
which may be required by the Americans with Disabilities Act or any similar laws as a result of Lessee's use (see Paragraph 50), or to any Alterations or Utility Installations (as defined in
Paragraph 7.3 (a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the zoning and other Applicable Requirements are appropriate for Lessee's intended
use, and acknowledges that past uses of the Premises may no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent of such non compliance, rectify the same. If the Applicable Requirements are hereafter changed so as to require during
the term of this Lease the construction of an addition to or an alteration of the Premises, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the
Premises ("Capital Expenditure"). Lessor and Lessee shall allocate the cost
of such work as follows: 



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


        (b)   If
such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such
as, governmentally mandated coismic modifications), then Lessor and Lessee shall allocate the cost of such Capital Expenditure as follows: Lessor shall advance the funds necessary for such Capital
Expenditure but Lessee shall be obligated to pay each month during the remainder of the term of this Lease on the date on which Base Rent is due, an amount equal to the product of multiplying Lessee's
share of the cost of such Capital Expenditure (the percentage specified in Paragraph 1-6 by a fraction, the numerator of which is one, and the denominator of which is 144 (ie.
1/144th of the cost per month) Lessee shall pay interest on the unamortized balance of Lessee's share at a rate that is commercially reasonable in the judgment of Lessor's accountants. Lessee may,
however, prepay its obligation at any time. Provided, however, that if such Capital Expenditure is required during the last 2 years of this Lease or if Lessor reasonably determines that it is
not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, in writing,
within 10 days after receipt of Lessor's termination notice that Lessee will pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any such
Capital Expenditure, Lessee may advance such funds and deduct same, with interest, from Rent until Lesser's share of such costs have been fully paid; If lessee is unable to finance Lessor's share, or
if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the right to terminate this Lease upon
30 days written notice to Lessor. 


        (c)   Notwithstanding
the above, the provisions concerning Capital Expenditures are intended to apply only to
nonvoluntary, unexpected and new Applicable Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use, change in intensity of use, or
modification to the Premises then, and in that event, Lessee shall be fully responsible for the cost thereof, and Lessee shall not have any right to terminate this Lease. 




        2.4    Acknowledgements.    Lessee acknowledges that: (a) Lessee
has been advised by Lessor and/or Brokers to satisfy itself with respect to the condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security,
environmental aspects, and compliance with Applicable Requirements), and their suitability for Lessee's intended use, (b) Lessee has made such investigation as it deems necessary with reference
to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises, and (c) neither Lessor, Lessor's agents, nor Brokers have made any oral or written
representations or warranties with respect to said matters other than as set forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have made no representations, promises or
warranties concerning Lessee's ability to honor the Lease or suitability to occupy the Premises, and (ii) it is Lessor's sole responsibility to investigate the financial capability and/or
suitability of all proposed tenants. 


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


        2.6    Vehicle Parking.    So long as Lessee is not in default, and
subject to the Rules and Regulations attached hereto, and as established by Lessor from time to time, Lessee shall be entitled and use the number of parking spaces specified in
Paragraph 1.2(b). 



        (a)   If
Lessee commits, permits or allows any of the prohibited activities described in the Lease or the rules then in effect, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have to remove or tow away the vehicle involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by
Lessor. 




        2.7    Common Areas—Definition.    The term
"Common Areas" is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Project and interior utility
raceways and installations within the Premises that are provided and designated by the Lessor from time to time for the general nonexclusive use of Lessor, Lessee and other tenants of the Project and
their respective employees, suppliers, shippers, customers, contractors and invitees, including, but not limited to, common entrances, lobbies, corridors, stairwells, public restrooms, elevators,
parking areas, loading and unloading areas, trash areas, roadways; walkways, driveways and landscaped areas. 


        2.8    Common Areas—Lessee's Rights.    Lessor grants to
Lessee, for the benefit of Lessee and its employees, suppliers, shippers, contractors, customers and invitees, during the term of this Lease, the nonexclusive right to use, in common with other
entitled to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and
regulations or restrictions governing the use of the Project. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property,
temporarily or permanently, in the Common Areas. Any such storage shall be permitted only by the prior written consent of Lessor or Lessor's designated agent, which consent may be revoked at any time.
In the event that any unauthorized storage shall occur then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have to remove the property and
charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor. 


        2.9    Common Areas—Rules and Regulations.    Lessor or such
other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to adopt, modify, amend and enforce reasonable
rules and regulations ("Rules and Regulations") for the management, safety, care, and cleanliness of the grounds, the parking and unloading of vehicles
and the preservation of good order, as well as for the convenience of other occupants or tenants of the Building and the Project and their invitees. The Lessee agrees
to abide by and conform to all such Rules and Regulations, and to cause its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform. Lessor shall not be responsible
to Lessee for the noncompliance with said Rules and Regulations by other tenants of the Project. 



        2.10    Common Areas—Changes.    Lessor shall have the right,
in Lessor's sole discretion, from time to time: 



        (a)   To
make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of the lobbies, windows, stairways, air shafts,
elevators, escalators, restrooms, driveways, entrances, parking spaces, parking areas, loading and unloading areas ingress, egress, direction of traffic, landscaped areas, walkways and utility
raceways; 



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        (b)   To
close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available; 


        (c)   To
designate other land outside the boundaries of the Project to be a part of the Common Areas; 


        (d)   To
add additional buildings and improvements to the Common Areas; 


        (e)   To
use the Common Areas while engaged in making additional improvements, repairs or alterations to the Project or any portion thereof; and 


        (f)    To
do and perform such other acts make such other changes in, to or with respect to the Common Areas and Project as Lessor may, in the exercise of sound business
judgment deem to be appropriate. 




3.    Term.    


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


        3.2    Early Possession.    If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall be abated for the period of such early possession. All other terms of this Lease (including but not limited to the
obligations to pay Lessee's Share of the Operating Expense Increase) shall, however, be in effect during such period. Any such early possession shall not affect the Expiration Date. 


        3.3    Delay in Possession.    Lessor agrees to use its best commercially
reasonable efforts to delivery possession of the Premises to Lessee by the Commencement Date. If, despite said efforts, Lessor is unable to deliver possession by such date, Lessor shall not be subject
to any liability therefor, nor shall such failure affect the validity of this Lease. Lessee shall not, however, be obligated to pay Rent or perform its other obligations until Lessor delivers
possession of the Premises and any period of rent abatement that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what Lessee
would otherwise have enjoyed under the terms hereof, but minus any days of delay caused by the acts or omissions of Lessee. If possession is not delivered within 60 days after the Commencement
Date, as the same may be extended under the terms of any Work Letter executed by Parties, Lessee may, at its option, by notice in writing within 10 days after the end of such 60 day
period, cancel this Lease, in which event the Parties shall be discharged from all obligations hereunder. If such written notice is not received by Lessor within said 10 day period, Lessee's
right to cancel shall terminate. If possession of the Premises is not delivered within 120 days after the Commencement Date, this Lease shall terminate unless other agreements are reached
between Lessor and Lessee, in writing. 


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


4.    Rent.    


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



        4.2    Operating Expense Increase.    Lessee shall pay to Lessor during
the term hereof, in addition to the Base Rent, Lessee's Share of the amount by which all Operating Expenses for each Comparison Year exceeds the amount of all Operating Expenses for the Base Year such
excess being hereinafter referred to as the "Operating Expense Increase" in accordance with the following provisions: 



        (a)   "Base Year" is as specified in Paragraph 1.9. 



        (b)   "Comparison Year" is defined as each calendar year during the term of this Lease subsequent to the Base Year, provided,
however, Lessee shall have no obligation to pay a share of the Operating Expense Increase applicable to the first 12 months of the Lease Term (other than such as are mandated by a governmental
authority, as to which government mandated expenses Lessee shall pay Lessee's Share, notwithstanding they occur during the first twelve (12) months). Lessee's Share of the Operating Expense
increase for the first and last Comparison Years of the Lease Term shall be prorated according to that portion of such Comparison Year as to which Lessee is responsible for a share of such increase. 



        (c)   "Operating Expenses" include all costs incurred by Lessor relating to the ownership and operation of the Project calculated
as if the Project was at least 95% occupied, including, but not limited to, the following: 



        (i)    The
operation repair and maintenance in neat, clean, safe, good order and condition, but not the replacement (see subparagraph (g)) of the following: 



        (aa) The
Common Areas, including their surfaces, coverings, decorative items, carpets, drapes and window coverings, and including parking areas, loading and unloading areas,
trash areas, roadways, sidewalks, walkways, stairways, parkways driveways landscaped areas, striping, bumpers, irrigation systems, Common Area lighting facilities, building exteriors and roofs, fences
and gates; 


        (bb) All
heating, air conditioning, plumbing, electrical systems, life safety equipment, communication systems and other equipment used in common by, or for the benefit of,
lessees or occupants of the Project including elevators and escalators, tenant directories, fire detection systems including sprinkler system maintenance and repair. 




        (ii)   Trash
disposal, janitorial and security services, pest control services, and the costs of any environmental inspections; 



        (iii)  Any
other service to be provided by Lessor that is elsewhere in this Lease stated to be an "Operating Expense"; 


        (iv)  The
cost of the premiums for the insurance policies maintained by Lessor pursuant to paragraph 8 and any deductible portion of an insured loss concerning the
Building or the Common Areas; 


        (v)   The
amount of the Real Property Taxes payable by Lessor pursuant to paragraph 10; 


        (vi)  The
cost of water, sewer, gas, electricity and other publicly mandated services not separately metered; 



        (vii) Labor,
salaries, and applicable fringe benefits and costs, materials supplies and tools, used in maintaining and/or cleaning the Project and accounting and management
fees attributable to the operation of the Project. 


