**Exhibit 10.1**

**AIR COMMERCIAL REAL ESTATE ASSOCIATION**

**STANDARD INDUSTRIAL/COMMERCIALSINGLE-TENANT LEASE — NET**

**(DO NOTUSE THIS FORM FOR MULTI-TENANT BUILDINGS)**

**1.Basic Provisions**(**“Basic Provisions”**).

1.1 **Parties:**ThisLease (**“Lease”**), dated forreference purposes only February 13, 2007                       , is made by and between 30452 EsperanzaLLC, a California limited liability company (**“Lessor”**)and Liquidmetal Technologies, Inc., aDelaware corporation                                                      **“Lessee”**), (collectively the **“Parties,”**or individually a **“Party”**).

1.2 **Premises:**Thatcertain real property, including all improvements therein or to be provided byLessor under the  terms of this Lease,and commonly known as 30452 Esperanza; Rancho Santa Margarita                                                          , located in the County of Orange, State of California 92688                                                                                                      , and generally described as (describe briefly the nature of the property and,if applicable, the **“Project”**, ifthe property is located within a Project) an approximate 15,070 rentablesquare foot R&D building referred to as Building D oftheBrookhollow Business Park - Phase III (the “Project”)                                                                                                                                                   —(**“Premises”**). (See also Paragraph 2)

1.3 **Term:**5      years and N/A                                months (**“Original Term”**) commencing May 1, 2007                         (“**Commencement Date**”) and ending April 30,2012                                          (“**Expiration Date**”). (See alsoParagraph 3)

1.4 **Early Possession:**Upon execution of the Lease by all parties and the delivery of thecertificate or copies of insurance policies referred to in Paragraph 8.5, thepayment of the sum set out in Paragaph 1.6(e), and the incumbency certificateset out in Exhibit “D”. (**“Early PossessionDate”**). (See also Paragraphs 3.2 and 3.3)

1.5 **Base Rent:**$14,919.30     per month (**“Base Rent”**), payable on the 1st                                . day of each month commencing June 1,2007                                                                                                                .(See also Paragraph 4)

x  If this box is checked, there are provisionsin this Lease for the Base Rent to be adjusted.

1.6 **Base Rent and Other Monies Paid Upon Execution:**

(a) **Base Rent:**$14,919.30              for the period May 1, 2007through May 31, 2007                                              .

(b) **Security Deposit:**$76,555.60                  (**“Security Deposit”**). (See also Paragraph5)

(c) **Association Fees:**$See (d)                       for the period

(d) **Other:**$4,219.60                                                 for estimated NNN fees for May 1, 2007throughMay 31, 2007 .

(e) **Total Due Upon Execution of this Lease:**$95,694.50                                            .

1.7 **Agreed Use:**Administrative office andresearch, development, design, engineering,and light manufacturing (butnot mass production) of amorphous alloys . (See also Paragraph 6)

1.8 **Insuring Party:**Lessor is the **“Insuring Party”**unless otherwise statedherein. (See also Paragraph 8)

1.9 **Real Estate Brokers:**(See also Paragraph15)

(a) **Representation:**The following real estatebrokers (the **“Brokers”**) andbrokerage relationships exist in this transaction (check applicable boxes):

x  Lee & Associates - Irvine, Inc.                          represents Lessorexclusively ( **“Lessor’s Broker”**);

x  CB Richard Ellis                                                               represents Lessee exclusively ( **“Lessee’sBroker”**); or

o  N/A                                                                                                   represents both Lessor and Lessee ( **“DualAgency”**).

(b) **Payment to Brokers:**Upon execution anddelivery of this Lease by both Parties, Lessor shall pay to the Broker the feeagreed to in their separate written agreement ~~(or if there is no suchagreement, the sum of or % of the total Base Rent)~~ for the brokerageservices rendered by the Brokers.

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

1.11 **Attachments.**Attached hereto are thefollowing, all of which constitute a part of this Lease:

x  an Addendum One consisting of Paragraphs 51                through 52, and 56-58              ;

x  a plot plan depicting the Premises; Exhibit “A”

x  a current set of the Rules and Regulations;Exhibit “C”

o  a Work Letter;

x  other(specify): Addendum Two consisting of Paragraph 53; Addendum Threeconsisting of Paragraph 54; Addendum Four consisting of Paragraph 55; Exhibit “B”Floor Plan; and Exhibit “D” Incumbency Certificate and Resolution                                                ..

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**2.Premises.**

 

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**©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                                                                     FORM STN-8-5/05E**

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

2.2 **Condition.**Lessor shall deliver thePremises to Lessee broom clean and free of debris on the Commencement Date orthe Early Possession Date, whichever first occurs ( **“Start Date”**), and, so long as the required service contractsdescribed in Paragraph 7.1(b) below are obtained by Lessee and in effect withinthirty days following the Start Date, warrants that the existing electrical,plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems (**“HVAC”**), loading doors, sump pumps, if any, and all other suchelements in the Premises, other than those constructed by Lessee, shall be ingood operating condition on said date, that the structural elements of theroof, bearing walls and foundation of any buildings on the Premises (the **“Building”**) shall be free of materialdefects, and that the Premises do not contain hazardous levels of any mold orfungi defined as toxic under applicable state or federal law. If a non-compliancewith said warranty exists as of the Start Date, or if one of such systems orelements should malfunction or fail within the appropriate warranty period,Lessor shall, as Lessor’s sole obligation with respect to such matter, exceptas otherwise provided in this Lease, promptly after receipt of written noticefrom Lessee setting forth with specificity the nature and extent of suchnon-compliance, malfunction or failure, rectify same at Lessor’s expense. Thewarranty periods shall be as follows: (i) 6 months as to the HVAC systems, and(ii) 30 days as to the remaining systems and other elements of the Building .If Lessee does not give Lessor the required notice within the appropriatewarranty period, correction of any such non-compliance, malfunction or failureshall be the obligation of Lessee at Lessee’s sole cost and expense.

2.3 **Compliance.**Lessor warrants that to thebest of its knowledge the improvements on the Premises comply with the buildingcodes, applicable laws, covenants or restrictions of record, regulations, andordinances ( **“Applicable Requirements”**)that were in effect at the time that each improvement, or portion thereof, wasconstructed. Said warranty does not apply to the use to which Lessee will putthe Premises, modifications which may be required by the Americans withDisabilities Act or any similar laws as a result of Lessee’s use (see Paragraph50), or to any Alterations or Utility Installations (as defined in Paragraph7.3(a)) made or to be made by Lessee. **NOTE:Lessee is responsible for determining whether or not the ApplicableRequirements, and especially the zoning, are appropriate for Lessee’s intendeduse, and acknowledges that past uses of the Premises may no longer be allowed.**Ifthe Premises do not comply with said warranty, Lessor shall, except asotherwise provided, promptly after receipt of written notice from Lesseesetting forth with specificity the nature and extent of such non-compliance,rectify the same at Lessor’s expense. If Lessee does not give Lessor writtennotice of a non-compliance with this warranty within 6 months following theStart Date, correction of that non-compliance shall be the obligation of Lesseeat Lessee’s sole cost and expense. If the Applicable Requirements are hereafterchanged so as to require during the term of this Lease the construction of anaddition to or an alteration of the Premises and/or Building, the remediationof any Hazardous Substance, or the reinforcement or other physical modificationof the Unit, Premises and/or Building ( **“CapitalExpenditure”**), Lessor and Lessee shall allocate the cost of suchwork as follows:

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

(b) If such Capital Expenditure is not the result ofthe specific and unique use of the Premises by Lessee (such as, governmentallymandated seismic modifications), then Lessor and Lessee shall allocate theobligation to pay for such costs pursuant to the provisions of Paragraph7.1(d); provided, however, that if such Capital Expenditure is required duringthe last 2 years of this Lease or if Lessor reasonably determines that it isnot economically feasible to pay its share thereof, Lessor shall have theoption to terminate this Lease upon 90 days prior written notice to Lesseeunless Lessee notifies Lessor, in writing, within 10 days after receipt ofLessor’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 anysuch Capital Expenditure, Lessee may advance such funds and deduct same, withInterest, from Rent until Lessor’s share of such costs have been fully paid. IfLessee is unable to finance Lessor’s share, or if the balance of the Rent dueand payable for the remainder of this Lease is not sufficient to fullyreimburse Lessee on an offset basis, Lessee shall have the right to terminatethis Lease upon 30 days written notice to Lessor.

(c) Notwithstanding the above, the provisionsconcerning Capital Expenditures are intended to apply only to non-voluntary, unexpected,and new Applicable Requirements. If the Capital Expenditures are insteadtriggered by Lessee as a result of an actual or proposed change in use, changein intensity of use, or modification to the Premises then, and in that event,Lessee shall either: (i) immediately cease such changed use or intensity of useand/or take such other steps as may be necessary to eliminate the requirementfor such Capital Expenditure, or (ii) complete such Capital Expenditure at itsown expense. Lessee shall not, however, have any right to terminate this Lease.

2.4 **Acknowledgements.**Lessee acknowledges that: (a) it has been advised by Lessor and/orBrokers 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 Requirementsand the Americans with Disabilities Act), and their suitability for Lessee’sintended use, (b) Lessee has made such investigation as it deems necessary withreference to such matters and assumes all responsibility therefor as the samerelate to its occupancy of the Premises, and (c) neither Lessor, Lessor’sagents, nor Brokers have made any oral or written representations or warrantieswith respect to said matters other than as set forth in this Lease. Inaddition, Lessor acknowledges that: (i) Brokers have made no representations,promises or warranties concerning Lessee’s ability to honor the Lease orsuitability to occupy the Premises, and (ii) it is Lessor’s sole responsibilityto investigate the financial capability and/or suitability of all proposedtenants.

2.5 **Lessee as PriorOwner/Occupant.**The warranties made by Lessor in Paragraph 2 shallbe of no force or effect if immediately prior to the Start Date Lessee was theowner or occupant of the Premises. In such event, Lessee shall be responsiblefor any necessary corrective work.

3. **Term.**

3.1 **Term.**TheCommencement Date, Expiration Date and Original Term of this Lease are asspecified in Paragraph 1.3.

3.2 **Early Possession.**If Lessee totally or partially occupies the Premises prior to theCommencement Date, the obligation to pay Base Rent shall be abated for theperiod of such early possession. All other terms of this Lease (including butnot limited to the obligations to pay Real

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**©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                                                     FORM STN-8-5/05E**

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Property Taxes and insurance premiums and all othermonetary obligations and NNN charges other than Base Rent and to maintain thePremises) shall be in effect during such period. Any such early possessionshall not affect the Expiration Date.

3.3 **Delay In Possession.**Lessor agrees to use its best commercially reasonable efforts todeliver 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 failureaffect the validity of this Lease. Lessee shall not, however, be obligated topay Rent or perform its other obligations until Lessor delivers possession ofthe Premises and any period of rent abatement that Lessee would otherwise haveenjoyed shall run from the date of delivery of possession and continue for aperiod equal to what Lessee would otherwise have enjoyed under the termshereof, 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,Lessee may, at its option, by notice in writing within 10 days after the end ofsuch 60 day period, cancel this Lease, in which event the Parties shall bedischarged from all obligations hereunder. If such written notice is notreceived by Lessor within said 10 day period, Lessee’s right to cancel shallterminate. If possession of the Premises is not delivered within 120 days afterthe Commencement Date, this Lease shall terminate unless other agreements arereached between Lessor and Lessee, in writing.

3.4 **LesseeCompliance.**Lessor shall not be required to deliver possession ofthe Premises to Lessee until Lessee complies with its obligation to provideevidence of insurance (Paragraph 8.5). Pending delivery of such evidence,Lessee shall be required to perform all of its obligations under this Leasefrom and after the Start Date, including the payment of Rent, notwithstandingLessor’s election to withhold possession pending receipt of such evidence ofinsurance. Further, if Lessee is required to perform any other conditions priorto or concurrent with the Start Date, the Start Date shall occur but Lessor mayelect to withhold possession until such conditions are satisfied. For the purposesof this Paragraph 3.4 only, the Start Date shall be determined as if Paragraph1.4 excluded the phrase “the certificate or copies of insurance policiesreferred to in Paragraph 8.5 and”.

4. **Rent.**

4.1. **Rent Defined.**Allmonetary obligations of Lessee to Lessor under the terms of this Lease (exceptfor the Security Deposit) are deemed to be rent (**“Rent”**).

4.2 **Payment.**Lesseeshall cause payment of Rent to be received by Lessor in advance in lawful moneyof the United States, without offset or deduction (except as specificallypermitted in this Lease), on or before the day on which it is due. All monetaryamounts shall be rounded to the nearest whole dollar. In the event that anyinvoice prepared by Lessor is inaccurate such inaccuracy shall not constitute awaiver and Lessee shall be obligated to pay the amount set forth in this Lease.Rent for any period during the term hereof which is for less than one fullcalendar month shall be prorated based upon the actual number of days of saidmonth. Payment of Rent shall be made to Lessor at its address stated herein orto such other persons or place as Lessor may from time to time designate inwriting. Acceptance of a payment which is less than the amount then due shallnot be a waiver of Lessor’s rights to the balance of such Rent, regardless ofLessor’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 dishonoredfor any reason, Lessee agrees to pay to Lessor the sum of $25 in addition toany Late Charge and Lessor, at its option, may require all future Rent be paidby cashier’s check. Payments will be applied first to accrued bad checkcharges, late charges and attorney’s fees, second to accrued interest, then toBase Rent and Common Area Operating Expenses, and any remaining amount to anyother outstanding charges or costs.

4.3 **Association Fees.**In addition to the Base Rent, Lessee shall pay to Lessor each monthan amount equal to 1/12 of the annual amount of any owner’s association orcondominium fees levied or assessed against the Premises. Said monies shall bepaid at the same time and in the same manner as the Base Rent.

5. **Security Deposit.**Lesseeshall deposit with Lessor upon execution hereof the Security Deposit assecurity for Lessee’s faithful performance of its obligations under this Lease.If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor mayuse, apply or retain all or any portion of said Security Deposit for thepayment of any amount due Lessor or to reimburse or compensate Lessor for anyliability, expense, loss or damage which Lessor may suffer or incur by reasonthereof. If Lessor uses or applies all or any portion of the Security Deposit,Lessee shall within 10 days after written request therefor deposit monies withLessor sufficient to restore said Security Deposit to the full amount requiredby this Lease. If the Base Rent increases during the renewed or extended termof this Lease (but not the original term), Lessee shall, upon written requestfrom Lessor, deposit additional moneys with Lessor so that the total amount ofthe Security Deposit shall at all times bear the same proportion to theincreased Base Rent as the initial Security Deposit bore to the initial BaseRent. Should the Agreed Use be amended to accommodate a material change in thebusiness of Lessee or to accommodate a sublessee or assignee, Lessor shall havethe right to increase the Security Deposit to the extent necessary, in Lessor’sreasonable judgment, to account for any increased wear and tear that thePremises may suffer as a result thereof. If a change in control of Lesseeoccurs during this Lease and following such change the financial condition ofLessee is, in Lessor’s reasonable judgment, significantly reduced, Lessee shalldeposit such additional monies with Lessor as shall be sufficient to cause theSecurity Deposit to be at a commercially reasonable level based on such changein financial condition. Lessor shall not be required to keep the SecurityDeposit separate from its general accounts. Within 14 days after the expirationor termination of this Lease, if Lessor elects to apply the Security Depositonly to unpaid Rent, whether past or future, and otherwise within 30 days afterthe Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor shallreturn that portion of the Security Deposit not used or applied by Lessor.Notwithstanding anything in California Civil Code Section 1950.7 to thecontrary, Lessor may apply the Security Deposit to defaults in the payment ofRent accruing after the date referred to in that section or in the immediatelypreceding sentence of this Lease, and Lessee waives the provisions ofCalifornia Civil Code Section 1950.7 to the extent that such provisions wouldotherwise prevent Lessor from applying the Security Deposit to a default inRent accruing after the date specified in that section or in this Lease for thereturn of the Security Deposit. No part of the Security Deposit shall beconsidered to be held in trust, to bear interest or to be prepayment for anymonies to be paid by Lessee under this Lease. See also Paragraph 52 in AddendumOne.

