Lease


    Exhibit
      10.12

     

    


    AMERICAN
      INDUSTRIAL REAL ESTATE ASSOCIATION

     

    1. Parties.
      This
      lease, dated, for reference purposes only July 1,
      1986,
      is made by and between LARRY H.
      STRASBAUGH and ALAN E. STRASBAUGH
      (herein
      celled “Lessor”) and R.
      Howard Strasbaugh, Inc.
      (herein
      called “Lessee”).

     

    2. Premises.
      Lessor
      hereby leases to Lessee and Lessee leases from Lessor for the term, at the
      rental, and upon all of the conditions set forth herein, that certain real
      property situated in the County of San Luis Obispo State of California, commonly
      known as 825
      Buckley Road, San Luis Obispo, California 93401
      described as Industrial
      and office building complex located upon the certain real property more
      particularly described as follows:

     

    Parcels
      1
      and 2 of Parcel Map CO 87-164 recorded in Book 45 at page 77 of Parcel Maps,
      San
      Luis Obispo County, California.

     

    said
      real
      property including the land end all improvements thereon, is herein called
“the
      Premises”.

     

    3. Term.

    3.1 Term.
      The
      term of this lease shall be for 15
      Years
      commencing on May 1,
      1990,
      and
      ending on April
      30, 2005
      unless
      sooner terminated pursuant to any provision hereof. (See Rider).

     

    3.2 Delay
      in
      Commencement. Notwithstanding said commencement date, if for any reason Lessor
      cannot deliver possession of the Premises in to Lessee on said date, Lessor
      shall not be subject to any liability therefor, nor shall such failure affect
      the validity of this Lease or the obligations of Lessee hereunder or extend
      the
      term hereof, but in such case Lessee shall not be obligated to pay rent until
      possession of the Premises is tendered Lessee; provided, however, that if Lessor
      shall not have delivered possession of the Premises within sixty (60) days
      from
      said commencement, Lessee may, at Lessee’s option, by notice in writing to
      Lessor within ten (10) days thereafter, cancel this Lease, in which event the
      parties shall be discharged from all obligations hereunder. If Lessee occupies
      the Premises prior to said commencement date, such occupancy shall be subject
      to
      all provisions hereof, such occupancy shall not advance the termination date,
      and Lessee shall pay rent for such period at the initial monthly rates set
      forth
      below.

     

    4. Rent.
      Lessee
      shall pay to Lessor as rent for the Premises equal monthly payments of
$60,000.00,
      in
      advance, on the 1st
      day of
      each month of the term hereof. Lessee shall pay Lessor upon the execution hereof
      $120,000.00
      as rent
      for The
      First and Last Months
      rent for
      any period during the term hereof which is for less than one month shall be
      a
      pro rata portion of the monthly installment. Rent shall be payable in lawful
      money of the United Slates to Lessor at the address stated herein or to such
      other persons or at such other places as Lessor may designate in writing. (See
      Rider).

     

    5. Security
      Deposit.
      Lessee
      shall deposit with Lessor upon execution hereof $60,000.00
      as
      security for Lessee’s faithful performance of Lessee’s obligations hereunder. If
      Lessee falls to pay rent or other charges dye hereunder, or otherwise defaults
      with respect to any provision of this Lease, Lessor may use, apply or retain
      all
      or any portion of said deposit for the payment of any rent or other charge
      in
      default or for the payment of any other sum to which Lessor may become obligated
      by reason of Lessee’s default, or to compensate Lessor for any loss or damage
      which Lessor may suffer thereby. If Lessor so uses or applies all or any portion
      or said deposit, Lessee shall within ten (10) days after written demand therefor
      deposit cash with Lessor in an amount sufficient to restore said deposit to
      the
      full amount hereinabove stated and Lessee’s failure to do so shall be a material
      breach of this Lease. Lessor shall not be required to keep said deposit separate
      from its general accounts. If Lessee performs all of Lessee’s obligations
      hereunder, said deposit, or so much thereof as has not theretofore been applied
      by Lessor, shall be returned, without payment or Interest other Increment for
      its use, to Lessee (or at Lessor’s option, to the last assignee. If any of
      Lessee’s interest hereunder) at the expiration of the term thereof, and after
      Lessee has vacated the Premises. No trust relationship is created herein between
      Lessor and Lessee with respect to said Security deposit.

     

    
      
        
        

      

      
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    6. Use.

     

    6.1 Use.
      The
      Premises shall be used and occupied only for Optical
      Machinery Manufacturing and Head Corporate Offices
      and for
      no other purpose.

     

    6.2 Compliance
      with Law.

     

    (a) Lessor
      warrants to Lessee that the Premises, in its existing state, but without regard
      to the use for which Lessee will use me Premises, does not violate any
      applicable building code regulation or ordinance at the time that this Lease
      is
      executed. In the event that it is determined that this warranty has been
      violated, then it shall be the obligation of the Lessor, after written notice
      from Lessee, to promptly, at Lessor’s sole cost and expense, to rectify any such
      violation. In the event that Lessee does not give to Lessor written notice
      of
      the violation of this warranty within 1 year from the commencement of the term
      of this Lease. It shall be conclusively deemed that such violation did not
      exist
      and the correction of the same shall be the obligation of the
      Lessee.

     

    (b) Except
      as
      provided in paragraph 6.2(a), Lessee shall, at Lessee’s expense, comply promptly
      with all applicable statutes, ordinances, rules, regulations, orders,
      restrictions of record, and requirements in effect during the term or any part
      of the term hereof regulating the use by Lessee of the Premises. Lessee shall
      not use nor permit the use of the Premises in any manner that will lend to
      create waste or a nuisance or , if there shall be more than one tenant in the
      building containing the Premises, shall lend to disturb such other
      benefit.

     

    6.3 Condition
      of Premises.
      Except
      as provided in paragraph 6.2(a) Lessee hereby accepts the Premises in their
      condition existing as of the date of the execution hereof, subject to all
      applicable zoning, municipal, county and state laws, ordinances and regulations
      governing and regulating the use of the Premises, and accepts this Lease subject
      thereto and to all matters disclosed thereby and by any exhibits attached
      hereto. Lessee acknowledges that neither Lessor nor Lessor’s agent has made any
      representation or warranty as to the suitability of the Premises for the conduct
      of Lessee’s business.

     

    Maintenance,
      Aspens end Alteration.

     

    7.1 Lessee’s
      Obligations.
      Lessee
      shall keep in good order, condition and repair the Premises and every part
      thereof, structural and nonstructural (whether or not such portion of the
      Premises requiring repair, or the means of repairing the same are reasonably
      or
      readily accessible Lessee, and whether or not the need for such repairs occurs
      as a result of Lessee’s use, any prior use, the elements or the age of such
      portion of the Premises), including, without limiting the generality of the
      foregoing, all plumbing, heating, air /conditioning, ventilating, electrical,
      lighting facilities and equipment within the Premises, fixtures, walls (interior
      and exterior) foundations, ceilings, roofs (interior and exterior) floors,
      windows, doors. plate glass and skylights located within the Premises, and
      all
      landscaping, driveways, parking lots, fences and signs located on the Premises
      and sidewalks and parkways adjacent to the Premises.