        (viii) The
cost of any Capital Expenditure to the Building or the Project not covered under the provisions of
Paragraph 2.3 provided; however, that Lessor shall allocate the cost of any such Capital Expenditure over a 12 year period and Lessee shall not be required to pay more than Lessee's
Share of 1/144th of the cost of such Capital Expenditure in any given month. 


        (ix)  Replacement
of equipment or improvements that have a useful life for accounting purposes of 53 years or less. 




        (d)   Any
item of Operating Expense that is specifically attributable to the Premises, the Building or to any other building in the Project or to the operations, repair and
maintenance thereof, shall be allocated entirely to such Premise, Building, or other building. However, any such item that is not specifically attributable to the Building or to any other building or
to the operation, repair and maintenance thereof, shall be equitably allocated by Lessor to all buildings in the Project. 



        (e)   The
inclusion of the improvements, facilities and services set forth in Subparagraph 4.2(c) shall not be deemed to impose an obligation upon Lessor to either have said
improvements or facilities or to provide these services unless the Project already has the same Lesssor already provides the services, or Lessor has agreed elsewhere in this Lease to provide the same
or some of them. 


        (f)    Lessee's
Share of Operating Expense increase shall be payable by Lessee within 10 days after a reasonably detailed statement of actual expenses is presented to
Lessee by Lessor. At Lessor's option, however, an amount may be estimated by Lessor from time to time in advance of Lessee's Share of the Operating Expense increase for any Comparison Year, and the
same shall be payable monthly during each Comparison Year of the Lease term, on the same day as the Base Rent is due hereunder. In the event that Lessee pays Lessor's estimate of Lessee's Share of
Operating Expense increase as aforesaid, Lessor shall deliver to Lessee within 60 days after the expiration of each Comparison Year a reasonably detailed statement showing Lessee's Share of the
actual Operating Expense increase incurred during such year. If Lessee's payments under this paragraph (f) during said Comparison Year exceed Lessee's Share as indicated on said statement,
Lessee shall be entitled to credit the amount of such overpayment against Lessee's Share of Operating Expense increase next failing due. If Lessee's payments under this paragraph during said
Comparison Year were less than Lessee's Share as indicated on said statement, Lessee shall pay to Lessor the amount of the deficiency within 10 days after delivery by Lessor to Lessee of said
statement. Lessor and Lessee shall forthwith adjust between them by cash payment any balance determined to exist with respect to that portion of the last Comparison Year for which Lessee is
responsible as to Operating Expense increases, notwithstanding that the Lease term may have terminated before the end of such Comparison Year. 


        (g)   Operating
Expenses shall not include the costs of replacement of equipment or capital components such as the roof, foundations, exterior walls or a Common Area capital
improvement, such as the parking lot paving, elevator, fences that have a useful life for accounting purposes of 5 years or more unless it is of the type described in paragraph 4.2(c)
(viii), in which case their cost shall be included as above provided. 



        (h)   Operating
Expenses shall not include any expenses paid by any tenant directly to third parties, or as to which Lessor is otherwise reimbursed by any third party, other
tenant, or by insurance proceeds. 




        4.3    Payment.    Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States on or before the day on which it is due, without offset or deduction (except as specifically permitted in this Lease). Rent for any period during the term
hereof which is for less than one full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to
such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor's rights to the balance
of such Rent, regardless of Lessor's endorsement of any check so stating. In the event that any check draft or other instrument of payment given by Lessee to Lessor is dishonored for any reason,
Lessee agrees to pay to Lessor the sum of $25 in addition to any Late Charge. Payments will be applied first to accrued late charges and attorney's fees, second to accrued interest, then to Base Rent
and Operating Expense Increase and any remaining amount to any other outstanding charges or costs. 


5.    Security Deposit.    Lessee shall deposit with Lessor upon execution hereof the
Security Deposit as security for Lessee's faithful performance of its obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor 



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may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of the Security Deposit, Lessee shall within 10 days after written request therefor, deposit monies with
Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written request from Lessor,
deposit additional moneys with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Security Deposit bore to
the initial Base Rent. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to increase
the Security Deposit to the extent necessary, in Lessor's reasonable judgment, to account for any increased wear and tear that the Premises may suffer as a result thereof. If a change in control of
Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessor's reasonable judgment, significantly reduced, Lessee shall deposit such additional monies with
Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on such change in financial condition. Lessor shall not be required to keep the Security
Deposit separate from its general accounts. Within 14 days after the expiration or termination of this Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent, and otherwise
within 30 days after the Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit not used or applied by Lessor. No part of
the Security Deposit shall be considered to be held in trust to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease. 


6.    Use.    



        6.1    Use.    Lessee shall use and occupy the Premises only for the
Agreed Use, or any other legal use which is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates
damage, waste or a nuisance, or that disturbs occupants of or causes damage to neighboring premises or properties. Lessor shall not unreasonably withhold or delay its consent to any written request
for a modification of the Agreed Use, so long as the same will not impair the structural integrity of the improvements of the Building, will not adversely affect the mechanical, electrical, HVAC, and
other systems of the Building, and/or will not affect the exterior appearance of the Building. If Lessor elects to withhold consent, Lessor shall within 7 days after such request give written
notification of same, which notice shall include an explanation of Lessor's objections to the change in the Agreed Use. 


        6.2    Hazardous Substances.    


        (a)    Reportable Uses Require Consent.    The term
"Hazardous Substance" as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or
release, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or
the Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable
statute or common law theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, byproducts or fractions thereof. Lessee
shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee's
expense) with all Applicable Requirements. "Reportable Use" shall mean (i) the installation or use of any above or below ground storage tank,
(ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements
requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use such as ordinary office supplies (copier toner, liquid paper, glue, etc.) and common household cleaning materials, so long as such use is in
compliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Lessor to any
liability therefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public,
the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before Lease expiration or termination)
of protective modifications (such as concrete encasements) and/or increasing the Security Deposit. 


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


        (c)    Lessee Remediation.    Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee's expense, comply with all
Applicable Requirements and take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the
maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought
onto the Premises during the term of this Lease, by or for Lessee, or any third party. 


        (d)    Lessee Indemnification.    Lessee shall indemnify, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents and/or damages, liabilities, judgments, claims, expenses, penalties, and
attorneys' and consultants' fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party (provided, however, that Lessee shall have no
liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from areas outside of the Project not caused or contributed to by Lessee). Lessee's
obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation,
removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement. 



        (e)    Lessor Indemnification.    Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all environmental damages, including the cost of remediation, which result from
Hazardous Substances which existed on the Premises prior to Lessee's occupancy or which are caused by the gross negligence or willful misconduct of Lessor, its agents or employees. Lessor's
obligations, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive
the expiration or termination of this Lease. 


        (f)    Investigations and Remediations.    Lessor shall retain the
responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior
to Lessee's occupancy, unless such remediation measure is required as a result of Lessee's use (including "Alterations", as defined in
paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including
allowing Lessor and Lessor's agents to have reasonable access to the Premises at reasonable times in order to carry out Lessor's investigative and remedial responsibilities. 


        (g)    Lessor Termination Option.    If a Hazardous Substance Condition
(see Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by
the Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessor's rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's
option, either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in
full force and effect, or (ii) if the estimated cost to remediate such condition exceeds 12 times the then monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee,
within 30 days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of Lessor's desire to terminate this Lease as of the date 60 days following
the date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee's commitment to pay the amount
by which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal to 12 times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor
with said funds or satisfactory assurance thereof within 30 days following such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make
such remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time
provided, this Lease shall terminate as of the date specified in Lessor's notice of termination. 


        6.3    Lessee's Compliance with Applicable Requirements.    Except as
otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of any
applicable fire insurance underwriter or rating bureau, and the recommendations of Lessor's engineers and/or consultants which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of Lessor's written request, provide Lessor with copies of all permits and
other documents, and other information evidencing Lessee's compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of
any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable
Requirements. 


        6.4    Inspection; Compliance.    Lessor and Lessor's
"Lender" (as defined in Paragraph 30) and consultants shall have the right to enter into Premises at any time, in the case of an emergency, and
otherwise at reasonable times, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by
Lessor, unless a violation of Applicable Requirements, or a Hazardous Substance Condition (see paragraph 9.1e) is found to exist or be imminent, or the inspection is requested or ordered by a
governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such inspection is reasonably related to the violation or contamination. 


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


        7.1    Lessee's Obligations.    Notwithstanding Lessor's obligation to
keep the Premises in good condition and repair, Lessee shall be responsible for payment of the cost thereof to Lessor as additional rent for that portion of the cost of any maintenance and repair of
the Premises, or any equipment (wherever located) that serves only Lessee or the Premises, to the extent such cost is attributable to causes beyond normal wear and tear. Lessee shall be responsible
for the cost of painting, repairing or replacing wall coverings, and to repair or replace any interior improvements with the 



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Premises. Lessor may, at its option, upon reasonable notice, elect to have Lessee perform any particular such maintenance or repairs the cost of which is
otherwise Lessee's responsibility hereunder. 


        7.2    Lessor's Obligations.    Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance), 4.2 (Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to
Paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler system, fire alarm
and/or smoke detection systems, fire hydrants, and the Common Areas. Lessee expressly waives the benefit of any statute now or hereafter in effect to extent it is inconsistent with the terms of this
Lease. 


        7.3    Utility Installations; Trade Fixtures; Alterations.    



        (a)    Definitions.    The term "Utility
Installations" refers to all floor and window coverings, air lines, vaccum lines, power panels, electrical distribution, security and fire protection systems, communication
cabling, lighting fixtures, HVAC equipment, and plumbing in or on the Premises. The term "Trade Fixtures" shall mean Lessee's machinery and equipment that
can be removed without doing material damage to the Premises. The term "Alterations" shall mean any modification of the improvements, other than Utility
Installations or Trade Fixtures, whether by addition or deletion. "Lessee Owned Alterations and/or Utility Installations" are defined as Alterations
and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a). 