6. **Use.**

6.1 **Use.**Lesseeshall use and occupy the Premises only for the Agreed Use, or any other legaluse which is reasonably comparable thereto, and for no other purpose. Lesseeshall not use or permit the use of the Premises in a manner that is unlawful,creates damage, waste or a nuisance, or that unreasonably disturbs occupants ofor causes damage to neighboring premises or properties. Other than guide,signal and seeing eye

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**©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                                                     FORM STN-8-5/05E**

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dogs, Lessee shall not keep or allow in the Premisesany pets, animals, birds, fish, or reptiles. Lessor shall not unreasonablywithhold or delay its consent to any written request for a modification of theAgreed Use, so long as the same will not impair the structural integrity of theimprovements on the Premises or the mechanical or electrical systems therein,and/or is not significantly more burdensome to the Premises or more likely toincrease the risk of release of a Hazardous Substance in the Premises or aReportable Use therein . If Lessor elects to withhold consent, Lessor shallwithin 7 days after such request give written notification of same, whichnotice shall include an explanation of Lessor’s objections to the change in theAgreed Use.

6.2 **HazardousSubstances.**

(a) **Reportable UsesRequire Consent.**The term **“HazardousSubstance”**as used in this Lease shall mean any product, substance,or waste whose presence, use, manufacture, disposal, transportation, orrelease, either by itself or in combination with other materials expected to beon the Premises, is either: (i) potentially injurious to the public health,safety or welfare, the environment or the Premises, (ii) regulated or monitoredby any governmental authority, or (iii) a basis for potential liability ofLessor to any governmental agency or third party under any applicable statuteor common law theory. Hazardous Substances shall include, but not be limitedto, hydrocarbons, petroleum, gasoline, and/or crude oil or any products,by-products or fractions thereof. Lessee shall not engage in any activity in oron the Premises which constitutes a Reportable Use of Hazardous Substanceswithout the express prior written consent of Lessor and timely compliance (atLessee’s expense) with all Applicable Requirements. **“Reportable Use”**shall mean (i) the installation or use of anyabove or below ground storage tank, (ii) the generation, possession, storage,use, transportation, or disposal of a Hazardous Substance that requires apermit from, or with respect to which a report, notice, registration orbusiness plan is required to be filed with, any governmental authority, and/or(iii) the presence at the Premises of a Hazardous Substance with respect towhich any Applicable Requirements requires that a notice be given to personsentering or occupying the Premises or neighboring properties. Notwithstandingthe foregoing, Lessee may use any ordinary and customary materials reasonablyrequired to be used in the normal course of the Agreed Use, ordinary officesupplies (copier toner, liquid paper, glue, etc.) and common household cleaningmaterials, so long as such use is in compliance with all ApplicableRequirements, is not a Reportable Use, and does not expose the Premises orneighboring property to any meaningful risk of contamination or damage orexpose Lessor to any liability therefor. In addition, Lessor may condition itsconsent to any Reportable Use upon receiving such additional assurances asLessor reasonably deems necessary to protect itself, the public, the Premisesand/or the environment against damage, contamination, injury and/or liability,including, but not limited to, the installation (and removal on or before Leaseexpiration or termination) of protective modifications (such as concreteencasements) and/or increasing the Security Deposit.

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

(c) **LesseeRemediation.**Lessee shall not cause or permit any HazardousSubstance 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 allinvestigatory and/or remedial action reasonably recommended, whether or notformally ordered or required, for the cleanup of any contamination of, and forthe maintenance, security and/or monitoring of the Premises or neighboringproperties, that was caused or materially contributed to by Lessee, orpertaining to or involving any Hazardous Substance brought onto the Premisesduring the term of this Lease, by or for Lessee, or any third party acting forLessee or on behalf of Lessee, or under Lessee’s direction or control .

(d) **LesseeIndemnification.**Lessee shall indemnify, defend and hold Lessor, itsagents, employees, lenders and ground lessor, if any, harmless from and againstany and all loss of rents and/or damages, liabilities, judgments, claims,expenses, penalties, and attorneys’ and consultants’ fees arising out of orinvolving any Hazardous Substance brought onto the Premises by or for Lessee,or any third party (provided, however, that Lessee shall have no liabilityunder this Lease with respect to underground migration of any HazardousSubstance under the Premises from adjacent properties not caused or contributedto by Lessee). Lessee’s obligations shall include, but not be limited to, theeffects of any contamination or injury to person, property or the environmentcreated or suffered by Lessee, and the cost of investigation, removal,remediation, restoration and/or abatement, and shall survive the expiration ortermination of this Lease. **No termination,cancellation or release agreement entered into by Lessor and Lessee shallrelease Lessee from its obligations under this Lease with respect to HazardousSubstances, unless specifically so agreed by Lessor in writing at the time ofsuch agreement.**

(e) **LessorIndemnification.**Lessor and its successors and assigns shallindemnify, defend, reimburse and hold Lessee, its employees and lenders,harmless from and against any and all environmental damages, including the costof remediation, which result from Hazardous Substances which existed on thePremises prior to Lessee’s occupancy or which are caused by the grossnegligence or willful misconduct of Lessor, its agents or employees. Lessor’sobligations, as and when required by the Applicable Requirements, shallinclude, but not be limited to, the cost of investigation, removal,remediation, restoration and/or abatement, and shall survive the expiration ortermination of this Lease.

(f) **Investigationsand Remediations.**Lessor shall retain the responsibility and pay forany investigations or remediation measures required by governmental entitieshaving jurisdiction with respect to the existence of Hazardous Substances onthe Premises prior to Lessee’s occupancy, unless such remediation measure isrequired as a result of Lessee’s use (including “Alterations”, as defined inparagraph 7.3(a) below) of the Premises, in which event Lessee shall beresponsible for such payment. Lessee shall cooperate fully in any suchactivities at the request of Lessor, including allowing Lessor and Lessor’sagents to have reasonable access to the Premises at reasonable times in orderto carry out Lessor’s investigative and remedial responsibilities.

(g) **LessorTermination Option.**If a Hazardous Substance Condition (seeParagraph 9.1(e)) occurs during the term of this Lease, unless Lessee islegally responsible therefor (in which case Lessee shall make the investigationand remediation thereof required by the Applicable Requirements and this Leaseshall continue in full force and effect, but subject to Lessor’s rights underParagraph 6.2(d) and Paragraph 13), Lessor may, at Lessor’s option, either (i)investigate and remediate such Hazardous Substance Condition, if required, assoon as reasonably possible at Lessor’s expense, in which event this Leaseshall continue in full force and effect, or (ii) if the estimated cost toremediate such condition exceeds 12 times the then monthly Base Rent or$100,000, whichever is greater, give written notice to Lessee, within 30 daysafter receipt by Lessor of knowledge of the occurrence of such HazardousSubstance Condition, of Lessor’s desire to terminate this Lease as of the date60 days following the date of such notice. In the event Lessor elects to give atermination notice, Lessee may, within 10 days thereafter, give written noticeto Lessor of Lessee’s commitment to pay the amount by which the cost of theremediation of such Hazardous Substance Condition exceeds an amount equal to 12times the then monthly Base Rent or $100,000, whichever is greater. Lesseeshall provide Lessor with said funds or satisfactory assurance thereof within30 days following such

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**©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                                                     FORM STN-8-5/05E**

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commitment. In such event, this Lease shall continue infull force and effect, and Lessor shall proceed to make such remediation assoon as reasonably possible after the required funds are available. If Lesseedoes not give such notice and provide the required funds or assurance thereofwithin the time provided, this Lease shall terminate as of the date specifiedin Lessor’s notice of termination.

6.3 **Lessee’sCompliance with Applicable Requirements.**Except as otherwiseprovided in this Lease, Lessee shall, at Lessee’s sole expense, fully,diligently and in a timely manner, materially comply with all ApplicableRequirements, including without limitation the covenants, conditions ,reservations, and restrictions of the Brookhollow Business Park, therequirements of any applicable fire insurance underwriter or rating bureau, andthe reasonable recommendations of Lessor’s engineers and/or consultants whichrelate in any manner to the such Requirements, without regard to whether suchRequirements are now in effect or become effective after the Start Date. Lesseeshall, within 10 days after receipt of Lessor’’s written request, provideLessor with copies of all permits and other documents, and other informationevidencing Lessee’s compliance with any Applicable Requirements specified byLessor, and shall immediately upon receipt, notify Lessor in writing (withcopies of any documents involved) of any threatened or actual claim, notice,citation, warning, complaint or report pertaining to or involving the failureof Lessee or the Premises to comply with any Applicable Requirements. Likewise,Lessee shall immediately give written notice to Lessor of: (i) any water damageto the Premises and any suspected seepage, pooling, dampness or other conditionconducive to the production of mold; or (ii) any mustiness or other odors thatmight indicate the presence of mold in the Premises.

6.4 **Inspection;Compliance.**Lessor and Lessor’’s **“Lender”**(as defined in Paragraph 30) and consultants shall have the right toenter into Premises at any time, in the case of an emergency, and otherwise atreasonable times during business hours as defined below after reasonable notice,for the purpose of inspecting the condition of the Premises and for verifyingcompliance by Lessee with this Lease. The cost of any such inspections shall bepaid by Lessor, unless a violation of Applicable Requirements, or a HazardousSubstance Condition (see paragraph 9.1) is found to exist or be imminent, orthe inspection is requested or ordered by a governmental authority. In suchcase, Lessee shall upon request reimburse Lessor for the cost of suchinspection, so long as such inspection is reasonably related to the violationor contamination. In addition, Lessee shall provide copies of all relevantmaterial safety data sheets (**MSDS**)to Lessor within 10 days of the receipt of a written request therefor. Theinspections referred to in this paragraph shall not unreasonably interfere withLessee’s business. For the purposes of this paragraph the term “business hours”shall be from 9:00 a.m. to 5:00 p.m., or within shall other hours as Lesseeshall customarily be conducting business, on business days as that term isdefined in Calfironia Civil Code Section 9.

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

7.1 **Lessee’sObligations.**

(a) **In General.**Subjectto the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee’sCompliance with Applicable Requirements), 7.2 (Lessor’s Obligations), 9 (Damageor Destruction), and 14 (Condemnation), Lessee shall, at Lessee’s sole expense,keep the Premises, Utility Installations (intended for Lessee’s exclusive use,no matter where located), and Alterations in good order, condition and repair(whether or not the portion of the Premises requiring repairs, or the means ofrepairing the same, are reasonably or readily accessible to Lessee, and whetheror not the need for such repairs occurs as a result of Lessee’s use, any prioruse, the elements or the age of such portion of the Premises), including, butnot limited to, all equipment or facilities, such as plumbing, HVAC equipment,electrical, lighting facilities, boilers, pressure vessels, fire protectionsystem, fixtures, walls (interior and exterior), foundations, ceilings, roofs,roof drainage systems, floors, windows, doors, plate glass, skylights,landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalksand parkways located in, on, or adjacent to the Premises. Lessee, in keepingthe Premises in good order, condition and repair, shall exercise and performgood maintenance practices, specifically including the procurement andmaintenance of the service contracts required by Paragraph 7.1(b) below. Lessee’sobligations shall include restorations, replacements or renewals when necessaryto keep the Premises and all improvements thereon or a part thereof in goodorder, condition and state of repair. Lessee shall, during the term of thisLease, keep the exterior appearance of the Building in a first-class condition(including, e.g. graffiti removal) consistent with the exterior appearance ofother similar facilities of comparable age and size in the vicinity, including,when necessary, the exterior repainting of the Building.

(b) **ServiceContracts.**Lessee shall, at Lessee’s sole expense, procure andmaintain contracts, with copies to Lessor, in customary form and substance for,and with contractors specializing and experienced in the maintenance of thefollowing equipment and improvements, if any, if and when installed on thePremises: (i) HVAC equipment, (ii) boiler, and pressure vessels, (iii) fireextinguishing systems, including fire alarm and/or smoke detection, (iv)landscaping and irrigation systems, (v) roof covering and drains, (vi)clarifiers (vii) basic utility feed to the perimeter of the Building, and(viii) any other equipment, if reasonably required by Lessor. However, Lessorreserves the right, upon notice to Lessee, to procure and maintain any or allof such service contracts, and Lessee shall reimburse Lessor, upon demand, forthe reasonable cost thereof.

(c) **Failure toPerform.**If Lessee fails to perform Lessee’s obligations under thisParagraph 7.1, Lessor may enter upon the Premises after 10 days’ prior writtennotice to Lessee (except in the case of an emergency, in which case no noticeshall be required), perform such obligations on Lessee’s behalf, and put thePremises in good order, condition and repair, and Lessee shall promptly pay toLessor a sum equal to 115% of the cost thereof.

(d) **Replacement.**Subjectto Lessee’s indemnification of Lessor as set forth in Paragraph 8.7 below, andwithout relieving Lessee of liability resulting from Lessee’s failure toexercise and perform good maintenance practices, if an item described inParagraph 7.1(b) cannot be repaired other than at a cost which is in excess of50% of the cost of replacing such item, then such item shall be replaced byLessor, and the cost thereof shall be prorated between the Parties and Lesseeshall only be obligated to pay, each month during the remainder of the term ofthis Lease, on the date on which Base Rent is due, an amount equal to theproduct of multiplying the cost of such replacement by a fraction, thenumerator of which is one, and the denominator of which is 144 (ie. 1/144th ofthe cost per month). In addition, and on the date each month on which Base Rentis due, Lessee shall pay interest on the unamortized balance but may prepay itsobligation at any time.

7.2 **Lessor’sObligations.**Subject to the provisions of Paragraphs 2.2(Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14 (Condemnation),it is intended by the Parties hereto that Lessor have no obligation, in anymanner whatsoever, to repair and maintain the Premises, or the equipmenttherein, all of which obligations are intended to be that of the Lessee. It isthe intention of the Parties that the terms of this Lease govern the respectiveobligations of the Parties as to maintenance and repair of the Premises, andthey expressly waive the benefit of any statute now or hereafter in effect tothe extent it is inconsistent with the terms of this Lease.

7.3 **UtilityInstallations; Trade Fixtures; Alterations.**

(a) **Definitions.**Theterm “**Utility Installations**”refers to all floor and window coverings, air and/or vacuum lines, powerpanels, electrical distribution, security and fire protection systems,communication cabling, lighting fixtures, HVAC equipment, plumbing, and fencingin or on the

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**©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                                                     FORM STN-8-5/05E**

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Premises. The term **“TradeFixtures”**shall mean Lessee’s machinery and equipment that can beremoved without doing material damage to the Premises. The term **“Alterations”**shall mean any modificationof the improvements, other than Utility Installations or Trade Fixtures,whether by addition or deletion. “**LesseeOwned Alterations and/or Utility Installations**“ are defined asAlterations and/or Utility Installations made by Lessee that are not yet ownedby Lessor pursuant to Paragraph 7.4(a).

(b) **Consent.**Lesseeshall not make any Alterations or Utility Installations to the Premises withoutLessor’s prior written consent. Lessee may, however, make non-structuralUtility Installations to the interior of the Premises (excluding the roof)without such consent but upon notice to Lessor, as long as they are not visiblefrom the outside, do not involve puncturing, relocating or removing the roof orany existing walls, will not affect the electrical, plumbing, HVAC, and/or lifesafety systems, and the cumulative cost thereof during this Lease as extendeddoes not exceed a sum equal to 3 month’s Base Rent in the aggregate or a sumequal to one month’s Base Rent in any one year. Notwithstanding the foregoing,Lessee shall not make or permit any roof penetrations and/or install anythingon the roof without the prior written approval of Lessor. Lessor may, as aprecondition to granting such approval, require Lessee to utilize a contractorchosen and/or approved by Lessor. Any Alterations or Utility Installations thatLessee shall desire to make and which require the consent of the Lessor shallbe presented to Lessor in written form with detailed plans. Consent shall bedeemed conditioned upon Lessee’s: (i) acquiring all applicable governmentalpermits, (ii) furnishing Lessor with copies of both the permits and the plansand specifications prior to commencement of the work, and (iii) compliance withall conditions of said permits and other Applicable Requirements in a promptand expeditious manner. Any Alterations or Utility Installations shall beperformed in a workmanlike manner with good and sufficient materials. Lesseeshall promptly upon completion furnish Lessor with as-built plans andspecifications. For work which costs an amount in excess of one month’s BaseRent, Lessor may condition its consent upon Lessee providing a lien andcompletion bond in an amount equal to 150% of the estimated cost of suchAlteration or Utility Installation and/or upon Lessee’s posting an additionalSecurity Deposit with Lessor.

c) **Liens; Bonds.**Lesseeshall pay, when due, all claims for labor or materials furnished or alleged tohave been furnished to or for Lessee at or for use on the Premises, whichclaims are or may be secured by any mechanic’s or materialmen’s lien againstthe Premises or any interest therein. Lessee shall give Lessor not less than 10days 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 Lesseeshall contest the validity of any such lien, claim or demand, then Lesseeshall, at its sole expense defend and protect itself, Lessor and the Premisesagainst the same and shall pay and satisfy any such adverse judgment that maybe 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 ofsuch contested lien, claim or demand, indemnifying Lessor against liability forthe same. If Lessor elects to participate in any such action, Lessee shall payLessor’s reasonable attorneys’ fees and costs immediately upon presentation ofinvoices.

