**Exhibit 10.6**

**LEASE**

For and in consideration of the rental and of thecovenants and agreements hereinafter set forth to be kept and performed by theTenant, Landlord hereby leases to Tenant and Tenant hereby leases from Landlordthe Premises described below in Paragraph 1.2 for the term, at the rental andsubject to and upon all of the terms, covenants and agreements hereinafter setforth.

**1.****                         BasicLease Provisions.**

**1.1Parties:** This Lease, dated for reference purposes only as ofApril 18, 2003, is made by and between Griffin Properties, LLC, a Californialimited liability company (hereinafter “Landlord”) and 1st Pacific Bank of California, a Californiacorporation (hereinafter “Tenant”).

**1.2Premises:** The premises leased hereunder are commonly known as8889 Rio San Diego Drive, Suite        , SanDiego, CA 92108, deemed to be approximately 2,791 rentable square feet, more orless, which are to be constructed in a manner substantially as shown in Exhibit“A” attached hereto and made a part hereof (hereinafter the “Premises”).

**1.3 Building:** The “Building” is that certain building to be constructed on the realproperty commonly described as being located at 8889 Rio San Diego Drive, inthe City of San Diego, County of San Diego, State of California, as more particularlyshown in Exhibit “A” attached hereto and made a part hereof. Tenantacknowledges that the sole purpose of any floor plan provided herein is toidentify the location of the Premises in the Building.

**1.4Project:** The Premises, the Building, the Common Areas (asdefined below) and the land upon which the same are located, along with allother improvements thereon or thereunder, are herein collectively referred toas the “Project” . The Project, as is anticipated to be constructed, is moreparticularly described in Exhibit “B” attached hereto.

**1.5 Use:**The Premises shall be utilized solely for general office useconsistent with the character of the Building as a first-class office building,and for no other purpose whatsoever, and shall be fully subject to allprovisions contained in Paragraph 7, below.

**1.6Term:** The term of this Lease (the “Lease Term” shall be for aperiod of ten (10) years, commencing on the earlier of the date Tenant occupiesthe Premises for purposes of conducting business therein, or August 15, 2003(hereinafter “Commencement Date”) and ending ten (10) years (and the remainingpart of the month in which the Commencement Date occurs, if other than thefirst day of a month) thereafter (“Termination Date”). In addition, Tenantshall have two (2) options to extend the Term by an additional five (5) yearseach pursuant to the provisions contained in Paragraph 3.5, below.

**1.7 BaseRent:** Initial base rent (the “Base Rent”) for the Premisesshall be Seven Thousand One Hundred Seventeen and 05/100 Dollars ($7.117.05)per month, payable on the first (1st) day of each month subject to Paragraph 4below. Notwithstanding the foregoing, however, the parties agree that Base Rentfor the first (1st)month of the Term shall be paid upon execution of this Lease, pursuant toParagraph 1.10, below.

**1.8 BaseRent Increase:** On the first anniversary of the CommencementDate, and on each anniversary thereafter, the monthly Base Rent payable underthe provisions of this Lease shall be increased by an amount equal to 3% of theBase Rent payable immediately prior to such anniversary date, resulting in thefollowing rent schedule:
| Months  | ** ** | **Monthly  Base Rent** | ** ** |
|---------|------------|-----------------------------|------------|
| 01-12   |       | $                           | 7,117.05   |   |
| 13-24   |       | $                           | 7,330.56   |   |
| 25-36   |       | $                           | 7,550.48   |   |
| 37-48   |       | $                           | 7,776.99   |   |
| 49-60   |       | $                           | 8,010.30   |   |
| 61-72   |       | $                           | 8,250.61   |   |
| 73-84   |       | $                           | 8,498.13   |   |
| 85-96   |       | $                           | 8,753.07   |   |
| 97-108  |       | $                           | 9,015.67   |   |
| 109-120 |       | $                           | 9,286.14   |   |

 

**1.9Rent:** For purposes of this Lease, the term “Rent” means BaseRent, Additional Rent (as hereafter defined), and all other amounts payable byTenant hereunder and defined as “rent” or “additional rent” hereunder.

**1.10Rent Paid Upon Execution:** Upon execution of this Lease,Tenant shall pay Seven Thousand One Hundred Seventeen and 05/100 Dollars($7,117.05) for the first month’s Base Rent.

**1.11Security Deposit:** No security deposit shall be required.

**1.12Tenant’s Share:** Tenant’s Share, as defined in Paragraph4.5(a), below, shall be an amount calculated by dividing the rentable squarefootage of the Premises by the rentable square footage of the Building.Landlord shall notify Tenant of Tenant’s Share upon completion of itsconstruction of the Building and completion of its calculation of the rentablesquare footage thereof.

**1.13Work of Improvement.** Landlord shall not be required to performany work or supply any material or labor to prepare the Premises for occupancy.Landlord’s sole obligation shall be todeliver to Tenant a Warm Shell; any improvements to the Premises shall be thesole responsibility of Tenant. For purposes of this Lease, the term “WarmShell” means that the Landlord shall deliver the Building with the items setforth on Exhibit “C” completed.

**1.14Base Year.** The term “Base Year” means the calendar yearending on December 31, 2003. In the event the Project has not been completedfor the entire Base Year, then the Operating Expenses incurred by Landlord fromand after the date the Project is substantially completed until the end of theBase Year shall be annualized to determine Base Year Operating Expenses. Forpurposes of calculating Real Property Taxes for the Base Year, such taxes shallbe calculated as if all of

1

----

the tenant improvements for all space in the Buildingwere fully constructed and the Real Property, the Building and all tenantimprovements in the Building were fully assessed for the entire Base Year.

**1.15Tenant Allowance.** Landlord shall reimburse Tenant up to amaximum of One Hundred Seventeen Thousand Dollars ($117,000.00) for theconstruction of the Tenant Improvements (the “Tenant Improvement Allowance”);any and all costs for Tenant Improvements in excess of the Tenant ImprovementAllowance shall be paid by Tenant. Landlord shall reimburse Tenant for anycosts incurred by Tenant in constructing the Tenant Improvements, up to amaximum amount equal to the Tenant Improvement Allowance, within thirty (30)days of receiving invoices from Tenant detailing the Tenant Improvement costsincurred by Tenant. In the event Landlord pays more than the Tenant ImprovementAllowance for any Tenant Improvements, any such excess amount shall reimbursedto Landlord by Tenant within ten (10) business days of receiving an invoicetherefore from Landlord. In the event Tenant fails to pay any amounts it isrequired to pay hereunder when due, Tenant shall be responsible to pay any andall late charges, interest and other charges related thereto, and agrees toindemnify and hold Landlord harmless from and against any and all claims,liabilities, charges, damages, costs and expenses incurred by Landlord as aresult of any late payment or failure to pay by Tenant of any amounts requiredto be paid hereunder by Tenant. The Tenant Improvement Allowance will be usedonly for the Tenant Improvements to be constructed under Paragraph 2.7,below, and shall not be applied against moveable furniture, consultant fees orother relocation-related uses.

**1.16Refurbishment Allowance.** Landlord agrees to pay to Tenant upto Eight Thousand Three Hundred Seventy-three Dollars ($8,373.00) towards anycosts incurred by Tenant during the sixty-first (61st) month of the Term in refurbishing thePremises. Landlord shall pay such amounts to Tenant within thirty (30) days ofreceiving invoices from Tenant detailing the refurbishment costs incurred byTenant in the sixty-first (61st)month of the Term.

**1.17Utilities.** The cost of all utilities used by Tenant at thePremises which are metered separately shall be paid by Tenant in accordancewith Paragraph 8.1, below.

**1.18Signage.** Landlord shall allow Tenant to install, at Tenant’sexpense, Building top signage on the glass spandrel directly east of the mainentry. Any such signage shall be subject to Landlord’s prior written consent,and shall be subject to the provisions of Paragraph 9.3, below. Tenant shall bepermitted to install signage in size up to a maximum of one-third (1/3) of theallowable frontage signage for the Building.

**1.19Automated Teller Machine.** If permitted under applicablecodes, regulations and ordinances, Landlord shall allow Tenant to install anautomated teller machine (“ATM”) at the Premises, the installation of whichshall be subject to the provisions of Paragraph 9.3. Tenant shall beresponsible for any maintenance and security for any ATM it has installed.Landlord makes no representation regarding whether or not an ATM is permittedunder applicable codes, regulations or ordinances.

**1.20Early Occupancy.** Landlord anticipates completing the Projectand delivering to Tenant a Warm Shell on or around June 1, 2003; however,Landlord shall have no liability to Tenant whatsoever if Landlord does not, infact, complete the Project by June 1, 2003. Upon execution of this Lease,Tenant shall be permitted access to the Premises for purposes of preparing itsspace plan and constructing its Tenant Improvements in the Premises; provided,however, that in no event shall such access and/or construction interfere withLandlord’s completion of the Project, and Tenant shall immediately ceaseconducting any activities at the Premises and/or any other part of the Projectwhich interferes with Landlord’s completion of the Project. Upon Landlord’scompletion of the Project (including, without limitation, all Building systemslocated within or supporting the Building and/or the Premises) and Tenant’scompletion of the Tenant Improvements, and upon issuance of a certificate ofoccupancy and any and all other permits or approvals necessary to allow Tenantto occupy the Premises, Landlord shall notify Tenant, and Tenant shall bepermitted to occupy the Premises from such date. During the period of timecommencing on the date hereof until the Commencement Date (the “Early OccupancyPeriod”), Tenant shall not be required to pay Base Rent; however, all otherprovisions of this Lease shall apply to Tenant during the Early OccupancyPeriod.

**2.****                         Premises,Parking, Common Areas, Work of Improvement:**

**2.1Premises.** The Premises consists of a portion of the firstfloor of the Building, and shall include the parking specified in Paragraph2.2, below. Landlord agrees that Landlord shall cause the Building to beconstructed substantially as depicted on Exhibit “A” attached hereto. Landlordshall attempt to substantially complete construction of the Building and anyTenant Improvements required to be constructed by Landlord as described inParagraph 2.7, below, by August 1, 2003. In the event Landlord does notsubstantially complete the Building (as indicated by the architect for theBuilding indicating that the Building has been substantially completed) byAugust 1, 2003, then the Commencement Date shall be delayed until such time asthe Building has been completed. In the event Landlord does not substantiallycomplete the Building by January 1, 2004, then Tenant may, during the ten (10)day period following January 1, 2004, elect, by providing written notice toLandlord, to terminate this Lease Agreement. In the event Landlord isconstructing any Tenant Improvements pursuant to Paragraph 2.7, below, if suchTenant Improvements are not completed by Landlord by August 1, 2003, and thedelays are not caused by or contributed to by Tenant (including, withoutlimitation, Tenant’s failure to promptly approve space plans submitted byLandlord to Tenant), then the Commencement Date shall be delayed by the samenumber of days that Landlord is delayed in completing the Tenant Improvementsdue to no fault or contribution by Tenant. In the event the delays in causingthe Tenant Improvements to be completed are caused by or contributed to byTenant, then no delay in the Commencement Date shall occur as a result of suchdelay in completion. The rights of Tenant pursuant to this Paragraph 2.1 areTenant’s sole and exclusive rights for a failure of Landlord to deliver thePremises to Tenant hereunder, and Landlord shall have no liability whatsoeverto Tenant for failure to deliver the Premises and/or the Tenant Improvements toTenant by the outside date specified herein. In the event the Commencement Datedoes not occur on or before January 1, 2004, then Landlord may, at any timethereafter until the Commencement Date, terminate this Lease. Upon terminationby Tenant or Landlord hereunder, neither party shall have any other rights orobligations with respect to this Lease Agreement, except that Landlord shallrefund to Tenant the payment made pursuant to Paragraph 1.10, above.

**2.2Vehicle Parking.** Tenant shall be entitled to thenon-exclusive use of unreserved and unassigned parking spaces on those portionsof the Common Area designated by Landlord for parking. In addition, subject tothe rights of adjacent landowners and their tenants, invitees and customersunder reciprocal parking agreements now or hereafter affecting the Project,Landlord shall provide for the following parking: (i) Tenant shall be entitledto two (2) parking spaces during the Term which shall be reserved to Tenant asagainst any other tenant in the Building during the hours from 7:30 a.m.through 5:00 p.m., Monday through Friday, the location of which shall bedesignated, from time to time, by Landlord, but which shall be as close toTenant’s ATM as is reasonably practical taking into account the

2

----

parking layout and theparking spaces already reserved to other tenants of the Project; and (ii)Landlord shall provide a minimum of eight (8) parking spaces designated as “CustomerParking” which shall be reserved to customers and visitors of the Project asagainst any other tenant in the Building during the hours from 7:30 a.m.through 5:00 p.m., Monday through Friday, the location of which shall bedesignated, from time to time, by Landlord, but which shall be as close to thefront entrance to the Building as is reasonably practical taking into accountthe parking layout and the parking spaces already reserved to other tenants ofthe Project. A copy of the current reciprocal parking agreements are attachedas Exhibit “D” hereto. All parking spaces shall be used only for parking byvehicles no larger than full size passenger automobiles or pick-up trucks,called “Permitted Size Vehicles”. Vehicles other than Permitted Size Vehiclesare referred to as “Oversized Vehicles”. Tenant shall not at any time park orpermit the parking of Tenant’s vehicles, trucks, Oversized Vehicles, or thevehicles, trucks or Oversized Vehicles of Tenant’s employees, invitees,suppliers or others, in any portion of the Common Area not designated byLandlord for such use by Tenant. Tenant shall not abandon any inoperativevehicles or equipment on any portion of the Common Area, nor shall Tenant, itsemployees, invitees, suppliers or others park or store any vehicle (PermittedSize or otherwise) on any portion of the Common Area, including designatedparking areas, unattended for any period longer than twenty-four (24) hours. IfTenant commits, permits or allows any of the prohibited activities described inthe Lease or the rules then in effect, then Landlord shall have the right,without notice, in addition to such other rights and remedies that it may have,to remove or tow away the vehicle involved and charge the cost to Tenant, whichcost shall be immediately paid by Tenant to Landlord upon demand from Landlord.

**2.3**Common Areas - Definition.**The term “Common Areas” is defined as all areas and facilities outside thePremises and within the exterior boundary line of the Project that are providedand designated by Landlord from time to time for the general non-exclusive useof Landlord, Tenant, and the other tenants and other authorized users of theProject and their respective employees, suppliers, shippers, customers andinvitees, including, but not limited to common entrances, lobbies, corridors,stairways and stairwells, public restrooms, elevators, escalators, heating,ventilation and air conditioning (“HVAC”) systems, parking areas to the extentnot otherwise referenced in this Lease, loading and unloading areas, trashareas, roadways, sidewalk, walkways, parkways, ramps, driveways, landscapedareas and decorative walls.

**2.4Common Areas - Tenant’s Rights.** Landlord hereby grants toTenant, for the benefit of Tenant and its employees, suppliers, shippers,customers and invitees, during the term of this Lease, the non-exclusive rightto use, in common with others entitled to such use, the Common Areas as theyexist from time to time, subject to any rights, powers, and privileges reservedby Landlord under the terms hereof or under the terms of any rules andregulations or restrictions governing the use of the Project. Under nocircumstances shall the right herein granted to use the Common Areas be deemedto include the right to store any property, temporarily or permanently, in theCommon Areas or to construct or install any improvements in the Common Areas.Any such storage shall be permitted only by the prior written consent ofLandlord or Landlord’s designated agent, which consent may be revoked at anytime. In the event that any unauthorized storage shall occur, Landlord shallhave the right, without notice, in addition to such other rights and remediesthat it may have, to remove the property and charge the cost to Tenant, whichcost shall be immediately payable by Tenant to Landlord upon demand byLandlord.