     

    7.2 Surrender.
      On the
      last day of the term hereof, or on any sooner termination, Lessee shall
      surrender the Premises to Lessor in the same condition as when received, broom
      clean, ordinary wear end tear excepted. Lessee shall repair any damage to the
      Premises occasioned by the removal of Lessee’s trade fixtures, furnishings and
      equipment pursuant to Paragraph 7.5(d), which repair shall include the patching
      and filling of holes and repair of structural damage.

     

    7.3 Lessee’s
      Rights.
      If
      Lessee fails to perform Lessee’s obligations under this Paragraph 7, Lessor
      may at its option (but shall not be required to transfer upon the Premises,
      after ten (10) days’ prior written notice to Lessee, and put the same in good
      order, condition and repair, and the cost thereof together with interest thereon
      at the rate of 10% per annum shall become due and payable as additional rental
      to Lessor together with Lessees next Initial Installment.

     

    7.4 Lessor’s
      Obligation.
      Except
      for the obligations of Lessor under Paragraph 6.2(a) (relating to Lessor’s
      warranty), Paragraph 9 (relating to destruction of the Premises) and under
      Paragraph 14 (relating to condemnation of the Premises), it is intended by
      the
      parties hereto that Lessor have no obligation. In any manner whatsoever, to
      repair and maintain the Premises nor the building located thereon nor the
      equipment therein, whether structural or non-structural all which obligations
      are intended to be that of the Lessee under Paragraph 7.1 hereof. Lessee
      expressly waives the benefit of any statute now or hereinafter in effect which
      would otherwise afford Lessee the right to make repairs at Lessor’s expense or
      to terminate this Lease because of Lessor’s failure to keep the premises in good
      order, condition and repair.

     

    7.5 Alterations
      and Additions.

     

    (a) Lessee
      shall not, without Lessor’s prior written consent make any alterations,
      improvements, additions, or Utility Installations in, on or about the Premises,
      except for nonstructural alterations not exceeding $1,000 in cost. As used
      in
      this Paragraph 7.5 the term “Utility Installation” shall mean bus ducting, power
      panels, wiring, florescent fixtures, space healers, conduits, airconditioning
      equipment and plumbing. Lessor may require that Lessee remove any or all of
      said
      alterations, Improvements, additions or Utility Installations at the expiration
      of the term, and restore the Premises to their prior condition. Lessor may
      require Lessee to provide Lessor, at Lessee’s sole cost and expense, a lien and
      completion bond in an amount equal to one and one-half times the estimated
      cost
      of such Improvements, to insure Lessor against any liability for mechanic’s and
      materialmen’s liens and to insure completion of the work. Should Lessee make any
      alterations, Improvements, additions or Utility Installations without the prior
      approval of Lessor, Lessor may require that Lessee remove any or all of the
      same.

     

    
      
        
        

      

      
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    (b) Any
      alterations, Improvements, additions or Utility Installations in or about the
      Premises that Lessee shall desire to make and which requires the consent of
      the
      Lessor shall be presented to Lessor in written form, with proposed detailed
      plans. If Lessor shall give its consent the consent shall be deemed conditioned
      upon Lessee acquiring a permit to do so from appropriate governmental agencies,
      the furnishing of a copy thereof to Lessor prior to the commencement of the work
      and the compliance by Lessee of all conditions of said permit in a prompt and
      expeditious manner.

     

    (c) Lessee
      shall pay, when due, all claims for labor or materials furnished or alleged
      to
      have been furnished to or for Lessee at or for use in the Premises, which claims
      are or may be secured by any mechanics or materialmen’s lien against the
      Premises or any interest therein. Lessee shall give Lessor not less than ten
      (10) days notice prior to the commencement of any work in the Premises, and
      Lessor shall have the right to post notice, of non-responsibility in or on
      the
      Premises as provided by law. If Lessee shall, in good faith, contest the
      validity of any such lien, claim or demand, then Lessee shall, at its sole
      expense defend itself and Lessor against the same and shall pay and satisfy
      any
      such adverse judgment that may be rendered thereon before the enforcement
      thereof against the Lessor or the Premises, upon the condition that if Lessor
      shall require, Lessee shall furnish to Lessor a surety bond satisfactory to
      Lessor in an amount equal to such contested lien, claim or demand indemnifying
      Lessor against liability for the same and holding the Premises free from the
      effect of such lien or claim. In addition, Lessor may require Lessee to pay
      Lessor’s attorneys fees and costs in participating in such action if Lessor
      shall decide it is to its best interest to do so.

     

    (d) Unless
      Lessor requires their removal, as set forth in Paragraph 7.5(a), all
      alterations, Improvements, additions and Utility Installations (whether or
      not
      such Utility Installations constitute trade fixtures of Lessee), which may
      be
      made on the Premises, shall become the properly of Lessor and remain upon and
      be
      surrendered with the Premises at the expiration of the term. Notwithstanding
      the
      provisions of this Paragraph 7.5(d). Lessee’s machinery and equipment, other
      than that which is affixed to the Premises so that it cannot be removed without
      material damage to the Premise, shall remain the property of Lessee and may
      be
      removed by Lessee subject to the provisions of Paragraph 7.2.

     

    8. Insurance
      Indemnity.

     

    8.1 Insuring
      Party. As used in this Paragraph 8, the term “Insuring Party” shall mean the
      party who has the elongation to obtain the Property Insurance required
      hereunder. The insuring party shall be designated in Paragraph 16.26 hereof.
      Whether the Insuring Party is the Lessor or the Lessee, Lessee shall, as
      additional rent for the Premises, pay the cost of all Insurance required
      hereunder. If Lessor is the insuring party Lessee shall, within ten (10) days
      following demand by Lessor, reimburse Lessor for the cost of the Insurance
      so
      obtained.

     

    8.2 Liability
      Insurance. Lessee shall, at Lessee’s expense obtain and keep in force during the
      term of this Lease a policy of Combined Single Limit, Bodily Injury and Property
      Damage Insurance Insuring Lessor and Lessee against any liability arising out
      of
      the ownership, use, occupancy or maintenance of, the Premises and all areas
      appurtenant thereto. Such Insurance shall be a combined single limit policy
      in
      an amount not less than $500.000. The policy shall contain cross liability
      endorsements and shall insure performance by Lessee of the indemnity provisions
      of this Paragraph 8. The limits of said insurance shall not, however, limit
      the
      liability of Lessee hereunder. In the event that the Premises constitute a
      part
      of a larger property said insurance shall have a Lessor’s Protective Liability
      endorsement attached thereto. If Lessee shall fail to procure and maintain
      said
      insurance Lessor may, but shall not be required to procure and maintain the
      same, but at the expense of Lessee. Not more frequently than each 5 years,
      if,
      in the reasonable opinion of Lessor, the amount of liability insurance required
      hereunder is not adequate, Lessee shall increase said insurance coverage as
      required by Lessor. Provided, however that in no event shall the amount of
      the
      liability insurance increase be more than fifty percent greater than the amount
      thereof during the preceding live years of the term of this lease. However,
      the
      failure to Lessor to require any additional insurance coverage shall not be
      deemed to relieve Lessee from any obligations under this Lease.

     

    
      
        
        

      

      
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    8.3 Property
      Insurance.