7.4 **Ownership;Removal; Surrender; and Restoration.**

(a) **Ownership.**Subjectto Lessor’s right to require removal or elect ownership as hereinafterprovided, all Alterations and Utility Installations made by Lessee shall be theproperty of Lessee, but considered a part of the Premises. Lessor may, at anytime, elect in writing to be the owner of all or any specified part of theLessee Owned Alterations and Utility Installations. Unless otherwise instructedper paragraph 7.4(b) hereof, all Lessee Owned Alterations and UtilityInstallations shall, at the expiration or termination of this Lease, become theproperty of Lessor and be surrendered by Lessee with the Premises.

(b) **Removal.**Bydelivery to Lessee of written notice from Lessor not earlier than 90 and notlater than 30 days prior to the end of the term of this Lease, Lessor mayrequire that any or all Lessee Owned Alterations or Utility Installations beremoved by the expiration or termination of this Lease. Lessor may require theremoval at any time of all or any part of any Lessee Owned Alterations orUtility Installations made without the required consent.

(c) **Surrender;Restoration.**Subject to the provisions of Paragraph 9 below, Lesseeshall surrender the Premises by the Expiration Date or any earlier terminationdate, with all of the improvements, parts and surfaces thereof broom clean andfree of debris, and in good operating order, condition and state of repair,ordinary wear and tear excepted. “Ordinary wear and tear” shall not include anydamage or deterioration that would have been prevented by good maintenancepractice. Notwithstanding the foregoing, if this Lease is for 12 months orless, then Lessee shall surrender the Premises in the same condition asdelivered to Lessee on the Start Date with NO allowance for ordinary wear andtear. Lessee shall repair any damage occasioned by the installation,maintenance or removal of Trade Fixtures, Lessee owned Alterations and/orUtility Installations, furnishings, and equipment as well as the removal of anystorage tank installed by or for Lessee. Lessee shall completely remove fromthe Premises any and all Hazardous Substances brought onto the Premises by orfor Lessee, or any third party (except Hazardous Substances which weredeposited via underground migration from areas outside of the Premises, or ifapplicable, the Premises) even if such removal would require Lessee to performor pay for work that exceeds statutory requirements. Trade Fixtures shallremain the property of Lessee and shall be removed by Lessee. Any personalproperty of Lessee not removed on or before the Expiration Date or any earliertermination date shall be deemed to have been abandoned by Lessee and may bedisposed of or retained by Lessor as Lessor may desire. The failure by Lesseeto timely vacate the Premises pursuant to this Paragraph 7.4(c) without theexpress written consent of Lessor shall constitute a holdover under theprovisions of Paragraph 26 below.

8. **Insurance;Indemnity.**

8.1 **Payment ForInsurance.**Lessee shall pay for all insurance required underParagraph 8 except to the extent of the cost attributable to liabilityinsurance carried by Lessor under Paragraph 8.2(b) in excess of $ 4,000,000 ~~,000,000~~per occurrence. Premiums for policy periods commencing prior to or extendingbeyond the Lease term shall be prorated to correspond to the Lease term.Payment shall be made by Lessee to Lessor within 10 days following receipt ofan invoice or at Lessor’s election by monthly estimates due and payable inadvance with the payment of Base Rent .

8.2 **LiabilityInsurance.**

(a) **Carried byLessee.**Lessee shall obtain and keep in force a Commercial GeneralLiability policy of insurance protecting Lessee and Lessor as an additionalinsured against claims for bodily injury, personal injury and property damagebased upon or arising out of the ownership, use, occupancy or maintenance ofthe Premises and all areas appurtenant thereto. Such insurance shall be on anoccurrence basis providing single limit coverage in an amount not less than$2,000,000 ~~1,000,000~~ per occurrence with an annual aggregate of not lessthan $ 4,000,000 ~~2,000,000~~. Lessee shall add Lessor as an additionalinsured by means of an endorsement at least as broad as the Insurance ServiceOrganization’s “Additional Insured-Managers or Lessors of Premises” Endorsementand coverage shall also be extended to include damage caused by heat, smoke orfumes from a hostile fire. The policy shall not contain any intra-insuredexclusions as between insured persons or organizations, but shall includecoverage for liability assumed under this Lease as an “ **insured contract**” for the performance ofLessee’s indemnity obligations under this Lease. The limits of said insuranceshall not, however, limit the liability of Lessee nor relieve Lessee of anyobligation hereunder. Lessee shall provide an endorsement on its

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**©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                                                     FORM STN-8-5/05E**

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liability policy(ies) which provides that its insuranceshall be primary to and not contributory with any similar insurance carried byLessor, whose insurance shall be considered excess insurance only.

(b) **Carried byLessor.**Lessor shall maintain liability insurance as described inParagraph 8.2(a), in addition to, and not in lieu of, the insurance required tobe maintained by Lessee. Lessee shall not be named as an additional insuredtherein.

8.3 **PropertyInsurance - Building, Improvements and Rental Value.**

(a) **Building andImprovements.**The Insuring Party shall obtain and keep in force apolicy or policies in the name of Lessor, with loss payable to Lessor, anyground-lessor, and to any Lender insuring loss or damage to the Premises. Theamount of such insurance shall be equal to the full insurable replacement costof the Premises, as the same shall exist from time to time, or the amountrequired by any Lender, but in no event more than the commercially reasonableand available insurable value thereof. If Lessor is the Insuring Party,however, Lessee Owned Alterations and Utility Installations, Trade Fixtures,and Lessee’s personal property shall be insured by Lessee under Paragraph 8.4rather than by Lessor. If the coverage is available and commerciallyappropriate, such policy or policies shall insure against all risks of directphysical loss or damage (except the perils of flood and/or earthquake unlessrequired by a Lender), including coverage for debris removal and theenforcement of any Applicable Requirements requiring the upgrading, demolition,reconstruction or replacement of any portion of the Premises as the result of acovered loss. Said policy or policies shall also contain an agreed valuationprovision in lieu of any coinsurance clause, waiver of subrogation, andinflation guard protection causing an increase in the annual property insurancecoverage amount by a factor of not less than the adjusted U.S. Department ofLabor Consumer Price Index for All Urban Consumers for the city nearest towhere the Premises are located. If such insurance coverage has a deductibleclause, the deductible amount shall not exceed $1,000 per occurrence, andLessee shall be liable for such deductible amount in the event of an InsuredLoss.

(b) **Rental Value.**TheInsuring Party shall obtain and keep in force a policy or policies in the nameof Lessor with loss payable to Lessor and any Lender, insuring the loss of thefull Rent for one year with an extended period of indemnity for an additional180 days (“Rental Value insurance”). Said insurance shall contain an agreedvaluation provision in lieu of any coinsurance clause, and the amount ofcoverage shall be adjusted annually to reflect the projected Rent otherwisepayable by Lessee, for the next 12 month period. Lessee shall be liable for anydeductible amount in the event of such loss.

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

8.4 **Lessee’sProperty; Business Interruption Insurance.**

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

(b) **BusinessInterruption.**Lessee shall obtain and maintain loss of income andextra expense insurance in amounts as will reimburse Lessee for direct orindirect loss of earnings attributable to all perils commonly insured againstby prudent lessees in the business of Lessee or attributable to prevention ofaccess to the Premises as a result of such perils.

(c) **No Representationof Adequate Coverage.**Lessor makes no representation that the limitsor forms of coverage of insurance specified herein are adequate to cover Lessee’sproperty, business operations or obligations under this Lease.

8.5 **InsurancePolicies.**Insurance required herein shall be by companies dulylicensed or admitted to transact business in the state where the Premises arelocated, and maintaining during the policy term a “General Policyholders Rating”of at least A-, VI, as set forth in the most current issue of “Best’s InsuranceGuide”, or such other rating as may be required by a Lender. Lessee shall notdo or permit to be done anything which invalidates the required insurancepolicies. Lessee shall, prior to the Start Date, deliver to Lessor certifiedcopies of policies of such insurance or certificates evidencing the existenceand amounts of the required insurance. No such policy shall be cancelable orsubject to modification except after 30 days prior written notice to Lessor.Lessee shall, at least 10 days prior to the expiration of such policies,furnish Lessor with evidence of renewals or “insurance binders” evidencingrenewal thereof, or Lessor may order such insurance and charge the cost thereofto Lessee, which amount shall be payable by Lessee to Lessor upon demand. Suchpolicies shall be for a term of at least one year, or the length of theremaining term of this Lease, whichever is less. If either Party shall fail toprocure and maintain the insurance required to be carried by it, the otherParty may, but shall not be required to, procure and maintain the same.

8.6 **Waiver ofSubrogation.**Without affecting any other rights or remedies, Lesseeand Lessor each hereby release and relieve the other, and waive their entireright to recover damages against the other, for loss of or damage to itsproperty arising out of or incident to the perils required to be insuredagainst herein. The effect of such releases and waivers is not limited by theamount of insurance carried or required, or by any deductibles applicablehereto. The Parties agree to have their respective property damage insurancecarriers waive any right to subrogation that such companies may have againstLessor or Lessee, as the case may be, so long as the insurance is notinvalidated thereby.

8.7 **Indemnity.**Exceptfor Lessor’s gross negligence or willful misconduct, Lessee shall indemnify,reimburse, protect, defend and hold harmless the Premises, Lessor and itsagents, Lessor’s master or ground lessor, partners and Lenders, from andagainst any and all claims, losses including without limitation loss of rentsand/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 proceedingis brought against Lessor by reason of any of the foregoing matters, Lesseeshall upon notice defend the same at Lessee’s expense by counsel reasonablysatisfactory 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 orindemnified.

8.8 **Exemption ofLessor and its Agents from Liability**. Notwithstanding the negligenceor breach of this Lease by Lessor or its agents, neither Lessor nor its agentsshall be liable under any circumstances except to the extent of injury ordamage caused by the gross negligence or willful misconduct of Lessor for: (i)injury or damage to the person or goods, wares, merchandise or other propertyof Lessee, Lessee’s employees, contractors, invitees, customers, or any otherperson in or about the Premises, whether such damage or injury is caused by orresults from fire, steam, electricity, gas, water or rain, indoor air quality,the presence of mold or from the breakage, leakage, obstruction or otherdefects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC orlighting fixtures, or from any other cause, whether the said injury or damageresults from conditions arising upon the Premises or upon other portions of thebuilding of which the Premises are a part, or from other sources or places,(ii) any damages arising from any act or neglect of any other tenant of Lessoror from the failure of Lessor or its agents to enforce the provisions of anyother lease in the Project, or (iii) injury to Lessee’s business or for anyloss of income or profit therefrom. Instead, it is intended that Lessee’s solerecourse in

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**©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                                                     FORM STN-8-5/05E**

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the event of such damages or injury be to file a claimon the insurance policy(ies) that Lessee is required to maintain pursuant tothe provisions of paragraph 8.

8.9 **Failure toProvide Insurance.**Lessee acknowledges that any failure on its partto obtain or maintain the insurance required herein will expose Lessor to risksand potentially cause Lessor to incur costs not contemplated by this Lease, theextent of which will be extremely difficult to ascertain. Accordingly, for anymonth or portion thereof that Lessee does not maintain the required insuranceand/or does not provide Lessor with the required binders or certificatesevidencing the existence of the required insurance, the Base Rent shall beautomatically increased, without any requirement for notice to Lessee, by anamount equal to 10% of the then existing Base Rent or $100, whichever isgreater. The parties agree that such increase in Base Rent represents fair andreasonable compensation for the additional risk/costs that Lessor will incur byreason of Lessee’s failure to maintain the required insurance. Such increase inBase Rent shall in no event constitute a waiver of Lessee’s Default or Breachwith respect to the failure to maintain such insurance, prevent the exercise ofany of the other rights and remedies granted hereunder, nor relieve Lessee ofits obligation to maintain the insurance specified in this Lease.

9. **Damage orDestruction.**

9.1 **Definitions.**

(a) **“Premises PartialDamage”**shall mean damage or destruction to the improvements on thePremises, other than Lessee Owned Alterations and Utility Installations, whichcan reasonably be repaired in 6 months or less from the date of the damage ordestruction. Lessor shall notify Lessee in writing within 30 days from the dateof the damage or destruction as to whether or not the damage is Partial orTotal. Notwithstanding the foregoing, Premises Partial Damage shall not includedamage to windows, doors, and/or other similar items which Lessee has theresponsibility to repair or replace pursuant to the provisions of Paragraph7.1.

(b) **“Premises TotalDestruction”**shall mean damage or destruction to the Premises, otherthan Lessee Owned Alterations and Utility Installations and Trade Fixtures,which cannot reasonably be repaired in 6 months or less from the date of thedamage or destruction. Lessor shall notify Lessee in writing within 30 daysfrom the date of the damage or destruction as to whether or not the damage isPartial or Total.

(c) **“Insured Loss”**shallmean damage or destruction to improvements on the Premises, other than LesseeOwned Alterations and Utility Installations and Trade Fixtures, which wascaused by an event required to be covered by the insurance described inParagraph 8.3(a), irrespective of any deductible amounts or coverage limitsinvolved.

(d) **“Replacement Cost”**shall mean the cost to repair or rebuild the improvements owned byLessor at the time of the occurrence to their condition existing immediatelyprior thereto, including demolition, debris removal and upgrading required bythe operation of Applicable Requirements, and without deduction fordepreciation.

(e) **“HazardousSubstance Condition”**shall mean the occurrence or discovery of acondition involving the presence of, or a contamination by, a HazardousSubstance as defined in Paragraph 6.2(a), in, on, or under the Premises whichrequires repair, remediation, or restoration.

9.2 **Partial Damage -Insured Loss.**If a Premises Partial Damage that is an Insured Lossoccurs, then Lessor shall, at Lessor’s expense, repair such damage (but notLessee’s Trade Fixtures or Lessee Owned Alterations and Utility Installations)as soon as reasonably possible and this Lease shall continue in full force andeffect; provided, however, that Lessee shall, at Lessor’s election, make therepair of any damage or destruction the total cost to repair of which is$10,000 or less, and, in such event, Lessor shall make any applicable insuranceproceeds available to Lessee on a reasonable basis for that purpose.Notwithstanding the foregoing, if the required insurance was not in force orthe insurance proceeds are not sufficient to effect such repair, the InsuringParty shall promptly contribute the shortage in proceeds (except as to thedeductible which is Lessee’s responsibility) as and when required to completesaid repairs. In the event, however, such shortage was due to the fact that, byreason of the unique nature of the improvements, full replacement costinsurance coverage was not commercially reasonable and available, Lessor shallhave no obligation to pay for the shortage in insurance proceeds or to fullyrestore the unique aspects of the Premises unless Lessee provides Lessor withthe funds to cover same, or adequate assurance thereof, within 10 daysfollowing receipt of written notice of such shortage and request therefor. IfLessor receives said funds or adequate assurance thereof within said 10 dayperiod, the party responsible for making the repairs shall complete them assoon as reasonably possible and this Lease shall remain in full force andeffect. If such funds or assurance are not received, Lessor may neverthelesselect by written notice to Lessee within 10 days thereafter to: (i) make suchrestoration and repair as is commercially reasonable with Lessor paying anyshortage in proceeds, in which case this Lease shall remain in full force andeffect, or (ii) have this Lease terminate 30 days thereafter. Lessee shall notbe entitled to reimbursement of any funds contributed by Lessee to repair anysuch damage or destruction. Premises Partial Damage due to flood or earthquakeshall be subject to Paragraph 9.3, notwithstanding that there may be someinsurance coverage, but the net proceeds of any such insurance shall be madeavailable for the repairs if made by either Party.