        (b)    Consent.    Lessee shall not make any Alterations or Utility
Installations to the Premises without Lessor's prior written consent. Lessee may, however, make non-structural Utility Installations to the interior of the Premises (excluding the roof)
without such consent but upon notice to Lessor as long as they are not visible from the outside, do not involve puncturing, relocating or removing the roof, ceilings, floors or any existing walls,
will not affect the electrical, plumbing. HVAC, and/or life safety systems, and the cumulative cost thereof during this Lease as extended does not exceed $2000. Notwithstanding the foregoing, Lessee
shall not make or permit any roof penetrations and/or install anything on the roof without the prior written approval of Lessor. Lessor may, as a precondition to granting such approval, require Lessee
to utilize a contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to
Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee's: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of
both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility Installations shall be preformed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with
asbuilt plans and specifications. For work which costs an amount in excess of one month's Base Rent, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount
equal to 150% of the estimated cost of such Alteration or Utility Installation and/or upon Lessee's posting an additional Security Deposit with Lessor. 


        (c)    Liens; Bonds.    Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises
or any interest therein. Lessee shall give Lessor not less than 10 days notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post
notices of non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and the
Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond
in an amount equal to 150% of the amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. If Lessor elects to participate in any such action, Lessee shall
pay Lessor's attorneys' fees and costs. 


        7.4    Ownership; Removal; Surrender; and Restoration.    


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


        (b)    Removal.    By delivery to Lessee of written notice from Lessor not
earlier than 90 and not later than 30 days prior to the end of the term of this Lease, Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the
expiration or termination of this Lease. Lessor may require the removal at any time of all or any part of any Lessee Owned Alterations or Utility Installations made without the required consent. 


        (c)    Surrender; Restoration.    Lessee shall surrender the Premises by
the Expiration Date or any earlier termination date with all of the improvements, parts and surfaces therefor clean and free of debris, and in good operating order, condition and state of repair,
ordinary wear and tear excepted. "Ordinary wear and tear" shall not include any damage or deterioration that would have been prevented by good maintenance
practice. Notwithstanding the foregoing, if this Lease is for 12 months or less, the Lessee shall surrender the Premises in the same condition as delivered to Lessee on the Start Date with NO
allowance for ordinary wear and tear. Lessee shall repair any damage occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations and/or Utility Installations,
furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee. Lessee shall also completely remove from the Premises any and all Hazardous Substances brought onto
the Premises by or for Lessee, or any third party (except Hazardous Substances which were deposited via underground migration from areas outside of the Project) even if such removal would require
Lessee to perform or pay for work that exceeds statutory requirements. Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate the
Premise pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 26 below. 


8.    Insurance; Indemnity.    


        8.1    Insurance Premiums.    The cost of the premiums of the insurance
policies maintained by Lessor pursuant to paragraph 8 are included as Operating Expenses (see paragraph 4.2 (c)(iv)). Said costs shall include increases in the premiums resulting from
additional coverage related to requirements of the holder of a mortgage or deed of trust covering the Premises, Building and/or Project, increased valuation of the Premises, Building and/or Project,
and/or general premium rate increase. Said costs shall not, however, include any premium increases resulting from the nature of the occupancy of any other tenant of the Building. If the Project was
not insured for the entirely of the Base Year, then the base premium shall be the lowest annual premium reasonably obtainable for the required insurance as of the Start Date, assuming the most nominal
use possible of the Building and/or Project. In no event, however, shall Lessee be responsible for any portion of the premium cost attributable to liability insurance coverage in excess of $2,000,000
procured under Paragraph 8.2(b). 


        8.2    Liability Insurance.    


        (a)    Carried by Lessee.    Lessee shall obtain and keep in force a
Commercial General Liability policy of insurance protecting Lessee and Lessor as an additional insured against claims for bodily injury, personal injury and property damage based upon or arising out
of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an either occurrence or claims made basis providing single limit coverage
in an amount not less than $1,000,000 per occurrence with an annual aggregate of not less than $2,000,000, an "Additional Insured-Managers or Lessors of Premises
Endorsement" and contain the "Amendment of the Pollution Exclusion Endorsement" for damage caused by heat, smoke or fumes from a
hostile fire. The policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an
"insured contract" for the performance of Lessee's indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All insurance carried by Lessee shall be primary to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only. 


        (b)    Carried by Lessor.    Lessor shall maintain liability insurance as
described in Paragraph 8.2(a) in addition to and not in lieu of the insurance required to be maintained by Lessee. Lessee shall not be named as an additional insured therein. 



        8.3    Property Insurance—Building, Improvements and Rental
Value.    


        (a)    Building and Improvements.    Lessor shall obtain and keep in force
a policy or policies of insurance in the name of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender insuring loss or damage to the Building and/or Project. The amount of such
insurance shall be equal to the full replacement cost of the Building and/or Project, as the same shall exist from time, or the amount required by any Lender, but in no event more than the
commercially reasonable and available insurable value thereof. Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's personal property shall be insured by Lessee under
Paragraph 8.4. If the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood
and/or earthquake unless required by a Lender), including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or
replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index
for All Urban Consumers for the city nearest to where the Premises are located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed $1,000 per occurrence. 


        (b)    Rental Value.    Lessor shall also obtain and keep in force a
policy or policies in the name of Lessor with loss payable to Lessor and any Lender, insuring the loss of the full Rent for one year with an extended period of indemnity for an additional
180 days ("Rental Value Insurance"). Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount
of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Lessee for the next 12 month period. 


        (c)    Adjacent Premises.    Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or other buildings in the Project if said increase is caused by Lessee's acts, omissions, use or occupancy of the Premises. 


        (d)    Lessee's Improvements.    Since Lessor is the insuring Party,
Lessor shall not be required to insure Lessee Owned Alterations and Utility Installations unless the item in question has become the property of Lessor under the terms of this Lease. 



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        8.4    Lessee's Property; Business Interruption
Insurance.    


        (a)    Property Damage.    Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such insurance shall be full replacement cost coverage  with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal
property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with written evidence that such insurance is in force. 


        (b)    Business Interruption.    Lessee shall obtain and maintain loss of
income and extra expense insurance in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent lessees in the business of
Lessee or attributable to prevention of access to the Premises as a result of such perils. 


        (c)    No Representation of Adequate Coverage.    Lessor makes no
representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee's property, business operations or obligations under this Lease. 



        8.5    Insurance Policies.    Insurance required herein shall be by
companies duly licensed or admitted to transact business in the state where the Premises are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, as set forth in the most current issue of "Best's Insurance Guide", or such other rating as may be
required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of
policies of such insurance or certificates evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or subject to modification except after 30 days
prior written notice to Lessor. Lessee shall, at least 30 days prior to the expiration of such policies, furnish Lessor with evidence of renewals or "insurance
binders" evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand.
Such policies shall be for a term of at least one year or the length of the remaining term of this Lease, whichever is less. If either
Party shall fail to procure and maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same. 



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


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


        8.8    Exemption of Lessor from Liability.    Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee's employees, contractors, invitees, customers, or any other person in or about the Premises, whether
such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building, or
from other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor nor from the failure of Lessor to enforce the provisions of any
other lease in the Project. Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee's business or for any loss of income or
profit therefrom. 


9.    Damage or Destruction.    



        9.1    Definitions.    


        (a)   "Premises Partial Damage" shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned
Alterations and Utility Installations, which can reasonably be repaired in 3 months or less from the date of the damage or destruction, and the cost thereof does not exceed a sum equal to
6 month's Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total. 



        (b)   "Premises Total Destruction" shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned
Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be repaired in 3 months or less from the date of the damage or destruction and/or the cost thereof exceeds a
sum equal to 6 month's Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total. 


        (c)   "Insured Loss" shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3(a), irrespective of any deductible amounts or coverage
limits involved. 


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


        (e)   "Hazardous Substance Condition" shall mean the occurrence or discovery of a condition involving the presence of, or a
contamination by a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the Premises which requires repair, remediation, or restoration. 


        9.2    Partial Damage—Insured Loss.    If a Premises Partial
Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as
reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor's election, make the repair of any damage or destruction the total cost to
repair of which is $5,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if
the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds as and when required
to complete said repairs. In the event, however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not
commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides
Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or
adequate assurance thereof within said 10 day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force
and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10 days thereafter to: (i) make such restoration and repair as
is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect, or (ii) have this Lease terminate 30 days
thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be
subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party. 


        9.3    Partial Damage—Uninsured Loss.    If a Premises Partial
Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), Lessor may
either: (i) repair such damage as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease
by giving written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective 60 days following the date of
such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within 10 days after receipt of the termination notice to give written notice to Lessor of Lessee's
commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days after making such
commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If
Lessee does not make the required commitment, this Lease shall terminate as of the date specified in the termination notice. 



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


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


        9.6    Abatement of Rent; Lessee's Remedies.    



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



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insurance. All other obligations of Lessee hereunder shall be performed by Lessee and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as
provided herein. 


        (b)    Remedies.    If Lessor shall be obligated to repair or restore this
Premises and does not commence, in substantial and meaningful way, such repair or restoration within 90 days after such obligation shall accrue, Lessee may, at any time prior to the
commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee's election to terminate this Lease on a date not less than
60 days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within 30 days thereafter, this Lease shall terminate as of the
date specified in said notice. If the repair or restoration is commenced within such 30 days, this Lease shall continue in full force and effect.
"Commence" shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the
Premises, whichever first occurs. 