**2.5Common Areas - Rules and Regulations/CC&R’s.** Landlord orsuch other person(s) as Landlord may appoint, shall have the exclusive controland management of the Common Areas and shall have the right, from time to time,to establish, modify, amend and enforce reasonable non-discriminatory rules andregulations with respect thereto. Tenant agrees to abide by and conform to allsuch rules and regulations, as well as any private conditions, covenants, andrestrictions of public record now or hereafter affecting the Premises and anyamendment thereof, and to cause its employees, suppliers, shippers, customersand invitees to abide and conform; provided, however, that no such modified ornew Covenants, Conditions and Restrictions will adversely affect Tenant’srights under this Lease or impose a material burden on Tenant. Tenant’sobligation to comply with modifications or new Covenants, Conditions andRestrictions shall not arise until Landlord shall have provided copies of anysuch new Covenants, Conditions and Restrictions, and any modifications to anyexisting Covenants, Conditions and Restrictions, to Tenant. Landlord shall notbe responsible to Tenant for the non-compliance with said rules and regulationsby other tenants or authorized users of the Project. Any failure by Tenant orits agents, employees or representatives to observe and comply with the rulesand regulations established by Landlord with respect to the Common Areas whichfailure continues after notice provided in accordance with Paragraph 18.1,below, shall be a default by Tenant hereunder. Tenant agrees to comply with allterms and conditions of the Covenants, Conditions and Restrictions applicableto the Premises, as the same may be modified from time to time in accordancewith the provisions of this Paragraph 2.5. A copy of the current Covenants,Conditions and Restrictions are attached hereto as Exhibit “E”. A copy of therules and regulations governing the Common Areas, together with anymodifications thereto, shall be provided to Tenant from time to time during theTerm by Landlord.

**2.6 Common Areas - Changes.** Landlord shall have the right at Landlord’ssole discretion, from time to time:

(a) To make changes tothe Common Areas, including, without limitation, changes in the location, size,shape and number of driveways entrances, parking spaces, parking areas, loadingand unloading areas, ingress, egress, direction of traffic, landscaped areasand walkways; (b) to close temporarily any of the Common Areas for maintenancepurposes, so long as reasonable access to the Premises remains available; (c)to use the Common Areas while engaged in making additional improvements,repairs or alterations to the Project, or any portion thereof; (d) to close, atreasonable times, all or any portion of the parking areas for any reasonablepurpose, including without limitation, the prevention of a dedication thereof,or the accrual of the rights of any person or public therein; (e) to designateportions of the Common Areas as reserved exclusively for specific tenants orothers; and, (f) to do and perform such other acts and make such other changesin, to or with respect to the Common Areas and the Project as Landlord may, inthe exercise of sound business judgment, deem to be appropriate.

**2.7Tenant Improvements.** Landlord shall be responsible fordelivering a Warm Shell to Tenant; Tenant shall be responsible for developing awork plan (the “Tenant Improvement Plans”) depicting all improvements to beconstructed on the Premises by Tenant (the “Tenant Improvement”). The TenantImprovement Plans and the Tenant Improvements shall be subject to the approvalof Landlord, which shall be delivered to Tenant within 5 business days ofreceipt by Landlord of a complete set of Tenant Improvement Plans, whichapproval shall not be unreasonably withheld, conditioned or delayed, and shallfurther be subject to the provisions of Paragraph 9.3, below entitled “Alterations”,below, prior to submittal to any governmental entity which is also required toapprove such Tenant Improvement Plans and issue permits therefore. Tenantagrees that it shall construct the Tenant Improvements substantially inaccordance with the Tenant Improvement Plans. Any changes or additions to theTenant Improvement Plans desired by Tenant shall be at Tenant’s sole cost and expense,and shall be subject to the provisions of Paragraph 9.3, below.

3

----

**3.****                         Term**

**3.1Term.** The Lease Term, the Commencement Date and theTermination Date shall be as specified in Paragraph 1.6, above, unlessterminated earlier pursuant to this Lease, or unless extended by Tenantpursuant to Paragraph 3.5, below.

**3.2Delay in Commencement.** Tenant agrees that in the event of theinability of Landlord for any reason to deliver possession of the Premises toTenant on said Commencement Date set forth in Paragraphs 1.6 and 2.1, above,Landlord shall not be liable for any damage thereby nor shall such inabilityaffect the validity of this Lease or the obligations of Tenant hereunder, butin such case, so long as the delay is not caused by or contributed to by Tenant,Tenant shall not be obligated to pay rent or other monetary sums untilpossession of the Premises is tendered to Tenant; provided that if the delay inthe Commencement Date exceeds thirty (30) days, then the Termination Date shallbe extended by the period of time computed from the scheduled Commencement Dateto the actual Commencement Date. If Tenant occupies the Premises prior to saidCommencement Date, such occupancy shall be subject to all provisions hereof.

**3.3Commencement After Construction.** Possession shall not bedeemed tendered and the term of this Lease shall not commence until the firstto occur of the following:

(a) The date on which allimprovements to be constructed by Landlord have been substantially completedexcept for: (i) punch list items which do not prevent Tenant from using thePremises for its intended use; (ii) work Landlord is required to perform butwhich is delayed because of fault or neglect of Tenant, acts of Tenant orTenant’s agents (including, without limitation, delays caused by work done onthe Premises by Tenant or Tenant’s agents or by acts of Tenant’s contractors orsubcontractors) or delays caused by change orders requested by Tenant orrequired because of errors or omissions in plans submitted by Tenant; and (iii)work Landlord is required to perform but cannot complete until Tenant performsnecessary portions of construction work it has elected or is required to do;or,

(b)After a Certificate of Occupancy, or its equivalent, is granted by the propergovernmental agency or, if no Certificate of Occupancy, or its equivalent, isissued by any local agency, then after notification by Landlord’s architect orcontractor that Landlord’s construction work has been completed; or

(c)Upon the occupancy of the Premises by any of Tenant’s operating personnel.

**3.4Confirmation of Commencement Date.** Landlord and Tenant shallexecute a written acknowledgment setting forth the Commencement Date.

**3.5Extension of Term.**Landlord grants to Tenant two (2) options(each, an “Option”) to extend the Lease Term for a period of five years each.Tenant must exercise such right of extension by delivering written notice ofTenant’s exercise at least six (6) months, but no more than twelve (12) months,prior to the expiration of the existing Lease Term. Such extension of the Termwill be on the same terms, covenants and conditions as in this Lease, exceptthat the Base Rent for the extension period will be equal to an amountdetermined by agreement between Landlord and Tenant. In the event Landlord andTenant, for any reason whatsoever, fail to agree on the Base Rent to be paid byTenant during the extension period within thirty (30) days of the date Tenantdelivers its notice of exercise of an Option, then the Option shall be null,void and of no force or effect, and the Term of the lease shall expire at itsscheduled expiration date. Neither party shall have any liability whatsoever tothe other party as a result of a failure to agree on Base Rent during theextension term.

**4.****                         Rent**

**4.1 BaseRent.** Tenant shall pay to Landlord as Base Rent for thePremises in advance on the first day of each calendar month of the Lease Termwithout deduction, offset, prior notice or demand, in lawful money of theUnited States, the sum as defined in Paragraphs 1.7 and 1.8, above. If theCommencement Date is not the first day of a month, or if the Termination Dateis not the last day of a month, a prorated monthly installment shall be paid atthe then current rate for the fractional month during which the Lease commencesand/or terminates.

Concurrently with Tenant’sexecution of this Lease, Tenant shall pay to Landlord the sum set forth inParagraph 1.10, above as Base Rent for the period defined in Paragraph 1.10,above.

**4.2Additional Rent.** Commencing with the calendar year beginningon January 1, 2004, and continuing throughout the remainder of the Lease Term,Tenant shall pay, as Additional Rent, all of the following: (i) increases inOperating Expenses as defined in Paragraph 4.5 below, including, withoutlimitation, increases in Real Property Taxes as required by Paragraph 6.1 andinsurance premiums pursuant to Paragraph 13.2; and (ii) all other chargespayable by Tenant hereunder and designated as Additional Rent hereunder. AllOperating Expenses, Real Property Taxes, insurance costs, late charges, costs,expenses and other sums which Tenant is required to pay under this Lease,together with all interest and penalties that may accrue thereon in the eventof Tenant’s failure to pay such amounts, and all reasonable damages, costs andattorneys’ fees and expenses which Landlord may incur by reason of any defaultof Tenant, or failure on Tenant’s part to comply with the terms of this Lease,shall be deemed to be additional rent (“Additional Rent”) and shall be paid inaddition to the Base Rent, and, in the event of non-payment by Tenant, Landlordshall have all the rights and remedies with respect thereto as Landlord has forthe non-payment of the Base Rent.

**4.3Late Charges.** Tenant hereby acknowledges that late payment byTenant to Landlord of Base Rent, Additional Rent and other sums due hereunderwill cause Landlord to incur costs not contemplated by this Lease, the exactamount of which will be extremely difficult to ascertain. Such costs include,but are not limited to, processing, accounting charges and late payment feeswhich may be imposed on Landlord by the terms of any mortgage or trust deedcovering the Premises. Accordingly, if any installment of Base Rent, AdditionalRent or any other sum due from Tenant shall not be received by Landlord orLandlord’s designee within seven (7) days after such amount shall be due,Tenant shall pay to Landlord as Additional Rent a late charge equal to sevenand one-half percent (7.5%) of such overdue amount. The parties hereby agreethat such late charge represents a fair and reasonable estimate of the costsLandlord will incur by reason of late payments by Tenant. Acceptance of suchlate charge by Landlord shall in no event constitute a waiver of Tenant’sdefault with respect to such overdue amount, nor prevent Landlord fromexercising any of the other rights and remedies granted hereunder. In no eventshall this provision for a late charge be deemed to grant to Tenant a graceperiod or extension of time within which to pay any installment of Base Rent orAdditional Rent or prevent Landlord from exercising any right or remedyavailable to Landlord upon Tenant’s failure to make such payment when due. Inthe event any payment of Base Rent or Additional Rent is not received byLandlord by the thirtieth (30th) day after the due date for such payment orinstallment, such payment or installment shall bear interest at the PermittedRate, as defined in Paragraph 20.17 below, commencing on the thirty-first(31st) day after the due date for such payment or installment and continuinguntil the same is paid.

4

----

**4.4Returned Check Fee.** A twenty-five dollar ($25.00) charge willbe paid by Tenant as Additional Rent to Landlord for each check returned unpaidby the bank and Tenant shall replace the payment with a Cashier’s Check orCertified Check. If Tenant has two (2) or more checks returned for insufficientfunds at any time during its tenancy, Landlord, at its option, may request allpayments, current and future, be made by Cashier’s Check or Certified Check.

**4.5Operating Expenses.** Tenant shall pay to Landlord during theterm hereof, in addition to the Base Rent, Tenant’s Share, as hereinafterdefined, of all Operating Expenses, as hereinafter defined, incurred byLandlord during each calendar year of the term of this Lease which are inexcess of the Operating Expenses incurred by Landlord during the Base Year (“ExcessOperating Expenses”), in accordance with the following provisions:

(a)“Tenant’s Share” is defined, for purposes of this Lease, as the respectivepercentage set forth in Paragraph 1.12, above. It is understood and agreed thatthe footage figures set forth in Paragraph 1.2, above, are approximate, whichLandlord and Tenant agree are reasonable and shall not be subject to revisionexcept in connection with a significant change in the plans and specificationsfor the Building which results in a material change in the size of thePremises, or a material change in the space available for lease in theBuilding.

(b)“Operating Expenses” as defined, for purposes of this Lease, shall include allcosts and expenses incurred by Landlord in connection with the ownership andoperation of the Project, including but not limited to the following:

(i)           the operating, repair, maintenance,and replacement in neat, clean, good order and condition of the following:

(aa)the Common Areas, including parking areas, loading and unloading areas, trashareas, roadways, sidewalks, walkways, parkways, driveways, landscaped areas,striping, bumpers, irrigation systems, Common Area lighting facilities,electric rooms, elevators, fences and gates;

(bb)Common Area signage (i.e., address, directional, Project identity and tenantdirectories);

(cc)fire detection systems, including sprinkler systems; and,

(dd)security services, if provided.

(ii)          the cost of water, gas, electricityand other utilities to serve the Common Areas or which are not separatelycharged to the Premises under Paragraph 8.1, below;

(iii)         trash disposal and janitorial services;

(iv)         costs for maintenance and repair ofelevators, HVAC systems and other systems serving the Project or any partthereof;

(v)          increases in Real Property Taxes asprovided in Paragraph 6.1;

(vi)         property insurance premiums as providedin Paragraph 13.2;

(vii)        the cost of liability insurance carriedby Landlord with respect to the Common Areas;

(viii)       any deductible portion of an insured lossconcerning the Project or any portion thereto;

(ix)         the cost of any capital improvementsmade to the Building or Project by Landlord, which cost, if less then tenthousand dollars ($10,000), shall be expensed in the year incurred, or if atleast ten thousand dollars ($10,000), shall be amortized over such period oftime as permitted under Generally Acceptable Accounting Principles with intereston the unamortized balance at the rate of six percent (6%) per annum or suchhigher rate as may have been paid by Landlord on funds borrowed for the purposeof constructing such capital improvements;

(x)          fees for licenses and permits requiredfor the operation of the Building, Common Areas and Project;

(xi)         the cost of contesting the validity orapplicability of any governmental enactment’s or assessments, including withoutlimitation property tax assessments, which may affect Operating Expenses;

(xii)        the repair, maintenance or patching, butnot replacement, of the roof membrane of the Building;

(xiii)       any other services to be provided byLandlord that are stated elsewhere in this Lease to be an Operating Expense;

(xiv)       if the Project is not fully occupied duringany portion of any Lease year, Landlord may adjust (an “Equitable Adjustment”)Operating Costs to equal what would have been incurred by Landlord had theProject been fully occupied. This Equitable Adjustment shall apply only toOperating Costs which are variable and therefore increase as occupancy of theProject increases. Landlord may incorporate the Equitable Adjustment in itsestimates of Operating Costs. In addition, if Landlord does not furnish anyparticular service whose cost would have constituted an Operating Cost to atenant other than Tenant who has undertaken to perform such service itself,Operating Costs shall be increased by the amount which Landlord would haveincurred if it had furnished the service to such tenant; and

(xv)        payments under any equipment rentalagreements or management agreements (including the cost of any market ratemanagement fee and the fair rental value of any office space providedthereunder).

(c)Except as specifically provided in subparagraph (b), above, Operating Expensesshall not include: (a) charges for depreciation, interest or amortization withrespect to the Building; (b) expenses for capital improvements to orrehabilitation of structural components of the Building and roof; (c) expensesresulting from the grossly negligent acts of Landlord; (d) expenses associatedwith the operation of the general business of Landlord not directlyattributable to management and operation of the Common Areas such as personnelcosts of employees not directly involved in management and operation of theCommon Area, legal and accounting fees involving relations or disputes withemployees, tenants or others, tax return preparation and expenses, costs ofleasing and re-leasing, bad debts and other business losses; (e) amounts forwhich recovery is obtained under warranties, insurance coverage or from othertenants; and (g) the cost of providing tenant improvements for other tenants inthe Building.

(d)The inclusion of the improvements, facilities and services set forth in Paragraph4.5(b) shall not be deemed to impose an obligation by Landlord to either havesaid improvements or facilities or to provide those services. Without limitingthe generality of the foregoing, nothing contained in Paragraph 4.5(b) orelsewhere in this Lease shall create or imply an obligation or duty on the partof Landlord to provide any security services or protection for the Premises,the Building, Common Area and/or the Project.