9.3 **Partial Damage -Uninsured Loss.**If a Premises Partial Damage that is not an InsuredLoss occurs, unless caused by a negligent or willful act of Lessee (in whichevent 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, inwhich event this Lease shall continue in full force and effect, or (ii)terminate this Lease by giving written notice to Lessee within 30 days afterreceipt by Lessor of knowledge of the occurrence of such damage. Suchtermination shall be effective 60 days following the date of such notice. Inthe event Lessor elects to terminate this Lease, Lessee shall have the rightwithin 10 days after receipt of the termination notice to give written noticeto Lessor of Lessee’s commitment to pay for the repair of such damage withoutreimbursement from Lessor. Lessee shall provide Lessor with said funds orsatisfactory assurance thereof within 30 days after making such commitment. Insuch event this Lease shall continue in full force and effect, and Lessor shallproceed to make such repairs as soon as reasonably possible after the requiredfunds are available. If Lessee does not make the required commitment, thisLease shall terminate as of the date specified in the termination notice.

9.4 **Total Destruction.**Notwithstanding any other provision hereof, if a Premises TotalDestruction occurs, this Lease shall terminate **45** 60 days following such Destruction ; provided, however,that if the Premises Total Destruction is the result of a natural disaster orother cause resulting in widespread damage causing a shortage of availablecontractors the number of days shall be 60 . If the damage or destruction wascaused by the gross negligence or willful misconduct of Lessee, Lessor shallhave the right to recover Lessor’s damages from Lessee, except as provided inParagraph 8.6.

9.5 **Damage Near Endof Term.**If at any time during the last 6 months of this Lease thereis damage for which the cost to repair exceeds one month’s Base Rent, whetheror not an Insured Loss, Lessor may terminate this Lease effective 60 daysfollowing the date of occurrence of such damage by giving a written terminationnotice to Lessee within 30 days after the date of occurrence of such damage.Notwithstanding the foregoing,

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**©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                                                     FORM STN-8-5/05E**

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if Lessee at that time has an exercisable option toextend this Lease or to purchase the Premises, then Lessee may preserve thisLease by, (a) exercising such option and (b) providing Lessor with any shortagein insurance proceeds (or adequate assurance thereof) needed to make therepairs on or before the earlier of (i) the date which is 10 days after Lessee’sreceipt 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 dulyexercises such option during such period and provides Lessor with funds (oradequate assurance thereof) to cover any shortage in insurance proceeds, Lessorshall, at Lessor’s commercially reasonable expense, repair such damage as soonas reasonably possible and this Lease shall continue in full force and effect.If Lessee fails to exercise such option and provide such funds or assuranceduring such period, then this Lease shall terminate on the date specified inthe termination notice and Lessee’s option shall be extinguished.

9.6 **Abatement ofRent; Lessee’s Remedies.**

(a) **Abatement.**Inthe event of Premises Partial Damage or Premises Total Destruction or aHazardous Substance Condition for which Lessee is not responsible under thisLease, the Rent payable by Lessee for the period required for the repair,remediation or restoration of such damage shall be abated in proportion to thedegree to which Lessee’s use of the Premises is impaired, but not to exceed theproceeds received from the Rental Value insurance. All other obligations ofLessee hereunder shall be performed by Lessee, and Lessor shall have noliability for any such damage, destruction, remediation, repair or restorationexcept as provided herein.

(b) **Remedies.**IfLessor shall be obligated to repair or restore the Premises and does notcommence, in a substantial and meaningful way, such repair or restorationwithin **60**90 days after suchobligation shall accrue, Lessee may, at any time prior to the commencement ofsuch repair or restoration, give written notice to Lessor and to any Lenders ofwhich Lessee has actual notice, of Lessee’s election to terminate this Lease ona date not less than **45**60 daysfollowing the giving of such notice. If Lessee gives such notice and suchrepair or restoration is not commenced within 30 days thereafter, this Leaseshall terminate as of the date specified in said notice. If the repair orrestoration is commenced within such 30 days, this Lease shall continue in fullforce and effect. “Commence” shall mean either the unconditional authorizationof the preparation of the required plans, or the beginning of the actual workon the Premises, whichever first occurs.

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

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

10. **Real PropertyTaxes.**

10.1 **Definition.**Asused herein, the term **“Real Property Taxes”**shallinclude any form of assessment; real estate, general, special, ordinary orextraordinary, or rental levy or tax (other than inheritance, personal incomeor estate taxes); improvement bond; and/or license fee imposed upon or leviedagainst any legal or equitable interest of Lessor in the Premises or theProject, Lessor’s right to other income therefrom, and/or Lessor’s business ofleasing, by any authority having the direct or indirect power to tax and wherethe funds are generated with reference to the Building address and where theproceeds so generated are to be applied by the city, county or other localtaxing authority of a jurisdiction within which the Premises are located. RealProperty Taxes shall also include any tax, fee, levy, assessment or charge, orany increase therein: (i) imposed by reason of events occurring during the termof this Lease, including but not limited to, a change in the ownership of thePremises, and (ii) levied or assessed on machinery or equipment provided byLessor to Lessee pursuant to this Lease.

10.2 **Payment ofTaxes.**In addition to Base Rent, Lessee shall pay to Lessor anamount equal to the Real Property Tax installment due at least 20 days prior tothe applicable delinquency date. If any such installment shall cover any periodof time prior to or after the expiration or termination of this Lease, Lessee’sshare of such installment shall be prorated. In the alternative, at Lessor’selection event Lessee incurs a late charge on any Rent payment, Lessor mayestimate the current Real Property Taxes, and require that such taxes be paidin advance to Lessor by Lessee monthly in advance with the payment of the BaseRent. Such monthly payments shall be an amount equal to the amount of theestimated installment of taxes divided by the number of months remaining beforethe month in which said installment becomes delinquent. When the actual amountof the applicable tax bill is known, the amount of such equal monthly advancepayments shall be adjusted as required to provide the funds needed to pay theapplicable taxes. If the amount collected by Lessor is insufficient to pay suchReal Property Taxes when due, Lessee shall pay Lessor, upon demand, suchadditional sum as is necessary. Advance payments may be intermingled with othermoneys of Lessor and shall not bear interest. In the event of a Breach byLessee in the performance of its obligations under this Lease, then any suchadvance payments may be treated by Lessor as an additional Security Deposit.

10.3 **JointAssessment.**If the Premises are not separately assessed, Lessee’sliability shall be an equitable proportion of the Real Property Taxes for allof the land and improvements included within the tax parcel assessed, suchproportion to be conclusively determined by Lessor from the respectivevaluations assigned in the assessor’s work sheets or such other information asmay be reasonably available.

10.4 **PersonalProperty Taxes.**Lessee shall pay, prior to delinquency, all taxesassessed against and levied upon Lessee Owned Alterations, UtilityInstallations, Trade Fixtures, furnishings, equipment and all personal propertyof Lessee. When possible, Lessee shall cause its Lessee Owned Alterations andUtility Installations, Trade Fixtures, furnishings, equipment and all otherpersonal property to be assessed and billed separately from the real propertyof Lessor. If any of Lessee’s said property shall be assessed with Lessor’sreal property, Lessee shall pay Lessor the taxes attributable to Lessee’sproperty within 10 days after receipt of a written statement setting forth thetaxes applicable to Lessee’s property.

11. **Utilities andServices.**Lessee shall pay for all water, gas, heat, light, power,telephone, trash disposal and other utilities and services supplied to thePremises, together with any taxes thereon. If any such services are notseparately metered or billed to Lessee, Lessee shall pay a reasonableproportion, to be determined by Lessor, of all charges jointly metered orbilled. There shall be no abatement of rent and Lessor shall not be liable inany respect whatsoever for the inadequacy, stoppage, interruption ordiscontinuance of any utility or service due to riot, strike, labor dispute,breakdown, accident, repair or other cause beyond Lessor’s reasonable controlor in cooperation with governmental request or directions.

12. **Assignment andSubletting.**

12.1 **Lessor’s ConsentRequired.**

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

 

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(b) Unless Lessee is a corporation and its stock ispublicly traded on a national stock exchange, a change in the control of Lesseeshall constitute an assignment requiring consent. The transfer, on a cumulativebasis, of more than 50% 25% or more of the voting control of Lessee shallconstitute a change in control for this purpose.

(c) The involvement of Lessee or its assets in anytransaction, or series of transactions (by way of merger, sale, acquisition, financing,transfer, leveraged buy-out or otherwise), whether or not a formal assignmentor hypothecation of this Lease or Lessee’s assets occurs, which results or willresult 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 thisLease or at the time of the most recent assignment to which Lessor hasconsented, or as it exists immediately prior to said transaction ortransactions constituting such reduction, whichever was or is greater, shall beconsidered an assignment of this Lease to which Lessor may withhold itsconsent. **“Net Worth of Lessee”**shallmean the net worth of Lessee (excluding any guarantors) established undergenerally 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), ora noncurable Breach without the necessity of any notice and grace period. IfLessor elects to treat such unapproved assignment or subletting as a noncurableBreach, Lessor may either: (i) terminate this Lease, or (ii) upon 30 dayswritten notice, increase the monthly Base Rent to **105%**110% of the Base Rent then in effect. Further, in theevent of such Breach and rental adjustment, (i) the purchase price of anyoption to purchase the Premises held by Lessee shall be subject to similaradjustment to 110% of the price previously in effect, and (ii) all fixed andnon-fixed rental adjustments scheduled during the remainder of the Lease termshall be increased to 110% of the scheduled adjusted rent.

(e) Lessee’s remedy for any breach of Paragraph 12.1 byLessor shall be limited to compensatory damages and/or injunctive relief. f)Lessor may reasonably withhold consent to a proposed assignment or sublettingif Lessee is in Default at the time consent is requested.

(g) Notwithstanding the foregoing, allowing a diminimusportion of the Premises, ie. 20 square feet or less, to be used by a thirdparty vendor in connection with the installation of a vending machine orpayphone shall not constitute a subletting.

12.2 **Terms andConditions Applicable to Assignment and Subletting.**

(a) Regardless of Lessor’s consent, no assignment orsubletting shall: (i) be effective without the express written assumption bysuch assignee or sublessee of the obligations of Lessee under this Lease, (ii)release Lessee of any obligations hereunder, or (iii) alter the primaryliability of Lessee for the payment of Rent or for the performance of any otherobligations to be performed by Lessee.

(b) Lessor may accept Rent or performance of Lessee’sobligations from any person other than Lessee pending approval or disapprovalof an assignment. Neither a delay in the approval or disapproval of suchassignment nor the acceptance of Rent or performance shall constitute a waiveror estoppel of Lessor’s right to exercise its remedies for Lessee’s Default orBreach.

(c) Lessor’s consent to any assignment or sublettingshall 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 elseresponsible for the performance of Lessee’s obligations under this Lease,including any assignee or sublessee, without first exhausting Lessor’s remediesagainst any other person or entity responsible therefor to Lessor, or anysecurity held by Lessor.

(e) Each request for consent to an assignment orsubletting shall be in writing, accompanied by information relevant to Lessor’sdetermination as to the financial and operational responsibility andappropriateness of the proposed assignee or sublessee, including but notlimited to the intended use and/or required modification of the Premises, ifany, together with a fee of $500 as consideration for Lessor’s considering and processingsaid request. Lessee agrees to provide Lessor with such other or additionalinformation and/or documentation as may be reasonably requested. (See alsoParagraph 36)

(f) Any assignee of, or sublessee under, this Leaseshall, by reason of accepting such assignment, entering into such sublease, orentering into possession of the Premises or any portion thereof, be deemed tohave assumed and agreed to conform and comply with each and every term,covenant, condition and obligation herein to be observed or performed by Lesseeduring the term of said assignment or sublease, other than such obligations asare contrary to or inconsistent with provisions of an assignment or sublease towhich Lessor has specifically consented to in writing.

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

12.3 **Additional Termsand Conditions Applicable to Subletting.**The following terms andconditions shall apply to any subletting byLessee of all or any part of thePremises and shall be deemed included in all subleases under this Lease whetheror not expressly incorporated therein:

(a) Lessee hereby assigns and transfers to Lessor allof Lessee’s interest in all Rent payable on any sublease, and Lessor may collectsuch Rent and apply same toward Lessee’s obligations under this Lease;provided, however, that until a Breach shall occur in the performance of Lessee’sobligations, Lessee may collect said Rent. In the event that the amountcollected by Lessor exceeds Lessee’s then outstanding obligations any suchexcess shall be refunded to Lessee. Lessor shall not, by reason of theforegoing or any assignment of such sublease, nor by reason of the collectionof Rent, be deemed liable to the sublessee for any failure of Lessee to performand comply with any of Lessee’s obligations to such sublessee. Lessee herebyirrevocably authorizes and directs any such sublessee, upon receipt of awritten notice from Lessor stating that a Breach exists in the performance ofLessee’s obligations under this Lease, to pay to Lessor all Rent due and tobecome due under the sublease. Sublessee shall rely upon any such notice fromLessor and shall pay all Rents to Lessor without any obligation or right toinquire as to whether such Breach exists, notwithstanding any claim from Lesseeto the contrary.

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

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

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

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

13. **Default; Breach;Remedies.**

13.1 **Default; Breach.**A **“Default”**is definedas a failure by the Lessee to comply with or perform any of the terms,covenants, conditions

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or Rules and Regulations under this Lease. A **“Breach”**is defined as the occurrence ofone or more of the following Defaults, and the failure of Lessee to cure suchDefault within any applicable grace period:

(a) The abandonment of the Premises; or the vacating ofthe Premises without providing a commercially reasonable level of security, orwhere the coverage of the property insurance described in Paragraph 8.3 isjeopardized as a result thereof, or without providing reasonable assurances tominimize potential vandalism.

(b) The failure of Lessee to make any payment of Rentor any Security Deposit required to be made by Lessee hereunder, whether toLessor or to a third party, when due, to provide reasonable evidence ofinsurance or surety bond, or to fulfill any obligation under this Lease whichendangers or threatens life or property, in each case where such failurecontinues for a period of 3 business days following written notice to Lessee.

(c) The commission of waste, act or acts constitutingpublic or private nuisance, and/or an illegal activity on the Premises byLessee, where such actions continue for a period of 3 business days followingwritten notice to Lessee.

(d) The failure by Lessee to provide (i) reasonablewritten evidence of compliance with Applicable Requirements, (ii) the service contracts,(iii) the rescission of an unauthorized assignment or subletting, (iv) anEstoppel Certificate, (v) a requested subordination, (vi) evidence concerningany guaranty and/or Guarantor, (vii) any document requested under Paragraph 42,(viii) material safety data sheets (MSDS), or (ix) any other documentation orinformation which Lessor may reasonably require of Lessee under the terms ofthis Lease, where any such failure continues for a period of 10 days followingwritten notice to Lessee.

(e) A Default by Lessee as to the terms, covenants,conditions or provisions of this Lease, or of the rules adopted under Paragraph40 hereof, other than those described in subparagraphs 13.1(a), (b), (c) or(d), above, where such Default continues for a period of 30 days after writtennotice; provided, however, that if the nature of Lessee’s Default is such thatmore than 30 days are reasonably required for its cure, then it shall not bedeemed to be a Breach if Lessee commences such cure within said 30 day periodand thereafter diligently prosecutes such cure to completion.

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

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

(h) If the performance of Lessee’s obligations underthis Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination ofa Guarantor’s liability with respect to this Lease other than in accordance withthe terms of such guaranty, (iii) a Guarantor’s becoming insolvent or thesubject of a bankruptcy filing, (iv) a Guarantor’s refusal to honor theguaranty, or (v) a Guarantor’s breach of its guaranty obligation on ananticipatory basis, and Lessee’s failure, within 60 days following writtennotice of any such event, to provide written alternative assurance or security,which, when coupled with the then existing resources of Lessee, equals orexceeds the combined financial resources of Lessee and the Guarantors thatexisted at the time of execution of this Lease.