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


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


10.    Real Property Taxes.    


        10.1    Definitions.    As used herein, the term
"Real Property Taxes" shall include any form of assessment; real estate, general, special ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes or other taxes based on income); improvement bond; and/or license fee imposed upon or levied against any legal or equitable interest of Lessor in the
Project Lessor's right to other income therefrom, and/or Lessor's business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to
the Project address and where the proceeds so generated are to be applied by the city, county or other local taxing authority of a jurisdiction within which the Project is located.
"Real Property Taxes" shall also include any tax, fee, levy, assessment or change, or any increase therein, imposed by reason of events occurring during
the term of this Lease, including but not limited to, a change in the ownership of the Project or any portion thereof or a change in the improvements thereon. 



        10.2    Payment of Taxes.    Except as otherwise provided in
Paragraph 10.3, Lessor shall pay the Real Property Taxes applicable to the Project, and said payments shall be included in the calculation of Operating Expenses in accordance with the
provisions of Paragraph 4.2. 


        10.3    Additional Improvements.    Operating Expenses shall not include
Real Property Taxes specified in the tax assessor's records and work sheets as being caused by additional improvements placed upon the Project by other lessees or by Lessor for the exclusive enjoyment
of such other lessees. Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at the time Operating Expenses are payable under Paragraph 4.2, the entirety of any
increase in Real Property Taxes if assessed solely by reason of Alterations, Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee's request. 


        10.4    Joint Assessment.    If the Building is not separately assessed,
Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Property Taxes for all of the land and improvements included within the tax parcel assessed, such proportion
to be determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. Lessor's reasonable determination thereof, in
good faith, shall be conclusive. 


        10.5    Personal Property Taxes.    Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained in the Premises.
When possible, Lessee shall cause its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately
from the real property of Lessor. If any of Lessee's said property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's property within
10 days after receipt of a written statement setting forth the taxes applicable to Lessee's property. 


11.    Utilities and Services.    


        11.1    Services Provided by Lessor.    Lessor shall provide heating,
ventilation, air conditioning, reasonable amounts of electricity for normal lighting and office machines, water for reasonable and normal drinking and lavatory use in connection with an office, and
replacement light bulbs and/or fluorescent tubes and ballasts for standard overhead fixtures. Lessor shall also provide janitorial services to the Premises and Common Areas 5 times
per including Holidays or pursuant to the attached janitorial schedule, if any. Lessor shall not, however, be required to provide janitorial services to kitchens or storage areas included within the
Premises. 


        11.2    Services Exclusive to Lessee.    Lessee shall pay for all water,
gas, heat, light, power, telephone and other utilities and services specially or exclusively supplied and/or metered exclusively to the Premises or to Lessee, together with any taxes thereon. If a
service is deleted by Paragraph 1.13 and such service is not separately metered to the Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a reasonable proportion to be
determined by Lessor of all charges for such jointly metered service. 


        11.3    Hours of
Services.    Sold and affiliates shall be provided during time set forth in Paragraph 1.12. Utilities and services required at
other times shall be subject to advance request and reimbursement by Lessee to Lessor and the taxes thereon. 



        11.4    Excess Usage by Lessee.    Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use machinery or equipment in or about the Premises that uses excess water, lighting or power, or suffer or permit any act that
causes extra burden upon the utilities or services, including but not limited to security and trash services, over standard office usage for the Project. Lessor shall require Lessee to reimburse
Lessor for any excess expenses or costs that may arise out of a breach of this subparagraph by Lessee. Lessor may, in its sole discretion, install at Lessee's expense supplemental equipment and/or
separate metering applicable to Lessee's excess usage or loading. 


        11.5    Interruptions.    There shall be no abatement of rent and Lessor
shall not be liable in any respect whatsoever for the inadequacy, stoppage, interruption or discontinuance of any utility or service due to riot, strike, labor dispute, breakdown, accident, repair or
other cause beyond Lessor's reasonable control or in cooperation with governmental request or directions. 


12.    Assignment and Subletting.    



        12.1    Lessor's Consent Required.    


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


        (b)   Unless
Lessee is a corporation and its stock is publicly traded on a national stock exchange, a change in the control of Lessee shall constitute an assignment requiring
consent. The transfer on a cumulative basis of 25% or more of the voting control of Lessee shall constitute a change in control for this purpose. 


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


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


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



        12.2    Terms and Conditions Applicable to Assignment and Subletting.    


        (a)   Regardless
of Lessor's consent, no assignment or subletting shall; (i) be effective without the express written assumption by such assignee or sublessee of the
obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of
any other obligations to be performed by Lessee. 


        (b)   Lessor
may accept Rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the
approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for Lessee's Default or Breach. 


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



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


        (e)   Each
request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor's determination as to the financial and
operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any. Lessee agrees
to provide Lessor with such other or additional information and/or documentation as may be reasonably requested. (See also Paragraph 36) 


        (f)    Any
assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment or entering into such sublease, be deemed to have assumed and agreed to
conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations
as are contrary to or inconsistent with provisions of an 



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assignment or sublease to which Lessor has specifically consented to in writing. 


        (g)   Lessor's
consent to any assignment or subletting shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease unless such
transfer is specifically consented to by Lessor in writing. (See Paragraph 39.2) 



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



        (a)   Lessee
hereby assigns and transfers to Lessor all of Lessee's interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward
Lessee's obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee's obligations, Lessee may collect said Rent. Lessor shall not, by reason of the
foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's
obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of
Lessee's obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor
without any obligation or right to inquire as to whether such Breach exists notwithstanding any claim from Lessee to the contrary. 


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


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


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


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




13.    Default; Breach; Remedies:    


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



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


        (b)   The
failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to
provide reasonable evidence of insurance of surety bond, or to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of 5
calendar days following written notice to Lessee. 


        (c)   The
failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements, (ii) the service contracts, (iii) the
rescission of an unauthorized assignment or subletting, (iv) an Estoppel Certificate (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor,
(vii) any document requested under Paragraph 41 (easements), or (viii) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this
Lease, where any such failure continues for a period of 10 days following written notice to Lessee. 



        (d)   A
Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof, other than those
described in subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of 30 days after written notice; provided however, that if the nature of Lessee's Default
is such that more than 30 days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said 30 day period and thereafter
diligently prosecutes such cure to completion. 


        (e)   The
occurrence of any of the following events: (i) the making of any general arrangement of assignment for the benefit of creditors; (ii) becoming a
"debtor" as defined in 11 U.S.C. § 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is
dismissed within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in
this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not discharged within 30 days; provided, however, in the event that any provision of this subparagraph (e) is
contrary to any applicable law, such provision shall be of no force or effect and not affect the validity of the remaining provisions. 



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


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




        13.2    Remedies.    If Lessee fails to perform any of its affirmative
duties or obligations, within 10 days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duty or obligation on Lessee's behalf, including
but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee upon receipt of invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its option, may require all future
payments to be made by Lessee to be by cashier's check. In the event of a Breach, Lessor may with or without further notice or demand, and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such Breach: 



        (a)   Terminate
Lessee's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession to
Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the
amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided;
(iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves
could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee's failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including
necessary renovation and alternation of the Premises, reasonable attorneys, fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired
term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent. Efforts by Lessor to mitigate damages caused by Lessee's Breach
of this Lease shall not waive Lessor's right to recover damages under Paragraph 12. If termination of this Lease is obtained through the provision remedy of unlawful detainer, Lessor shall have
the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and
grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also
constitute the notices required by Paragraph 13.1. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the
failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided
for in this Lease and/or by said statute. 


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



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




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


        13.4    Late Charges.    Lessee hereby acknowledges that late payment by
Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent shall not be received by Lessor within 5 days after such amount
shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to 10% of each such overdue amount or $100, whichever is greater.
The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor 



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will incur by reason of such late payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's Default or Breach with
respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for
3 consecutive installments of Base Rent, then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor's option, become due and payable quarterly in advance. 



        13.5    Interest.    Any monetary payment due Lessor hereunder, other than
late charges, not received by Lessor, when due as to scheduled payments (such as Base Rent) or within 30 days following the date on which it was due for nonscheduled payment, shall bear
interest from the date when due as to scheduled payments, or the 31st day after it was due as to nonscheduled payments. The interest ("interest") charged
shall be computed at the rate of 10% per annum but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charge provided for in Paragraph 13.4. 



        13.6    Breach by Lessor.    


        (a)   Notice
of Breach. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by
Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than 30 days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee
in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor's obligation is such that more than
30 days are reasonably required for its performance then Lessor shall not be in breach if performance is commenced within such 30 day period and thereafter diligently pursued to
completion. 


        (b)   Performance
by Lessee on Behalf of Lessor. In the event that neither Lessor nor Lender cures said breach within 30 days after receipt of said notice, or if having
commenced said cure they do not diligently pursue it to completion, then Lessee may elect to cure said breach at Lessee's expense and offset from Rent the actual and reasonable cost to perform such
cure, provided however, that such offset shall not exceed an amount equal to the greater of one month's Base Rent or the Security Deposit reserving Lessee's right to seek reimbursement from Lessor.
Lessee shall document the cost of said cure and supply said documentation to Lessor. 


14.    Condemnation.    If the Premises or any portion thereof are taken under the power
of eminent domain or sold under the threat of the exercise of said power (collectively "Condemnation") this Lease shall terminate as to the Part taken as
of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the rentable floor area of the Premises, or more than 25% of Lessee's Reserved Parking
Spaces, if any, are taken by Condemnation, Lessee may, at Lessee's option, to be exercised in writing within 10 days after Lessor shall have given Lessee written notice of such taking (or in
the absence of such notice, within 10 days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If
Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation for Lessee's
relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and
Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any and all compensation which
is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnation. 