(e)Tenant’s Share of Excess Operating Expenses shall be payable by Tenant withinten (10) days after a reasonably detailed statement of actual expenses ispresented to Tenant by Landlord. At Landlord’s option, however, an amount maybe estimated by Landlord from time to time of Tenant’s Share of annual ExcessOperating Expenses and the same shall be payable monthly or quarterly, asLandlord shall designate, during the Lease Term herein, on the same day as theBase Rent is

5

----

due hereunder. In the event that Tenant pays Landlord’sestimate of Tenant’s Share of Excess Operating Expenses as aforesaid, Landlordshall provide Tenant with a reasonably detailed statement reconciling Tenant’sShare of the actual Excess Operating Expenses. Said detailed statement shall beprovided on an annual basis within ninety (90) days following the end of eachcalendar year, or within thirty (30) days of the expiration of this Lease orTenant’s vacation of the Premises. If Tenant’s payments under this Paragraph4.5 (d) during the preceding year exceed Tenant’s Share as indicated on saidstatement, Tenant shall be entitled to credit the amount of such overpaymentagainst Tenant’s Share of Excess Operating Expenses next falling due. If Tenant’spayments under this Paragraph during said preceding year were less than Tenant’sShare, as indicated on said statement, Tenant shall pay to Landlord the amountof the deficiency within ten (10) days after delivery by Landlord to Tenant ofsaid statement.

(f) Tenant and itsrepresentatives will have the right to audit Landlord’s determination of theactual amount of Tenant’s Share of Excess Operating Expenses for any calendaryear and to inspect, copy and audit Landlord’s records, invoices and other datarelating to Operating Expenses for such year. This right must be exercised byTenant, if at all, by providing Landlord written notice of Tenant’s desire toconduct an audit within thirty (30) days of the date Tenant receives Landlord’sdetailed statement of annual actual Excess Operating Expenses. Such audit willtake place during regular business hours at a time and place reasonablyacceptable to Landlord. A copy of the audit shall be provided to Landlordimmediately upon completion of the same. If Landlord accepts the results of theaudit, and the audit report shows that Landlord overcharged Tenant for Tenant’sShare of Excess Operating Expenses, then Landlord will refund the excess amountto Tenant within 10 days after Landlord receives a copy of the audit report. Ifthe audit shows that Tenant underpaid for Tenant’s Share of Excess OperatingExpenses, then Tenant will pay the underpayment to Landlord within 10 daysafter Tenant receives a copy of the audit.

**5.****                         SecurityDeposit.** [Intentionally Omitted]

**6.****                         Taxation.**

**6.1Payment of Increases in Real Property Taxes as Additional Rent.**Tenant shall pay, as Additional Rent, Tenant’s Share of the all Real PropertyTaxes levied against the Premises which are attributable to periods occurringafter the Base Year and during the term of this Lease which are in excess ofthe Real Property Taxes incurred by Landlord which are attributable to the BaseYear, except as otherwise provided in this Lease. Such increases shall beconsidered Operating Expenses, and shall be paid by Tenant pursuant toParagraph 4.5, above.

**6.2Definition of “Real Property Tax”.** For the purpose of thisLease, “Real Property Taxes” means and includes all taxes, assessments(including, but not limited to, assessments for public improvements orbenefits), taxes based on vehicles utilizing parking areas, taxes based ormeasured by the rent paid, payable or received under this Lease, taxes on thevalue, use, or occupancy of the Premises, the Buildings and/or the Project,Environmental Surcharges, and all other governmental impositions, fees andcharges of every kind and nature whatsoever, whether or not customary or withinthe contemplation of the parties hereto and regardless of whether the sameshall be extraordinary or ordinary, general or special, unforeseen or foreseen,similar or dissimilar to any of the foregoing which, at any time during theLease Term, shall be applicable to the Premises, the Building and/or theProject, or assessed, levied or imposed upon the Premises, the Building and/orthe Project, or become due and payable and a lien or charge upon the Premises,the Building and/or the Project, or any part thereof, under or by virtue of anypresent or future laws, statutes, ordinances, regulations or other requirementsof any governmental authority whatsoever. The term “Environmental Surcharges”shall mean and include any and all expenses, taxes, charges or penaltiesimposed by the Federal Department of Energy, the Federal EnvironmentalProtection Agency, the Federal Clean Air Act, or any regulations promulgatedthereunder or any other local, state or federal governmental agency or entitynow or hereafter vested with the power to impose taxes, assessments, or othertypes of surcharges as a means of controlling or abating environmentalpollution or the use of energy. The term “Real Property Taxes” shall notinclude any federal, state or local net income, estate, or inheritance taximposed on Landlord. Notwithstanding the foregoing, however, the term “RealProperty Taxes” shall not include any increases in any Real Property Taxeswhich are attributable solely to a change in ownership of the Premises from theoriginal Landlord hereunder to a successor. The exclusion for increases in RealProperty Taxes resulting in a change in ownership of the Premises from theoriginal Landlord is applicable only to the first change in ownership from theoriginal Landlord hereunder, and shall not be applicable to any increasesresulting from subsequent changes in ownership which may occur thereafter.

**6.3Personal Property Taxes.**

(a) Tenant shall payprior to delinquency all taxes assessed against and levied upon trade fixtures,furnishings, equipment and all other personal property of Tenant contained inthe Premises or elsewhere. When possible, Tenant shall cause said tradefixtures, furnishings, equipment and all other personal property to be assessedand billed separately from the real property of Landlord.

(b)If any of Tenant’s personal property shall be assessed with Landlord’s realproperty, Tenant shall pay to Landlord the taxes attributable to Tenant withinten (10) days after receipt of a written statement setting forth the taxesapplicable to Tenant’s property.

**6.4Other Taxes.** Tenant shall, as Additional Rent, pay orreimburse Landlord for any tax based upon, allocable to, or measured by thearea of the Premises; or by the rent paid, payable or received under thisLease; any tax upon or with respect to the possession, leasing, operation,management, maintenance, alteration, repair, use or occupancy of the Premisesor any portion thereof; any privilege tax, excise tax, business and occupationtax, gross receipts tax, sales and/or use tax, water tax, sewer tax, employeetax, occupational license tax imposed upon Landlord or Tenant with respect tothe Premises; any tax upon this transaction or any document to which Tenant isa party creating or transferring an interest or an estate in the Premises.

**7.****                         Use**

**7.1 Use.**The Premises shall be used and occupied by Tenant only for the purpose as setforth in Paragraph 1.5, above, and for no other purpose whatsoever.

**7.2Suitability.** Upon completion of the Warm Shell, Tenant shallbe permitted to inspect the Premises and either accept the Premises or, ifthere are items which are not acceptable, shall list such items in writing toLandlord. If Tenant fails to provide a list of disapproved items prior to itsoccupancy of the Premises, Tenant shall be deemed to have accepted the Premisesand all tenant improvements to be constructed by Landlord as being completed inaccordance with the plans and specifications for such improvements and, ifTenant has provided Landlord with a list of disapproved items, Tenant shall bedeemed to have accepted the Premises and

6

----

all tenant improvements to be constructed by Landlordas being completed in accordance with the plans and specifications for suchimprovements subject only to such list of disapproved items. Tenantacknowledges that neither Landlord nor Landlord’s agent has made anyrepresentation, warranty, estimation or promise of any kind as to thesuitability of the Premises for the conduct of Tenant’s business, or the use oroccupancy which may be made thereof. Tenant hereby warrants to Landlord thatTenant (i) has made its own investigation and examination of all the relevantdata relating to or affecting the Premises; (ii) is relying solely on its ownjudgment in entering into this Lease; and, (iii) is satisfied that the Premiseswill be suitable for Tenant’s intended use and that the Building and Premiseswill meet all governmental requirements for such intended use, if constructedin the manner contemplated hereunder.

**7.3 UsesProhibited.**

(a) Tenant shall not door permit anything to be done in or about the Premises which will increase theexisting rate of insurance upon the Premises (unless Tenant shall pay anyincreased premium as a result of such use or acts) or cause the cancellation ofany insurance policy covering said Premises, the Building or the Project, norshall Tenant sell or permit to be kept, used or sold in or about said Premisesany articles which may be prohibited by a standard form policy of fireinsurance.

(b) Tenant shall not do orpermit anything to be done in or about the Premises which will in any wayobstruct or interfere with the rights of other tenants or occupants of anybuilding of which the Premises may be a part or injure or annoy them or use orallow the Premises to be used for any unlawful or objectionable purpose, norshall Tenant cause, maintain or permit any nuisance in, on or about thePremises. Tenant shall not commit or suffer to be committed any waste in orupon the Premises and Tenant shall keep the Premises in a clean, attractivecondition, free of any objectionable noises, odors, dust or debris.

(c)Tenant shall not use the Premises or permit anything to be in or about thePremises which will in any way conflict with or violate any law, statute,zoning restriction, ordinance, governmental rule, regulation, requirements nowin force or which may hereafter be enacted or promulgated. Tenant shall, at itssole cost and expense, promptly comply with all laws, statutes, ordinances andgovernmental rules, regulations or requirements now in force or which mayhereafter be in force and with requirements of any board of fire underwritersor other similar body now or hereafter constituted relating to or affecting thecondition, use or occupancy of the Premises, whether applicable due to Tenant’sparticular use of the Premises, applicable to business uses in general, orotherwise. Tenant shall also comply, at its sole cost, with the provisions ofall recorded documents affecting the Premises insofar as the same relate to oraffect the condition, use or occupancy of the Premises. Tenant shall obtain,prior to taking possession of the Premises, any permits, licenses or otherauthorizations required for the lawful operation of its business at thePremises. The judgment of any court of competent jurisdiction or the admissionof Tenant in any action against Tenant, whether Landlord be a party thereto ornot, that Tenant has violated any law, statute, ordinance or governmental rule,regulation, recorded document, or requirement, shall be conclusive of that factas between Landlord and Tenant. Tenant shall indemnify and hold Landlordharmless from and against any and all loss, expense, cost, damage, attorney’sfees, penalties or liability arising out of the failure of Tenant or Tenant’sagents or employees to comply with any applicable law, statute, ordinance,rule, regulation, order, requirement or recorded document.

(d)Tenant shall not store, park or operate any vehicles inside the Building, otherthan those operated by electricity.

**8.****                        ****Utilities, Waste Disposal and Janitorial**

**8.1Utilities.** Tenant shall contract and pay for all water, gas,heat, light, power, telephone and other utilities servicing the Premises to theextent they are separately metered, and shall use its best efforts to have suchutilities separately metered to the Premises. If any such services are notseparately metered or billed to Tenant, they shall constitute OperatingExpenses. The lack or shortage of any utilities or services described above dueto any cause whatsoever other than Landlord’s gross negligence or willfulmisconduct shall not affect any obligation of Tenant hereunder, and Tenantshall faithfully keep and observe all the terms, conditions and covenants ofthis Lease and pay all rentals due hereunder, all without diminution, credit ordeduction.

**8.2 Waste Disposal.** Tenant shall store its waste either inside the Premises or in theBuilding’s dumpsters located within outside trash enclosures. Tenant shall notstore, place or maintain any garbage, trash, rubbish, other refuse or Tenant’spersonal property in any area of the Common Area or exterior of the Premisesnot specifically designated therefor by Landlord at any time. Tenant, at itssole expense, shall be responsible to maintain and keep the area outside thedesignated trash enclosures and Common Area free of Tenant’s garbage, trash,rubbish, other refuse or Tenant’s personal property.

**8.3 No Landlord Representation Regarding Utilities.**Tenant acknowledges and agrees that Landlordhas made no representation whatsoever regarding the availability or quality ofany utility or other services to the Premises, the Building or the Project, andTenant agrees that Landlord shall not be liable in any manner whatsoever forany failure or interruption of any such services, or for any diminution in thequality or quantity thereof, whether such failure, interruption or diminutionoccurs due to acts or omissions of the service provider, Tenant, Landlord orany other party.

**8.4 Janitorial Services.** Landlord shall provide janitorial servicesfive (5) days per week except the date of observation of any nationally orlocally recognized holidays in accordance with practices for similarfirst-class buildings in San Diego County. The cost of any such janitorialservices shall be considered an Operating Cost pursuant to Paragraph 4.5,above.

**9.****                         Maintenanceand Repairs, Alterations and Additions**

**9.1 Landlord’s Obligations.** Subject to the provisions of Paragraph 14 andexcept for damage caused by a negligent or intentional act or omission ofTenant and Tenant’s agents, employees or invitees, Landlord, at Landlord’sexpense, shall keep in good order, condition and repair the foundations,exterior walls, the exterior roof, the roof membrane and other exteriorportions of the Premises, together with the Common Areas located at theProject. In addition, Landlord shall be repair any construction defects whichexist in the Building (excluding any tenant improvements installed by Tenant).The cost of such repairs shall constitute an Operating Expense under paragraph4.5, above, and Tenant shall pay Tenant’s Share of the cost thereof pursuant toparagraph 4.5, above. Landlord shall not, however, be obligated to maintain theinterior surface of exterior walls, ceiling or doors located within thePremises, nor shall Landlord be required to maintain, repair or replacewindows, doors, skylights or plate glass located on the Premises. Landlordshall have no obligation to make repairs under this Paragraph 9.1 until areasonable time after receipt of written notice of the need for such repairs.Landlord shall maintain, repair or patch the roof membrane (as an OperatingExpense), and Tenant shall pay

7

----

Tenant’s Share of the cost thereof, pursuant toParagraph 4.5 above. Tenant expressly waives the benefits of any statute(including, without limitation, the provisions of subsection 1 of Section 1932,Section 1941 and Section 1942 of the California Civil Code and any similar law,statute or ordinance now or hereafter in effect) which would otherwise affordTenant the right to make repairs at Landlord’s expense (or to deduct the costof such repairs from rent due hereunder) or to terminate this Lease because ofLandlord’s failure to keep the Premises in good order, condition and repair.

**9.2Tenant’s Obligations.**

(a)Subject to the provisions of Paragraphs 9.1 and 14, Tenant, at Tenant’sexpense, shall maintain in good order, condition and repair the Premises andevery part thereof, regardless of whether the damaged portion of the Premisesor the means of repairing the same are accessible to Tenant, including, but notlimited to floors, ceilings, windows, doors, skylights, interior walls, and theinterior surfaces of the exterior walls, interior plumbing, interiortelecommunications equipment and intra-building network cabling, interiorelectrical and lighting facilities and equipment including interior circuitbreakers.

(b)All glass in the Premises, both interior and exterior, is at the sole risk ofTenant, and any broken glass shall promptly be replaced by Tenant at Tenant’sexpense with glass of the same kind, size and quality according to the currentlocal code.

(c)In the event the Premises, the Building, the Project or any part thereof aredamaged due to an attempted burglary or forcible entry into Premises, Tenantshall be responsible for any ensuing damage to the Premises, the Building orthe Project.

(d)In the event Tenant fails to perform Tenant’s obligations under this Paragraph9, Landlord shall give Tenant notice to do such acts as are reasonably requiredto so maintain the Premises. If Tenant, within ten (10) days after notice fromLandlord, fails to commence to do the work and diligently prosecute it tocompletion, then Landlord shall have the right (but not the obligation), inaddition to any other rights and remedies available to Landlord under thisLease, at law or in equity, to do such acts and expend such funds at theexpense of Tenant as are reasonably required to perform such work. Any amountso expended by Landlord shall be paid by Tenant promptly after demand withinterest at the Permitted Rate from the date of such work until paid. Landlordshall have no liability to Tenant for any damage, inconvenience or interferencewith the use of the Premises by Tenant as a result of performing any such work.