13.2 **Remedies.**IfLessee fails to perform any of its affirmative duties or obligations, within 10days after written notice (or in case of an emergency, without notice), Lessormay, 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. Lesseeshall pay to Lessor an amount equal to 115% of the costs and expenses incurredby Lessor in such performance upon receipt of an invoice therefor. In the eventof a Breach, Lessor may, with or without further notice or demand, and withoutlimiting Lessor in the exercise of any right or remedy which Lessor may have byreason of such Breach:

(a) Terminate Lessee’s right to possession of thePremises by any lawful means, in which case this Lease shall terminate and Lesseeshall immediately surrender possession to Lessor. In such event Lessor shall beentitled to recover from Lessee: (i) the unpaid Rent which had been earnedat the time of termination; (ii) the worth at the time of award of the amountby which the unpaid rent which would have been earned after termination untilthe time of award exceeds the amount of such rental loss that the Lessee provescould have been reasonably avoided; (iii) the worth at the time of award of theamount by which the unpaid rent for the balance of the term after the time ofaward exceeds the amount of such rental loss that the Lessee proves could bereasonably avoided; and (iv) any other amount necessary to compensate Lessorfor all the detriment proximately caused by the Lessee’s failure to perform itsobligations under this Lease or which in the ordinary course of things would belikely to result therefrom, including but not limited to the cost of recoveringpossession of the Premises, expenses of reletting, including necessaryrenovation and alteration of the Premises, reasonable attorneys’ fees, and thatportion of any leasing commission paid by Lessor in connection with this Leaseapplicable to the unexpired term of this Lease. The worth at the time of awardof the amount referred to in provision (iii) of the immediately precedingsentence shall be computed by discounting such amount at the discount rate ofthe Federal Reserve Bank of the District within which the Premises are locatedat the time of award plus one percent. Efforts by Lessor to mitigate damagescaused by Lessee’s Breach of this Lease shall not waive Lessor’s right torecover damages under Paragraph 12. If termination of this Lease is obtainedthrough the provisional remedy of unlawful detainer, Lessor shall have theright to recover in such proceeding any unpaid Rent and damages as arerecoverable therein, or Lessor may reserve the right to recover all or any partthereof in a separate suit. If a notice and grace period required underParagraph 13.1 was not previously given, a notice to pay rent or quit, or toperform or quit given to Lessee under the unlawful detainer statute shall alsoconstitute the notice required by Paragraph 13.1. In such case, the applicablegrace period required by Paragraph 13.1 and the unlawful detainer statute shallrun concurrently, and the failure of Lessee to cure the Default within thegreater of the two such grace periods shall constitute both an unlawfuldetainer and a Breach of this Lease entitling Lessor to the remedies providedfor in this Lease and/or by said statute. In no event shall Lessor be requiredto provide separate notices in order to comply with the unlawful detainerstatutes and the notice provisions of Paragraph 13.1, and one notice shall bedeemed sufficient for both purposes.

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

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

13.3 **InducementRecapture.**Any agreement for free or abated rent or other charges,or for the giving or paying by Lessor to or for

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Lessee of any cash or other bonus, inducement orconsideration for Lessee’s entering into this Lease, all of which concessionsare hereinafter referred to as **“InducementProvisions,”**shall be deemed conditioned upon Lessee’s full andfaithful performance of all of the terms, covenants and conditions of thisLease. Upon Breach of this Lease by Lessee, any such Inducement Provision shallautomatically be deemed deleted from this Lease and of no further force oreffect, and any rent, other charge, bonus, inducement or considerationtheretofore abated, given or paid by Lessor under such an inducement Provisionshall be immediately due and payable by Lessee to Lessor, notwithstanding anysubsequent cure of said Breach by Lessee. The acceptance by Lessor of rent orthe cure of the Breach which initiated the operation of this paragraph shallnot be deemed a waiver by Lessor of the provisions of this paragraph unlessspecifically so stated in writing by Lessor at the time of such acceptance.

13.4 **Late Charges.**Lesseehereby acknowledges that late payment by Lessee of Rent will cause Lessor toincur costs not contemplated by this Lease, the exact amount of which will beextremely difficult to ascertain. Such costs include, but are not limited to,processing and accounting charges, and late charges which may be imposed uponLessor by any Lender. Accordingly, if any Rent shall not be received by Lessorwithin **7**5 days after such amountshall be due, then, without any requirement for notice to Lessee, Lessee shallimmediately pay to Lessor a one-time late charge equal to 10% of each suchoverdue amount or $100, whichever is greater. The Parties hereby agree thatsuch late charge represents a fair and reasonable estimate of the costs Lessorwill incur by reason of such late payment. Acceptance of such late charge byLessor shall in no event constitute a waiver of Lessee’s Default or Breach withrespect to such overdue amount, nor prevent the exercise of any of the otherrights and remedies granted hereunder. In the event that a late charge ispayable hereunder, whether or not collected, for any 3 consecutive installmentsof Base Rent within any 12-month period, then notwithstanding any provision ofthis Lease to the contrary, Base Rent shall, at Lessor’s option, become due andpayable quarterly in advance. Lessor may exercise this option by giving writtennotice thereof to Lessee.

13.5 **Interest.**Anymonetary payment due Lessor hereunder, other than late charges, not received byLessor, when due as to scheduled payments (such as Base Rent) or within 30 daysfollowing the date on which it was due for non-scheduled payment, shall bearinterest from the date when due, as to scheduled payments, or the 31st dayafter it was due as to non-scheduled payments. The interest ( **“Interest”**) charged shall be computed atthe 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 Paragraph13.4.

13.6 **Breach byLessor.**

(a) **Notice of Breach.**Lessor shall not be deemed in breach of this Lease unless Lessorfails within a reasonable time to perform an obligation required to beperformed by Lessor. For purposes of this Paragraph, a reasonable time shall inno event be less than 30 days after receipt by Lessor, and any Lender whosename and address shall have been furnished Lessee in writing for such purpose,of written notice specifying wherein such obligation of Lessor has not beenperformed; provided, however, that if the nature of Lessor’s obligation is suchthat more than 30 days are reasonably required for its performance, then Lessorshall not be in breach if performance is commenced within such 30 day periodand thereafter diligently pursued to completion.

(b) **Performance byLessee on Behalf of Lessor.**In the event that neither Lessor norLender cures said breach within 30 days after receipt of said notice, or ifhaving commenced said cure they do not diligently pursue it to completion, thenLessee may elect to cure said breach at Lessee’s expense and offset from Rentthe actual and reasonable cost to perform such cure, provided, however, thatsuch offset shall not exceed an amount equal to the greater of one month’s BaseRent or the Security Deposit, reserving Lessee’s right to seek reimbursementfrom Lessor for any such expense in excess of such offset. Lessee shalldocument the cost of said cure and supply said documentation to Lessor.

14. **Condemnation.**Ifthe Premises or any portion thereof are taken under the power of eminent domainor sold under the threat of the exercise of said power (collectively **“Condemnation”**), this Lease shall terminateas to the part taken as of the date the condemning authority takes title or possession,whichever first occurs. If more than 10% of the Building, or more than 25% ofthat portion of the Premises not occupied by any building, is taken byCondemnation, Lessee may, at Lessee’s option, to be exercised in writing within10 days after Lessor shall have given Lessee written notice of such taking (orin the absence of such notice, within 10 days after the condemning authorityshall have taken possession) terminate this Lease as of the date the condemningauthority takes such possession. If Lessee does not terminate this Lease inaccordance with the foregoing, this Lease shall remain in full force and effectas to the portion of the Premises remaining, except that the Base Rent shall bereduced in proportion to the reduction in utility of the Premises caused bysuch Condemnation. Condemnation awards and/or payments shall be the property ofLessor, whether such award shall be made as compensation for diminution invalue 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’srelocation expenses, loss of business goodwill and/or Trade Fixtures, withoutregard to whether or not this Lease is terminated pursuant to the provisions ofthis Paragraph. All Alterations and Utility Installations made to the Premisesby Lessee, for purposes of Condemnation only, shall be considered the propertyof the Lessee and Lessee shall be entitled to any and all compensation which ispayable therefor. In the event that this Lease is not terminated by reason ofthe Condemnation, Lessor shall repair any damage to the Premises caused by suchCondemnation.

15. **Brokerage Fees.**

15.1 **AdditionalCommission.**Additional commission, if any is owed to the Brokersabove and beyond that referred to in Paragraph 1.9, shall be paid by theParties in accordance with the provisions of whatever separate agreements mayexist between the Brokers and the Parties.~~In addition to the payments owedpursuant to Paragraph 1.9 above, and unless Lessor and the Brokers otherwiseagree in writing, Lessor agrees that: (a) if Lessee exercises any Option, (b)if Lessee acquires any rights to the Premises or other premises owned by Lessorand located within the same Project, if any, within which the Premises islocated, (c) if Lessee remains in possession of the Premises, with the consentof Lessor, after the expiration of this Lease, or (d) if Base Rent isincreased, whether by agreement or operation of an escalation clause herein,then, Lessor shall pay Brokers a fee in accordance with the schedule of theBrokers in effect at the time of the execution of this Lease.~~

~~15.2 **Assumption ofObligations.**Any buyer or transferee of Lessor’s interest in thisLease shall be deemed to have assumed Lessor’s obligation hereunder. Brokersshall be third party beneficiaries of the provisions of Paragraphs 1.9, 15, 22and 31. If Lessor fails to pay to Brokers any amounts due as and for brokeragefees pertaining to this Lease when due, then such amounts shall accrueInterest. In addition, if Lessor fails to pay any amounts to Lessee’s Brokerwhen due, Lessee’s Broker may send written notice to Lessor and Lessee of suchfailure and if Lessor fails to pay such amounts within 10 days after saidnotice, Lessee shall pay said monies to its Broker and offset such amountsagainst Rent. In addition, Lessee’s Broker shall be deemed to be a third partybeneficiary of any commission agreement entered into by and/or between Lessorand Lessor’s Broker for the limited purpose of collecting any brokerage feeowed.~~

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15.3 **Representationsand Indemnities of Broker Relationships.**Lessee and Lessor eachrepresent 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 thisLease, and that no one other than said named Brokers is entitled to anycommission or finder’s fee in connection herewith. Lessee and Lessor do eachhereby agree to indemnify, protect, defend and hold the other harmless from andagainst liability for compensation or charges which may be claimed by any suchunnamed broker, finder or other similar party by reason of any dealings oractions of the indemnifying Party, including any costs, expenses, attorneys’fees reasonably incurred with respect thereto.

16. **EstoppelCertificates.**

(a) Each Party (as **“RespondingParty”**) shall within **15**10days after written notice from the other Party (the **“Requesting Party”**) execute, acknowledge and deliver to theRequesting Party a statement in writing in form similar to the then mostcurrent **“Estoppel Certificate”**formpublished by the AIR Commercial Real Estate Association, plus such additionalinformation, confirmation and/or statements as may be reasonably requested bythe Requesting Party.

(b) If the Responding Party shall fail to execute ordeliver the Estoppel Certificate within such **15**10 day period, the Requesting Party may execute an EstoppelCertificate stating that: (i) the Lease is in full force and effect withoutmodification except as may be represented by the Requesting Party, (ii) thereare no uncured defaults in the Requesting Party’s performance, and (iii) ifLessor is the Requesting Party, not more than one month’s rent has been paid inadvance. Prospective purchasers and encumbrancers may rely upon the RequestingParty’s Estoppel Certificate, and the Responding Party shall be estopped fromdenying the truth of the facts contained in said Certificate.

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

17. **Definition ofLessor.**The term **“Lessor”**asused herein shall mean the owner or owners at the time in question of the feetitle to the Premises, or, if this is a sublease, of the Lessee’s interest inthe prior lease. In the event of a transfer of Lessor’s title or interest inthe 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 asprovided in Paragraph 15, upon such transfer or assignment and delivery of theSecurity Deposit, as aforesaid, the prior Lessor shall be relieved of allliability with respect to the obligations and/or covenants under this Leasethereafter to be performed by the Lessor. Subject to the foregoing, theobligations and/or covenants in this Lease to be performed by the Lessor shallbe binding only upon the Lessor as hereinabove defined.

18. **Severability.**Theinvalidity of any provision of this Lease, as determined by a court ofcompetent jurisdiction, shall in no way affect the validity of any otherprovision hereof.

19. **Days.**Unlessotherwise specifically indicated to the contrary, the word “days” as used inthis Lease shall mean and refer to calendar days.

20. **Limitation onLiability.**The obligations of Lessor under this Lease shall notconstitute personal obligations of Lessor or its partners, members, directors,officers or shareholders, and Lessee shall look to the Premises, and to noother assets of Lessor, for the satisfaction of any liability of Lessor withrespect to this Lease, and shall not seek recourse against Lessor’s partners,members, directors, officers or shareholders, or any of their personal assetsfor such satisfaction.

21. **Time of Essence.**Timeis of the essence with respect to the performance of all obligations to beperformed or observed by the Parties under this Lease.

22. **No Prior or OtherAgreements; Broker Disclaimer.**This Lease contains all agreementsbetween the Parties with respect to any matter mentioned herein, and no otherprior or contemporaneous agreement or understanding shall be effective. ~~Lessorand 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 asto the use, nature, quality and character of the Premises. Brokers have noresponsibility with respect thereto or with respect to any default or breachhereof by either Party. The liability (including court costs and attorneys’fees), of any Broker with respect to negotiation, execution, delivery orperformance by either Lessor or Lessee under this Lease or any amendment ormodification hereto shall be limited to an amount up to the fee received bysuch Broker pursuant to this Lease; provided, however, that the foregoinglimitation on each Broker’s liability shall not be applicable to any gross negligenceor willful misconduct of such Broker.~~

23. **Notices.**

23.1 **NoticeRequirements.**All notices required or permitted by this Lease orapplicable law shall be in writing and may be delivered in person (by hand orby courier) or may be sent by regular, certified or registered mail or U.S.Postal Service Express Mail, with postage prepaid, or by facsimiletransmission, and shall be deemed sufficiently given if served in a mannerspecified in this Paragraph 23. The addresses noted adjacent to a Party’ssignature on this Lease shall be that Party’s address for delivery or mailingof notices. Either Party may by written notice to the other specify a differentaddress for notice, except that upon Lessee’s taking possession of thePremises, the Premises shall constitute Lessee’s address for notice. A copy ofall notices to Lessor shall be concurrently transmitted to such party orparties at such addresses as Lessor may from time to time hereafter designatein writing. Unless and until Lessor otherwise specifies in a written notice, anadditional copy of any notice to Lessor shall also be sent to Michael Deitch;Coldwell Banker Previews International; 4 San Joaquin Plaza, Suite 260; NewportBeach, CA 92660.

23.2 **Date of Notice.**Anynotice sent by registered or certified mail, return receipt requested, shall bedeemed given on the date of delivery shown on the receipt card, or if nodelivery date is shown, the postmark thereon. If sent by regular mail thenotice shall be deemed given 72 hours after the same is addressed as requiredherein and mailed with postage prepaid. Notices delivered by United StatesExpress Mail or overnight courier that guarantee next day delivery shall bedeemed given 24 hours after delivery of the same to the Postal Service orcourier. Notices transmitted

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by facsimile transmission or similar means shall bedeemed delivered upon telephone confirmation of receipt (confirmation reportfrom fax machine is sufficient), provided a copy is also delivered via deliveryor mail. If notice is received on a Saturday, Sunday or legal holiday, it shallbe deemed received on the next business day.

24. **Waivers.**Nowaiver by Lessor of the Default or Breach of any term, covenant or conditionhereof by Lessee, shall be deemed a waiver of any other term, covenant orcondition hereof, or of any subsequent Default or Breach by Lessee of the sameor of any other term, covenant or condition hereof. Lessor’s consent to, orapproval of, any act shall not be deemed to render unnecessary the obtaining ofLessor’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 orprovisions of this Lease requiring such consent. The acceptance of Rent byLessor shall not be a waiver of any Default or Breach by Lessee. Any payment byLessee may be accepted by Lessor on account of moneys or damages due Lessor,notwithstanding any qualifying statements or conditions made by Lessee inconnection therewith, which such statements and/or conditions shall be of noforce or effect whatsoever unless specifically agreed to in writing by Lessorat or before the time of deposit of such payment.