     

    (a) The
      insuring party shall obtain and keep in force during the term of this Lease
      a
      policy or policies of insurance covering loss or damage to the Premises, in
      the
      amount of the full replacement value thereof, as the same may exist from time
      to
      time, which replacement value is now but in no event less than the total amount
      of promissory notes secured by liens on the Premises against all perils included
      within the classification of fire, extended coverage, vandalism, malicious
      mischief, special extended perils (all risk) and sprinkler leakage. Said
      insurance shall provide for payment of loss thereunder to Lessor or to the
      holders of mortgages or deeds of trust on the Premises. The insuring party
      shall, in addition, obtain and keep in force during the term of this Lease
      a
      policy of rental income insurance covering a period of six months, with loss
      payable to Lessor, which insurance shall also cover all real estate taxes and
      insurance costs for said period. If the insuring party shall fail to procure
      and
      maintain said insurance the other party may, but shall not be required to,
      procure and maintain the same, but at the expense of Lessee.

     

    (b) If
      the
      Premises are part of a larger building, or if the Premises are part of a group
      of buildings owned by Lessor which are adjacent to the Premises, then Lessee
      shall pay for any increase in the property insurance at such other building
      or
      buildings if said increase is caused by Lessee’s acts, omissions, use or
      occupancy of the Premises.

     

    (c) If
      the
      Lessor is the insuring party the Lessor will not insure Lessee’s fixtures,
      equipment or tenant improvements unless the tenant improvements have become
      a
      part of the Premises under paragraph 7, hereof. But if Lessee is the insuring
      party the Lessee shall insure its fixtures, equipment and tenant
      improvements.

     

    (d) Not
      more
      frequently than each three years, if, in the opinion of Lessor, the amount
      of
      property insurance required hereunder is not adequate, the insuring party shall
      increase said insurance coverage as required by Lessor. However, such increase
      may be more frequent than each three years if required by the insurance carrier
      in order to maintain insurance for the full replacement value of the
      Premises.

     

    8.4 Insurance
      Policies. Insurance required hereunder shall be in companies holdings “General
      Policyholders Rating” of B plus or better as set forth in the most current issue
      of “Best’s Insurance Guide”. The insuring party shall deliver to the other party
      copies of policies of such insurance or certificates evidencing the existence
      and amounts of such insurance with loss payable clauses satisfactory to Lessor.
      No such policy shall be cancellable or subject to reduction of coverage or
      other
      modification except after ten (10) days prior written notice to Lessor. If
      Lessee is the insuring party Lessee shall, within ten (10) days prior to the
      expiration of such policies, furnish Lessor with renewals or “binders” thereof,
      or Lessor may order such insurance and charge the cost thereof to Lessee, which
      amount shall be payable by Lessee upon demand. Lessee shall not do or permit
      to
      be done anything which shall invalidate the insurance policies referred to
      in
      Paragraph 8.3. If Lessee does or permits to be done anything which shall
      increase the cost of the insurance policies referred to in Paragraph 8.3, then
      Lessee shall forthwith upon Lessor’s demand reimburse Lessor for any additional
      premiums attributable to any act or omission or operation of Lessee causing
      such
      increase in the cost of insurance. If Lessor is the insuring party, and if
      the
      insurance policies maintained hereunder cover other improvements in addition
      to
      the Premises, Lessor shall deliver to Lessee a written statement setting forth
      the amount of any such insurance cost increase and showing in reasonable detail
      the manner in which it has been computed.

     

    8.5 Waiver
      al
      Subrogation. Lessee and Lessor each hereby waive any and all rights of recovery
      against the other. or against the editors. employees, agents and representatives
      of the other. for loss of or damage to such waiving party or Its properly or
      the
      properly of others under Its control to the extent Mel such MSS or damage Is
      Insured against under any Insurance policy In force at the time of such loss
      or
      damages. The Insuring party shall, upon obtaining the policies of Insurance
      required hereunder, give notice to the insurance carrier or carriers that the
      foregoing mutual waiver of subrogation Is contained In this Lease

     

    8.6 Indemnity.
      Lessee shall indemnify and hold harmless Lessor from and against any and all
      claims arising from Lessee’s use of the Premises, or from the conduct of
      Lessee’s business or from any activity, work or things done, permitted or
      suffered by Lessee in or about the Premises or elsewhere and shall further
      indemnity and hold harmless Lessor from and against any and all claims arising
      from any breach or default in the performance of any obligation on Lessee’s part
      to be performed under the terms of this Lease, or arising from any negligence
      of
      the Lessee, or any of Lessee’s agents, contractors, or employees, and from and
      against all costs, attorney’s fees, expenses and liabilities incurred in the
      defense of any such claim or any action or proceeding brought thereon; and
      in
      case any action or proceeding be brought against Lessor by reason of any such
      claim, Lessee upon notice from Lessor shall defend the same at Lessee’s expense
      by counsel satisfactory to Lessor. Lessee, as a material part of the
      consideration to Lessor, hereby assumes all risk of damage to property or injury
      to persons, in, upon or about the Premises arising from any cause and Lessee
      hereby waives all claims in respect thereof against Lessor.

     

    8.7 Exemption
      of Lessor from Liability. Lessee hereby agrees that Lessor shall not be liable
      for injury to Lessee’s business or any loss of income therefrom or for damage to
      the goods, wares, merchandise or other property of Lessee. Lessee’s employees,
      invitees, customers, or any other person in or about the Premises, nor shall
      Lessor be liable for injury to the person of Lessee, Lessee’s employees, agents
      or contractors, whether such damage or injury is caused by or results from
      fire,
      steam, electricity, gas, water or rain, or from the breakage, leakage,
      obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
      air conditioning or lighting fixtures, or from any other cause, whether the
      said
      damage or injury results from conditions arising upon the Premises or upon
      other
      portions of the building of which the Premises are a part, or from other sources
      or places, and regardless of whether the cause of such damage or injury or
      the
      means of repairing the same is inaccessible to Lessee. Lessor shall not be
      liable for any damages arising from any act or neglect of any other tenant,
      if
      any, of the building in which the Premises are located.

     

    
      
        
        

      

      
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    9. Damage
      or
      Destruction.

     

    9.1 Partial
      Damage—Insured. Subject to the provisions of Paragraph, 9.3 and 9.4, if the
      Premises are damaged and such damage was caused by a casualty covered under
      an
      insurance policy required to be maintained pursuant to Paragraph 8.3. Lessor
      shall at Lessor’s expense repair such damage but not Lessee’s fixtures,
      equipment or tenant improvements unless the same have become a part of the
      Premises pursuant to Paragraph .5 hereof as soon as reasonably possible and
      this
      Lease shall continue in full force and effect. Notwithstanding the above, if
      the
      Lessee is the insuring party, and if the insurance proceeds received by Lessor
      are not sufficient to effect such repair, Lessor shall give notice to Lessee
      of
      the amount required in addition to the insurance proceeds to effect such repair.
      Lessee shall contribute the required amount to Lessor within ten days after
      Lessee has received notice from Lessor of the shortage in the insurance. When
      Lessee shall contribute such amount to Lessor, Lessor shall make such repairs
      as
      soon as reasonably possible and this Lease shall continue in full force and
      affect. Lessee shall in no event have any right to reimbursement for any such
      amount so contributed.