15.    Brokerage Fees.    


        15.1    Additional Commission.    In addition to the payments owed
pursuant to Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee acquires from
Lessor any rights to the Premises or other premises owned by Lessor and located within the Project, (c) if Lessee remains in possession of the Premises, with the consent of Lessor, after the
expiration of this Lease, or (d) if Base Rent is increased, whether by agreement or operation of an escalation clause herein, then, Lessor shall pay Brokers a fee in accordance with the
schedule of the Brokers in effect at the time of the execution of this Lease. 


        15.2    Assumption of Obligations.    Any buyer or transferee of Lessor's
interest in this Lease shall be deemed to have assumed Lessor's obligation hereunder. Brokers shall be third party beneficiaries of the provisions of Paragraphs 1, 10, 15, 22 and 31. If Lessor fails
to pay to Brokers any amounts due as and for brokerage fees pertaining to this Lease when due, then such amounts shall accrue Interest. In addition, if Lessor fails to pay any amounts to Lessee's
Broker when
due, Lessee's Broker may send written notice to Lessor and Lessee of such failure and if Lessor fails to pay such amounts within 10 days after said notice, Lessee shall pay said monies to its
broker and offset such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a third party beneficiary of any commission agreement entered into by and/or between Lessor and Lessor's
Broker for the limited purpose of collecting any brokerage fee owed. 


        15.3    Representations and Indemnities of Broker Relationships.    Lessee
and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) in connection with this Lease, and that no one
other than said named Brokers is entitled to any commission or finder's fee in connection herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless
from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party
including any costs, expenses, attorneys' fees reasonably incurred with respect thereto. 


16.    Estoppel Certificates.    


        (a)   Each
Party (as "Responding Party') shall within 10 days after written notice from the other Party (the
"Requesting Party') execute, acknowledge and deliver to the Requesting Party a statement in writing in form similar to the then most current
"Estoppel Certificate" form published by the American Industrial Real Estate Association, plus such additional information, confirmation and/or statements
as may be reasonably requested by the Requesting Party. 


        (b)   If
the Responding Party shall fail to execute or deliver the Estoppel Certificate within such 10 day period, the Requesting Party may execute an Estoppel
Certificate stating that: (i) the Lease is in full force and effect without modification except as may be represented by the Requesting Party, (ii) there are no uncured defaults in the
Requesting Party's performance, and (iii) if Lessor is the Requesting Party, not more than one month's rent has been paid in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party's Estoppel Certificate and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate. 


        (c)   If
Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee and all Guarantors shall deliver to any potential lender or purchaser
designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee's financial statements for the past 3 years. All
such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth. 


17.    Definition of Lessor.    The term
"Lessor" as used herein shall mean the owner or owners at the time in question of the fee title to the Premises, or, if this is a sublease, of the
Lessee's interest in the prior lease. In the event of a transfer of Lessor's title or interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit)
any unused Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing the obligations and/or covenants in this
Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. 


18.    Severability.    The invalidity of any provision of this Lease, as determined by
a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof. 


19.    Days.    Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days. 


20.    Limitation on Liability.    The obligations of Lessor under this Lease shall not
constitute personal obligations of Lessor or its partners, members, directors, officers or shareholders, and Lessee shall look to the Project, and to no other assets of Lessor, for the satisfaction of
any liability of Lessor with respect to this Lease and shall not seek recourse against Lessor's partners, members, directors, officers or shareholders or any of their personal assets for such
satisfaction. 


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


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


23.    Notices.    



        23.1    Notice Requirements.    All notices required or permitted by this
Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail with
postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party's signature
on this Lease shall be that Party's address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee's taking
possession of the Premises, the Premises shall constitute Lessee's address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as
Lessor may from time to time hereafter designate in writing. 


        23.2    Date of Notice.    Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of delivery shown 



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on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given 48 hours after the same is addressed as required herein and
mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantee next day delivery shall be deemed given 24 hours after delivery of the same to
the Postal Service or courier. Notices transmittled by facsimile by facsimile transmission or similar means shall be deemed delivered upon telephone confirmation of receipt (confirmation report from
fax machine is sufficient), provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day. 


24.    Waivers.    No waiver by Lessor of the Default or Breach of any term, covenant or
condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or of any other term, covenant or
condition hereof, Lessor's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent or similar act by Lessee;
or be construed as the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach
by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment. 



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


        (a)   When
entering into a discussion with a real estate agent regarding a real estate transaction, a Lessor or Lessee should from the outset understand what type of agency
relationship or representation it has with the agent or agents in the transaction. Lessor and Lessee acknowledge being advised by the Brokers in this transaction, as follows: 



        (i)    Lessor's Agent. A Lessor's agent under a listing agreement with the Lessor acts as the agent for the Lessor only. A
Lessor's agent or subagent has the following affirmative obligations: To the Lessor: A fiduciary duly of utmost care, integrity, honesty, and loyalty in
dealings with the Lessor. To the Lessee and the Lessor: a. Diligent exercise of reasonable skills and care in performance of the agent's duties. b. A duty
of honest and fair dealing and good faith. c. A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the
diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the
affirmative duties set forth above. 


        (ii)   Lessee's Agent. An agent can agree to act as agent for the Lessee only. In these situations, the agent is not the Lessor's
agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Lessor. An agent acting only for a Lessee has the following affirmative
obligations. To the Lessee: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessee. To the
Lessee and the Lessor: a. Dilligent exercise of reasonable skills and care in performance of the agent's duties. b. A duty of honest and fair dealing and good faith. c. A duty
to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An
agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above. 


        (iii)  Agent Representing Both Lessor and Lessee. A real estate agent, either acting directly or through one or more associate
licenses, can legally be the agent of both the Lessor and the Lessee in transaction, but only with the knowledge and consent of both the Lessor and the Lessee. In a dual agency situation, the agent
has the following affirmative obligations to both the Lessor and the Lessee: a. A fiduciary duty of utmost care, integrity, honesty and loyaly in the dealings with either Lesser or the Lessee. b.
Other duties to the Lessor and the Lessee as stated above in subparagraphs (i) or (ii). In representing both Lessor and Lessee, the agent may not without the express permission of the
respective Party, disclose to the other Party that the Lessor will accept rent in an amount less than that indicated in the listing or that the Lessee is willing to pay a higher rent than that
offered. The above duties of the agent in a real estate transaction do not relieve a Lessor or Lessee from the responsibility to protect their own interests. Lessor and Lessee should carefully read
all agreements to assure that they adequately express their understanding of the transaction. A real estate agent is a person qualified to advise about real estate. If legal or tax advise is desired,
consult a competent professional. 




        (b)   Brokers
have no responsibility with respect to any default or breach hereof by either Party. The liability (including court costs and attorneys fees), of any Broker with
respect to any breach of duty, error or omission relating to this Lease shall not exceed the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on
each Broker's liability shall not be applicable to any gross negligence or willful misconduct of such Broker. 



        (c)   Buyer
and Seller agree to identify to Brokers as "Confidential" any communication or information given Brokers that is
considered by such Party to be confidential. 


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



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


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


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


30.    Subordination; Attornment; Non-Disturbance.    


        30.1    Subordination.    This Lease and any Option granted hereby shall
be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, "Security Device"), now
or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such
Security Devices (in this Lease together referred to as "Lender") shall have no liability or obligation to perform any of the obligations of Lessor under
this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, whereupon this Lease and
such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof. 


        30.2    Attornment.    In the event that Lessor transfers title to the
Premises, or the Premises are acquired by another upon the foreclosure or termination of a Security Device to which this Lease is subordinated (i) Lessee shall subject to the nondisturbance
provisions of Paragraph 30.3, attorn to such new owner, and upon request, enter into a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder
of the term hereof, or, at the election of such new owner, this Lease shall automatically become a new Lease between Lessee and such new owner, upon all of the terms and conditions hereof, for the
remainder of the term hereof, and (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor's obligations hereunder, except
that such new owner shall not: (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (b) be subject to any
offsets or defenses which Lessee might have against any prior lessor. (c) be bound by prepayment of more than one month's rent, or (d) be liable for the return of any security deposit
paid to any lessor. 


        30.3    Non-Disturbance.    With respect to Security Devices
entered into by Lessor after the execution of this Lease, Lessee's subordination of this Lease shall be subject to receiving a commercially reasonable non-disturbance agreement (a
"Non-Disturbance Agreement") from the Lender which Non-Disturbance Agreement provides that Lessee's possession of the Premises,
and this Lease, including any options to extend the term hereof, will not be disturbed so long as Lessee in not in Breach hereof and attorns to the record owner of the Premises. Further, within
60 days after the execution of this Lease, Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing
Security Device which is secured by the Premises. In the event that Lessor is unable to provide the Non-Disturbance Agreement within said 60 days then Lessee may at Lessee's option,
directly contact Lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement. 


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


31.    Attorney's Fees.    If any Party or Broker brings an action or proceeding
involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall
be entitled to reasonable attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The
term, "Prevailing Party" shall include, without limitation, a Party of Broker who substantiality obtains or defeats the relief sought, as the case may be,
whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fees award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be entitled to attorneys' fees, costs and expenses incurred in the preparation and
service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a
reasonable minimum per occurrence for such services and consultation). 