25. **DisclosuresRegarding The Nature of a Real Estate Agency Relationship.**

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

(i) Lessor’s Agent. A Lessor’s agent under a listingagreement with the Lessor acts as the agent for the Lessor only. A Lessor’sagent or subagent has the following affirmative obligations: To the Lessor: Afiduciary duty of utmost care, integrity, honesty, and loyalty in dealings withthe Lessor. To the Lessee and the Lessor: a. Diligent exercise of reasonableskills and care in performance of the agent’s duties. b. A duty of honest andfair dealing and good faith. c. A duty to disclose all facts known to the agentmaterially affecting the value or desirability of the property that are notknown to, or within the diligent attention and observation of, the Parties. Anagent is not obligated to reveal to either Party any confidential informationobtained from the other Party which does not involve the affirmative duties setforth above.

(ii) Lessee’s Agent. An agent can agree to act as agentfor 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 Lesseehas the following affirmative obligations. To the Lessee: A fiduciary duty ofutmost care, integrity, honesty, and loyalty in dealings with the Lessee. Tothe Lessee and the Lessor: a. Diligent exercise of reasonable skills and carein performance of the agent’s duties. b. A duty of honest and fair dealing andgood faith. c. A duty to disclose all facts known to the agent materiallyaffecting the value or desirability of the property that are not known to, orwithin the diligent attention and observation of, the Parties. An agent is notobligated to reveal to either Party any confidential information obtained fromthe other Party which does not involve the affirmative duties set forth above.

(iii) Agent Representing Both Lessor and Lessee. A realestate agent, either acting directly or through one or more associate licenses,can legally be the agent of both the Lessor and the Lessee in a transaction,but only with the knowledge and consent of both the Lessor and the Lessee. In adual agency situation, the agent has the following affirmative obligations toboth the Lessor and the Lessee: a. A fiduciary duty of utmost care, integrity,honesty and loyalty in the dealings with either Lessor or the Lessee. b. Otherduties 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 expresspermission of the respective Party, disclose to the other Party that the Lessorwill accept rent in an amount less than that indicated in the listing or thatthe Lessee is willing to pay a higher rent than that offered. The above dutiesof the agent in a real estate transaction do not relieve a Lessor or Lesseefrom the responsibility to protect their own interests. Lessor and Lesseeshould carefully read all agreements to assure that they adequately expresstheir understanding of the transaction. A real estate agent is a personqualified to advise about real estate. If legal or tax advice is desired,consult a competent professional.

~~(b) Brokers have no responsibility with respect to anydefault or breach hereof by either Party. The Parties agree that no lawsuit orother legal proceeding involving any breach of duty, error or omission relatingto this Lease may be brought against Broker more than one year after the StartDate and that the liability (including court costs and attorneys’ fees), of anyBroker with respect to any such lawsuit and/or legal proceeding shall notexceed the fee received by such Broker pursuant to this Lease; provided,however, that the foregoing limitation on each Broker’s liability shall not beapplicable to any gross negligence or willful misconduct of such Broker.~~

~~(c) Lessor and Lessee agree to identify to Brokers as “Confidential”any communication or information given Brokers that is~~~~considered by such Party to beconfidential.~~

26. **No Right ToHoldover.**Lessee has no right to retain possession of the Premisesor any part thereof beyond the expiration or termination of this Lease. In theevent that Lessee holds over, then the Base Rent shall be increased to 150% ofthe Base Rent applicable immediately preceding the expiration or termination.Nothing contained herein shall be construed as consent by Lessor to any holdingover by Lessee.

27. **CumulativeRemedies.**No remedy or election hereunder shall be deemed exclusivebut shall, wherever possible, be cumulative with all other remedies at law orin equity.

28. **Covenants andConditions; Construction of Agreement.**All provisions of this Leaseto be observed or performed by Lessee are both covenants and conditions. Inconstruing this Lease, all headings and titles are for the convenience of theParties only and shall not be considered a part of this Lease. Wheneverrequired 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, butrather according to its fair meaning as a whole, as if both Parties hadprepared it.

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

30. **Subordination;Attornment; Non-Disturbance.**

30.1 **Subordination.**Subjectto Paragraph 30.3, except as a Lender may otherwise elect pursuant to the lastsentence

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of this Paragraph 30.1, this This Lease and any Optiongranted 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 placedupon the Premises, to any and all advances made on the security thereof, and toall renewals, modifications, and extensions thereof. Lessee agrees that theholders of any such Security Devices (in this Lease together referred to as **“Lender”**) shall have no liability orobligation to perform any of the obligations of Lessor under this Lease. AnyLender may elect to have this Lease and/or any Option granted hereby superiorto 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 SecurityDevice, notwithstanding the relative dates of the documentation or recordationthereof.

30.2 **Attornment.**Inthe event that Lessor transfers title to the Premises, or the Premises areacquired by another upon the foreclosure or termination of a Security Device towhich this Lease is subordinated (i) Lessee shall, subject to thenon-disturbance provisions of Paragraph 30.3, attorn to such new owner, andupon request, enter into a new lease, containing all of the terms andprovisions of this Lease, with such new owner for the remainder of the termhereof, or, at the election of the new owner, this Lease will automaticallybecome a new lease between Lessee and such new owner, for the remainder of theterm hereof, and (ii) Lessor shall thereafter be relieved of any furtherobligations hereunder and such new owner shall assume all of Lessor’sobligations, except that such new owner shall not: (a) be liable for anyact or omission of any prior lessor or with respect to events occurring priorto acquisition of ownership; (b) be subject to any offsets or defenses whichLessee might have against any prior lessor, (c) be bound by prepayment of morethan one month’s rent, or (d) be liable for the return of any securitydeposit paid to any prior lessor.

30.3 **Non-Disturbance.**With respect to Security Devices entered into by Lessor after theexecution of this Lease, Lessee’s subordination of this Lease shall be subjectto receiving a commercially reasonable non-disturbance agreement (a **“Non-Disturbance Agreement”**) from theLender which Non-Disturbance Agreement provides that Lessee’s possession of thePremises, and this Lease, including any options to extend the term hereof, willnot be disturbed so long as Lessee is not in Breach hereof and attorns to therecord owner of the Premises. Further, within 60 days after the execution ofthis Lease, Lessor shall use its diligent commercially reasonable efforts toobtain a Non-Disturbance Agreement from the holder of any pre-existing SecurityDevice which is secured by the Premises. In the event that Lessor is unable toprovide the Non-Disturbance Agreement within said 60 days, then Lessee may, atLessee’s option, directly contact Lender and attempt to negotiate for theexecution and delivery of a Non-Disturbance Agreement.

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

31. **Attorneys’ Fees.**Ifany Party or Broker brings an action or proceeding involving the Premiseswhether founded in tort, contract or equity, or to declare rights hereunder,the Prevailing Party (as hereafter defined) in any such proceeding, action, orappeal thereon, shall be entitled to reasonable attorneys’ fees. Such fees maybe awarded in the same suit or recovered in a separate suit, whether or notsuch action or proceeding is pursued to decision or judgment. The term, **“Prevailing Party”**shall include, withoutlimitation, a Party or Broker who substantially obtains or defeats the reliefsought, as the case may be, whether by compromise, settlement, judgment, or theabandonment 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, butshall be such as to fully reimburse all attorneys’ fees reasonably incurred. Inaddition, Lessor shall be entitled to attorneys’ fees, costs and expensesincurred in the preparation and service of notices of Default and consultationsin connection therewith, whether or not a legal action is subsequentlycommenced in connection with such Default or resulting Breach ($200 is areasonable minimum per occurrence for such services and consultation).

32. **Lessor’s Access;Showing Premises; Repairs.**Lessor and Lessor’s agents shall have theright to enter the Premises at any time, in the case of an emergency, andotherwise at reasonable times after reasonable prior notice for the purpose ofshowing the same to prospective purchasers, lenders, or tenants, and makingsuch alterations, repairs, improvements or additions to the Premises as Lessormay deem necessary or desirable and the erecting, using and maintaining ofutilities, services, pipes and conduits through the Premises and/or otherpremises as long as there is no material adverse effect to Lessee’s use of thePremises. All such activities shall be without abatement of rent or liabilityto Lessee. All such activities shall not unreasonably interfere with Lessee’sbusiness.

33. **Auctions.**Lesseeshall not conduct, nor permit to be conducted, any auction upon the Premiseswithout Lessor’s prior written consent. Lessor shall not be obligated toexercise any standard of reasonableness in determining whether to permit anauction.

34. **Signs.**Lessormay place on the Premises ordinary “ **For Sale**”signs at any time and ordinary “ **For Lease**”signs during the last 6 months of the term hereof. Except for ordinary “forsublease” signs, Lessee shall not place any sign upon the Premises withoutLessor’s prior written consent. All signs must comply with all ApplicableRequirements.

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

36. **Consents.**Exceptas otherwise provided herein, wherever in this Lease the consent or approval ofa Party is required to an act by or for the other Party, such consent orapproval shall not be unreasonably withheld or delayed. Lessor’s actualreasonable costs and expenses (including but not limited to architects’,attorneys’, engineers’ and other consultants’ fees) incurred in theconsideration of, or response to, a request by Lessee for any Lessor consent,including but not limited to consents to an assignment, a subletting or thepresence or use of a Hazardous Substance, shall be paid by Lessee upon receiptof an invoice and supporting documentation therefor. Lessor’s consent to anyact, assignment or subletting shall not constitute an acknowledgment that noDefault or Breach by Lessee of this Lease exists, nor shall such consent bedeemed a waiver of any then existing Default or Breach, except as may beotherwise specifically stated in writing by Lessor at the time of such consent.The failure to specify herein any particular

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condition to Lessor’s consent shall not preclude theimposition by Lessor at the time of consent of such further or other conditionsas are then reasonable with reference to the particular matter for whichconsent is being given. In the event that either Party disagrees with anydetermination made by the other hereunder and reasonably requests the reasonsfor such determination, the determining party shall furnish its reasons inwriting and in reasonable detail within 10 business days following suchrequest.

37. **Guarantor.**

37.1 **Execution.**TheGuarantors, if any, shall each execute a guaranty in the form most recentlypublished by the AIR Commercial Real Estate Association, and each suchGuarantor shall have the same obligations as Lessee under this Lease.

37.2 **Default.**Itshall 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 obligateGuarantor, and in the case of a corporate Guarantor, a certified copy of aresolution of its board of directors authorizing the making of such guaranty,(b) current financial statements, (c) an Estoppel Certificate, or (d) writtenconfirmation that the guaranty is still in effect.

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

39. **Options.**IfLessee is granted an Option, as defined below, then the following provisionsshall apply:

39.1 **Definition. “Option”**shall mean: (a) the right to extend the term of or renew this Leaseor 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 orother property of Lessor; (c) the right to purchase or the right of firstrefusal to purchase the Premises or other property of Lessor.

39.2 **Options PersonalTo Original Lessee.**Any Option granted to Lessee in this Lease ispersonal to the original Lessee, and cannot be assigned or exercised by anyoneother than said original Lessee and only while the original Lessee is in fullpossession of the Premises and, if requested by Lessor, with Lessee certifyingthat Lessee has no intention of thereafter assigning or subletting.

39.3 **MultipleOptions.**In the event that Lessee has any multiple Options to extendor renew this Lease, a later Option cannot be exercised unless the priorOptions have been validly exercised.

39.4 **Effect ofDefault 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 andcontinuing until said Default is cured, (ii) during the period of time any Rentis 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 thatLessee has been given 3 or more notices of separate Default, whether or not theDefaults are cured, during the 12 month period immediately preceding theexercise of the Option.

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

(c) An Option shall terminate and be of no furtherforce or effect, notwithstanding Lessee’s due and timely exercise of theOption, if, after such exercise and prior to the commencement of the extendedterm or completion of the purchase, (i) Lessee fails to pay Rent for a periodof 30 days after such Rent becomes due (without any necessity of Lessor to givenotice thereof), or (ii) if Lessee commits a Breach of this Lease.

40. **MultipleBuildings.**If the Premises are a part of a group of buildingscontrolled by Lessor, Lessee agrees that it will abide by and conform to allreasonable rules and regulations which Lessor may make from time to time forthe management, safety, and care of the Premises and the Building, and theProject to the extent owned by Lessorsaid properties, including the care and cleanlinessof the grounds and including the parking, loading and unloading of vehicles,and to cause its employees, suppliers, shippers, customers, contractors andinvitees to so abide and conform. Lessee also agrees to pay its fair share ofcommon expenses incurred in connection with such rules and regulations.

41. **SecurityMeasures.**Lessee hereby acknowledges that the Rent payable to Lessorhereunder does not include the cost of guard service or other securitymeasures, and that Lessor shall have no obligation whatsoever to provide same.Lessee assumes all responsibility for the protectionof the Premises, Lessee,its agents and invitees and their property from the acts of third parties.

42. **Reservations.**Lessorreserves to itself the right, from time to time, to grant, without the consentor joinder of Lessee, such easements, rights and dedications that Lessor deemsnecessary, and to cause the recordation of parcel maps and restrictions, solong as such easements, rights, dedications, maps and restrictions do notunreasonably interfere with the use of the Premises by Lessee. Lessee agrees tosign any documents reasonably requested by Lessor to effectuate any sucheasement rights, dedication, map or restrictions.

43. **Performance UnderProtest.**If at any time a dispute shall arise as to any amount orsum 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 havethe right to make payment “under protest” and such payment shall not beregarded as a voluntary payment and there shall survive the right on the partof said Party to institute suit for recovery of such sum. If it shall beadjudged that there was no legal obligation on the part of said Party to paysuch sum or any part thereof, said Party shall be entitled to recover such sumor so much thereof as it was not legally required to pay. A Party who does notinitiate suit for the recovery of sums paid “under protest” with 6 months shallbe deemed to have waived its right to protest such payment.

44. **Authority;Multiple Parties; Execution.**

(a) If either Party hereto is a corporation, trust,limited liability company, partnership, or similar entity, each individual executingthis Lease on behalf of such entity represents and warrants that he or she isduly authorized to execute and deliver this Lease on its behalf. Each Partyshall, within 30 days after request, deliver to the other Party satisfactoryevidence of such authority. Lessee shall provide to Lessor evidence of corporateauthority and the corporate resolution in substantially the form set out inExhibit “D” attached hereto and incorporated herein by this reference.

(b) If this Lease is executed by more than one personor entity as “Lessee”, each such person or entity shall be jointly and severallyliable hereunder. It is agreed that any one of the named Lessees shall beempowered to execute any amendment to this Lease, or other

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document ancillary thereto and bind all of the namedLessees, and Lessor may rely on the same as if all of the named Lessees hadexecuted such document.

(c) This Lease may be executed by the Parties incounterparts, each of which shall be deemed an original and all of which togethershall constitute one and the same instrument.

45. **Conflict.**Anyconflict between the printed provisions of this Lease and typewritten orhandwritten provisions shall be controlled by the typewritten or handwrittenprovisions.

46. **Offer.**Preparationof this Lease by either Party or their agent and submission of same to theother Party shall not be deemed an offer to lease to the other Party. ThisLease is not intended to be binding until executed and delivered by all Partieshereto.

47. **Amendments.**ThisLease may be modified only in writing, signed by the Parties in interest at thetime of the modification. As long as they do not materially change Lessee’sobligations hereunder, Lessee agrees to make such reasonable non-monetarymodifications to this Lease as may be reasonably required by a Lender inconnection with the obtaining of normal financing or refinancing of thePremises.

48. **Waiver of JuryTrial. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANYACTION OR****PROCEEDING INVOLVING THEPROPERTY OR ARISING OUT OF THIS AGREEMENT.**

49. **Mediation andArbitration of Disputes.**An Addendum requiring the Mediation and/orthe Arbitration of all disputes between the Parties and/or Brokers arising outof this Lease x**is** o**is not**attachedto this Lease.