     

    9.2 ___[illegible]_________________________.
      Subject to the provisions of Paragraph 8.3 and 9.4, if at any time during
      the term hereof the Premises are damaged, except by negligent or willful act
      of
      Lessee (in which event Lessee shall make the repairs, at its expense) and such
      damage was caused by a casualty not covered under an insurance policy required
      to be maintained pursuant to Paragraph 8.3, Lessor may at Lessor’s option
      either (i) repair such damage as soon as reasonably possible at Lessor’s
      expense, in which event this Lease shall continue in full force and effect
      or
      (ii) give written notice to Lessee within thirty (30) days after the date
      of the occurrence of such damage of Lessor’s intention to cancel an terminate
      this Lease as of the as of the date of the occurrence of such damage. In which
      event this Lease shall continue in full force and effect, and Lessee shall
      proceed to make such repairs a soon as reasonably possible. If Lessee does
      not
      give such notice within such 10-day period this Lease shall be cancelled and
      terminated as of the date of the occurrence of such damage.

     

    9.3 Total
      Destruction. If at any time during the term hereof the Premises are totally
      destroyed from any cause whether or not covered by the insurance required to
      be
      maintained pursuant to Paragraph 8.3 (including any total destruction
      required by any authorized public authority) this Lease shall automatically
      terminate as of the date of such total destruction.

     

    9.4 Damage
      Near End of Term. If the Premises are partially destroyed or damaged during
      the
      last six months of the term of this Lease, Lessor may at Lessor’s option cancel
      and terminate this Lease as of the date of occurrence of such damage by giving
      written notice to Lessee of Lessor’s election to do so within 30 days after the
      date of occurrence of such damage.

     

    9.5 Abatement
      of Rent; Lessee’s Remedies.

     

    (a) If
      the
      Premises are partially destroyed or damaged and Lessor or Lessee repairs or
      restores them pursuant to the provisions of this Paragraph 9, the rent payable
      hereunder for the period during which such damage, repair or restoration
      continues shall be abated in proportion to the degree to which Lessee’s use of
      the Premises is impaired, provided, however, that the aggregate amount of
      abatement hereunder shall not exceed the total rent payable under Paragraph
      4
      for a period of six months. Except for abatement of rent, if any, Lessee shall
      have no claim against Lessor for any damage suffered by reason of any such
      damage, destruction, repair or restoration.

     

    (b) If
      Lessor
      shall be obligated to repair or restore the Premises under the provisions of
      this Paragraph 9 and shall not commence such repair or restoration within 90
      days after such obligation shall accrue, Lessee may at Lessee’s option cancel
      and terminate this Lease by giving Lessor written notice of Lessee’s election to
      do so at any time prior to the commencement of such repair or restoration.
      In
      such event this Lease shall terminate as of the date of such
      notice.

     

    9.6 Termination
      — Advance Payments. Upon termination of this Lease pursuant to this Paragraph
      9,
      an equitable adjustment shall be made concerning advance rent and any advance
      payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee
      so much of Lessee’s security deposit as has not theretofore been applied by
      Lessor.

     

    9.7 Waiver.
      Lessee waives the provisions of California Civil Code Sections 1932(2) and
      1933
      (4) which relate to termination of leases when the thing leased is destroyed
      and
      agrees that such event shall be governed by the terms of this
      Lease.

     

    
      
        
        

      

      
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    10. Real
      Property Taxes.

     

    10.1 Payment
      of Lease. Lessee shall pay all real property taxes applicable to the Premises
      during the term of this Lease. All such payments shall be made at least ten
      (10)
      days prior to the delinquency date of such payment. Lessee shall promptly
      furnish Lessor with satisfactory evidence that such taxes have been paid. If
      any
      such taxes paid by Lessee shall cover any period of time prior to or alter the
      expiration of the term hereof, Lessee’s share of such taxes shall be equitably
      prorated to cover only the period of time within the tax fiscal year during
      which this Lease shall be in effect, and Lessor shall reimburse Lessee to the
      extent required. If Lessee shall fail to pay any such taxes, Lessor shall have
      the right to pay the same, in which case Lessee shall repay such amount to
      Lessor with Lessee’s next rent installment together with interest at the rate of
      10% per annum.

     

    10.2 Definition
      of “Real Property” Tax. As used herein, the term “real property tax” shall
      include any form of assessment, license fee, commercial rental tax, levy,
      penalty, or tax (other than inheritance or estate taxes), imposed by any
      authority having the direct or indirect power to tax, including any city,
      county, state or federal government, or any school, agricultural, lighting,
      drainage or other improvement district thereof, as against any legal or
      equitable interest of Lessor in the Premises or in the real property of which
      the Premises are a part, as against Lessor’s right to rent or other income
      therefrom, or as against Lessor’s business of leasing the Premises or any tax
      imposed in substitution, partially or totally, of any tax previously included
      within the definition of real property tax, or any additional tax the nature
      of
      which was previously included within the definition of real property
      tax.

     

    10.3 Joint
      Assessment. If the Premises are not separately assessed, Lessee’s liability
      shall be an equitable proportion of the real properly taxes for all of the
      land
      and improvements included within the tax parcel assessed, such proportion to
      be
      determined by Lessor from the respective valuations assigned in the assessor’s
      work sheets or such other information as may be reasonably available. Lessor’s
      reasonable determination thereof, in good faith, shall be
      conclusive.

     

    10.4 Personal
      Property Taxes.

     

    (a) Lessee
      shall pay prior to delinquency all taxes assessed against and levied upon trade
      fixtures, furnishings, equipment and all other personal property of Lessee
      contained in the Premises or elsewhere. When possible, Lessee shall cause said
      trade fixtures, furnishings, equipment and all other personal property to be
      assessed and billed separately from the real property of Lessor.

     

    (b) If
      any of
      Lessee’s said personal property shall be assessed with Lessor’s real property,
      Lessee shall pay Lessor the taxes attributable to Lessee within 10 days after
      receipt of a written statement selling forth the taxes applicable to Lessee’s
      property.

     

    11. Utilities.

     

    Lessee
      shall pay for all water, gas, heat, light, power, telephone and other utilities
      and services supplied to the Premises, together with any taxes thereon. If
      any
      such services are not separately metered to Lessee, Lessee shall pay a
      reasonable proportion to be determined by Lessor of all charges jointly metered
      with other premises.

     

    12.
      Assignment and Subletting.

     

    12.1 Lessor’s
      Consent Required. Lessee shall not voluntarily or by operation of law assign,
      transfer, mortgage, sublet, or otherwise transfer or encumber all or any part
      of
      Lessee’s interest in this Lease or in the Premises, without Lessor’s prior
      written consent, which Lessor shall not unreasonably withhold. Any attempted
      assignment, transfer, mortgage, encumbrance or subletting without such consent
      shall be void, and shall constitute a breach of this Lease.

     

    12.2 Affiliate.
      Notwithstanding the provisions of paragraph 12.1 hereof, Lessee may assign
      or
      sublet the Premises, or any portion thereof, without Lessor’s consent, to any
      corporation which controls, is controlled by or is under common control with
      Lessee, or to any corporation resulting from the merger or consolidation with
      Lessee, or to any person or entity which acquires all the assets of Lessee
      as a
      going concern of the business that is being conducted on the Premises, provided
      that said assignee assumes, in full, the obligations of Lessee under this Lease.
      Any such assignment shall not, in any way, affect or limit the liability of
      Lessee under the terms of this Lease even if after such assignment or subletting
      the terms of this Lease are materially changed or altered without the consent
      of
      Lessee, the consent of whom shall not be necessary.