(e)Upon the expiration or earlier termination of this Lease, Tenant shallsurrender the Premises in the same condition as received, broom clean, ordinarywear and tear and damage by fire, earthquake, act of God or the elements aloneexcepted. On the last day of the Lease Term or upon the sooner termination ofthe Lease, Tenant shall, to the reasonable satisfaction of Landlord surrenderthe Premises in good condition (and free of all Hazardous Materials used,generated or stored by Tenant and its agents, employees and contractors) withall originally painted interior walls and doors cleaned and repaired, allcarpets cleaned and in good condition, and all floors cleaned and waxed. Tenantfurther agrees to remove all Tenant’s personal property and trade fixtures fromthe Premises and repair any damage to the Premises caused by or in connectionwith the removal of any articles of personal property, business or tradefixtures, machinery, equipment or furniture, including without limitationthereto, repairing the floor and patching and painting the walls where requiredby Landlord to Landlord’s reasonable satisfaction. Tenant agrees that allTenant’s personal property and trade fixtures not removed shall be deemed to beabandoned by Tenant and may be removed by Landlord at Tenant’s expense. Tenantshall continue to pay Rent at the rate paid by Tenant prior to the terminationof this Lease until such time that the Premises are returned in a condition asrequired above; however, said payment of Rent does not constitute an extensionor renewal of this Lease nor does it constitute a month-to-month tenancy, itshall constitute immediate compensation for Tenant’s detention of the Premisesand does not preclude Landlord from obtaining additional monetary damages forTenant’s delay in surrendering the Premises, as set forth below. Tenant shallindemnify the Landlord against any loss or liability resulting from delay byTenant in so surrendering the Premises, including without limitation, anyclaims made by any succeeding tenant founded in whole or in part on such delay.

**9.3Alterations.**

(a) Tenant shall notconstruct any improvements or additions or otherwise alter, change or improvethe Premises in excess of Ten Thousand Dollars ($10,000) without Landlord’sprior written approval, and not until Landlord shall have first approved theplans and specifications therefor, which approvals shall not be unreasonablywithheld. Landlord’s approval of the plans, specifications and working drawingsfor Tenant’s alterations shall create no responsibility or liability on thepart of Landlord for their completeness, design sufficiency, or compliance withall laws, rules and regulations of governmental agencies or authorities. Allsuch approved alterations, or improvements shall be installed by Tenant atTenant’s expense using a licensed contractor first approved by Landlord incompliance with the approved plans and specifications therefor and in strictaccordance with all laws. All such construction shall be done in a good andworkmanlike manner using new materials of good quality. As a condition toconsenting to any leasehold improvement or alteration or change requested byTenant, the cost of which may exceed Twenty-five Thousand Dollars ($25,000),Landlord shall have the right to require Tenant to post a completion bond in anamount and in a form satisfactory to Landlord. In no event shall Tenant makeany structural changes to the Premises or make any changes to the Premiseswhich would weaken or impair the structural integrity of the Building or theroof membrane integrity of the Building. Tenant shall not commence constructionof any alterations, additions, or improvements (whether or not Landlord’sconsent to the improvements are required therefore) until (i) all requiredgovernmental approvals and permits shall have been obtained, (ii) allrequirements regarding insurance imposed by this Lease have been satisfied, and(iii) Tenant shall have given Landlord at least ten (10) days prior writtennotice of its intention to commence such construction. All alterations,additions and improvements constructed by Tenant shall remain the property ofTenant during the Lease Term but shall not be damaged, altered, or removed fromthe Premises. At the expiration or sooner termination of the Lease Term, allalterations, additions, or improvements shall be surrendered to Landlord as apart of the realty and shall then become Landlord’s property, and Landlordshall have no obligation to reimburse Tenant for all or any portion of thevalue or cost thereof; provided, however, that, notwithstanding the foregoing,Landlord may, at its option, require Tenant to remove any alterations,additions, or improvements in which case Tenant shall so remove suchalterations, additions or improvements prior to the expiration or soonertermination of the Lease Term, repair any damage to the Premises caused by suchremoval, and restore the Premises to the condition they were in at thecommencement of this Lease.

(b) Alterations Required by Law. If during the term of this Lease, anyalteration, addition or change of any sort, whether structural or otherwise toall or any portion of the Premises is required by law (including, but notlimited to, alterations from the original construction later required by theAmericans with Disabilities Act of 1990 or any amendments thereto or anyregulations propagated thereunder (collectively the “ADA”)) for any reasonwhatsoever, including, without limitation, because of (i) Tenant’s use oroccupancy of the Premises or change of use or occupancy of the Premises, (ii)Tenant’s application for any permit or governmental approval, (iii) Tenant’sconstruction or installation of any leasehold improvements or trade fixtures,(iv) any violation by Tenant of any law, ordinance, statute,

8

----

regulation or rule (including, without limitation, anyrequirement of the ADA) (collectively, “Laws”), (v) any special use of thePremises or any part thereof by Tenant or any subtenant or assignee of Tenant(including, but not limited to any use for a facility which constitutes, or ifopen to the public would generally constitute a “place of public accommodation”under the ADA requirements), or (vi) any special needs of the employees ofTenant or any assignee or subtenant of Tenant, then Tenant shall promptly makethe same at its sole cost and expense. Within ten (10) days after receipt,Tenant shall notify Landlord in writing and provide Landlord with copies of (i)any notices alleging any violation of any Law relating to the Premises orTenant’s occupancy or use of the Premises, including, without limitation, anynotices alleging a violation of or relating to the ADA to any portion of theProject or the Premises; (ii) any claims made or threatened in writingregarding non-compliance with the ADA or any Law relating to the Project or thePremises; or (iii) any governmental or regulatory actions or investigationsinstituted or threatened regarding non-compliance with the ADA or any Lawrelating to any portion of the Project or the Premises.

**10.****                  Entry byLandlord**

Landlord and Landlord’sagents shall have the right at reasonable times and upon reasonable priornotice to enter the Premises to inspect the same or to maintain or repair, makealterations or additions to the Premises or any portion thereof or to show thePremises to prospective purchasers, tenants or lenders. Landlord may, at anytime, place on or about the Premises any ordinary “for sale” signs; Landlordmay at any time during the last one hundred eighty (180) days of the term ofthe Lease place on or about the Premises any ordinary “for lease” signs;provided, however, that no such signs shall be placed in the windows of thePremises. Tenant hereby waives claim for abatement of rent or for damages forany injury or inconvenience to or interference with Tenant’s business, any lossof occupancy or quiet enjoyment of the Premises, and any other loss occasionedthereby.

**11.****                  Liens**

Tenant shall keep thePremises and any building of which the Premises are a part free from any liensarising out of work performed, materials furnished or obligations incurred byTenant and shall indemnify, hold harmless and defend Landlord from any liensand encumbrances arising out of any work performed or materials furnished to orat the direction of Tenant. In the event that Tenant shall not, within twenty(20) days following the imposition of any such liens, cause such lien to bereleased of record by payment or posting of a proper bond, Landlord shall have,in addition to all other remedies provided herein and by law, the right, but notthe obligation, to cause the same to be released by such means as it shall deemproper, including payment of the claim giving rise to such lien. All such sumspaid by Landlord and all expenses incurred by it in connection therewithincluding, without limitation, attorneys’ fees and costs, plus anadministrative fee equal to ten percent (10%) of all such amounts, shall bepayable to Landlord by Tenant on demand with interest at the Permitted Rate (asdefined in Paragraph 20.17 below). Landlord shall have the right at all timesto post and keep posted on the Premises any notices permitted or required bylaw, or which Landlord shall deem proper, for the protection of Landlord andthe Premises, and any other party having an interest therein, from mechanics’ andmaterial person’s liens and Tenant shall give to Landlord at least ten (10)business days prior written notice of the expected date of commencement of anywork relating to alterations, improvements or additions to the Premises.

**12.****                  Indemnity**

**12.1Indemnity.** Tenant agrees to indemnify, protect and defendLandlord, Landlord’s agents, employees, members, officers, directors andshareholders (collectively, Landlord’s “Agents”), and any creditors or lendersof Landlord (collectively, Landlord’s “Lenders”) against and hold Landlord andLandlord’s Agents and Lenders harmless from any and all claims, causes ofaction, judgments, obligations or liabilities and all reasonable expensesincurred in investigating or resisting the same (including, without limitation,attorneys’ fees), on account of, or arising out of (i) the Tenant’s operation,maintenance, use or occupancy of the Premises, (ii) any bodily injury, death orproperty damage occurring in or about the Premises, (iii) any act, omission orneglect of Tenant or its agents, employees, customers, vendors, contractors orinvitees (collectively, Tenant’s “Agents”), (iv) any breach or default in theperformance in a timely manner of any obligation on Tenant’s part to beperformed under this Lease; or (v) any other cause related to or occurring onthe Premises which is in any way related to Tenant’s operation, maintenance,use or occupancy of the Premises. In the event any legal proceeding is broughtagainst Landlord by reason of any such Claim, Tenant upon notice from Landlordshall defend the same at Tenant’s expense by counsel satisfactory to Landlord.Tenant, as a material part of the consideration to Landlord, hereby assumes allrisk of damage to property or injury to persons, in, upon or about the Premisesarising from any cause which is in any way related to Tenant’s operation,maintenance, use or occupancy of the Premises and Tenant hereby waives allclaims in respect thereof against Landlord. The provisions of this Paragraph12.1 shall survive termination of the Lease with respect to any default, claim,liability, cost, damage, injury or death occurring or accruing prior to suchtermination, or otherwise during Tenant’s use or occupancy of the Premises, orany part thereof.

**12.2 Exemption of Landlord from Liability.** Landlord shall not be liable for injury andTenant waives all claims against Landlord including, without limitation, claimsrelated to Tenant’s business or loss of income therefrom or for damage whichmay be sustained by the person, goods, wares, merchandise or property ofTenant, its employees, invitees, customers, agents or contractors or any otherperson in or about the Premises, caused by or resulting from fire, steam,electricity, gas, water or rain, which may leak or flow from or into any part ofthe Premises, or from the breakage, leakage, obstruction or other defects ofthe pipes, sprinklers, wires, appliances, plumbing, air conditioning orlighting fixtures of the same, whether the said damage or injury results fromconditions arising upon the Premises or upon other portions of the Building, orfrom other sources or places and regardless of whether the cause of such damageor injury or the means of repairing the same is inaccessible to Tenant.Landlord shall not be liable for any damages arising from any act or neglect ofany other tenant, if any, of the Building or of the Project.

**12.3 Landlord Gross Negligence or Willful Misconduct.** Notwithstanding the foregoing, nothing inthis Paragraph 12 shall be construed to release Landlord from any liabilitywhich is solely the result of the Landlord’s gross negligence, willfulmisconduct or willful violation of law.

**13.****                  Insurance**

**13.1Tenant’s Insurance.** Tenant shall, at its own expense,maintain in full force and effect during the Lease Term the followinginsurance:

9

----

(a) Tenant shall maintaina policy or policies of comprehensive general liability insurance (or “commercial”general liability insurance, if such policy is substantially similar to whatwas previously known as comprehensive general liability insurance), includingfire and property damage carried with a company or companies satisfactory toLandlord, which will insure Tenant and Landlord (and such others as are timelydesignated by Landlord) against liability for personal injury, bodily injury,death, and damage to property (including but not limited to, Tenant’s personalproperty, inventory, trade fixtures and improvements constructed by Tenantwithin the Premises with coverage for the full actual replacement costthereof), occurring in or about, or resulting from any occurrence in or about,the Premises or use or occupancy of the Premises (and Tenant’s operations onthe Premises) or arising out of Tenant’s or its agents’, employees’, orrepresentatives’ use of the Building, Common Areas or Project with combinedsingle limit coverage of not less than three million dollars ($3,000,000.00).Such comprehensive (or commercial) general liability insurance shall beextended to include a “blanket contractual liability” endorsement, ifreasonably available, insuring Tenant’s performance of Tenant’s obligation toindemnify Landlord contained in Paragraph 12.1 and all of the other broadenedliability features normally contained in an extended liability endorsement. IfLandlord’s lender, insurance advisor or counsel reasonably determines at anytime that the amount of such coverage is not adequate (such determination to bemade not more frequently than every three (3) years), Tenant shall increasesuch coverage to such amount as Landlord’s lender, insurance advisor or counselreasonably deems adequate. The limits of such insurance shall not limit theliability of Tenant. Tenant shall deliver to Landlord, prior to possession, andat least thirty (30) days prior to the expiration of any policy, a certificate ofinsurance evidencing the existence of the policy required hereunder and suchcertificate shall certify that the policy (i) names Landlord as additionalinsured, (ii) shall not be canceled or reduced in coverage without thirty (30)days prior written notice to Landlord, (iii) insures performance of theindemnity set forth in Paragraphs 12.1, above; (iv) provides coverage which isprimary and not contributing with and not in excess of coverage which Landlordmay carry; and (v) contains a cross-liability endorsement providing coveragefor claims between or among insureds. In the event Tenant fails to procure andmaintain such insurance, Landlord may (but shall not be required to) procurethe same at Tenant’s expense after ten (10) days prior written notice. No suchpolicy shall be cancelable or subject to reduction of coverage or othermodification except after thirty (30) days prior written notice to Landlord bythe insurer. All such policies shall be written as primary policies, notcontributing with and not in excess of coverage which Landlord may carry.Tenant shall have the right to provide such insurance coverage pursuant toblanket policies obtained by Tenant provided such blanket policies expresslyafford coverage to the Premises and to Tenant as required by this lease.

(b)Tenant, at its sole cost, shall procure and maintain in force during the LeaseTerm, “all-risk” property insurance, including vandalism, sprinkler damage, andmalicious mischief on all leasehold improvements installed in the Premises byTenant at its expense and all equipment, trade fixtures and personal propertylocated on, in or about the Premises. Such insurance shall be an amount equalto the full replacement cost of the aggregate of the foregoing.

(c)The policies required to be maintained by Tenant pursuant to subparagraphs (a)and (b) above shall be with companies, on forms, with deductible amounts (ifany) and loss payable clauses reasonably satisfactory to Landlord and shallinclude Landlord and the beneficiary of any deed of trust encumbering thePremises as additional insureds, and shall provide that such parties may,although additional insureds, recover for any loss suffered by Tenant’snegligence.

**13.2 Property Insurance.** Landlord shall obtain and keep in forceduring the term of this Lease a policy or policies of insurance covering lossor damage to the Premises, the Building and all other buildings located in theProject, in such amounts and with such coverage and loss limitations asLandlord shall reasonably determine, which shall include coverage for the fullreplacement cost thereof, and shall include protection against those perilsincluded within the classification of “all risk” insurance, a policy of rentalincome insurance in the amount of up to 100% of 12 months Rent (including,without limitation, sums payable as Additional Rent) plus, at Landlord’soption, flood insurance and earthquake insurance and any other coverage whichmay be required from time to time by Landlord’s Lender; provided, however, thatif such additional coverage is not originally included in the insurance costsfor the Base Year, the initial premiums for such additional insurance coverageshall be added to the Base Year insurance amounts in the first year suchcoverage is implemented. Tenant shall have no interest in nor any right to theproceeds of any insurance procured by Landlord on the Premises, the Building orthe Project. Landlord shall not be required to cause such insurance to coverany of Tenant’s personal property, inventory, trade fixtures or anymodifications, alterations or improvements made or constructed by Tenant to orwithin the Premises. During the term of this Lease, Tenant shall pay toLandlord Tenant’s Share (as defined in Paragraph 4.5(a) above) of the increasein the amount of any premium for the insurance maintained by Landlord over thepremiums paid by Landlord during the Base Year under this Paragraph 13.2,including, without limitation, any increase in insurance premiums due to aLender’s requirements or due to an increase in value. Such amounts shall beincluded as an Operating Cost and shall be payable pursuant to Paragraph 4.5,above.

**13.3 Mutual Waiver of Subrogation.** Tenant and Landlord hereby mutually waivetheir respective rights of recovery against each other of any loss of or damageto the property of either party, to the extent such loss or damage is coveredby any applicable insurance policy. Each party shall obtain any specialendorsements, if required by the insurer, whereby the insurer waives its rightof subrogation against the other party hereto. The provisions of thisSubparagraph 13.3 shall not apply in those instances in which the waiver ofsubrogation would cause either party’s insurance coverage to be voided orotherwise made uncollectible; or, if any such insurance policy cannot beobtained with such a waiver of subrogation, then the party obtaining suchinsurance shall notify the other party of that fact and thereon shall berelieved of the obligation to obtain such a waiver of subrogation rights from theinsurer with respect to the particular insurance involved.