32.    Lessor's Access; Showing Premises; Repairs.    Lessor and Lessor's agents shall
have the right to enter the Premises at any time. In the case of an emergency, and otherwise at reasonable times for the purpose of showing the same to prospective purchasers, lenders, or tenants, and
making such alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary or desirable and the erecting, using and maintaining of utilities, services, pipes and conduits
through the Premises and/or other premises as long as there is no material adverse effect to Lessee's use of the Premises. All such activities shall be without abatement of rent or liability to
Lessee. Lessor may at any time place on the Premises any ordinary "For Sale" signs and Lessor may during the last 6 months of the term hereof place
on the Premises any ordinary "For Lease" signs. In addition, Lessor shall have the 



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right to retain keys to the Premises and to unlock all doors in or upon the Premises other than to files, vaults and safes, and in the case of emergency to enter
the Premises by any reasonably appropriate means, and any such entry shall not be deemed a forcible or unlawful entry or detainer of the Premises or an eviction. Lessee waives any charges for damages
or injuries or interference with Lessee's property or business in connection therewith. 


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


34.    Signs.    Lessee shall not place any sign upon the Project without Lessor's prior
written consent. 


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



36.    Consents.    Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including but not limited
to architects', attorneys', engineers' and other consultants' fees) incurred in the consideration of, or response to a request by Lessee for any Lessor consent, including but not limited to consents
to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor. Lessor's consent to any act,
assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or
Breach except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor's consent shall not preclude
the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that
either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and in
reasonable detail within 10 business days following such request. 


37.    Guarantor.    



        37.1    Execution.    The Guarantors if any shall each execute a guaranty
in the form most recently published by the American Industrial Real Estate Association. 


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


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


39.    Options    If Lessee is granted an Option, as defined below then the following
provisions shall apply. 


        39.1    Definition.    "Option"
shall mean: (a) the right to extend the term of or renew this Lease or to extend or renew any lease that Lessee has on other property of Lessor; (b) the right of first refusal or first
offer to lease either the Premises or other property of Lessor; (c) the right to purchase or the right of first refusal to purchase the Premises or other property of Lessor. 



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


        39.3    Multiple Options.    In the event that Lessee has any multiple
Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Options have been validly exercised. 


        39.4    Effect of Default on Options.    


        (a)   Lessee
shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is
cured. (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee). (iii) during the time Lessee is in Breach of this Lease, or
(iv) in the event that Lessee has been given 3 or more notices of separate Default whether or not the Defaults are cured, during the 12 month period immediately preceding the exercise of
the Option. 


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


        (c)   An
Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and prior to the
commencement of the extended term or completion of the purchase, (i) Lessee fails to pay Rent for a period of 30 days after such Rent becomes due (without any necessity of Lessor to give
notice thereof), or (ii) if Lessee commits a Breach of this Lease. 


40.    Security Measures.    Lessee hereby acknowledges that the Rent payable to Lessor
hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the
protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties. In the event, however, that Lessor should elect to provide security services, then the
cost thereof shall be an Operating Expense. 


41.    Reservations.    


        (a)   Lessor
reserves the right: (i) to grant, without the consent or joinder of Lessee; such easements, rights and dedications that Lessor deems necessary,
(ii) to cause the recordation of parcel maps and restrictions, (iii) to create and/or install new utility raceways, so long as such easements, rights, dedications, maps, restrictions,
and utility raceways do not unreasonably interfere with the use of the Premises by Lessee. Lessor may also: change the name, address or title of the Building or Project upon at least 90 days
prior written notice; provide and install, at Lessee's expense, Building standard graphics on the door of the Premises and such portions of the Common Areas as Lessor shall reasonably deem
appropriate; grant to any lessee the exclusive right to conduct any business as long as such exclusive right does not conflict with any rights expressly given herein; and to place such signs, notices
or displays as Lessor reasonably deems necessary or advisable upon the roof, exterior of the Building or the Project or on pole signs in the Common Areas. Lessee agrees to sign any documents
reasonably requested by Lessor to effectuate such rights. The obstruction of Lessee's view, air, or light by any structure erected in the vicinity of the Building, whether by Lessor or third parties,
shall in no way affect this Lease or impose any liability upon Lessor. 



        (b)   Lessor
also reserves the right to move Lessee to other space of comparable size in the Building or Project. Lessor must provide at least 45 prior written notice of such
move, and the new space must contain improvements of comparable quality to those contained within the Premises. Lessor shall pay the reasonable out of pocket costs that Lessee incurs with regard to
such relocation, including the expenses of moving and necessary stationary revision costs. In no event, however, shall Lessor be required to pay an amount in excess of two months Base Rent. Lessee may
not be relocated more than once during the term of this Lease. 


        (c)   Lesses
shall not: (i) use a representation (photographic or otherwise) of the Building or Project or their name(s) in connection with Lessee's business; or
(ii) suffer or permit anyone, except in emergency, to go upon the roof of the Building. 


42.    Performance Under Protest.    If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment
"under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute
suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such
sum or so much thereof as it was not legally required to pay. 


43.    Authority.    


        (a)   If
either Party hereto is a corporation, trust, limited liability company, partnership, or similar entity, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each party shall within 30 days after request, deliver to the other party satisfactory
evidence of such authority. 


        (b)   If
this Lease is executed by more than one person or entity as "Lessee", each such person or entity shall be jointly and
severally liable hereunder. It is agreed that any one of the named Lessees shall be empowered to execute any amendment to this Lease, or other document ancillary thereto and bind all of the named
Lessees, and Lessor may rely on the same as if all of the named Lessees had executed such document. 


44.    Conflict.    Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions. 


45.    Offer.    Preparation of this Lease by either party or their agent and submission
of same to the other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto. 


46.    Amendments.    This Lease may be modified only in writing, signed by the Parties
in interest at the time of the modification. As long as they do not materially change Lessee's obligations hereunder. Lessee agrees to make such reasonable nonmonetary modifications to this Lease as
may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises. 


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



48.    Waiver of Jury Trial.    THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR ARISING OUT OF THIS AGREEMENT. 


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


50.    Americans with Disabilities Act.    In the event that as a
result of Lessee's use, or intended use, of the Premises the Americans with Disabilities Act or any similar law requires modifications or the construction or installation of improvements in or to the
Premises, Building, Project and/or Common Areas. 



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the Parties agree that such modifications, construction or improvements shall be made at: o Lesser's
expense o Lessee's expense. 


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


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


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



        2.     RETAIN
APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF
HAZARDOUS SUBSTANCES, THE ZONING AND SIZE OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND THE
SUITABILITY OF THE PREMISES OF R LESSEE'S INTENDED USE. 


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


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



	Executed at:	 	Carlsbad, CA
	 	Executed at:	 	LA, CA

	on:	 	1/6/03
	 	on:	 	12/20/02

	

By LESSOR:	
 	

 	
 	

BY LESSEE:	
 	

 
	MG Palomar, LLC    
	 	K2, Inc.; a Delaware Corporation    

	

By:	
 	

/s/ Blake Fennell
	
 	

By:	
 	

/s/ John Rangel

	Name Printed:	 	Blake Fennell
	 	Name Printed:	 	John Rangel

	Title:	 	Chief Executive Officer
	 	Title:	 	Senior Vice President

	

By:	
 	

          
	
 	

By:	
 	

          

	Name Printed:	 	          
	 	Name Printed:	 	          

	Title:	 	          
	 	Title:	 	          

	Address:	 	2051 Palomar Airport Road, Suite 200
Carlsbad, CA 92009
          
	 	Address:	 	2051 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
          

	

(760) 438-2131
 Telephone / Facsimile	
 	

          
 Telephone / Facsimile
	Federal ID No.	 	          
	 	Federal ID No.	 	          

	

LESSOR'S

BROKER:	
 	

 	
 	

LESSEER'S

BROKER:	
 	

 
	BRE Commercial / NAI
	 	BRE Commercial / NAI

	Attn:	 	Joe Anderson / Mark Emerick
	 	Attn:	 	Mark Emerick / Andy Melzer

	Address:	 	705 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
          
	 	Address:	 	705 Palomar Airport Road, Suite 100
Carlsbad, CA 92009
          

	(760) 431-4200 / (760) 431-7656
 Telephone / Facsimile No.	 	(760) 431-4200 / (760) 431-7656
 Telephone / Facsimile No.





        These forms are often modified to meet changing requirements of law and needs of the industry. Always write or call to make
sure you are utilizing the most current form: American Industrial Real Estate Association, 700 South Flower Street, Suite 600, Los Angeles, CA 90017.


(213) 687-8777.


©Copyright 1999-By American Industrial Real Estate Association.

All rights reserved.

No part of these works may be reproduced in any form without permission in writing.  


Anderson\2051PalomarAirportRd-MTLGRS-K2  



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[LOGO] 


 
 

OPTION(S) TO EXTEND
  STANDARD LEASE ADDENDUM    
    



	Dated	 	December 3, 2002

	
By and Between (Lessor)	
 	

MG Palomar, LLC

	 	 	 
	 	 	

	
(Lessee)	
 	

K2, Inc., a Delaware Corporation

	 	 	 
	 	 	

	
Address of Premises:	
 	

2051 Palomar Airport Road, Suite 100

	 	 	Carlsbad, CA 92009







Paragraph 39



	A.
	OPTION(S)
TO EXTEND: 



Lessor
hereby grants to Lessee the option to extend the term of this Lease for One (1) additional Sixty (60) month period(s) commencing when the prior term expires upon each and all of
the following terms and conditions: 


          (i)  In
order to exercise an option to extend, Lessee must give written notice of such election to Lessor and Lessor must receive the same at least 4 but not more than
9 months prior to the date that the option period would commence, time being of the essence. If proper notification of the exercise of an option is not given and/or received, such option shall
automatically expire. Options (if there are more than one) may only be exercised consecutively. 


         (ii)  The
provisions of paragraph 39 including those relating to Lessee's Default set forth in paragraph 39.4 of this Lease, are conditions of this Option. 


        (iii)  Except
for the provisions of this Lease granting an option or options to extend the term, all of the terms and conditions of this Lease except where specifically
modified by this option shall apply. 


        (iv)  This
Option is personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in
full possession of the Premises and without the intention of thereafter assigning or subletting. 