     

    
      
        
        

      

      
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    12.3 No
      Release of Lessee. Regardless of Lessor’s consent, no subletting or assignment
      shall release Lessee of Lessee’s obligation or alter the primary liability of
      Lessee to pay the rent and to perform all other obligations to be performed
      by
      Lessee hereunder. The acceptance of rent by Lessor from any other person shall
      not be deemed to be a waiver by Lessor of any provision hereof. Consent to
      one
      assignment or subletting shall not be deemed consent to any subsequent
      assignment or subletting. In the event of default by any assignee of Lessee
      or
      any successor of Lessee, in the performance of any of the terms hereof, Lessor
      may proceed directly against Lessee without the necessity of exhausting remedies
      against said assignee. Lessor may consent to subsequent assignments or
      subletting of this Lease or amendments or modifications to this Lease with
      assignees of Lessee, without notifying Lessee, or any successor of Lessee,
      and
      without obtaining its or their consent thereto and such action shall not relieve
      Lessee of liability under this Lease.

     

    12.4 Attorney’s
      Fees. In the event Lessee shall assign or sublet the Premises or request the
      consent of Lessor to any assignment or subletting or if Lessee shall request
      the
      consent of Lessor for any act that Lessee proposes to do then Lessee shall
      pay
      Lessor’s reasonable attorneys fees incurred in connection therewith, such
      attorneys fees not to exceed $250.00 for each such request.

     

    13. Defaults;
      Remedies.

     

    13.1 Defaults.
      The occurrence of any one or more of the following events shall constitute
      a
      material default and breach of this Lease by Lessee:

     

    (a) The
      vacating or abandonment of the Premises by Lessee.

     

    (b) The
      failure by Lessee to make any payment of rent or any other payment required
      to
      be made by Lessee hereunder, as and when due, where such failure shall continue
      for a period of three days after written notice thereof from Lessor to
      Lessee.

     

    (c)
       The
      failure by Lessee to observe or perform any of the covenants, conditions or
      provisions of this Lease to be observed or performed by Lessee, other than
      described in paragraph (b) above, where such failure shall continue for a period
      of 30 days after written notice hereof from Lessor to Lessee; provided, however,
      that if the nature of Lessee’s default is such that more than 30 days are
      reasonably required for its cure, then Lessee shall not be deemed to be in
      default if Lessee commenced such cure within said 30-day period and thereafter
      diligently prosecutes such cure to completion.

     

    (d) (i)
      The
      making by Lessee of any general assignment, or general arrangement for the
      benefit of creditors; (ii) the filing by or against Lessee of a petition to
      have
      Lessee adjudged a bankrupt or a petition for reorganization or arrangement
      under
      any law relating to bankruptcy (unless, in the case of a petition filed against
      Lessee, the same is dismissed within 60 days); (iii) the appointment of a
      Trustee or receiver to take possession of substantially all of Lessee’s assets
      located at the Premises or of Lessee’s interest in this Lease, where possession
      is not restored to Lessee within 30 days; or (iv) the attachment, execution
      or
      other judicial seizure of substantially all of Lessee’s assets located at the
      Premises or of Lessee’s interest in this Lease, where such seizure is not
      discharged within 30 days.

     

    (e) The
      discovery by Lessor that any financial statement given to Lessor by Lessee,
      any
      assignee of Lessee, any subtenant of Lessee, any successor in interest of Lessee
      or any guarantor of Lessee’s obligations hereunder, and any of them, was
      materially false. 

     

    13.2 Remedies.
      In the event of any such material default or breach by Lessee, Lessor may at
      any
      time thereafter, with or without notice or demand and without limiting Lessor
      in
      the exercise of any right or remedy which Lessor may have by reason of such
      default or breach:

     

    (a) Terminate
      Lessee’s right to possession of the Premises by any lawful means, in which case
      this Lease shall terminate and Lessee shall immediately surrender possession
      of
      the Premises to Lessor. In such event Lessor shall be entitled to recover from
      Lessee all damages incurred by Lessor by reason of Lessee’s default including,
      but not limited to, the cost of recovering possession of the Premises; expenses
      of reletting, including necessary renovation and alternation of the Premises,
      reasonable attorney’s fees, and any real estate commission actually paid; the
      worth at the time of award by the court having jurisdiction thereof of the
      amount by which the unpaid rent for the balance of the term after the time
      of
      such award exceeds the amount of such rental loss for the same period that
      Lessee proves could be reasonably avoided, that portion of the leasing
      commission paid by Lessor pursuant to Paragraph 15 applicable to the
      unexpired term of this Lease. Unpaid installments of rent or other sums shall
      bear interest from the date due at the rate of 10% per annum.

     

    (b) Maintain
      Lessees right to possession in which case this lease shall continue in effect
      whether or not Lessee shall have abandoned the Premises in such event Lessor
      shall be entitled to enforce all of Lessor’s rights end remedies under this
      Lease, including the right to recover the rent as it becomes due
      hereunder.

     

    (c) Pursue
      any other remedy now or hereafter available to Lessor under the laws of judicial
      decisions of the State of California.

     

    
      
        
        

      

      
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    13.3 Default
      by Lessor. Lessor shall not be in default unless Lessor fails to perform
      obligations required of Lessor within a reasonable time, but in no event later
      than thirty (30) days after written notice by Lessee to Lessor and to the holder
      of any first mortgage or deed of trust covering the Premises whose name and
      address shall have theretofore been furnished to Lessee in writing, specifying
      wherein Lessor has failed to perform such obligations; provided, however, that
      if the nature of Lessor’s obligation is such that more then thirty (30) days are
      required for performance then Lessor shall not be in default if Lessor commences
      performance within such 30-day period and thereafter diligently prosecutes
      the
      same to completion.

     

    13.4 Late
      Charges. Lessee hereby acknowledges that late payment by Lessee to Lessor of
      rent and other sums due hereunder will cause Lessor to incur costs not
      contemplated by this Lease, the exact amount of which will be extremely
      difficult to ascertain. Such costs include, but are not limited to, processing
      and accounting charges, and late charges which may be imposed on Lessor by
      the
      terms of any mortgage or trust deed covering the Premises. Accordingly, if
      any
      installment of rent or any other sum due from Lessee shall not be received
      by
      Lessor or Lessor’s designee within ten (10) days after such amount shall be due,
      Lessee shall pay to Lessor a late charge equal to 6% of such overdue amount.
      The
      parties hereby agree that such late charge represents a fair and reasonable
      estimate of the cost, Lessor will incur by reason of late payment by Lessee.
      Acceptance of such late charge by Lessor shall in no event constitute a waiver
      of Lessee’s default with respect to such overdue amount, nor prevent Lessor from
      exercising any of the other rights and remedies granted hereunder.