**14.****                  Damage orDestruction**

**14.1Partial Damage–Insured.** Subject to the provisions ofParagraphs 12 and 13 above, and if at any time during the term of this Leasethere is partial damage to the Premises that is not caused by the fault,omission, or negligence of Tenant or Tenant’s Agents, which is covered under aninsurance policy being maintained pursuant to Paragraph 13.2, then Landlordshall repair such damage as soon as reasonably possible and this Lease shallcontinue in full force and effect. If there is a monetary deductible applicableto the aforementioned insurance policy coverage which is required to be paidprior to coverage of such casualty or damage, it shall be the soleresponsibility for Tenant to reimburse Landlord for said monetary deductibleunless the casualty or damage is not caused by the fault, omission ornegligence of Tenant or Tenant’s Agents, in which case such monetary deductibleshall be included in Operating Costs. Tenant shall reimburse Landlord withinthirty (30) days of receipt by Tenant of a copy of the monetary deductiblestatement provided such statement is accompanied by documentation reasonablysubstantiating the amount expended and its applicability to the deductible. Inthe event of damage to the Premises or the Building by fire or other causesresulting from fault, omission or negligence of Tenant, its agents, employees,contractors, or invitees, such damage shall be promptly reported to Landlordand shall be repaired by and at expense of

10

----

Tenant under direction and supervision of Landlord andthere shall be no abatement of rent during the period of repair. Tenant shallindemnify and hold harmless Landlord from and against any damages, injuries,losses, claims, liabilities or causes of action arising out of or relating tothe repair or restoration of the Premises or Building by Tenant.Notwithstanding the foregoing, the indemnity obligations provided for in theimmediately preceding sentence shall terminate one year following thecompletion of all such repair or restorations of the Premises or Building byTenant as long as Tenant assigns to Landlord any and all warranties and causesof action it may have on account of such repair or restoration including,without limitation, any express warranties and any claims for either latent orpatent construction defects. Nothing herein shall be construed to require anyaction or agreement by Tenant that negates any insurance coverage potentiallyapplicable to the damage or to Tenant’s potential liability therefore.

**14.2Partial Damage–Uninsured.** In the event the improvements onthe Premises are damaged, except by a negligent or willful act or omission ofTenant or any of Tenant’s Agents, or from an attempted burglary or forcible entrypursuant to Paragraph 9.2 (c), by any casualty not covered under an insurancepolicy being maintained pursuant to Paragraph 13.2, then Landlord may, atLandlord’s option, either (a) repair such damage as soon as reasonably possibleat Landlord’s expense, in which event this Lease shall continue in full forceand effect or (b) give written notice to Tenant within ninety (90) days afterthe date of occurrence of such damage of Landlord’s intention to cancel andterminate this Lease as of the date of the occurrence of the damage. In theevent Landlord elects to terminate this Lease pursuant to this Paragraph 14.2,Tenant shall have the right within ten (10) days of receipt of the requirednotice to notify Landlord of Tenant’s election to repair such damage, at Tenant’ssole cost and expense, in which event this Lease shall continue in full forceand effect, and Tenant shall proceed to make such repairs as soon as reasonablypossible (or Landlord may elect, in itssole discretion, to require Tenant to pay to Landlord within ten (10) daysfollowing written request therefor, or furnish evidence reasonably satisfactoryto Landlord of Tenant’s ability to fund that portion of the cost of such repairor restoration which is not covered by insurance proceeds, in which eventLandlord shall proceed to make such repairs). If Tenant does not give suchnotice within the ten (10) day period, this Lease shall be canceled andterminated as of the date of the occurrence of such damage. All insuranceproceeds available from the fire and property damage insurance carried byLandlord pursuant to Paragraph 13.2 shall be paid to and become the property ofLandlord. If this Lease is not terminated under this Paragraph 14.2, then uponreceipt of the insurance proceeds (if the loss is covered by insurance) and theissuance of all necessary governmental permits, Landlord shall commence anddiligently prosecute to completion the restoration of the leased Premises, tothe extent then allowed by law, to substantially the same condition in whichthe leased Premises were in immediately prior to such damage. Landlord’sobligation to restore shall be limited to the building and interiorimprovements constructed by Landlord as they existed as of the CommencementDate. Landlord’s obligation to repair or restore the Premises shall not,however, include restoration of Tenant’s trade fixtures, equipment,merchandise, or any improvements alterations or additions made by Tenant to thePremises.

**14.3 Total Destruction.** If the Premises are totally destroyed duringthe term of this Lease from any cause whether or not covered by the insurancerequired under Paragraph 13.2 (including any destruction required by anyauthorized public authority), this Lease, at Landlord’s option, mayautomatically terminate as of the date of such total destruction. If this Leaseis not terminated pursuant to this Paragraph 14.3, Landlord shall immediatelybegin the process of reconstructing the Premises and all rent for the Premisesshall be abated from the date of total destruction to the date the Premises areready and available for reoccupancy by Tenant.

**14.4 Damage Near End of the Term.** If the Premises are partially destroyed ordamaged during the last six (6) months of the term of this Lease, and Tenanthas not exercised an option to extend the Term beyond the succeeding six (6)month period, Landlord may, at Landlord’s option, cancel and terminate thisLease as of the date of occurrence of such damage by giving written notice toTenant of Landlord’s election to do so within thirty (30) days after the dateof occurrence of such damage.

**14.5 Landlord’s Obligations.**The Landlord shall not be required to repairany injury or damage by fire or other cause, or to make any restoration orreplacement of any paneling, decorations, office fixtures, partitions,railings, ceilings, floor covering, equipment, machinery or fixtures or anyother improvements or property installed in the Premises by Tenant or at thedirect or indirect expense of Tenant. Tenant shall be required to restore orreplace the same in the event of damage.

**14.6****Abatement of Rent; Tenant’s Remedies.**

(a) If the Premises arepartially destroyed or damaged and Landlord or Tenant repairs them pursuant tothis Lease, the rent payable hereunder for the period during which such damageand repair continues shall be abated in proportion to the extent to whichTenant’s use of the Premises is impaired; provided, however, there shall be noabatement of rent if the damage or destruction was caused by the fault,omission, negligence or willful misconduct of Tenant or any of its Agents.Except for abatement of rent, if any, Tenant shall have no claim againstLandlord for any damage suffered by reason of any such damage, destruction orrestoration.

(b)If Landlord shall be obligated to repair or restore the Premises under thisParagraph 14 and shall not commence such repair or restoration within ninety(90) days after such obligation shall accrue, Tenant, at Tenant’s option, maycancel and terminate this Lease by written notice to Landlord at any time priorto the commencement of such repair or restoration. In such event, the Leaseshall terminate as of the date of such notice.

**14.7 Termination–Advance Payments.** Upon termination of this Lease pursuant tothis Paragraph 14, an equitable adjustment shall be made concerning advancerent and any advance payments made by Tenant to Landlord.

**15.****                  Condemnation**

**15.1 Definition of Terms.** For the purposes of this Lease, the term (1) “Taking”means a taking of the Premises or damage to the Premises related to theexercise of the power to eminent domain and includes a voluntary conveyance inlieu of court proceedings, to any agency, authority, public utility, person orcorporate entity empowered to condemn property; (2) “Total Taking” means thetaking of the entire Premises or so much of the Premises as to prevent orsubstantially impair the use thereof by Tenant for the uses herein specified;(3) “Partial Taking” means the taking of only a portion of the Premises whichdoes not constitute a Total Taking; (4) “Date of Taking” means the date uponwhich the title to the Premises, or a portion thereof, passes to and vests inthe condemnor or the effective date of any order for possession if issued priorto the date title vests in the condemnor, and (5) “Award” means the amount ofany award made, consideration paid, or damages ordered as a result of a Taking.

11

----

**15.2Rights.** The parties agree that in the event of a Taking allrights between them or in and to an Award shall be as set forth herein andTenant shall have no right to any Award except as set forth herein.

**15.3**TotalTaking.** In the eventof a Total Taking during the term hereof; (1) the rights of Tenant under theLease and the leasehold estate of Tenant in and to the Premises shall cease andbe terminated as of the date of Taking; (2) Landlord shall refund to Tenant anyprepaid rent; (3) Tenant shall pay to Landlord any rent or charges due Landlordunder the Lease, each prorated as of the Date of Taking; (4) Tenant shallreceive from the Award those portions of the Award specifically madeattributable to trade fixtures of Tenant; and (5) the remainder of the Awardshall be paid to and be the property of Landlord.

**15.4 Partial Taking.** In the event of a Partial Taking during the term hereof; (1) the rightsof Tenant under the Lease and the leasehold estate of Tenant in and to theportion of the Premises taken shall cease and terminate as of the Date ofTaking; (2) from and after the Date of Taking the monthly installment of rentshall be an amount equal to the product obtained by multiplying the monthlyinstallment of rent immediately prior to the Taking by the quotient obtained bydividing the number of square feet of floor area contained in the Premisesafter the Taking by the number of square feet of floor area contained in thePremises prior to the Taking; (3) Tenant shall receive from the Award theportions of the Award specifically made attributable to trade fixtures ofTenant, and (4) the remainder of the Award shall be paid to and be the propertyof Landlord. Each party waives the provisions of California Code of CivilProcedure Section 1265.130 allowing either party to petition the Superior Courtto terminate this Lease in the event of a Partial Taking.

**16.****                  Assignment &Subletting**

**16.1 Landlord’s Consent Required.** Tenant’s interest in this Lease is notassignable, by operation of law or otherwise, nor shall Tenant have the rightto sublet the Premises, transfer any interest of Tenant therein or permit anyuse of the Premises by another party, without the prior written consent ofLandlord to each such assignment, subletting, transfer or use, which consentLandlord agrees not to withhold unreasonably subject to the provisions ofSubparagraphs 16.3 and 16.4, below. A consent to one assignment, subletting,occupancy or use by another party shall not be deemed to be a consent to anysubsequent assignment, subletting, occupancy or use by another party. Anyassignment or subletting without such consent shall be void and shall, at theoption of Landlord, constitute an incurable default which shall permitLandlord, in addition to all other rights and remedies available under thisLease, at law and in equity, to terminate this Lease.

Landlord’swaiver or consent to any assignment or subletting hereunder shall not relieveTenant from any obligation under this Lease unless the consent shall soprovide.

IfTenant is a corporation, association, limited liability company, partnership orother legal entity, any dissolution, merger, consolidation or otherreorganization of Tenant, or the sale, transfer or issuance of interests inTenant such that, following such sale, transfer or issuance, those in controlof Tenant as of the Commencement Date are no longer in control of Tenant, orthe sale or other transfer of fifty percent (50%) of the value of the assets ofTenant, shall be deemed a voluntary assignment pursuant to the terms hereof.

**16.2 Transferee Information Required.** If Tenant desires to assign its interest inthis Lease or sublet the Premises or any part thereof, or transfer any interestof Tenant therein, or permit the use of the Premises by another party(hereinafter collectively referred to as a “Transfer”), Tenant shall giveLandlord at least thirty (30) business days prior written notice of theproposed Transfer and of the name and legal composition of the proposedtransferee, financial statements and Federal and State income tax returns ofthe proposed transferee for the past three (3) years, the nature of theproposed use of the Premises by the proposed transferee (including a list ofthe type and quantities of all Hazardous Materials to be used by the transfereeon the Premises), names and addresses of any and all lessors from whom theproposed transferee has leased real property during the past five (5) years, theterms of the proposed Transfer, and such other reasonably pertinent informationas may be requested by Landlord, all in sufficient detail to enable Landlord toevaluate the proposed Transfer and the prospective transferee. Failure toprovide such information shall be reasonable grounds for Landlord to withholdconsent to the proposed assignment or sublease.

**16.3 Landlord’s Recapture Rights.** In the event Tenant provides Landlord of aTransfer notice pursuant to Paragraph 16.2, above, Landlord may, in itsdiscretion, elect to terminate this Lease with respect to the portion of thePremises described in the Transfer notice, which termination shall be effectiveas of the proposed effective date of the proposed Transfer. Upon suchtermination, Tenant shall be released from any further liability accruing aftersuch termination date with respect to that portion of the Premises described inthe Transfer notice except for obligations of Tenant which survive terminationof this Lease. Such termination shall be effected by Landlord giving Tenantwritten notice of such termination within thirty (30) days after receipt byLandlord of Tenant’s notice of intent to Transfer as provided above. IfLandlord makes such election to terminate this Lease, Tenant shall surrender theaffected portion of Premises, in accordance with Paragraph 9.2(e), on or beforethe effective termination date. If Landlord does not elect to terminate thisLease pursuant hereto, then Tenant may, subject to receipt of Landlord’sconsent as required under Paragraph 16.1, above, Transfer the Premises to thetransferee and under the terms and conditions specified in the Transfer notice.If any change occurs in the identity of the transferee or the terms andconditions of the Transfer of the Premises, or if the Transfer is not completedwithin ninety (90) days of the date Landlord grants its consent thereto, thenthe Transfer shall be considered a new Transfer subject to all provisions ofthis Paragraph 16.

**16.4 Consent.** As a condition for granting its consent to any subletting orassignment, Landlord may require any or all of the following:

(a)Tenant shall provide Landlord with adequate evidence that the proposed assigneeor sublessee is creditworthy and experienced in the business for which thePremises are let hereunder, and that he, she, it or they can satisfy theconditions of this Lease including, but not limited to, the payment of any andall additional costs incurred by Landlord for maintenance and repair as aresult of any change in the nature of the occupancy caused by such assignmentor sublease.

(b)The assignment or sublease shall be on the same terms set forth in the Tenant’swritten notice given to Landlord.

(c)Tenant, or the proposed assignee or sublessee, agrees to pay to Landlord, upondemand, as Additional Rent, a sum equal to the additional costs, if any,reasonably incurred by Landlord for maintenance and repair as a result of anychange in the nature of the occupancy caused by such assignment or subletting.

(d)The occupancy resulting from such assignment or subletting shall conform withthe use restrictions set forth in this Lease, with the proposed use by the newTenant or occupant being subject to the reasonable consent of Landlord;

            (e) No assignment or sublease shallbe valid, and no assignee or sublessee shall take possession of the Premisesuntil an executed counterpart of such assignment or sublease has been deliveredto Landlord, containing a copy of this Lease, and expressly providing that theassignee or sublessee has expressly assumed all obligations under this Lease;that Tenant and assignee or sublessee are jointly and severally liable for thepayment of all sums due under this Lease and the

12

----

performance and observance of all of the agreements,covenants, conditions and provisions to be performed and observed by Tenantunder this Lease as and when performance and observances are due; and thatLandlord shall have the right to enforce such agreements, covenants, conditionsand provisions directly against Tenant and assignee or sublessee, and each ofthem.

(f)Any further assignment or subletting by such assignee or sublessee shall be andshall remain subject to the terms of this Lease.

(g) Landlord may requirethat the assignee or sublessee pay directly to Landlord, on a monthly basis,all monies due to Tenant from said assignee or sublessee. Any differencebetween the amount due Landlord under this Lease and the amount paid toLandlord by said assignee or sublessee shall be retained by Landlord asAdditional Rent.

(h)Landlord may require Tenant, or the proposed assignee or sublessee, to makesuch improvements to the Premises as may be required to bring the Premises tothe same standard and appearance as the remainder of the Building and/or theProject. Such improvements will be determined in Landlord’s reasonable judgmentand will be at the expense of Tenant, or the proposed assignee or sublessee.

**16.5 Release of Tenant.** Landlord’s waiver or consent to anyassignment or subletting shall not release Tenant from any obligations underthis Lease, unless the consent specifically so provides.