         (v)  The
monthly rent for each month of the option period shall be calculated as follows, using the method(s) indicated below: 


(Check
Method(s) to be Used and Fill in Appropriately) 



	o	 	I.	 	Cost of Living Adjustment(s) (COLA)
	 	 	a.	 	On (Fill in COLA Dates):	 	 
	 	 	 	 	 	 	

	 	 	 	 	 	 	 
	

	the Base Rent shall be adjusted by the change, if any, from the Base Month specified below, in the Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of Labor for (select one): o CPI W (Urban Wage Earners and Clerical Workers) or o CPI U (All Urban Consumers) for (Fill in Urban Area):
	 	 	 	 	 	 	 
	
 All Items (1982-1984 = 100) herein referred to as "CPI".





        b.     The
monthly rent payable in accordance with paragraph A.I.a. of this Addendum shall be calculated as follows: the Base Rent set forth in paragraph 1.5 of the attached
Lease, shall be multiplied by a fraction the numerator of which shall be the CPI of the calendar month 2 months prior to the month(s) specified in paragraph A.I.a above during which the adjustment is
to take effect, and the denominator of which shall be the CPI of the calendar month which is 2 months prior to (select one): o the first month of the term
of this Lease as set forth in paragraph 1.3. ("Base Month") or o (Fill in other "Base Month"):
                                         
              . The sum so calculated shall constitute the new monthly rent hereunder, but in no event, shall any such new monthly rent be less than the
rent payable for the month immediately preceding the rent adjustment. 


        c.     In
the event the compilation and/or publication of the CPI shall be transferred to any other governmental department or bureau or agency or shall be discontinued, then
the index most nearly the same as the CPI shall be used to make such calculation. In the event that the Parties cannot agree on such alternative index then the matter shall be submitted for decision
to the American Arbitration Association in accordance with the then rules of said Association and the decision of the arbitrators shall be binding upon the parties. The cost of said Arbitration shall
be paid equally by the Parties. 



	o	 	II.	 	Market Rental Value Adjustment(s) (MRV)
	 	 	a.	 	On (Fill in MRV Adjustment Date(s):	 	 
	 	 	 	 	 	 	

	 	 	 	 	 	 	 
	
 the Base Rent shall be adjusted to the "Market Rental Value" of the property as follows:





        1)    Four
months prior to each Market Rental Value Adjustment Date described above, the Parties shall attempt to agree upon what the new MRV will be on the adjustment date. If
agreement cannot be reached within thirty days, then: 



        (a)   Lessor
and Lessee shall immediately appoint a mutually acceptable appraiser or broker to establish the new MRV within the next 30 days. Any associated costs will be
split equally between the Parties, or 


        (b)   Both
Lessor and Lessee shall each immediately make a reasonable determination of the MRV and submit such determination, in writing, to arbitration in accordance with the
following provisions: 



	BF
          
Initials	 	 	 	JR
          
Initials




1







 


          (i)  Within
15 days thereafter, Lessor and Lessee shall each select an o appraiser or
o broker ("Consultant"—check one) of their choice to act as an arbitrator. The two
arbitrators so appointed shall immediately select a third mutually acceptable Consultant to act as a third arbitrator. 



         (ii)  The
3 arbitrators shall within 30 days of the appointment of the third arbitrator reach a decision as to what the actual MRV for the Premises is, and whether
Lessor's or Lessee's submitted MRV is the closest thereto. The decision of a majority of the arbitrators shall be binding on the Parties. The submitted MRV which is determined to be the closest to the
actual MRV shall thereafter be used by the Parties. 


        (iii)  If
either of the Parties fails to appoint an arbitrator within the specified 15 days, the arbitrator timely appointed by one of them shall reach a decision on
his or her own, and said decision shall be binding on the Parties. 


        (iv)  The
entire cost of such arbitration shall be paid by the party whose submitted MRV is not selected, ie., the one that is NOT the closest to the actual MRV. 





        2)    Notwithstanding
the foregoing, the new MRV shall not be less than the rent payable for the month immediately preceding the rent adjustment. 


	b.
	Upon
the establishment of each New Market Rental Value: 





        1)    the
new MRV will become the new "Base Rent" for the purpose of calculating any further Adjustments, and 


        2)    the
first month of each Market Rental Value term shall become the new "Base Month" for the purpose of calculating any
further Adjustments. 


ý    III.    Fixed Rental Adjustment(s) (FRA) 



The Base Rent shall be increased as to the following amounts on the dates set forth below: 


        The
base rent shall continue to increase by three percent (3%) annually from the last year of the existing lease term. 



	On (Fill in FRA Adjustment Date(s)):
 
	 	The New Base Rent shall be:

	 	 	$
	 	 	$
	 	 	$
	 	 	$




	B.
	NOTICE:




        Unless specified otherwise herein, notice of any rental adjustments, other than Fixed Rental Adjustments, shall be made as specified in
paragraph 23 of the Lease. 


	C.
	BROKER'S
FEE: 



        The
Brokers shall be paid a Brokerage Fee for each adjustment specified above in accordance with paragraph 15 of the Lease. 



        NOTE:
These forms are often modified to meet changing requirements of law and needs of the industry. Always write or call to make sure you are utilizing the most current form: AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION, 700 S. Flower Street, Suite 600, Los Angeles, Calif. 90017 



	BF
          
Initials	 	 	 	JR
          
Initials




FORM OE-3-8/OOE 


2









ADDENDUM TO LEASE DATED DECEMBER 3, 2002 BY AND BETWEEN MG PALOMAR LLC, AS LESSOR AND K2, INC. A DELAWARE CORPORATION, AS LESSEE FOR PREMISES LOCATED AT 2051 PALOMAR
AIRPORT ROAD, CARLSBAD, CALIFORNIA.



51.   RE: PARAGRAPH 1.2A:  



The
square footage of the premises is estimated to be 19,863 rentable square feet, which shall be measured and confirmed in writing by the Lessor per BOMA Industry Standards. The base rent of
$30,787.65 ($1.55 per square foot) and Lessee's share of operating expense increase (9.43%) and parking allotment shall be modified accordingly should the square footage of the premises be modified. 




52.   BASE RENT RATE:



The
base rent shall increase by three percent (3%) at each anniversary of the lease. 




53.   RIGHT OF FIRST OFFER:



Notwithstanding
anything to the contrary contained herein, Lessee shall have a right of first offer (the "Right of First Offer") with respect to any
other demised space located on the second floor of the Building (the "Offered Space"), on the following terms and conditions: 


	(a)
	If
any Offered Space becomes available to lease and Lessor elects to lease the same during the Original Term, as extended, then Lessor shall notify Lessee in writing (the
"Offer Notice") of the availability of said Offered Space reasonably promptly following the date on which said Offer Space is available to lease, in
Lessor's sole judgment. The Offer Notice shall include all of the pertinent economic terms on which Lessor is willing to lease the Offered Space to a third party, including without limitation a
reasonably detailed description of the Offered Space, the rent for the Offered Space and any tenant improvement allowance or other economic concession.



	(b)
	Lessee
shall have three (3) business days in which to respond to the Offer Notice, which response shall be delivered to Lessor in writing. If Lessee fails to notify Lessor in
writing within said three-business-day period of its intent to lease the Offered Space on the same terms and conditions as set forth in the Offer Notice, or if Lessee notifies Lessor in
writing that it does not elect to lease the Offered Space on said terms and conditions, then Lessee shall have no further right to lease the Offered Space pursuant to the terms of the Offer Notice,
and Lessor shall be free to offer the Offered Space to any third party on terms and conditions substantially similar to those described in the Offer Notice; provided, however, that if Lessor wishes to
lease the Offered Space to any third party on economic or other terms which are more favorable to the prospective lessee by 10% or more, then Lessor shall re-offer the Offered Space to
Lessee under the terms of this Paragraph 53.



	(c)
	If
Lessee timely notifies Lessor of its election to lease the Offered Space pursuant to the terms of the Offer Notice, then Lessor and Lessee shall promptly enter into a written
amendment of this Lease, incorporating the terms of the Offer Notice into this Lease.



	(d)
	Notwithstanding
anything to the contrary contained hereinabove, the term of this Lease with respect to any Offered Space shall be concurrent with the remaining term of this Lease, and
the expiration of the term of this Lease with respect to said Offered Space shall be the Expiration Date, as defined in Section 1.3 above, as same may be extended." 




54.   SIGNAGE:



Lessee
shall receive the following signage: 


	•
	Prominent
signage on the exterior existing monument facing Palomar Airport Road 











	•
	Exclusive
signage on the existing blank monument in front of the proposed space (located in the parking lot)



	•
	Signage
on the exterior of the building immediately in front of the entrance to the subject space 




Said
signage is subject to City of Carlsbad and Lessor approval. Lessee shall provide detailed plans for signs to Lessor for their prior written approval, which may not be unreasonably withheld. The
cost of design, installation, and removal of Lessee's signage shall be Lessee's responsibility. 




55.   TRANSFERABILITY:



Lessee
shall have the rights to sublease, assign the lease, or otherwise transfer all or part of the leased premises subject only to the reasonable consent of the Lessor and the terms of the Lease
Profits, if any, resulting from such transfer are to be split 50/50 between Lessee and Lessor. Lessee shall have the right to assign its rights under the lease to any entity which controls, is
controlled by or is under common control with Lessee (for the purposes of this Section 55, the term "control" shall mean voting control or ownership of not less than 50% of the voting shares or
ownership interests of any entity) without any required consent of the owner. 




56.   BUILDING SYSTEMS:



The
building offers packaged HVAC units for the Lessee's use. Lessee is not subjected to any set building HVAC hours or after hours charge. Lessor will be responsible for the replacement of any HVAC
units. 