     

    14 Condemnation.
      If the Premises or any portion thereof are taken under the power of eminent
      domain, or sold under the threat of the exercise of said power (all of which
      are
      herein called “condemnation”), this Lease shall terminate as to the part so
      taken as of the date the condemning authority takes title or possession,
      whichever ever occurs. If more than 10% of the floor area of the improvements
      on
      the Premises, or more than 25% of the land area of the Premises which is not
      occupied by any improvements, is taken by condemnation, Lessee may, at Lessee’s
      option, to be exercised in writing only within ten (10) days after Lessor shall
      have given Lessee written notice of such taking (or in the absence of such
      notice, within ten (10) days after the condemning authority shall have taken
      possession) terminate this Lease as of the date the condemning authority takes
      such possession. If Lessee does not terminate this Lease in accordance with
      the
      foregoing, this Lease shall remain in full force and effect as to the portion
      of
      the Premises remaining, except that the rent shall be reduced in the proportion
      that the floor area taken bears to the total floor area of the bolding situated
      on the Premises. Any award for the taking of all or any part of the Premises
      under the power of eminent domain or any payment made under threat of the
      exercise of such power shall be the property of Lessor, whether such award
      shall
      be made as compensation for diminution in value of the leasehold or for the
      taking of the fee, or as severance damages; provided, however, that Lessee
      shall
      be entitled to any award for loss of or damage to Lessee’s trade fixtures and
      removable personal property. In the event that this Lease is not terminated
      by
      reason of such condemnation, Lessor shall, to the extent of severance damages
      received by Lessor in connection with such condemnation, repair any damage
      to
      the Premises caused by such condemnation except to the extent that Lessee has
      been reimbursed therefor by the condemning authority. Lessee shall pay any
      amount in excess of such severance damages required to complete such
      repair.

     

    15. Broker’s
      Fee. Upon execution of this Lease by both parties, Lessor shall pay to
      ________________________________ a license real estate broker, a fee as set
      forth in a separate agreement between Lessor and said broker, or in the event
      there is no separate agreement, the sum of $0
      for
      brokerage services rendered by said broker to Lessor in this transaction. Lessor
      further agrees that if Lessee exercises any option granted herein or any option
      substantially similar thereto, either to extend the term of this Lease, to
      renew
      this Lease, to purchase said P remises or any part thereof and/or any adjacent
      property which Lessor may own or in which Lessor has an interest, or any other
      option granted herein, or if said broker is the procuring cause of any other
      lease or sale entered into between the parties pertaining to the Premises and/or
      any adjacent property in which Lessor has an interest, then as to any of said
      transactions, Lessor shall pay said broker a fee in accordance with the schedule
      of said broker in effect at the time of execution of this Lease. Lessor agrees
      to pay said fee not only on behalf of Lessor but also on behalf of any person,
      corporation, association, or other entity having an ownership interest in said
      real property or any part thereof, which such fee is due hereunder. Any
      transferee of Lessor’s interest in this Lease, by accepting an assignment of
      such interest, shall be deemed to have assumed Lessor’s obligation under this
      Paragraph `5. Said broker shall be a third party beneficiary of the
      provisions of this Paragraph.

     

    16. General
      Provisions.

     

    16.1 Estoppel
      Certificate..

     

    (a) Lessee
      shall at any time upon not less than ten (10) days’ prior written notice from
      Lessor execute, acknowledge and deliver to Lessor a statement in writing (i)
      certifying that this Lease is unmodified and in full force and effect (or,
      if
      modified, stating the nature of such modification and certifying that this
      Lease, as so modified, is in full force and effect) and the date to which the
      rent and other charges are paid in advance, if any, and (iii) acknowledging
      that
      there are not, to Lessee’s knowledge, any uncured defaults on the part of Lessor
      hereunder, or specifying such defaults if any are claimed. Any such statement
      may be conclusively relied upon by any prospective purchaser or encumbrancer
      of
      the Premises.

     

    (b) Lessee’s
      failure to deliver such statement within such time shall be conclusive upon
      Lessee (i) that this Lease is in full force and effect, without modification
      excepts as may be represented by Lessor,(ii) that there are no uncured defaults
      in Lessor’s performance, and (iii) that not more than one month’s rent has been
      paid in advance or such failure may be considered by Lessor as a default by
      Lessee under this Lease.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (c) If
      Lessor
      desires to finance or refinance the Premises, or any part thereof, Lessee hereby
      agrees to deliver to any lender designated by Lessor such financial statements
      of Lessee as may be reasonably required by such lender. Such statements shall
      include the past three years’ financial statements of Lessee. All such financial
      statements shall be received in confidence and shall be used only for the
      purposes herein set forth.

     

    16.2 Lessor’s
      Liability. The term “Lessor” as used herein shall mean only the owner or owners
      at the time in question of the fee title or a lessee’s interest in a ground
      lease of the Premises, and except as expressly provided in Paragraph 15, in
      the
      event of any transfer of such title or interest. Lessor herein named (and in
      case of any subsequent transfers the then grantor) shall be relieved from and
      after the date of such transfer of all liability as respects Lessor’s
      obligations thereafter lo be performed, provided that any funds in the hands
      of
      Lessor or the then grantor at the time of such transfer, in which Lessee has
      an
      interest, shall be delivered to the grantee. The obligations contained in this
      Lease to be performed by Lessor shall, subject as aforesaid, be binding on
      Lessor’s successors and assigns, only during their respective periods of
      ownership.

     

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

     

    16,4 Interest
      on Past-due Obligations. Except as expressly herein provided, any amount due
      Lessor not paid when due shall bear interest at 10% per annum from the date
      due.
      Payment of such interest shall not excuse or cure any default by Lessee under
      this Lease, provided, however, that interest shall not be payable on late
      charges incurred by Lessee nor on any amounts upon which late charges are paid
      by Lessee.

     

    16.5 Time
      of
      Essence. Time is of the essence.

     

    16.6 Captions.
      Article and paragraph captions are not a part hereof.

     

    16.7 Incorporation
      of Prior Agreement; Amendments. This Lease contains all agreements of the
      parties with respect to any matter mentioned herein. No prior agreement or
      understanding pertaining to any such matter shall be effective. This Lease
      may
      be modified in writing only, signed by the parties in interest at the time
      of
      the modification. Except as otherwise staled in this Lease, Lessee hereby
      acknowledges that neither the real estate broker listed in Paragraph 15 hereof
      nor any cooperating broker on this transaction nor the Lessor or any employees
      or agents of any of said persons has made any oral or written warranties or
      representations to Lessee relative to the condition or use by Lessee of said
      Premises and Lessee acknowledges that Lessee assumes all responsibility
      regarding the Occupational Safety Health Act or the legal use of adaptability
      of
      the Premises and the compliance thereof to all applicable laws and regulations
      enforced during the term of this Lease except as otherwise specifically stated
      in this Lease.

     

    16.8 Notices.
      Any notice required or permitted to be given hereunder shall be in writing
      and
      may be given by personal delivery or by certified mail, and if given personally
      or by mail, shall be deemed sufficiently given if addressed to Lessee or to
      Lessor at the address noted below the signature of the respective parties,
      as
      the case may be. Either party may by notice to the other specify a different
      address for notice purposes except that upon Lessee’s taking possession of the
      Premises, the Premises shall constitute Lessee’s address for notice purposes. A
      copy of all notices required or permitted to be given to Lessor hereunder shall
      be concurrently transmitted to such party or parties at such addresses as Lessor
      may from time to time hereafter designate by notice to Lessee.

     

    16.9 Waiver.
      No waiver by Lessor of any provision hereof shall be deemed a waiver of any
      other provision hereof or of any subsequent breach by Lessee of the same or
      any
      other provision. Lessor’s consent to or approval of any act shall not be deemed
      to render unnecessary the obtaining of Lessor, consent to or approval of any
      subsequent act by Lessee. The acceptance of rent hereunder by Lessor shall
      not
      be a waiver of any preceding breach by Lessee of any provision hereof, other
      than the failure of Lessee to pay the particular rent so accepted, regardless
      of
      Lessor’s knowledge at such preceding breach at the time of acceptance of such
      rent.