**16.6 Corporate or Limited Liability Company Transfers.** The provisions of this paragraph 16.6 shallapply to any Transfer of this Lease from Tenant to any corporation or limitedliability company, including, without limitation, any corporation or limitedliability company of which Tenant is the sole shareholder or member. IfLandlord determines not to consent to the proposed transaction because of thefinancial capacity of the proposed transferee, then Landlord, instead ofdisapproving the transaction, may condition its consent to a transfer to acorporation or limited liability company upon the personal guarantee of thisLease by the directors, shareholders and/or members of any corporate or limitedliability company Tenant.

**16.7 Payment of Landlord’s Expenses.** If Tenant assigns or sublets the Premises, orrequests the consent of Landlord for any act that Tenant proposes to doincluding, without limitation, the assignment or subletting of the Premises,then Tenant shall pay Landlord’s reasonable attorneys’, engineers’, architects’and accountants’ fees incurred in connection therewith, whether or not suchconsent is granted.

**17.      Subordination.**The following provisions shall govern the relationship of this Lease to anyunderlying lease, mortgage or deed of trust which now or hereafter affects thePremises or Landlord’s interest or estate therein and any renewal,modification, consolidation, replacement, or extension thereof (a “SecurityInstrument”).

**17.1 Priority.** This Lease is subject and subordinate to all Security Instrumentsexisting as of the Commencement Date. However, if any Lender so requires, thisLease shall become prior and superior to any such Security Instrument.

**17.2 Subsequent Security Instruments.** At Landlord’s election, this Lease shallbecome subject and subordinate to any Security Instrument created after theCommencement Date, which shall occur automatically upon Landlord’s providingwritten notice to Tenant thereof. Notwithstanding such subordination, Tenant’sright to quiet possession of the Premises shall not be disturbed so long asTenant is not in default and performs all of its obligations under this Lease,unless this Lease is otherwise terminated pursuant to its terms.

**17.3 Documents.** Tenant shall execute any reasonable document or instrument required byLandlord or any Lender to make this Lease either prior or subordinate to aSecurity Instrument, which may include such other matters as the Lendercustomarily requires in connection with such agreements, including provisionsthat the Lender, if it succeeds to the interest of Landlord under this Lease,shall not be (i) liable for any act or omission of any prior landlord(including Landlord), (ii) subject to any offsets or difference which Tenantmay have against any prior landlord (including Landlord), (iii) bound by anyRent or Additional Rent paid more than one (1) month in advance of the date dueunder this Lease, (iv) liable for any defaults on the part of Landlordoccurring prior to the time that Lender takes possession of the Premises inconnection with enforcement of its Security Instrument, (v) liable for thereturn of any security deposit unless such deposit has been delivered toLender, and (vi) bound by any agreement or modification of the Lease madewithout the prior written consent of the Lender. Tenant’s failure to executeany such documents reasonably requested by Landlord or Landlord’s Lender shallconstitute a default of this Lease by Tenant.

**17.4 Tenant’s Attornment.** Tenant shall attorn (1) to any purchase ofthe Premises at any foreclosure sale or private sale conducted pursuant to anySecurity Instrument encumbering the Premises; (2) to any grantee or transfereedesignated in any deed given in lieu of foreclosure; or (3) to the lessor underany underlying ground lease should such ground lease be terminated. Any suchattornment shall be subject to such purchaser, transferee or lessor agreeingthat, so long as Tenant is not in default hereunder, such purchaser, transfereeor lessor shall recognize Tenant’s rights under this Lease.

**18.****                  Default;Remedies**

**18.1 Default.** The occurrence of any of the following shall constitute a materialdefault and breach of this Lease by Tenant:

(a)Default in payment when due of any installment of Base Rent, Additional Rent orother payment required to be made by Tenant hereunder, where such default shallnot have been cured within three (3) days after written notice of such defaultis given to Tenant;

(b)The abandonment or vacation of the Premises by Tenant (failure to occupy andoperate the Premises for ten (10) consecutive days shall be deemed anabandonment and vacation unless repair work is being performed) where suchabandonment or vacation shall have continued for fifteen (15) days afterwritten notice thereof by Landlord to Tenant;

(c)A failure by Tenant to observe and perform any other provision of the Lease tobe observed or performed by Tenant, where such failure shall have continued forthirty (30) days after written notice thereof by Landlord to Tenant;

(d) Tenant or any guarantor of Tenant’s obligations hereunder shallcommence any case, proceeding or other action seeking reorganization,arrangement, adjustment, liquidation, dissolution or composition of it or itsdebts under any law relating to bankruptcy, insolvency, reorganization, orrelief of debtors, or seek appointment of a receiver, trustee, custodian, orother similar official for it or for all or any substantial part of itsproperty, and such action shall not be dismissed within fifteen (15) days afterwritten notice thereof by Landlord to Tenant;

13

----

(e) Tenant or any suchguarantor shall take any corporate action to authorize any of the actions setforth in Clause (d) above, and does not rescind such resolution or authorizationwithin fifteen (15) days after written notice to rescind has been given byLandlord to Tenant;

(f)Any case, proceeding or other action against Tenant or any guarantor of Tenant’sobligations hereunder shall be commenced seeking to have an order for reliefentered against it as debtor, or seeking reorganization, arrangement,adjustment, liquidation, dissolution or composition of it or its debts underany law relating to bankruptcy, insolvency, reorganization or relief ofdebtors, or seeking appointment of a receiver, trustee, custodian or othersimilar official for it or for all or any substantial part of its property, andsuch case, proceeding or other action (i) results in the entry of an order forrelief against it which is not fully stayed within seven (7) business daysafter the entry thereof or (ii) is not dismissed within forty-five (45) days offiling such case, action or proceeding.

(g)Levy of a writ of attachment or execution of Tenant’s interest under this Leasewhere such writ continues for a period of fifteen (15) days after issuance;

(h)An assignment, sublease or other transfer of this Lease or Tenant’s interest inthe Premises or portion thereof contrary to the provisions of Paragraph 16, andsuch assignment, sublease or other transfer is not rescinded within fifteen(15) days of Landlord giving written notice to Tenant to rescind suchtransaction; or

(i)Execution of an assignment for the benefit of creditors of substantially allassets of Tenant available by law for the satisfaction of judgment creditor.

**18.2Remedies.** In the event of any such material default or breachby Tenant, Landlord may at any time thereafter, with or without notice anddemand and without limiting Landlord inthe exercise of any right or remedy at law or in equity which Landlord may haveby reason of such default or breach:

(a)Maintain this Lease in full force and effect and recover the rent and othermonetary charges as they become due, without terminating Tenant’s right topossession, irrespective or whether Tenant shall have abandoned the Premises.In the event Landlord elects to not terminate the Lease, Landlord shall havethe right to enter the Premises and to re-let the Premises, or any partthereof, at such rent and upon such conditions and for such a term as Landlordshall determine, for Tenant’s account, and to do all acts necessary to maintainor preserve the Premises as Landlord deems reasonable and necessary withoutbeing deemed to have elected to terminate the Lease including removal of allpersons and property from the Premises; such property may be removed and storedin a public warehouse or elsewhere at the cost of and for the account ofTenant. Tenant shall be liable immediately to Landlord for all costs Landlordincurs in reletting the Premises, including, without limitation, brokers’commissions, expenses of remodeling the Premises required by the reletting,attorneys’ fees incurred in negotiating and drafting the documentation relatedto the reletting, and like costs. Reletting can be for a period shorter orlonger than the remaining term of this Lease. Tenant shall pay to Landlord anyamounts due under this Lease on the dates when such amounts are due, less therent Landlord receives from any reletting. No act by Landlord allowed by thisparagraph shall terminate this Lease unless Landlord notifies Tenant thatLandlord elects to terminate this Lease. After Tenant’s default and for as longas Landlord does not terminate Tenant’s right to possession of the Premises, ifTenant obtains Landlord’s consent, Tenant shall have the right to assign orsublet its interest in this Lease, but Tenant shall not be released fromliability. Any such assignment or subletting shall be subject to the provisionsof Paragraph 16, above. Notwithstanding that Landlord fails to elect toterminate the Lease initially, Landlord at any time during the Term of thisLease may elect to terminate this Lease by virtue of such previous default ofTenant.

(b)Terminate this Lease by giving Tenant written notice of termination or otherlawful means. On the giving of the notice, all of tenant’s rights in thePremises and the Building and Project shall terminate. Upon the giving of thenotice of termination. Tenant shall surrender and vacate the Premises in thecondition required by Paragraph 9.2(e). and Landlord may re-enter and takepossession of the Premises and all the remaining improvements or property andeject Tenant or any of Tenant’s subtenants, assignees or the person or personsclaiming any right under or through Tenant or eject some and not others oreject none. This Lease may also be terminated by a judgment specificallyproviding for termination. Any termination under this paragraph shall notrelease Tenant from the payment of any sum then due Landlord or from any claimfor damages or rent previously accrued or then accruing against Tenant. In noevent shall any one or more of the following actions by Landlord constitute atermination of this Lease:

(i)             maintenanceand preservation of the Premises;

(ii)            efforts to relet the Premises;

(iii)           appointment of a receiverin order to protect Landlord’s interest hereunder;

(iv)          consent to any subletting of thePremises or assignment of this Lease by Tenant, whether pursuant to provisionshereof concerning subletting and assignment or otherwise; or

(v)           any other action by Landlord orLandlord’s Agents intended to mitigate the adverse effects from any breach ofthis Lease by Tenant.

(c) In the event thisLease terminated pursuant to Subparagraph 18.2(b) above, or otherwise, Landlordshall be entitled to damages in the following sums:

(i)             theworth at the time of award of the unpaid rent which has been earned at the timeof termination; plus

(ii)            the worth at the time of award ofthe amount by which the unpaid rent which would have been earned aftertermination until the time of award exceeds the amount of such rental loss thatTenant proves could have been reasonably avoided; plus

(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 Tenant proves could bereasonably avoided; and

(iv)          any other amount necessary tocompensate Landlord for all detriment proximately caused by Tenant’s failure toperform Tenant’s obligations under the Lease, or which in ordinary course ofthings would be likely to result therefrom including, without limitation, thefollowing: (A) expenses for cleaning, repairing or restoring the Premises; (B)expenses for altering, remodeling or otherwise improving the Premises for thepurpose of reletting, including installation of leasehold improvements (whethersuch installation be funded by a reduction of rent, direct payment or allowanceto the succeeding lessee, or otherwise); (C) real estate broker’s fees,advertising costs and other expenses of reletting the Premises; (D) costs ofcarrying the Premises such as taxes and insurance premiums thereon, utilitiesand security precautions; (E) expenses in retaking possession of the Premises;(F) attorneys’ fees and court costs; and (G) any unamortized real estatebrokerage commission paid in connection with this Lease.

(v)           The “worth at the time of award” ofthe amounts referred to in Subparagraphs (i) and (ii) of this paragraph 18.2(c)is computed by allowing interest at the rate of ten percent (10%) per annum.The “worth at the time of award” of the amounts referred to in Subparagraph(iii) of this Paragraph 18.2(c) is computed by discounting such amount at thediscount rate of the Federal Reserve Board of San Francisco at the time ofaward plus one percent (1%). The term “rent” as used in this

14

----

Paragraph 18 shall include all sums required to bepaid by Tenant to Landlord pursuant to the terms of this Lease, including,without limitation, Base Rent, Additional Rent and Operating Expenses.

**18.3 Default by Landlord.** Landlord shall not be in default unlessLandlord fails to perform obligations required of Landlord hereunder within areasonable time, but in no event later than thirty (30) days after writtennotice by Tenant to Landlord and to the holder of any first mortgage or deed oftrust covering the Premises whose name and address shall have theretofore beenfurnished to Tenant in writing, specifying wherein Landlord has failed toperform such obligation, provided, however, that if the nature of Landlord’sobligation is such that more than thirty (30) days are required forperformance, then Landlord shall not be in default if Landlord commencesperformance within such thirty-day period and thereafter diligently prosecutesthe same to completion. In no event shall Tenant have the right to terminatethis Lease as a result of Landlord’s default. Any money judgment obtained byTenant based upon Landlord’s breach of this Lease shall be satisfied only outof the proceeds of the sale or disposition of Landlord’s interest in thePremises (whether by Landlord or by execution of judgment).

**19.****                  HazardousMaterials.**

**19.1 Definitions.** As used herein, the term “Hazardous Material” shall mean any substance:(i) the presence of which requires investigation or remediation under anyfederal, state or local statute, regulation, ordinance, order, action, policyor rules; (ii) any “hazardous substance”, pollutant or contaminant as now orhereafter defined under any federal, state or local statute, regulation, ruleor ordinance or amendments thereto, whether now existing or hereafter enacted,including, without limitation, the Comprehensive Environmental Response,Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and/or the ResourceConservation and Recovery Act (42 U.S.C. Section 6901 et seq.); (iii) which istoxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,mutagenic, or otherwise hazardous and is or becomes regulated by anygovernmental authority, agency, department, commission, board, agency orinstrumentality of the United States, the State of California or any politicalsubdivision thereof; (iv) the presence of which on the Premises causes orthreatens to cause a nuisance upon the Premises or to the adjacent propertiesor poses or threatens to pose a hazard to the health or safety of persons on orabout the Premises; (v) the presence of which on adjacent properties couldconstitute a trespass by Landlord or Tenant; (vi) any substance which containsgasoline, diesel fuel or other petroleum hydrocarbons; (vii) any substancewhich contains polychlorinated biphenyl’s (PCBs), asbestos or urea formaldehydefoam insulation; and/or (viii) radon gas.

**19.2 Permitted Use.** Subject to the compliance by Tenant with the provisions of Paragraphs19.3, 19.4, 19.5, 19.6, 19.7, 19.8 and 19.9 below, Tenant shall be permitted touse and store on the Premises those Hazardous Materials listed in Paragraph19.11, in the quantities set forth in Paragraph 19.11. In addition, Tenantshall be permitted to utilize reasonable quantities of Hazardous Materialstypically associated with general office uses.

**19.3 Hazardous Materials Management Plan.**

(a)Prior to Tenant using, handling, transporting or storing any Hazardous Materialat or about the Premises (including, without limitation, those listed inParagraph 19.11), Tenant shall submit to Landlord a Hazardous MaterialsManagement Plan (“HMMP”) for Landlord’s review and approval, which approvalshall be in Landlord’s sole discretion. The HMMP shall describe: (i) thequantities of each material to be used, (ii) the purpose for which eachmaterial is to be used, (iii) the method of storage of each material, (iv) themethod of transporting each material to and from the Premises and within thePremises (v) the methods Tenant will employ to monitor the use of the materialand to detect any leaks or potential hazards, (vi) any other information anydepartment of any governmental entity (city, state or federal) requires priorto the issuance of any required permit for the Premises or during Tenant’soccupancy of the Premises; and (vii) any other information which Landlord mayrequest. Landlord may, but shall have no obligation to review and approve theforegoing information and HMMP, and such review and approval or failure toreview and approve shall not act as an estoppel or otherwise waive Landlord’srights under this Lease or relieve Tenant of its obligations under this Lease.If Landlord determines in its sole discretion by inspection of the Premises orreview of the HMMP or otherwise that the methods in use or described by Tenantare not adequate in Landlord’s opinion to prevent or eliminate the existence ofenvironmental hazards, then Tenant shall not use, handle, transport, or store suchHazardous Materials at or about the Premises unless and until such methods areapproved by Landlord and added to an approved HMMP. Once approved by Landlord,Tenant shall strictly comply with the HMMP and shall not change its use,operations or procedures with respect to Hazardous Materials without submittingan amended HMMP for Landlord’s review and approval as provided above.