50. **Americans withDisabilities Act.**Since compliance with the Americans withDisabilities Act (ADA) is dependent upon Lessee’s specific use of the Premises,Lessor makes no warranty or representation as to whether or not the Premisescomply with ADA or any similar legislation. In the event that Lessee’s use ofthe Premises requires modifications or additions to the Premises in order to bein ADA compliance, Lessee agrees to make any such necessary modificationsand/or additions at Lessee’s expense.

51, 52, and 56through 58. See Addendum One.

53. See AddendumTwo.

54. See AddendumThree.

55. See AddendumFour.

LESSOR AND LESSEEHAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISIONCONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED ANDVOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THISLEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE ANDEFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THEPREMISES.

**ATTENTION****: NO REPRESENTATION ORRECOMMENDATION IS MADE BY THE AIR COMMERCIAL REAL ESTATE ASSOCIATION OR BY ANYBROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THISLEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:**

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

**2.RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THEPREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLEPRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURALINTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITYOF THE PREMISES FOR LESSEE’S INTENDED USE.**

**WARNING****: IF THE PREMISES ISLOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAYNEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISESIS LOCATED.**

The parties heretohave executed this Lease at the place and on the dates specified above theirrespective signatures.
| Executed at:                       | Newport Beach, California |       | Executed at:                               |  Lake Forest,  California |
|------------------------------------|---------------------------|------------|--------------------------------------------|--------------------------------|
| On:                                | 3-23-2007                 |       | On:                                        |  3-23-2007                |
| ** **                         | ** **                | ** ** | ** **                                 |
| **By  LESSOR:**                    | ** **                | ** ** | **By LESSEE:**                             |
| 30452 Esperanza  LLC, a California |                      |       | Liquidmetal Technologies, Inc., a Delaware |
| limited liability  company         |                      |       | corporation                                |
| By:                                | /s/ Mark Silverberg       |       | By:                                        | s/ /Larry Buffington           |
| Name Printed:                      | Mark Silverberg           |       | Name Printed:                              | Larry Buffington               |
| Title:                             | Vice President            |       | Title:                                     |  President                |
| By:                                |                      |       | By:                                        | /s/Young Ham                   |
| Name Printed:                      |                      |       | Name Printed:                              | Young Ham                      |
| Title:                             |                      |       | Title:                                     | CFO                            |
|                                    |                           |            |                                            |                                |  |  |  |  |  |  |  |

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| Address:                             | P.O. Box 9395                           |       | Address:                         |  30452  Esperanza        |
|--------------------------------------|-----------------------------------------|------------|----------------------------------|-------------------------------|
| Newport Beach, CA  92658             |                                    |       | Rancho Santa Margarita, CA 92688 |
| Telephone:                      | (714) 797-6926                          |       | Telephone:                       | (949) 206-8065                |
| Facsimile:                           | ( )                                     |       | Facsimile:                       | (949) 206-8008                |
| Federal ID No.                       |                                    |       | Federal ID No.                   |                          |
| ** **                           | ** **                              | ** ** | ** **                       | ** **                    |
| **BROKER:**                          | ** **                              | ** ** | **BROKER:**                      |
| Lee &  Associates - Irvine, Inc. |                                    |       | CB Richard Ellis                 |
| Attn:                                | Craig  Fitterer/Mark Jerue/Ryan Swanson |       | Attn:                            | Chris Ruzic                   |
| Title:                               | Vice President                          |       | Title:                           |                          |
| Address:                             | 7700 Irvine  Center Drive, Suite 600    |       | Address:                         | 3501 Jamboree Road, Suite 100 |
| Irvine, CA 92618                     |                                    |       | Newport Beach, CA 92660          |
| Telephone:                           | (949) 727-1200                          |       | Telephone:                       | (949) 725-8500                |
| Facsimile:                           | (949) 727-1299                          |       | Facsimile:                       | (949) 477-9118                |
|                                      |                                         |            |                                  |                               |  |  |  |  |  |  |  |  |  |  |

**NOTE: These forms are often modifiedto meet the changing requirements of law and industry needs. Always write orcall to make sure you are utilizing the most current form: AIR COMMERCIAL REALESTATE ASSOCIATION, 700 So. Flower Street, Suite 600, Los Angeles, California90017. (213) 687-8777. Fax No. (213) 687-8616**

**©Copyright 2001 - By AIR Commercial Real Estate Association. All rightsreserved.**

**No part of these works may bereproduced in any form without permission in writing.**

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ADDENDUM ONE
|   | **Date:**                                                                                                                                                                                                     |   | February 13, 2007                                            |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|   | **By and Between     (Lessor)**                                                                                                                                                           |   | 30452 Esperanza LLC, a California limited liability  company |
|   | **                                 (Lessee)** |   | Liquidmetal Technologies, Inc., a Delaware  corporation      |

 

**Address of Premises:**30452 Esperanza; Rancho Santa Margarita;CA 92688

The Following additionalparagraphs are added to the Lease to read as follows:

51.    **Premises Accepted AS-IS.**Lessor shall deliver, and Lessee agrees to accept, the Premises in theircondition as it exists at the time of the execution of this Lease “As-Is” and “WithAll Faults,” except as is otherwise expressly provided in this Lease.  Lessee shall make no Alterations to thePremises except in compliance with Paragraph 7.3 and other applicableprovisions of this Lease.

52.    **Conditional Credit ofSecurity Deposit**.  Providedthat Lessee has not been in Default under this Lease at any time prior to thecommencement of the 13th, 25th, and 37th months of the Original Term of thisLease, Lessor shall at the commencement of such months apply as a credit to theRent for such months a portion of the Security Deposit as described inParagraph 1.6(b).  The portion of theSecurity Deposit so applied in such months shall be only so much of the SecurityDeposit as shall allow the Lessor to retain as the Security Deposit sufficientfunds to cover all of the Base Rent and additional monetary sums reasonablyexpected to become due under this Lease for the last month or months, asappropriate, of the Original Term of this Lease in accordance with thefollowing:

            52.1      **13th Month**.  At the commencement of the 13th month of theOriginal Term of this Lease, if Lessee has not previously been in Default underthis Lease, Lessor shall apply to the Rent due for the 13th month of theOriginal Term of this Lease so much of the Security Deposit as shall allowLessor to retain as the Security Deposit the equivalent of the Base Rent forthe 58th, 59th, and 60th months of the Original Term of this Lease plus alladditional sums Lessor reasonably estimates will be due as Rent for those three(3) months of the Original Term of this Lease. For example, at the commencement of the 13th month, the amount of theSecurity Deposit which Lessor shall be entitled to retain is $17,933.30, beingthe Base Rent for each of the last three months per Paragraph 53, multiplied bythree (3) plus the estimated monthly NNN charges for each of the last three (3)months of the Original Term of the Lease multiplied by three (3); e.g.,($17,933.30 x 3) + ($4,567.43 x 3) = $67,502.19, where $4,567.43 is the amountof estimated monthly NNN charges for each of the last 12 months of the OriginalTerm of the Lease, being the estimated NNN charges of $4,219.60 per month forthe first 12 months of the Original Term of the Lease increased by ahypothetical estimated 2% per year by way of example.

            52.2     **25th Month.**    At the commencement of the 25th month ofthe Original Term of this Lease, if Lessee has not previously been in Defaultunder this Lease, Lessor shall apply to the Rent due for the 25th month of theOriginal Term of this Lease so much of the Security Deposit as shall allowLessor to retain as the Security Deposit the equivalent of the Base Rent forthe 59th and 60th months of the Original Term of this Lease plus all additionalsums Lessor reasonably estimates will be due as Rent for those two (2) monthsof the Original Term of this Lease.  Forexample, at the commencement of the 25th month, the amount of the SecurityDeposit which Lessor shall be entitled to retain is $17,933.30, being the BaseRent for each of the last two (2) months of the Original Term of the Lease perParagraph 53, multiplied by two (2) plus the estimated monthly NNN charges foreach of the last two (2) months of the Original Term of the Lease multiplied bytwo (2); e.g., ($17,933.30 x 2) + ($4,567.43 x 2) = $45,001.46, where $4,567.43is the amount of the estimated monthly NNN charges for the last 12 months ofthe Original Term of the Lease, being the estimated monthly NNN charges of$4,219.60 for each of the first 12 months of the Original Term of the Leaseincreased by a hypothetical estimated 2% per year by way of example.

**PAGE 1 of 2**

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52.3**        37th Month**.   At the commencement of the 37th month of theOriginal Term of this Lease, if Lessee has not previously been in Default underthis Lease, Lessor shall apply to the Rent due for the 37th month of theOriginal Term of this Lease so much of the Security Deposit as shall allowLessor to retain as the Security Deposit the equivalent of the Base Rent for thelast month of the Original Term of this Lease plus all additional sums Lessorreasonably estimates will be due as Rent for that last month of the OriginalTerm of this Lease.  For example, at thecommencement of the 37th month, the amount of the Security Desosit which Lessorshall be entitled to retain is $17,933.30, being the Base Rent for the lastmonth of the Original Term of the Lease per Paragraph 53, plus the estimatedNNN charges for the last month of the Original Term of the Lease; e.g.,$17,933.30 + $4,567.43 = $22,500.73, where $4,567.43 is the amount of theestimated NNN charges for the last 12 months of the Original Term of the Lease,being the estimated monthly NNN charges of $4,219.60 for the first 12 months ofthe Original Term of the Lease increased by a hypothetical 2% per year by wayof example.

            52.4     **During the 12th, 24th, and36th Months**.     During the12th, 24th, and 36th months of the Original Term of this Lease, if Lessee hasnot previously been in Default under this Lease, Lessor shall give notice toLessee of the amount of the credit which Lessor will be applying to Rent forthe succeeding month, as determined pursuant to this Paragraph 52, and thebalance of Rent which Lessee is obligated to pay for the succeeding month.  Lessor shall provide sufficient notice toLessee so as to allow Lessee a reasonable time prior to the end of the 12th,24th, or 36th month of the Original Term of the Lease, as appropriate, to maketimely payment of the balance of Rent due for the 13th, 25th, or 37th month ofthe Original Term of the Lease.

53.   See Addendum Two.

54.   See Addendum Three.

55.   See Addendum Four.

56.     **Reconciliation of NNNCharges.**   Lessee shall paymonthly in advance, on the same day that the Base Rent is due, all of themonthly NNN charges which Lessee is obligated to pay pursuant to this Lease inamounts as reasonably estimated by Lessor. Lessor shall deliver to Lessee within 90 days after the end of eachcalendar year during the term and any extended term of this Lease a reasonablydetailed statement showing the actual NNN charges for the prior year.  If Lessee’s estimated payments of NNN chargesduring that prior year exceed the actual NNN charges for that prior year,Lessee shall be credited the amount of such overpayment against Lessee’s NNNcharges next becoming due.  If Lessee’sestimated payments during that prior year were less than the actual NNN chargesfor that prior year, Lessee shall pay to Lessor the amount of the deficiencywithin 10 days after delivery by Lessor to Lessee of said statement.  At any time Lessor may adjust the amount ofthe estimated NNN charges to reflect Lessor’s revised estimate of such charges,and Lessee shall pay the revised estimated amount commencing with the nextpayment due following Lessee’s receipt of notice from Lessor of the revisedestimated amount.  The term “NNN charges”as used in this paragraph means such of the monetary obligations of Lesseeunder this Lease which are not Base Rent or Security Deposit, and which Lessorhas paid or is periodically paying during the term or extended term of thisLease.

57.     **Lessor’s Assignment ofLease to a Division of Lessor.** Lessor reserves the right to transfer title to the Premises and assignthe Lease to a new separate entity which will be a division of Lessor.  Upon any such assignment, the new separateentity will assume all of the obligations of Lessor under this Lease and Lesseeshall attorn to that new separate entity pursuant to the provisions ofparagraph 30.2 of this Lease; provided, however, that the exceptions in favorof a new owner contained in subparagraphs (a), (b), (c), and (d) of paragraph30.2(ii) shall not apply to the new separate entity as a division of Lessor.

58.     **Blueprints**.  Lessor agrees to make available to Lessee orits architects or space planners such blueprints, or copies thereof, related tothe Premises as Lessor has received from Lessor’s predecessor in interest inthe Premises.  Lessor makes norepresentations or warranties that such blueprints are accurate or correct orcomplete, and Lessor provides them to Lessee solely as an accommodation. Lessorshall not be responsible in any way for any inaccuracies or deficiencies in anyof such blueprints.  Lessee agrees toreturn all such blueprints to Lessor in the condition in which they werereceived.

**PAGE 2 of 2**

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**RENTADJUSTMENT(S)****STANDARD LEASE ADDENDUM TWO**

| **Dated**                                                                                                                                                                                  | February 13, 2007                                            |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|
| **By and Between (Lessor)**                                                                                                                                                 | 30452 Esperanza LLC, a  California limited liability company |
| **                             (Lessee)** | Liquidmetal  Technologies, Inc., a Delaware corporation      |
| **Address of Premises:**                                                                                                                                                                   | 30452 Esperanza Rancho  Santa Margarita, CA 92688            |

 

Paragraph 53

A. **RENT ADJUSTMENTS:**

The monthly rent for each month of the adjustmentperiod(s) specified below shall be increased using the method(s) indicatedbelow:

(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 Bureauof Labor~~

~~Statistics of the U.S. Department of Labor for (selectone):~~~~o~~~~CPI W (Urban Wage Earners and ClericalWorkers) or~~~~o~~~~CPI U (All Urban Consumers), for (Fill inUrban Area):                                                                                                                      ,All Items~~

~~(1982-1984 = 100), herein referred to as “CPI”.~~

~~b. The monthly rent payable in accordance withparagraph A.I.a. of this Addendum shall be calculated as follows: the Base Rentset forth in paragraph 1.5 of the attached Lease, shall be multiplied by afraction the numerator of which shall be the CPI of the calendar month 2 monthsprior to the month(s) specified in paragraph A.I.a. above during which theadjustment is to take effect, and the denominator of which shall be the CPI ofthe calendar month which is 2 months prior to (select one): the~~~~o~~~~first month of the term of this Lease asset forth in paragraph 1.3 (“Base Month”) or~~~~o~~~~(Fill in Other “Base Month”): . The sum so calculated shall constitutethe new monthly rent hereunder, but in no event, shall any such new monthlyrent be less than the rent payable for the month immediately preceding the rentadjustment.~~

~~c. In the event the compilation and/or publication ofthe CPI shall be transferred to any other governmental department or bureau oragency or shall be discontinued, then the index most nearly the same as the CPIshall be used to make such calculation. In the event that the Parties cannotagree on such alternative index, then the matter shall be submitted fordecision to the American Arbitration Association in accordance with the thenrules of said Association and the decision of the arbitrators shall be bindingupon the parties. The cost of said Arbitration shall be paid equally by theParties.~~

~~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 RentalValue” of the property as follows:~~

~~1) Four months prior to each Market Rental ValueAdjustment Date described above, the Parties shall attempt to agree upon whatthe new MRV will be on the adjustment date. If agreement cannot be reachedwithin thirty days, then:~~

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

~~(b) Both Lessor and Lessee shall each immediately makea reasonable determination of the MRV and submit such~~

~~determination, in writing, to arbitration in accordancewith the following provisions:~~

~~(i) Within 15 days thereafter, Lessor and Lessee shalleach select an~~~~o~~~~appraiser or~~~~o~~~~broker (**“Consultant”**- check one) of their choice to act as an arbitrator. The twoarbitrators so appointed shall immediately select a third mutually acceptableConsultant to act as a third arbitrator.~~

~~(ii) The 3 arbitrators shall within 30 days of theappointment of the third arbitrator reach a decision as to what the actual MRVfor the Premises is, and whether Lessor’s or Lessee’s submitted MRV is theclosest thereto. The decision of a majority of the arbitrators shall be bindingon the Parties. The submitted MRV which is determined to be the closest to theactual MRV shall thereafter be used by the Parties.~~

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

~~(iv) The entire cost of such arbitration shall be paidby the party whose submitted MRV is not selected, i.e., the one that is NOT theclosest to the actual MRV.~~

**PAGE****1****OF 2**
| **©2000 - AIR COMMERCIAL REAL ESTATE ASSOCIATION** | **FORM RA-3-8/00E** |
|---------------------------------------------------------|---------------------|

 

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~~2) Notwithstanding the foregoing, the new MRV shall notbe less than the rent payable for the month immediately preceding the rentadjustment.~~

~~b. Upon the establishment of each New Market RentalValue:~~

~~1)the new MRV will become the new “Base Rent” for the purpose of calculating anyfurther Adjustments, and~~

~~2) the first month of each Market Rental Value termshall become the new ‘Base Month’ for the purpose of calculating any furtherAdjustments.~~

þ            **III. Fixed Rental Adjustment(s) (FRA)**

The Base Rent shall be increased to the followingamounts on the dates set forth below:

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

Months 01 - 12$14,919.30Months 13 - 24 $15,672.80Months 25 - 36 $16,426.30Months 37 - 48 $17,179.80Months 49 - 60 $17,933.30

B. **NOTICE:**

Unless specified otherwise herein, notice of any suchadjustments, other than Fixed Rental Adjustments, shall be made as specified inparagraph 23 of the Lease.