     

    16.10 Recording.
      Lessee shall not record this Lease without Lessor’s prior written consent, and
      such recordation shall, at the option of Lessor, constitute a non-curable
      default of Lessee hereunder. Either party shall, upon request of the other,
      execute, acknowledge and deliver to the other a “short form” memorandum of this
      Lease for recording purposes.

     

    16.11 Holding
      Over. If Lessee remains in possession of the Premises or any part thereof after
      the expiration of the term hereof without the express written consent of Lessor,
      such occupancy shall be a tenancy from month to month at a rental the amount
      of
      the last monthly rental plus all other charges payable hereunder, and upon
      all
      the terms hereof applicable to a month-to-month tenancy.

     

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

     

    16.13 Covenants
      and Conditions. Each provision of this Lease performable by Lessee shall be
      deemed both a covenant and a condition.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    16.14 Binding
      Effect Choice of Law. Subject to any provisions hereof restricting assignment
      or
      subletting by Lessee and subject to the provisions of Paragraph 16.2. this
      Lease
      shall bind the parties, their personal representatives, successors and assigns.
      This Lease shall be governed by the laws of the State of
      California.

     

    16.15 Subordination.

     

    (a) This
      Lease, at Lessor’s option, shall be subordinate to any ground lease, mortgage,
      deed of trust, or any other hypothecation for security or hereafter placed
      upon
      the real property of which the Premises are a part and to any and all advances
      made on the security thereof and to all renewals, modifications, consolidations,
      replacements and extensions thereof. Notwithstanding such subordination Lessee’s
      right to quiet possession of the Premises shall not be disturbed it Lessee
      is
      not in default and so long as Lessee shall pay the rent and observe and perform
      all of the provisions of this Lease, unless this Lease is otherwise terminated
      pursuant to its terms. If any mortgagee, trustee or ground lessor shall elect
      to
      _[illegible]_ this Lease prior to the lien of its mortgage, deed of trust or
      ground lease, and shall given written notice thereof to Lessee, this Lease
      shall
      be _[illegible]__ prior to such mortgage, deed of trust, or ground lease,
      whether this Lease is dated prior or subsequent to the date of such mortgage,
      deed of trust or group lease or the date of recording thereof.

     

    ________[illegible]____________________________
      and _[illegible]_ to do so within ten (10) days after written demand, does
      hereby make, __[illegible]__ and irrevocably appoint Lessor as Lessee’s
      attorney-in-fact and in Lessee’s name, place and stead, to do so.

     

    16.16 Attorney’s
      Fees. If either party or the broker named herein brings an action to enforce
      the
      terms hereof or declare rights hereunder, the prevailing party in any such
      action, on trial or appeal, shall be entitled to his reasonable attorney’s fees
      to be paid by the losing party as fixed by the court. The provisions of this
      paragraph shall inure to the benefit of the broker named herein who seeks to
      enforce a right hereunder.

     

    16.17 Lessor’s
      Access. Lessor and Lessor’s agents shall have the right to enter the Premises at
      reasonable times for the purpose of inspecting the same, showing the same to
      or
      prospective purchasers, or lenders, or lessees, and making such alterations,
      repairs, improvements or additions to the Premises or to the building of which
      they are a part as Lessor may deem necessary or desirable. Lessor may at any
      time place on or about the Premises any ordinary “For Sale” signs and Lessor may
      at any time during the last 120 days of the term hereof place on or about the
      Premises any ordinary “For Sale” signs, all without rebate of rent or liability
      to Lessee.

     

    16.16 Signs
      and
      Auctions. Lessee shall not place any sign upon the Premises or conduct any
      auction thereon without Lessor’s prior written consent except that Lessee shall
      have the right, without the prior permission of Lessor to place ordinary and
      usual for rent or sublet signs thereon.

     

    l6.19 Merger.
      The voluntary or other surrender of this Lease by Lessee, or a mutual
      cancellation thereof, of a termination by Lessor, shall not work a merger,
      and
      shall, at the option of Lessor, terminate all or any existing subtenancies
      or
      may, at the option of Lessor, operate as an assignment to Lessor or any or
      all
      of such subtenancies. 

     

    16.20 Corporate
      Authority. If Lessee is a corporation, each individual executing this Lease
      on
      behalf of said corporation represents and warrants that he is duty authorized
      to
      execute and deliver this Lease on behalf of said corporation, in accordance
      with
      a duly adopted resolution the Board of Directors of said corporation or in
      accordance with the Bylaws of said corporation, and that this Lease is binding
      upon said corporation in accordance with its terms. If Lessee is a corporation
      Lessee shall, within thirty (30) days after execution of this Lease, deliver
      to
      Lessor a certified copy of a resolution of the Board of Directors of said
      corporation authorizing or ratifying the execution of this Lease.

     

    16.21 Consents.
      Wherever in this Lease the consent of one party is required to an act of the
      other party such consent shall not be unreasonably withheld or
      delayed.

     

    16.22 Guarantor.
      In the event that there is a guarantor of this Lease, said guarantor shall
      have
      the same obligations as Lessee under Paragraphs 16.1 and 16.20 of this
      Lease.

     

    16.23 Quiet
      Possession. Upon Lessee paying the fixed rent reserved hereunder and observing
      and performing all of the covenants, conditions and provisions on Lessee’s part
      to be observed and performed hereunder, Lessee shall have quiet possession
      of
      the Premises for the entire term hereof subject to all of the provisions of
      this
      Lease.

     

    16.24 Options.
      In the event that the Lessee, under the terms of this Lease, has any option
      to
      extend the term of this Lease, or any option to purchase the Premises or any
      right of first refusal to purchase the Premises or other property of Lessor,
      then each of such options and rights are personal to Lessee and may not be
      exercised or be assigned, voluntarily or involuntarily, by or to any one other
      that Lessee except that it may be exercised by or assigned to any of the
      entities described in paragraph 12.2 hereof for whom Lessee does not need the
      consent of Lessor to assign this Lease. In the event that Lessee hereunder
      has
      any multiple options to extend this Lease a later option to extend the Lease
      cannot be exercised unless the prior option has been so exercised.

     

    
      
        
        

      

      
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    16.25 Multiple
      Tenant Building Rules and Regulations. In the event that the Premises are part
      of a larger building or group of buildings then Lessee agrees that it will
      abide
      by, keep and observe all reasonable rules and regulation, which Lessor may
      make
      from time to time for the management, safety, care, and cleanliness of the
      building and grounds, the parking of vehicles and the preservation at good
      order
      therein as well as for the convenience of other occupants and tenants of the
      building. Further, Lessee will promptly pay its prorata share, as reasonably
      determined by Lessor, of any maintenance or repair of such portion of the
      Premises or such portion of the property of which the Premises are a part which
      are common areas or used by Lassie and other occupants thereof. The violations
      of any such rules and regulations, or the failure to pay such prorata share
      of
      costs, shall be deemed a material breach of this Lease by Lessee.

     

    16.26 Insuring
      Party. The insuring party under this lease shall be the Lessee.

     

    16.27 Additional
      Provisions. If there are no additional provisions draw a line from this point
      to
      the next printed word after the space left here. If there are additional
      provisions place the same here.