(b)Tenant shall pay to Landlord when Tenant submits an HMMP (or amended HMMP) theamount reasonably determined by Landlord to cover all Landlord’s costs andexpenses reasonably incurred or to be incurred in connection with Landlord’sreview of the HMMP which costs and expenses shall include, among other things,all reasonable out-of-pocket fees of attorneys, environmental engineers andconsultants, architects, or other consultants incurred by Landlord inconnection with Landlord’s review of the HMMP. Landlord shall have noobligation to consider a request for consent to a proposed HMMP unless anduntil Tenant has paid all such costs and expenses to Landlord irrespective ofwhether Landlord consents to such proposed HMMP. Tenant shall pay to Landlordon demand the excess, if any, of such costs and expenses actually incurred byLandlord over the amount of such costs and expenses actually paid by Tenant,and Landlord shall promptly refund to Tenant the excess, if any, of such costsand expenses actually paid by Tenant over the amount of such costs and expensesactually incurred by Landlord.

**19.4 Use Restriction.** Except as specifically allowed in Paragraph19.2 above, Tenant shall not cause or permit any Hazardous Material to be used,stored, generated, discharged, transported to or from, or disposed of in orabout the Premises, or any other land or improvements in the vicinity of the Premises.Without limiting the generality of the foregoing, Tenant, at its sole cost,shall comply with all Laws relating to the storage, use, generation, transport,discharge and disposal by Tenant or its Agents of any Hazardous Material. Ifthe presence of any Hazardous Materials results in contamination of thePremises or any soil, air, ground or surface waters under, through, over, on,in or about the Premises, or in any surrounding properties, Tenant, at itsexpense, shall promptly take all actions necessary to return the Premisesand/or the surrounding real property to the condition existing prior to theappearance of such Hazardous Material. In the event there is a release,discharge or disposal of or contamination of the Premises by a Hazardous Material,or in the event any part of the Project or any surrounding properties arecontaminated with Hazardous Materials which is of the type that has beenstored, handled, transported or otherwise used or permitted by Tenant or itsAgents on or about the Premises, Tenant shall have the burden of proving thatsuch release, discharge, disposal or contamination is not the result of theacts or omissions of Tenant or its Agents.

**19.5 Tenant Indemnity.** Tenant shall defend, protect, hold harmlessand indemnify Landlord and its Agents and Lenders with respect to all actions,claims, losses (including, diminution in value of the Premises), fines,penalties, fees (including, but not limited to, attorneys’ and consultants’fees) costs, damages, liabilities,

15

----

remediation costs, investigation costs, response costsand other expenses arising out of resulting from, or caused by any HazardousMaterial used, generated, discharged, transported to or from, stored, ordisposed of by Tenant or its Agents in, on, under, over through or about thePremises and/or the surrounding real property, or otherwise being introducedto, on or about the Premises during the period of time in which Tenant is inpossession of the Premises. Tenant shall not suffer any lien to be recordedagainst the Premises as a consequence of the disposal of any Hazardous Materialon the Premises by Tenant or its Agents, including any so called state, federalor local “super fund” lien related to the “clean up” of any Hazardous Materialin, over, on, under, through or about the Premises.

**19.6 Compliance.** Tenant shall immediately notify Landlord of any inquiry, test,investigation, enforcement proceeding by or against Tenant or the Premisesconcerning any Hazardous Material. Any remediation plan prepared by or on behalfof Tenant must be submitted to Landlord prior to conducting any work pursuantto such plan and prior to submittal to any applicable government authority andshall be subject to Landlord’s consent. Tenant acknowledges that Landlord, asthe owner of the Property, at its election, shall have the sole right tonegotiate, defend, approve and appeal any action taken or order issued withregard to any Hazardous Material by any applicable governmental authority.

**19.7 Assignment and Subletting.** It shall not be unreasonable for Landlord towithhold its consent to any proposed assignment or subletting if (i) theproposed assignee’s or subtenant’s anticipated use of the Premises involves thestorage, generation, discharge, transport, use or disposal of any Hazardous Material;(ii) if the proposed assignee or subtenant has been required by any priorlandlord, lender or governmental authority to “clean up” or remediate anyHazardous Material; (iii) if the proposed assignee or subtenant is subject toinvestigation or enforcement order or proceeding by any governmental authorityin connection with the use, generation, discharge, transport, disposal ofstorage of any Hazardous Material.

**19.8 Surrender.** Upon the expiration or earlier termination of the Lease, Tenant, at itssole cost, shall remove all Hazardous Materials from the Premises that Tenantor its Agents introduced to the Premises. If Tenant fails to so surrender thePremises, Tenant shall indemnify, protect, defend and hold Landlord harmlessfrom and against all damages resulting from Tenant’s failure to surrender thePremises as required by this Paragraph, including without limitation, anyactions, claims, losses, liabilities, fees, (including but not limited toattorneys’ and consultants’ fees), fines costs, penalties, or damages inconnection with the condition of the Premises including, without limitation,damages occasioned by the inability to relet the Premises or a reduction in thefair market and/or rental value of the Premises by reason of the existence of anyHazardous Material in, on, over, under, through or around the Premises.

**19.9 Right to Appoint Consultant.** Landlord shall have the right to appoint aconsultant to conduct an investigation to determine whether any HazardousMaterial is being used, generated, discharged, transported to or from, storedor disposed of in, on, over, through, or about the Premises, in an appropriateand lawful manner and in compliance with the requirements of this Lease. Tenantshall reimburse Landlord for the cost of such investigation. Tenant, at itsexpense, shall comply with all reasonable recommendations of the consultantrequired to conform Tenant’s use, storage or disposal of Hazardous Materials tothe requirements of applicable Law or to fulfill the obligations of Tenanthereunder.

**19.10 Holding Over.** If any action of any kind is required or requested to be taken by anygovernmental authority to clean-up, remove, remediate or monitor any HazardousMaterials (the presence of which is the result of the acts or omissions of Tenantor its Agents) and such action is not completed prior to the expiration orearlier termination of the Lease, Tenant shall be deemed to have impermissiblyheld over until such time as such required action is completed, and Landlordshall be entitled to all damages directly or indirectly incurred in connectionwith such holding over, including, without limitation, damages occasioned bythe inability to re-let the Premises or a reduction of the fair market and/orrental value of the Premises.

**19.11 Materials.** Tenant shall provide the list of its Hazardous Materials to be legallyused during its tenancy in the following section provided below in thisParagraph 19.11, or attach a separate list and so indicate below or indicate “NONE”and initial below to indicate if no Hazardous Materials will be used:
| Materials:         | ** ** | **Quantities:**    | ** ** | **Location and Method of Storage:** |
|--------------------|------------|--------------------|------------|-------------------------------------|
|     |       |     |       |                      |
|     |       |     |       |                      |
|     |       |     |       |                      |

 

**19.12 Provisions Survive Termination.** The provisions of this Paragraph 19 shallsurvive the expiration or termination of this Lease.

**19.13 Controlling Provisions.** The provisions of this Paragraph 19 areintended to govern the rights and liabilities of the Landlord and Tenanthereunder respecting Hazardous Materials to the exclusion of any otherprovisions in this Lease that might otherwise be deemed applicable. Theprovisions of this Paragraph 19 shall be controlling with respect to anyprovisions in this Lease that are inconsistent with this Paragraph 19.

**20.****                  Miscellaneous**

**20.1 Estoppel Certificate.**

(a) Tenant shall at any time, upon not less than ten (10) days priorwritten notice from Landlord, execute, acknowledge and deliver to Landlord astatement in writing (i) certifying that this Lease is unmodified and in fullforce and effect (or, if modified, stating the nature of such modification andcertifying that this Lease, as so modified, is in full force and effect) andthe date to which the rent and other charges are paid in advance, if any, (ii)acknowledging that there are not, to Tenant’s knowledge, any uncured defaultson the part of Landlord hereunder, or specifying such defaults if any areclaimed; (iii) evidence the status of this Lease as may be required by a lendermaking a loan to Landlord to be secured by a deed of trust covering thePremises, Building or Project or a purchaser of the same from Landlord, (iv)certify that all improvements to be constructed on or in the Premises byLandlord have been substantially completed except for punch list items which donot prevent Tenant from using the Premises for its intended use; and (v)certify such other matters relating to the Lease and/or the Premises as may berequested by a lender making a loan to Landlord or a purchaser of the Premises,Building or Project from Landlord. Any such statement may be conclusivelyrelied upon by any prospective purchaser or encumbrancer of the Premises.

16

----

(b) Tenant’s failure todeliver such statement within such time shall be conclusive upon Tenant (i)that this Lease is in full force and effect without modification except as maybe represented by Landlord, (ii) that there are no uncured defaults in Landlord’sperformance, and (iii) that not more than one month’s rent has been paid inadvance; and, (iv) the improvements to be constructed on the Premises byLandlord have been substantially completed except for punch list items which donot prevent Tenant from using the Premises for its intended use.

(c)If Landlord desires to finance, refinance or sell said Premises, or any parthereof, Tenant hereby agrees to deliver to Landlord, its agent or anyprospective purchaser or lender designated by Landlord such financialstatements of Tenant as may be reasonably required by such lender orprospective purchaser. Such statements shall include the past three yearsfinancial statements of Tenant, certified as accurate in all material respectsby Tenant’s chief financial officer and chief executive officer. All suchfinancial statements shall be received by Landlord in confidence and shall beused only for the purposes herein set forth.

**20.2 Transfer of Landlord’s Interest.** In the event of a sale or conveyance byLandlord of Landlord’s interest in the Premises other than a transfer forsecurity purposes only, Landlord shall be relieved from and after the datespecified in such notice of transfer of all obligations and liabilitiesaccruing thereafter on the part of the Landlord, provided that any funds in thehands of Landlord at the time of transfer in which Tenant has an interest,shall be delivered to the successor of Landlord. This Lease shall not beaffected by any such sale and Tenant agrees to attorn to the purchaser orassignee.

**20.3 Captions; Attachments; Defined Terms.**

(a)The captions of the paragraphs of this Lease are for convenience only and shallnot be deemed to be relevant in resolving any question of interpretation orconstruction of any part of this Lease.

(b)Exhibits attached hereto, and addenda and schedules initialed by the parties,are deemed by attachment to constitute part of this Lease and are incorporatedherein.

(c)The words “Landlord” and ‘Tenant” as used herein shall include the plural aswell as the singular. Words used in neuter gender include the masculine andfeminine and words in the masculine or feminine gender include the neuter. Ifthere be more than one Tenant, the obligations hereunder imposed upon Tenantshall be joint and several. If the Tenants are husband and wife, theobligations shall extend individually to their sole and separate property aswell as to their community property. The term “Landlord” shall mean only theowner or owners at the time in question of the fee title or a tenant’s interestin a ground lease of the Premises. The obligations contained in this Lease tobe performed by Landlord shall be binding on Landlord’s successors and assignsonly during their respective periods of ownership.

(d)**Law.** As used in this Lease, theterm “Law” or “Laws” shall mean any judicial decision, statute, constitution,ordinance, resolution, regulation, rule, administrative order, or otherrequirement of any government agency or authority having jurisdiction over theparties to this Lease or the Premises or both, in effect at the CommencementDate of this Lease or any time during the Lease Term, including, withoutlimitation, any regulation, order, or policy of any quasi-official entity orbody (e.g.,**board of fireexaminers, public utility or special district).

(e)**Agent.** As used in this Lease, theterm “Agent” shall mean, with respect to either Landlord or Tenant, itsrespective agents, employees, contractors (and their subcontractors), andinvitees (and in the case of Tenant, its subtenants, assignees, licensees,vendors, customers and any person or entity holding under Tenant).

(f)**Lender.** As used in this Lease, theterm “Lender” shall mean any beneficiary, mortgagee, secured party or otherholder of any deed of trust, mortgage or other written security device oragreement affecting Landlord’s interest in the Premises.

**20.4 Entire Agreement.** This instrument along with any exhibits andattachments hereto constitutes the entire agreement between Landlord and Tenantrelative to the Premises and this Agreement and the exhibits and attachmentsmay be altered, amended or revoked only by an instrument in writing signed byboth Landlord and Tenant. Landlord and Tenant agree hereby that all prior orcontemporaneous oral agreements between and among themselves and their agentsor representatives relative to the leasing of the Premises are merged in or revokedby this Agreement.

**20.5 Severability.** If any term or provision of this Lease shall, to any extent, bedetermined by a court of competent jurisdiction to be invalid or unenforceable,the remainder of this Lease shall not be affected thereby, and each term andprovision of this Lease shall be valid and enforceable to the fullest extentpermitted by law.

**20.6 Attorneys’ Fees; Costs.**

(a)If Tenant or Landlord shall bring any action for any relief against the other,declaratory or otherwise, arising out of this Lease, including any suit byLandlord for the recovery of rent or possession of the Premises, the losingparty shall pay the successful party a reasonable sum for attorneys’ fees asawarded by the court or other tribunal presiding over the action which shall bedeemed to have accrued on the commencement of such action. Any attorney’s feeaward shall not be computed in accordance with any court fee schedule, butshall be such as to fully reimburse attorneys’ fees reasonably incurred in goodfaith in any such action and in the appeal or enforcement of any judgmentrendered in any such action.

(b)If Landlord is required to retain an attorney in connection with any failure byTenant to perform any of its obligations hereunder, all costs and expensesincurred by Landlord including, without limitation, reasonable attorneys’ feesincurred by Landlord in connection therewith, shall be immediately reimbursedby Tenant upon demand therefore by Landlord, whether or not an action isactually commenced by Landlord.

**20.7 Landlord as Party Defendant.** Should Landlord, without fault on Landlord’spart, be made a party to any litigation instituted by Tenant or by any thirdparty against Tenant, or by or against any person holding under or using thePremises by license of Tenant, or for the foreclosure of any lien for labor ormaterial furnished to or for Tenant or any such other person or otherwisearising out of or resulting from any act or transaction of Tenant or of anysuch other person, Tenant covenants to save and hold Landlord harmless from anyjudgment rendered against Landlord or the Premises or any part thereof, and alldamages, liabilities, costs and expenses, including, without limitation,reasonable attorneys fees, incurred by Landlord in or in connection with suchlitigation. Such indemnity obligation shall survive termination of this Lease.

**20.8 Waiver of Jury Trial.** Tenant hereby waives its right to trial byjury of any cause of action, claim, counterclaim, cross-complaint in anyaction, proceeding and/or hearing brought by either Landlord against Tenant orTenant against Landlord on any matter whatsoever arising out of, or in any wayconnected with, this Lease, the relationship of Landlord and Tenant, Tenant’suse or occupancy of the Premises, or any claim or injury or damage, or theenforcement of any remedy under any law, statute or regulation, emergency orotherwise, now or hereafter in effect.

17

----

**20.9Time.** Time is of the essence of this Lease and each and everyprovision hereof, except as to the conditions relating to the delivery ofpossession of the Premises to Tenant. All rights and remedies of Landlord shallbe cumulative and non-exclusive of any other remedy at law or in equity.

**20.10 Binding Effect: Choice of Law.** Each provision of this Lease to be performedby Tenant shall be construed as both a covenant and condition. Subject to anyprovisions hereof restricting assignment or subletting by Tenant, and subjectto Paragraph 18.2, all of the provisions hereof shall bind and inure to thebenefit of the parties hereto and their respective heirs, legalrepresentatives, successors and assigns. This Lease shall be governed by thelaws of the State of California, and exclusive venue for any action withrespect to this Lease shall lie with the State and Federal Courts located inSan Diego County, California.

**20.11 Waiver.** No covenant term or condition or the breach thereof shall be deemedwaived, except by written consent of the party against whom the waiver isclaimed, and any waiver or the breach of any covenant, term or condition shallnot be deemed to be a waiver of any preceding or succeeding breach of the sameof any other covenant, term or condition. Acceptance by Landlord of theperformance by Tenant after the time the same shall have become due shall not constitutea waiver by Landlord of the breach or default of any covenant, term orcondition unless otherwise expressly agreed to by Landlord in writing.