C. **BROKER’S FEE:**

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

**NOTE: These forms are often modifiedto meet changing requirements of law and needs of the industry. Always write orcall to make sure you are utilizing the most current form: AIR COMMERCIAL REALESTATE ASSOCIATION, 700 S. Flower Street, Suite 600, Los Angeles, Calif. 90017**

**PAGE****2****OF 2**
| **©2000 - AIR COMMERCIAL REAL ESTATE ASSOCIATION** | **FORM RA-3-8/00E** |
|---------------------------------------------------------|---------------------|

 

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**ARBITRATION AGREEMENT**

**StandardLease Addendum THREE**

| **Dated**                                                                                                                                                                                                           |   | February 13, 2007                                       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|
| ** **                                                                                                                                                                                                          |   |                                                    |
| **By  and Between      (Lessor)**                                                                                                                                                          |   | 30542 Esperanza LLC., a California limited company      |
|                                                                                                                                                                                                                |   |                                                    |
| **                                  (Lessee)** |   | Liquidmetal Technologies, Inc., a Delaware  corporation |
| ** **                                                                                                                                                                                                          |   |                                                    |
| **Address of Premises:**                                                                                                                                                                                            |   | 30452 Esperanza Rancho Santa Margarita, CA 92688        |

 

Paragraph   54

A.            **ARBITRATION OFDISPUTES:**

Except as provided inParagraph B below, the Parties agree to resolve any and all claims, disputes ordisagreements arising under this Lease, including, but not limited to anymatter relating to Lessor’s failure to approve an assignment, sublease or othertransfer of Lessee’s interest in the Lease under Paragraph 12 of this Lease,any other defaults by Lessor, or any defaults by Lessee by and througharbitration as provided below and irrevocably waive any and all rights to thecontrary. The Parties agree to at all times conduct themselves in strict, full,complete and timely accordance with the terms hereof and that any attempt tocircumvent the terms of this Arbitration Agreement shall be absolutely null andvoid and of no force or effect whatsoever.

B.            **DISPUTES EXCLUDED FROMARBITRATION:**

The following claims,disputes or disagreements under this Lease are expressly excluded from thearbitration procedures set forth herein: 1. Disputes for which a differentresolution determination is specifically set forth in this Lease, 2. All claimsby either party which (a) seek anything other than enforcement or determinationof rights under this Lease, or (b) are primarily founded upon matters of fraud,willful misconduct, bad faith or any other allegations of tortious action, andseek the award of punitive or exemplary damages, 3. Claims relating to (a)Lessor’s exercise of any unlawful detainer rights pursuant to applicable law or(b) rights or remedies used by Lessor to gain possession of the Premises orterminate Lessee’s right of possession to the Premises, all of which disputesshall be resolved by suit filed in the applicable court of jurisdiction, thedecision of which court shall be subject to appeal pursuant to applicable lawand 4. All claims arising under Paragraph 39 of this Lease, which disputesshall be resolved by the specific dispute resolution procedure provided inParagraph 39 to the extent that such disputes concern solely the determinationof rent.

C.            **APPOINTMENT OF ANARBITRATOR:**

All disputes subject to this Arbitration Agreement,shall be determined by binding arbitration before: o aretired judge of the applicable court of jurisdiction (e.g., the Superior Courtof the State of California) affiliated with Judicial Arbitration &Mediation Services, Inc. (“JAMS”), o the American Arbitration Association (“AAA”)under its commercial arbitration rules, o                                                     o, or as may be otherwise mutually agreedby Lessor and Lessee (the “Arbitrator”). Such arbitration shall be initiated bythe Parties, or either of them, within ten (10) days after either party sendswritten notice (the “Arbitration Notice”) of a demand to arbitrate byregistered or certified mail to the other party and to the Arbitrator. TheArbitration Notice shall contain a description of the subject matter of thearbitration, the dispute with respect thereto, the amount involved, if any, andthe remedy or determination sought. If the Parties have agreed to use JAMS theymay agree on a retired judge from the JAMS panel. If they are unable to agreewithin ten days, JAMS will provide a list of three available judges and eachparty may strike one. The remaining judge (or if there are two, the oneselected by JAMS) will serve as the Arbitrator. If the Parties have elected toutilize AAA or some other organization, the Arbitrator shall be selected inaccordance with said organization’s rules. In the event the Arbitrator is notselected as provided for above for any reason, the party initiating arbitrationshall apply to the appropriate Court for the appointment of a qualified retiredjudge to act as the Arbitrator.

D.              **ARBITRATION PROCEDURE:**

1.               **PRE-HEARINGACTIONS.**The Arbitrator shall schedule a pre-hearing conference toresolve procedural matters, arrange for the exchange of information, obtainstipulations, and narrow the issues. The Parties will submit proposed discoveryschedules to the Arbitrator at the pre-hearing conference. The scope andduration of discovery will be within the sole discretion of the Arbitrator. TheArbitrator shall have the discretion to order a pre-hearing exchange ofinformation by the Parties, including, without limitation, production ofrequested documents, exchange of summaries of testimony of proposed witnesses,and examination by deposition of parties and third-party witnesses. Thisdiscretion shall be exercised in favor of discovery reasonable under thecircumstances. The Arbitrator shall issue subpoenas and subpoenas duces tecumas provided for in the applicable statutory or case law (e.g., in CaliforniaCode of Civil Procedure Section 1282.6).

2.               **THEDECISION.**The arbitration shall be conducted in the city or countywithin which the Premises are located at a reasonably convenient site. AnyParty may be represented by counsel or other authorized representative. Inrendering a decision(s), the Arbitrator shall determine the rights andobligations of the Parties according to the substantive laws and the terms andprovisions of this Lease. The Arbitrator’s decision shall be based on theevidence introduced at the hearing, including all logical and reasonableinferences therefrom. The Arbitrator may make any determination and/or grantany remedy or relief that is just and equitable. The decision must be based on,and accompanied by, a written statement of decision explaining the factual andlegal basis for the decision as to each of the principal controverted issues.The decision shall be conclusive and binding, and it may thereafter beconfirmed as a judgment by the court of applicable jurisdiction, subject onlyto challenge on the grounds set forth in the applicable statutory or case law(e.g., in California Code of Civil Procedure Section 1286.2). The validity andenforceability of the Arbitrator’s decision is to be determined exclusively bythe court of appropriate jurisdiction pursuant to the provisions of this Lease.The Arbitrator may award costs, including without limitation, Arbitrator’s feesand costs, attorneys’ fees, and expert and witness costs, to the prevailingparty, if any, as determined by the Arbitrator in his discretion. Whenever amatter which has been submitted to arbitration involves a dispute as to whetheror not a particular act or omission (other than a failure to pay money)constitutes a Default, the time to commence or cease such action shall betolled from the date that the Notice of Arbitration is served through and untilthe date the Arbitrator renders his or her decision. Provided, however, thatthis provision shall NOT apply in the event that the Arbitrator determines thatthe Arbitration Notice was prepared in bad faith. Whenever a dispute arisesbetween the Parties concerning whether or not the failure to make a payment ofmoney constitutes a default, the

**PAGE 1 OF 2**

 

**©1997 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                                                                     FORM ARB-0-7/97E**

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service of an ArbitrationNotice shall NOT toll the time period in which to pay the money. The Partyallegedly obligated to pay the money may, however, elect to pay the money “underprotest” by accompanying said payment with a written statement setting forththe reasons for such protest. If thereafter, the Arbitrator determines that theParty who received said money was not entitled to such payment, said moneyshall be promptly returned to the Party who paid such money under protesttogether with Interest thereon as defined in Paragraph 13.5. If a Party makes apayment “under protest” but no Notice of Arbitration is filed within thirtydays, then such protest shall be deemed waived. (See also Paragraph 43)

**NOTICE:These forms are often modified to meet changing requirements of law andindustry needs. Always write or call us to make sure you are utilizing the mostcurrent form: AIR Commercial Real Estate Association, 700 South Flower Street,Suite 600, Los Angeles, CA 90017, Telephone No.: (213) 687-8777. Fax.: (213)687-8616.**

 

**PAGE 2 OF 2**

 

**©1997 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                                                                     FORM ARB-0-7/97E**

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**OPTION(S)TO EXTEND**

**STANDARDLEASE ADDENDUM FOUR**

| **Dated**                    |   | February 13, 2007                                            |
|------------------------------|--------|--------------------------------------------------------------|
| **By and Between (Lessor)**  |   | 30452 Esperanza LLC, a California limited liability  company |
| **By and  Between (Lessee)** |   | Liquidmetal Technologies,  Inc., a Delaware corporation      |
| **Address of Premises:**     |   | 30452 Esperanza                                              |
|                         |   | Rancho Santa Margarita, CA 92688                             |

Paragraph 55

A. **OPTION(S) TOEXTEND:**

Lessor hereby grants to Lessee the option to extend theterm of this Lease for one (1) additional sixty (60) month period(s) (the “OptionPeriod”) commencing when the prior term expires upon each and all of thefollowing terms and conditions:

(i) In order to exercise an option to extend, Lesseemust give written notice of such election to Lessor and Lessor must receive thesame at least 6 but not more than 9 months prior to the date that the optionperiod would commence, time being of the essence. If proper notification of theexercise of an option is not given and/or received, such option shallautomatically expire. Options (if there are more than one) may only beexercised consecutively.

(ii) The provisions of paragraph 39, including thoserelating to Lessee’s Default set forth in paragraph 39.4 of this Lease, areconditions of this Option.

(iii) Except for the provisions of this Lease grantingan option or options to extend the term, all of the terms and conditions ofthis 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 Lesseeand only while the original Lessee is in full possession of the Premises andwithout the intention of thereafter assigning or subletting.

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

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

~~o~~~~**I. Cost ofLiving 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 Bureauof Labor Statistics of the U.S. Department of Labor for (select one):~~~~o~~~~CPI W (Urban Wage Earners and ClericalWorkers) or~~~~o~~~~CPI U (All Urban Consumers), for (Fill inUrban Area):~~

~~All Items (1982-1984 = 100), herein referred to as “CPI”.~~

~~b. The monthly rent payable in accordance withparagraph A.I.a. of this Addendum shall be calculated as follows: the Base Rentset forth in paragraph 1.5 of the attached Lease, shall be multiplied by a fractionthe numerator of which shall be the CPI of the calendar month 2 months prior tothe month(s) specified in paragraph A.I.a. above during which the adjustment isto take effect, and the denominator of which shall be the CPI of the calendarmonth which is 2 months prior to (select one):~~~~o~~~~the first month of the term of this Leaseas set forth in paragraph 1.3 (“Base Month”) or~~~~o~~~~(Fill in Other “Base Month”):~~

~~The sum so calculated shall constitute the new monthlyrent hereunder, but in no event, shall any such new monthly rent be less thanthe rent payable for the month immediately preceding the rent adjustment.~~

~~c. In the event the compilation and/or publication ofthe CPI shall be transferred to any other governmental department or bureau oragency or shall be discontinued, then the index most nearly the same as the CPIshall be used to make such calculation. In the event that the Parties cannotagree on such alternative index, then the matter shall be submitted fordecision to the American Arbitration Association in accordance with the thenrules of said Association and the decision of the arbitrators shall be bindingupon the parties. The cost of said Arbitration shall be paid equally by theParties.~~

~~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 RentalValue” of the property as follows:~~

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

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

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

~~(i) Within 15 days thereafter, Lessor and Lessee shalleach select an~~~~o~~~~appraiser or~~~~o~~~~broker (**“Consultant”**- check one) of their choice to act as an arbitrator. The twoarbitrators so appointed shall immediately select a third mutually acceptableConsultant to act as a third arbitrator.~~

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**©2000 - AIR COMMERCIAL REAL ESTATEASSOCIATION                                                                     FORMOE-3-8/00E**

~~(ii) The 3 arbitrators shall within 30 days of theappointment of the third arbitrator reach a decision as to what the actual MRVfor the Premises is, and whether Lessor’s or Lessee’s submitted MRV is theclosest thereto. The decision of a majority of the arbitrators shall be bindingon the Parties. The submitted MRV which is determined to be the closest to theactual MRV shall thereafter be used by the Parties.~~

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

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

~~2) Notwithstanding the foregoing, the new MRV shall notbe less than the rent payable for the month immediately preceding the rentadjustment.~~

~~b. Upon the establishment of each New Market RentalValue:~~

~~1)the new MRV will become the new “Base Rent” for the purpose of calculating anyfurther Adjustments, and~~

~~2) the first month of each Market Rental Value termshall become the new “Base Month” for the purpose of calculating any furtherAdjustments.~~

o**~~III.Fixed Rental Adjustment(s) (FRA)~~**

~~The Base Rent shall be increased to the followingamounts on the dates set forth below:~~

~~On (Fill in FRA Adjustment Date(s)):                                   The New BaseRent shall be:~~

**The Base Rent rate for the first yearof the Option Period shall be 100% fair market rental for competing propertiesin the South Orange County, California, area. There shall be four percent (4%)annual increases in Base Rent thereafter. Four (4) months prior to thecommencement of the Option Period, the Parties shall negotiate in good faith todetermine the Base Rent for the Option Period. If agreement cannot be reachedwithin thirty days, then Lessor and Lessee shall each, no later than 90 daysprior to the commencement of the Option Period, make a reasonable determinationof the fair market rental for the Premises for the first year of the OptionPeriod and submit such determination, in writing, to arbitration in accordancewith the following provisions:**

**(1) No later than 90 days prior to thecommencement of the Option Period, Lessor and Lessee shall each select alicensed real estate agent or broker with not less than five (5) years ofexperience in the leasing of industrial real estate in the South Orange County,California, area to act as an arbitrator. The two arbitrators so appointedshall, no later than 75 days prior to the commencement of the Option Period,select a mutually acceptable licensed real estate agent or broker with not lessthan five (5) years of experience in the leasing of industrial real estate inthe South Orange County, California, area to act as a third arbitrator.**

**(2) The three arbitrators, acting by amajority, shall no later than 60 days prior to the commencement of the OptionPeriod, determine their opinion of the fair market rental for the Premises forthe first year of the Option Period. The fair market rental determination ofLessor or Lessee which is closest to the opinion of the fair market rental asdetermined by the arbitrators shall be the Base Rent for the first year of theOption Period.**

**(3) If either of the Parties fails toappoint an arbitrator within the period required by this Addendum,thearbitrator timely appointed shall determine the Base Rent for the first yearof the Option Period.**

**(4) The entire cost of sucharbitration shall be paid by the party whose fair market rental submission isnot selected.**

**B. NOTICE:**

Unless specified otherwise herein, notice of any rentaladjustments, other than Fixed Rental Adjustments, shall be made as specified inparagraph 23 of the Lease.

**C. BROKER’S FEE:**

The Brokers shall be paid a Brokerage Fee in accordancewith their separate agreements with the Parties, if any for each adjustmentspecified above in accordance with paragraph 15 of the Lease.

**NOTE: These forms are often modifiedto meet changing requirements of law and needs of the industry. Always write orcall to make sure you are utilizing the most current form: AIR COMMERCIAL REALESTATE ASSOCIATION, 700 S. Flower Street, Suite 600, Los Angeles, Calif. 90017**

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**©2000 - AIR COMMERCIAL REAL ESTATEASSOCIATION                                                                     FORMOE-3-8/00E**

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