57.   OPERATING EXPENSES:



Lessee's
pro rata share of controllable operating expense increases shall not exceed ten percent (10%) per annum. 



	 	LESSOR:

MG PALOMAR, LLC	 	 	LESSEE:

K2, INC., A DELAWARE CORPORATION
	

By:	

/s/ [ILLEGIBLE]
	
 	

By:	

/s/ [ILLEGIBLE]

	Title:	CEO
	 	Title:	SVP—Finance

	Date:	1/6/03
	 	Date:	12/20/02












 
 

EXHIBIT A    
    
    WORK LETTER    
    


        This Exhibit (the "Work Letter") is attached to and made a part of the Lease dated December 3, 2002 by and between MG Palomar; a
California Limited Company ("Lessor") and K2, Inc., a Delaware Corporation ("Lessee") for space in the Building located
at 2051 Palomar Airport Road, Carlsbad, California. 


        As
used in this Work Letter, the "Premises" shall be deemed to mean the Premises, as initially defined in the attached Lease document. 


	1.
	Lessor,
at its sole cost and expense (subject to the terms and provisions of Section 2 below) shall perform improvements to the Premises in accordance with the following work
list (the "Work List") using Building standard methods, materials and finishes. The improvements to be performed in accordance with the Work List are hereinafter referred to as the "Lessor Work" and
subject to an approved upon space plan by both Lessor and Lessee. Lessor shall enter into a direct contract for the Lessor Work with a general contractor selected by Lessor. In addition, Lessor shall
have the right to select and/or approve of any subcontractors used in connection with the Lessor Work. 


 
 

WORK LIST    
    



	•
	Replace
the existing carpet in the open office area and "back" offices with building standard carpet.



	•
	Paint
the entire space with building standard paint.



	•
	Drywall
the existing entry locked door between the cafeteria and executive dining / conference room.



	•
	Demise
the subject space from the upstairs office area, cafeteria, Melles Griot, etc.






	2.
	All
other work and upgrades, subject to Lessor's approval, shall be at Lessee's sole cost and expense, plus any applicable state sales or use tax thereon, payable upon demand as
additional rent. Lessee shall be responsible for any Lessee delay in completion of the Premises resulting from any such other work and upgrades requested or performed by Lessee.



	3.
	Lessor's
supervision or performance of any work for or on behalf of Lessee shall not be deemed to be a representation by Lessor that such work complies with applicable insurance
requirements, building codes, ordinances, laws or regulations or that the improvements constructed will be adequate for Lessee's use.



	4.
	This
Work Letter shall not be deemed applicable to any additional space added to the Premises at any time or from time to time, whether by any options under the Lease or otherwise, or
to any portion of the original Premises or any additions to the Premises in the event of a renewal or extension of the Extended Term, whether by any options under the Lease or otherwise, unless
expressly so provided in the Lease or any amendment or supplement to the Lease.



	5.
	For
the purposes of this Lease, the term "Substantial Completion" shall mean the completion of the foregoing tenant improvements by Lessor, such that the Premises are usable by Lessee
for the 








agreed
use described at Section 1.8 of the Lease to which this Addendum is attached, in Lessor's sole reasonable judgement. 





	 	 	LESSOR:

MG PALOMAR, LLC	 	 	 	LESSEE:

K2, INC., A DELAWARE CORPORATION
	

By:	
 	

/s/ [ILLEGIBLE]
	
 	

By:	
 	

/s/ [ILLEGIBLE]

	Title:	 	CEO
	 	Title:	 	SVP—Finance

	Date:	 	1/6/03
	 	Date:	 	12/20/02










 
 

EXHIBIT B    
    
    FLOOR PLAN    
    


[FLOOR
PLAN] 







 
 

EXHIBIT C    
    
    RULES AND REGULATIONS FOR
  STANDARD OFFICE LEASE    
    


Dated:
December 3, 2002 


By
and Between MG Palomar, LLC, and K2, Inc., a Delaware Corporation 


 
 

GENERAL RULES    
    


        1.     Lessee
shall not suffer or permit the obstruction of any Common Areas, including driveways, walkways and stairways. 


        2.     Lessor
reserves the right to refuse access to any persons Lessor in good faith judges to be a threat to the safety and reputation of the Project and its occupants. 



        3.     Lessee
shall not make or permit any noise or odors that annoy or interfere with other lessees or persons having business within the Project. 


        4.     Lessee
shall not keep animals or birds within the Project, and shall not bring bicycles, motorcycles or other vehicles into areas not designated as authorized for same. 


        5.     Lessee
shall not make, suffer or permit litter except in appropriate receptacles for that purpose. 


        6.     Lessee
shall not alter any lock or install new or additional locks or bolts. 



        7.     Lessee
shall be responsible for the inappropriate use of any toilet rooms, plumbing or other utilities. No foreign substances of any kind are to be inserted therein. 


        8.     Lessee
shall not deface the walls, partitions or other surfaces of the Premises or Project. 


        9.     Lessee
shall not suffer or permit anything in or around the Premises or Building that causes excessive vibration or floor loading in any part of the Project. 



        10.   Furniture,
significant freight and equipment shall be moved into or out of the building only with the Lessor's knowledge and consent, and subject to such reasonable
limitations, techniques and timing, as may be designated by Lessor. Lessee shall be responsible for any damage to the Office Building Project arising from any such activity. 


        11.   Lessee
shall not employ any service or contractor for services or work to be performed in the Building, except as approved by Lessor. 


        12.   Lessor
reserves the right to close and lock the Building on Saturdays, Sundays and Building Holidays, and on
other days between the hours of                         P.M.
and                         A.M. of the following day. If Lessee uses the Premises during such periods, Lessee shall be
responsible for
securely locking any doors it may have opened for entry. 


        13.   Lessee
shall return all keys at the termination of its tenancy and shall be responsible for the cost of replacing any keys that are lost. 


        14.   No
window covering, shades or awnings shall be installed or used by Lessee. 


        15.   No
Lessee, employee or invitee shall go upon the roof of the Building. 


        16.   Lessee
shall not suffer or permit smoking or carrying of lighted cigars or cigarettes in areas reasonably designated by Lessor or by applicable governmental agencies as
non-smoking areas. 


        17.   Lessee
shall not use any method of heating or air conditioning other than as provided by Lessor. 


        18.   Lessee
shall not install, maintain or operate any vending machines upon the Premises without Lessor's written consent. 










        19.   The
Premises shall not be used for lodging or manufacturing, cooking or food preparation. 


        20.   Lessee
shall comply with all safety, fire protection and evacuation regulations established by Lessor or any applicable governmental agency. 


        21.   Lessor
reserves the right to waive any one of these rules or regulations, and/or as to any particular Lessee, and any such waiver shall not constitute a waiver of any
other rule or regulation or any subsequent application thereof to such Lessee. 


        22.   Lessee
assumes all risks from theft or vandalism and agrees to keep its Premises locked as may be required. 



        23.   Lessor
reserves the right to make such other reasonable rules and regulations as it may from time to time deem necessary for the appropriate operation and safety of the
Project and its occupants. Lessee agrees to abide by these and such rules and regulations. 


 
 

PARKING RULES    
    


        1.     Parking
areas shall be used only for parking by vehicles no longer than full size passenger automobiles herein called "Permitted Size Vehicles". Vehicles other than
Permitted Size Vehicles are herein referred to as "Oversized Vehicles." 


        2.     Lessee
shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee's employees, suppliers, shippers, customers or invitees to be loaded,
unloaded, or parked in areas other than those designated by Lessor for such activities. 


        3.     Parking
stickers or identification devices shall be the property of Lessor and be returned to Lessor by the holder thereof upon termination of the holder's parking
privileges. Lessee will pay such replacement charge as is reasonably established by Lessor for the loss of such devices. 


        4.     Lessor
reserves the right to refuse the sale of monthly identification devices to any person or entity that willfully refuses to comply with the applicable rules,
regulations, laws and/or agreements. 


        5.     Lessor
reserves the right to relocate all or a part of parking spaces from floor to floor, within one floor, and/or to reasonably adjacent offsite location(s), and to
reasonably allocate them between compact and standard size spaces, as long as the same complies with applicable laws, ordinances and regulations. 


        6.     Users
of the parking area will obey all posted signs and park only in the areas designated for vehicle parking. 


        7.     Unless
otherwise instructed, every person using the parking area is required to park and lock his own vehicle. Lessor will not be responsible for any damage to vehicles,
injury to persons or loss of property, all of which risks are assumed by the party using the parking area. 



        8.     Validation,
if established, will be permissible only by such method or methods as Lessor and/or its licensee may establish at rates generally applicable to visitor
parking. 


        9.     The
maintenance, washing, waxing or cleaning of vehicles in the parking structure or Common Areas is prohibited. 


        10.   Lessee
shall be responsible for seeing that all of its employees, agents and invitees comply with the applicable parking rules, regulations, laws and agreements. 



        11.   Lessor
reserves the right to modify these rules and/or adopt such other reasonable and non-discriminatory rules and regulations as it may deem necessary for
the proper operation of the parking area. 


        12.   Such
parking use as is herein provided is intended merely as a license only and no bailment is intended or shall be created hereby. 











QuickLinks


SUBLEASE AGREEMENT


Consent To Sublease Agreement

Recitals

EXHIBIT A [Attach the Sublease]


STANDARD MULTI-TENANT OFFICE LEASE—GROSS AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION


OPTION(S)  TO EXTEND STANDARD LEASE ADDENDUM


EXHIBIT A WORK LETTER

WORK LIST

EXHIBIT B FLOOR PLAN

EXHIBIT C RULES AND REGULATIONS FOR STANDARD OFFICE LEASE

GENERAL RULES

PARKING RULES