    The
      Rider
      attached hereto is made a part hereof.

     

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

     

    If
      this
      Lease has been filled in it has been prepared for submission to your attorney
      for his approval. No representation or recommendation is made by the real able
      broker or its agents or employees as to the legal sufficiency, legal effect,
      or
      tax consequences of this Lease or the transaction relating thereto.

    

      
        	
                 

                Executed
                  at San
                  Luis Obispo, California

              	 	
                 

                /s/
                  Larry H. Strasbaugh 
                  

                

                Larry
                  H. Strasbaugh

              
	 	 	
                 

              
	
                on
                  

              	 	
                By
                  /s/
                  Alan E. Strasbaugh 
                  

                

                Alan
                  E. Strasbaugh

              
	 	 	
                 

              
	
                Address
                  825
                  Buckley Road

              	 	
                By

              
	
                San
                  Luis Obispo, CA 93401

              	 	 
	
                 

              	 	
                “LESSOR”
                  (Corporate seal)

              
	 	 	 
	
                Executed
                  at San
                  Luis Obispo, California

              	 	
                R.
                  HOWARD STRASBAUGH, INC.

              
	 	 	 
	
                on
                  
                  

                

              	 	
                By
                  /s/
                  Larry H. Strasbaugh 
                  

                

                Larry
                  H. Strasbaugh, President

              
	 	 	
                 

              
	
                Address
                  825
                  Buckley Road
                  
                  San
                    Luis Obispo, CA 93401

                

              	 	
                By
                  /s/
                  Alan E. Strasbaugh 
                  

                

                Alan
                  E. Strasbaugh, Vice-President

              
	 	 	
                 

              
	
                 

              	 	 
	 	 	
                “LESSEE”
                  (Corporate seal)

              


      

    

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    


     

    RIDER

     

    PARAGRAPHS
      1 AND 2 BELOW ARE INCORPORATED IN AND MADE A PART OF THE FOREGOING
      LEASE.

     

    
      	
              1.

            	
              Every
                three years of this Lease, for the ensuing three-year period, commencing
                on the first day of the fourth year of the ‘term hereof, an adjustment
                shall be made whenever and in the same percentage (if any) that the
                United
                States Department of Labor, Bureau of Labor Statistics, Consumer
                Price
                Index, has increased above the said Index for March, 1990. Said comparison
                shall be made using the Index for the month of March preceding each
                third
                year beginning with the fourth year of the term hereof. If for any
                reason
                there is a change of any kind in the calculator or formulation of
                the said
                Index, or if the said Index shall no longer be published, then another
                Index generally recognized as authoritative shall be substituted
                by
                agreement, and if the parties cannot agree, such substituted Index
                shall
                be selected by the Presiding Judge of the Superior Court of the State
                of
                California, in and for the County of San Luis Obispo, or if such
                Judge is
                unable to determine that a satisfactory substitute index exists,
                then such
                Judge shall determine the then increase of the cost of living over
                March,
                1990; it being the intention of the parties that the base rental
                be
                increased in accordance with the cost of
                living.

            


    

     

    
      	
              2.

            	
              Lessee
                shall have two separate options to extend the term of this Lease
                at a
                rental to be determined as hereinafter provided, for two consecutive
                additional periods, as follows: (a) For the five-year period commencing
                May 1, 2005; and (b) for the five-year period commencing May 1, 2010,
                as
                extended by the exercise of the option designated (a) above; provided
                Lessee has exercised option (a)
                above.

            


    

     

    Lessee
      may, provided it is not in default under any of the terms of this Lease, at
      the
      time of the commencement of the extension, exercise the option designated (a)
      above by notifying Lessor in writing at any time six months prior to the
      expiration of the initial term that it does so exercise said option, and may
      exercise the option designated (b) above provided it is not in default under
      any
      of the terms of this Lease and has theretofore exercised the option designated
      (a) above, by notifying Lessor in writing at any time six months prior to the
      expiration of the term as extended by the exercise of option designated (a)
      above that it does so exercise said option.

     

    The
      rent
      for each of said five-year periods referred to above shall be fixed and arrived
      at as follows, and when so fixed shall be payable in equal monthly installments
      in advance on the first day of each and every calendar month of the respective
      five-year periods. The parties shall endeavor within the thirty days next
      following service of notice of exercise of option, to agree upon the rent for
      the particular five-year period; and should the parties fail to agree upon
      the
      rent for such period within thirty days, then the rent for such period shall
      be
      determined by arbitration based upon the fair market rental value for said
      premises then prevailing as follows: Lessee shall, within ten days next
      following said thirty day period appoint a qualified experienced representative
      and notify Lessor in writing of said appointment and the name and address of
      said representative so appointed by it, and Lessor shall also similarly, within
      the ten days next following the first mentioned ten-day period, appoint a
      qualified experienced representative, and notify Lessee in writing of said
      appointment and the name and address of said representative so appointed by
      Lessor. If the said representatives do not agree upon the then fair market
      rental value of the premises including land, building and equipment located
      thereon within thirty days next following the last mentioned ten-day period,
      then said representatives shall appoint a third qualified experienced
      representative within ten days next following the last mentioned thirty-day
      period; provided further that in the event they are unable to mutually agree
      upon a third representative within the aforementioned ten-day period, then
      the
      Lessor and Lessee shall immediately submit to the Court in the County in which
      the premises are located for a determination by said Court as to the appointment
      of the third representative. Promptly following the appointment of said third
      representative, this representative shall, within thirty days after such
      appointment, report in writing its opinion as to the then fair market rental
      value of the premises, including land, building and equipment, and if its
      opinion be the same as either of the representatives appointed by Lessor or
      Lessee, then the fair market rental value as determined by two of said three
      representatives shall be the fair market rental value of the real property
      including the land, building and equipment. If, however, said third
      representative’s determination does not coincide with that of either the
      Lessor’s or Lessee’s representative, then the average of the determinations of
      fair market rental value by the two closest representatives shall be deemed
      to
      be the rental for such option period. However, the rent for the first option
      period may be not less than for the original term herein, and the rent for
      the
      second option period may not be less than the rent for the first option
      period.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    It
      is
      further agreed that except for determination of the monthly rental by the method
      set forth above, all other terms and provisions of this Lease which are
      applicable during the initial term shall be deemed applicable to the option
      periods. Lessor shall pay the cost of its representative, Lessee shall pay
      the
      cost of its representative, and Lessor and Lessee shall mutually share all
      costs
      incurred in selecting the third representative.

     

    

      
        	
                 

                “LESSEE”

              	 	
                 

                “LESSOR”

              
	
                 

                R.
                  HOWARD STRASBAUGH, INC.

              	 	
                 

                /s/
                  Larry H. Strasbaugh 
                  

                

                LARRY
                  H. STRASBAUGH

              
	
                By
                  /s/
                  Larry H. Strasbaugh 
                  

                

                Larry
                  H. Strasbaugh

              	 	 
	
                
                  President,

                

              	 	
                 /s/
                  Alan E. Strasbaugh 
                  

                

                ALAN
                  E. STRASBAUGH

              
	
                 

              	 	
                 

              
	
                By
                  /s/
                  Alan E. Strasbaugh 
                  

                

                Alan
                  E. Strasbaugh,

              	 	 
	
                Vice
                  President

              	 	 
	 	 	 


      

    

     

     

     

    13