Landlord’sfailure to enforce against Tenant or any other tenant of the Building or theProject any of the rules or regulations made by Landlord shall not be deemed awaiver of such rules or regulations. No act or thing done by Landlord, itsagents or employees during this Lease Term shall be deemed an acceptance of asurrender of the Premises and no agreement to accept a surrender of thePremises shall be valid unless it is in writing and is signed by Landlord. Thedelivery of keys to any of Landlord’s Agents shall not serve to terminate thisLease or surrender the Premises. No payment by Tenant, or receipt andacceptance by Landlord, of a lesser amount than the Base Rent, Additional Rentor other amount due shall be deemed to be other than on account of the earlieststipulated Rent or Additional Rent, nor shall any endorsement or statement onany check or any letter accompanying a payment as rent be deemed an accord andsatisfaction. The receipt and acceptance by Landlord of any delinquent rentshall not constitute a waiver of any other default; it shall only be a waiverof timely payment for that particular month of Base Rent, Additional Rent orother payment involved. Landlord may accept such check or payment withoutprejudice to Landlord’s right to recover the balance of such Base Rent,Additional Rent or other amount due, or pursue any other remedy available toLandlord.

**20.12 Surrender of Premises.** The voluntary or other surrender of thisLease by Tenant, or a mutual cancellation thereof, shall not work a merger, andshall, at the option of the Landlord, terminate all or any existing subleasesor subtenancies, or may, at the option of Landlord, operate as an assignment toit of any or all such subleases or subtenancies.

**20.13 Holding Over.**

(a)Surrender of Possession. Tenant shall surrender possession of the Premisesimmediately upon the expiration or earlier termination of the Lease. If Tenantshall continue to occupy or possess the Premises after such expiration ortermination without the consent of Landlord, then Tenant shall be a tenant atsufferance. If Landlord has consented to such holdover in writing, Tenant shallbe a tenant from month-to-month. All the terms, provisions and conditions ofthe Lease shall apply to the month-to-month tenancy except those terms,provisions and conditions pertaining to the Lease Term, and except that theBase Rent shall be immediately adjusted upward upon the expiration or earliertermination of the Lease to equal the greater of (i) one hundred fifty percent(150%) of the then prevailing monthly rental rate for similar commercial space,as determined by Landlord; or (ii) one hundred fifty percent (150%) of the BaseRent for the Premises in effect under this Lease on the day immediately priorto the date of the expiration or earlier termination of the Lease.

Themonth-to-month tenancy may be terminated by Landlord or Tenant upon thirty (30)days prior notice to the non-terminating party. In the event that Tenant failsto surrender the Premises upon such expiration or earlier termination, thenTenant shall indemnify and hold Landlord harmless against all claims,liabilities, losses, damages, costs and expenses (including, withoutlimitation, attorneys’ fees) resulting from or arising out of Tenant’s failureto surrender the Premises. This includes, but is not limited to any amountsrequired to be paid or damages incurred due to the loss of any tenant orprospective tenant who was to have occupied the Premises after said terminationor expiration and any related attorneys’ fees and brokerage commissions.

**20.14 Payment of Money After Termination.** No payment of money by Tenant to Landlordafter the termination of the Lease by Landlord or after the giving of anynotice of termination to Tenant by Landlord, which Landlord is entitled to giveTenant under the Lease, shall reinstate, continue or extend the Term of theLease or shall affect any such notice given to Tenant prior to the payment ofsuch money. It is agreed that after the service of such notice or thecommencement of any suit by Landlord to obtain possession of the Premises,Landlord may receive and collect when due any and all payments owed by Tenantunder the Lease and otherwise exercise its rights and remedies. The making ofany such payments by Tenant shall not waive such notice or in any manner affectany pending suit or judgment obtained.

**20.15 Signs and Auctions.**

(a)Tenant shall not place any sign upon the Premises or conduct any auctionthereon without Landlord’s prior written consent. All such signs placed on thePremises by Tenant and consented to by Landlord shall comply with all recordeddocuments affecting the Premises and applicable statutes, ordinances, rules andregulations of governmental agencies having jurisdiction thereof. At Landlord’soption, Tenant shall, at the expiration or earlier termination of the Lease,remove any sign which it has placed on the Premises and shall at its sole cost,repair any damage caused by the installation or removal of such sign.

(b)Obtaining permits for Tenant signs as may be required by any governmentalagency shall be the responsibility of Tenant.

**20.16 Reasonable Consent**. Except as limited elsewhere in this Lease,wherever in this Lease Landlord or Tenant is required to give consent orapproval to any action on the part of the other, such consent or approval shallnot be unreasonably withheld. In the event of failure to give any such consent,the other party shall be entitled to specific performance at law and shall havesuch other remedies to it under this Lease, but in no event shall Landlord orTenant be responsible in monetary damages for failure to give consent unless saidfailure is withheld maliciously or in bad faith.

**20.17 Interest on Past Due Obligations.** Any installment of Base Rent or AdditionalRent due from Tenant, or any other sum due under this Lease from Tenant, whichis not received by Landlord when due, shall bear interest from said due dateuntil paid, at an annual rate equal to the lesser of (the “Permitted Rate”):(a) ten percent (10%); or (b) the highest rate allowable at law. Payment ofsuch interest shall not excuse or cure any default by Tenant. In addition,Tenant shall pay all costs and attorneys’ fees incurred by Landlord incollection of such amounts.

**20.18 Recording.** Tenant shall not record this Lease withoutLandlord’s prior written consent (which may be given or withheld in Landlord’ssole and absolute discretion), and such recordation shall, at the option ofLandlord, constitute a non-curable default of Tenant hereunder.

18

----

**20.19Notices.**All notices or demands of any kind required ordesired to be given by Landlord or Tenant hereunder shall be in writing andshall be deemed delivered on the date received if personally delivered toLandlord or Tenant, as the case may be, or if mailed, then forty-eight (48)hours after depositing the notice or demand in the United States mail,certified or registered, postage prepaid, addressed to the Landlord or Tenantrespectively at the addresses set forth after their signatures at the end ofthis Lease, or when received when delivered by facsimile, electronic mail or bycommercial carrier.

**20.20 Corporate Authority.** If Tenant is a corporation, each individualexecuting this Lease on behalf of said corporation individually and personallyrepresents and warrants that he or she is duly authorized to execute anddeliver this Lease on behalf of said corporation in accordance with a dulyadopted resolution of the Board of Directors of said corporation or inaccordance with the Bylaws of said corporation, that this Lease is binding uponsaid corporation in accordance with its terms, and that all informationprovided to Landlord by Tenant is true, correct and complete in all materialrespects. If Tenant is a corporation Tenant shall, within thirty (30) daysafter execution of this Lease, deliver to Landlord a certified copy of aresolution of the Board of Directors of said corporation authorizing orratifying the execution of this Lease.

**20.21 Limitation on Landlord’s Liability.** Tenant, for itself and its successors andassigns (to the extent this Lease is assignable), hereby agrees that in theevent of any actual or alleged, breach or default by Landlord under this Leasethat:

(a)Tenant’s sole and exclusive remedy and recourse against Landlord shall be asagainst Landlord’s interest in the Project;

(b)No partner, shareholder or member of Landlord shall be sued or named as a parryin a suit or action (except as may be necessary to secure jurisdiction ofLandlord);

(c)No service of process shall be made against any partner, shareholder or memberof Landlord (except as may be necessary to secure jurisdiction of Landlord);

(d)No partner, shareholder or member of Landlord shall be required to answer orotherwise plead to any service of process;

(e)No judgment will be taken against any partner, shareholder or member ofLandlord;

(f)Any judgment taken against any partner, shareholder or member of Landlord maybe vacated and set aside at any time nunc pro tunc;

(g)No writ of execution will ever be levied against the assets of any partner,shareholder or member of Landlord; and,

(h)The covenants and agreements of Tenant set forth in this Paragraph 20.21 shallbe enforceable by Landlord and any partner, shareholder or member of Landlord,and any partner, shareholder or member of Landlord is hereby declared to be anintended third party beneficiary of the provisions of this Paragraph 20.21.

**20.22 Construction of Lease Provisions.** Although printed provisions of this Leasewere prepared by Landlord, Tenant acknowledges that it has reviewed this leaseand has obtained such legal counsel as Tenant has deemed necessary orappropriate to fully explain Tenant’s rights, obligations and tax consequenceshereunder; consequently, the doctrine or rule that ambiguities in an agreementor document are to be construed against the drafting party, shall not beutilized in interpreting this Lease and this Lease shall instead be construedor interpreted neutrally and in accordance with the general tenor of thelanguage. The words “include,” “includes” and “including” when used herein isused in a non-exclusive sense and shall be deemed in each case to be followedby the words “without limitation.”

**20.23 Rules and Regulations.** Landlord shall, in a manner it deems properin its opinion, establish and enforce reasonable non-discriminatory rules andregulations concerning the Common Areas and the parking areas, close any of theCommon Areas to whatever extent required, in the opinion of Landlord, toprevent a dedication of any of the Common Areas or the accrual of any rights ofany person or of the public to the Common Areas, close temporarily any of theCommon Areas for maintenance purposes, and make changes to the Common Areas,including, without limitation, changes in the location of entrances and exits.Landlord reserves the right to make any reasonable rules affecting the Projectthroughout the term hereof. All delivery and dispatch of merchandise, supplies,fixtures, equipment and furniture shall be by means and during hoursestablished by Landlord.

**20.24 Confidentiality.** Except as may be required by law or by therules of any exchange on which Tenant’s stock may be traded, Tenant herebyagrees not to disclose the terms of this lease (specifically including, withoutlimitation, the rent or rental rate to be paid by Tenant hereunder and/or anytenant improvement allowance to be furnished by Landlord to Tenant) to anyexisting or prospective tenant of the Building or other third party; provided,however, Tenant may disclose the terms of this Lease to its accountant,bookkeeper or tax advisor or any employee of Tenant who has a need to know suchinformation for a legitimate business purpose. If Tenant discloses suchconfidential information as permitted hereunder, Tenant shall inform thedisclosee of the requirements of this Paragraph and shall require each suchperson to comply with such confidentiality requirements. In the event Tenant orany person to whom it discloses such confidential information fails in anyrespect to comply with its obligations under this Paragraph, Tenant shall beliable to Landlord for breach of this Paragraph 20.24 and Landlord may bring anaction against Tenant for damages as a result of such breach. In addition,nothing stated herein shall preclude or prohibit Landlord from seeking aninjunction to prevent disclosure of such confidential information or an ordercompelling specific protection of such confidential information. The provisionsof this Paragraph 20.24 shall survive the termination of this Lease.

**20.25 Counterparts.** This Lease Agreement may be executed in one or more counterparts, eachof which shall be deemed an original, but all of which together shallconstitute one and the same instrument.

**20.26 No Third Party Beneficiaries.** Except as may be specifically providedherein, the provisions of this Agreement are intended solely for the benefit ofthe parties hereto and are not to be construed for the benefit of any otherperson or entity. Except as may be specifically provided for herein, nocreditor, customer or other person who is not a party hereto shall obtain anyrights under the provisions of this Agreement, and no such person shall havethe right to make any claim with respect to any debt, liability or obligationagainst any party hereto on the basis of this Agreement.

**LANDLORDAND TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM ANDPROVISION CONTAINED HEREIN AND BY EXECUTION OF THIS LEASE SHOW THEIR INFORMEDAND VOLUNTARY 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 LANDLORD AND TENANT.**

19

----

**InWitness Whereof,** Landlord and Tenant have executed this Leasethe date and year first above written.
| **LANDLORD:**                |                      | **TENANT:**                                                                                                                                                                                                                                                                                                                               | ** ** | ** **               |
|------------------------------|---------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|
| ** **                   |                      | ** **                                                                                                                                                                                                                                                                                                                                | ** ** | ** **               |
| **Griffin  Properties, LLC** |                      | **1****st Pacific Bank of California**                                                                                                                                                                                                                                                                                               | ** ** | ** **               |
| ** **                   |                      | ** **                                                                                                                                                                                                                                                                                                                                | ** ** | ** **               |
| ** **                   |                      | ** **                                                                                                                                                                                                                                                                                                                                | ** ** | ** **               |
| By:                          | /s/ Gary Beyler           |                                                                                                                                                                                                                                                                                                                                      | By:        | /s/ A. Vincent Siciliano |   |
|                         |                      |                                                                                                                                                                                                                                                                                                                                      |       |                     |   |
| Printed:                     | Gary Beyler               |                                                                                                                                                                                                                                                                                                                                      | Printed:   | A. Vincent Siciliano     |   |
|                         |                      |                                                                                                                                                                                                                                                                                                                                      |       |                     |   |   |
| Its:                         | Member                    |                                                                                                                                                                                                                                                                                                                                      | Its:       |                     | CEO |   |
|                         |                      |                                                                                                                                                                                                                                                                                                                                      |       |                     |   |   |
| Dated:                       | 4/21/02                   |                                                                                                                                                                                                                                                                                                                                      | Dated:     |                     | 4/18/03 |   |
|                         |                      |                                                                                                                                                                                                                                                                                                                                      |       |                     |
|                         |                      |                                                                                                                                                                                                                                                                                                                                      |       |                     |
|                         |                      | By:                                                                                                                                                                                                                                                                                                                                       |       |                     |   |
|                         |                      |                                                                                                                                                                                                                                                                                                                                      |       |                     |   |
|                         |                      | Printed:                                                                                                                                                                                                                                                                                                                                  |       |                     |   |
|                         |                      |                                                                                                                                                                                                                                                                                                                                      |       |                     |   |
|                         |                      | Its:                                                                                                                                                                                                                                                                                                                                      |       |                     |   |
|                         |                      |                                                                                                                                                                                                                                                                                                                                      |       |                     |   |
|                         |                      | Dated:                                                                                                                                                                                                                                                                                                                                    |       |                     |   |
|                         |                      |                                                                                                                                                                                                                                                                                                                                      |       |                     |   |
| Address:                     | P.O. Box 675431           | Address:                                                                                                                                                                                                                                                                                                                                  |       |                     |   |
|                         | 6757 Poco Lago            |                                                                                                                                                                                                                                                                                                                                      |       |                     |   |
|                         | Rancho Santa Fe, CA 92067 |                                                                                                                                                                                                                                                                                                                                      |       |                     |
|                         |                      | Note: If Tenant is a corporation,  the signatures of two corporate officers is required, one signature must be  one of the following: chairman of the board, president or any vice-president  and the second signature must be one of the following: secretary, assistant  secretary, chief financial officer or any assistant treasurer. |
|                              |                           |                                                                                                                                                                                                                                                                                                                                           |            |                          |  |  |  |  |  |  |  |  |  |  |  |  |

 

20

----

**EXHIBIT “A”PREMISES**

----

****

----

**EXHIBIT A – rev 7/24/03**

****

----

**EXHIBIT “B”THE PROJECT**

----

**EXHIBIT “C”WARM SHELL**

For purposes of the Lease, the term “Warm Shell” means that theLandlord shall deliver the Premises to the Tenant with the following itemscompleted:

a.                         ThePremises shall include a 200 amp electrical meter with conduits installeddirectly to the Premises;

b.                        Conduitsshall be provided from the telephone room to the Premises for both Pacific Belland Time Warner Cable;

c.                         Forwater source heat pump system, a condenser water piping risers will be providedto each floor of the Building;

d.                        TheHVAC system will include roof platforms in place for split systems along withall water piping from the roof to the Premises;

e.                         TheHVAC main outside condenser water loop shall be in place on each floor andready to receive taps for water source heat pumps;

f.                           Thecentral outside air system will be installed with risers to each floor of theBuilding;

g.                        Thefire sprinkler system piping shall be in place throughout each floor of theBuilding with temporary heads in place;

h.                        Sewageand domestic water shall be stubbed to the Premises for ease of connection; and

i.                            Allwalls adjacent to common areas are fire taped only; any further finishconducted by Tenant.

----