Exhibit 10.67


LEASE


	
  

  	
  LANDLORD:

  	
   

  	
  Watson Land Company,

  	
   

  
	
   

  	
   

  	
   

  	
  a California corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TENANT:

  	
   

  	
  Hansen 
  Beverage Company,

  	
   

  
	
   

  	
   

  	
   

  	
  a Delaware corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DATED:

  	
   

  	
  October 13, 2006

  	
   

  



 


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



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SINGLE TENANT INDUSTRIAL LEASE


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


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


ARTICLE I


Basic Lease Provisions


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


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


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


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


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


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


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



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


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


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


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


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


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


Exhibit A - Performance
Standards of Watson Land Company


Exhibit B - Outline of
Building and Tenant Yard Area


Exhibit C - Intentionally
Omitted


Exhibit D - Hazardous
Material Certificate


Exhibit E - Form of Estoppel
Certificate


Exhibit F - Initial
Improvement Work


Lease Rider Number 1


1.14                           Mailing Addresses:


Landlord:                                             Watson Land Company


22010 Wilmington Avenue,
Suite 400 

Carson, California 90745


Tenant:                                                       Hansen Beverage Company


1010
Railroad Street


Corona,
CA 92882 until March 1, 2007 then,


1990
Pomona Road


Corona,
CA 90040


Attn: Rodney Sacks


ARTICLE II


Condition of Premises


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



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


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


ARTICLE III


Term of Lease


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


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


ARTICLE IV


Rent


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



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


ARTICLE V


Taxes and Assessments


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


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


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


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



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


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


ARTICLE VI


Utility Charges


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


ARTICLE VII


Hold Harmless


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



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ARTICLE VIII


Insurance


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


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


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



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


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


ARTICLE IX


Repairs and Maintenance


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



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


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


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


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



 8
 









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


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



 9
 









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


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


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


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



 10
 









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


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


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


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


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



 11
 









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


ARTICLE X


Inspection of Premises by
Landlord


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


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


ARTICLE XI


Mechanics’ Liens


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


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



 12
 









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


ARTICLE XII


Damage or Destruction of
Premises


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


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


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


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



 13
 









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


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


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


ARTICLE XIII


Condemnation


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


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



 14
 









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


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


ARTICLE XIV


Use Of Premises -
Assignments


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


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



 15
 









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


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


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


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


14.2.4                  The
credit history of the proposed Transferee;


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


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


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



 16
 









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


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


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


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



 17
 









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


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


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


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


ARTICLE XV


Event of Default


15.1                           Tenant shall be in default under this Lease if:


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


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


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



 18















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


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


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


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


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


15.2.4      Seek
any legal or equitable relief permitted by law.


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


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


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


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


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


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


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



 19
 









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


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


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


ARTICLE XVI


Surrender of Premises


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


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



 20
 









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


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


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


ARTICLE XVII


Delays - Extensions of Time


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



 21
 









ARTICLE XVIll


Attorneys’ Fees


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


ARTICLE XIX


Statement of Lease


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


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



 22
 









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


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


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


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


ARTICLE XX


Rights Reserved by Landlord


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


ARTICLE XXI


Covenant of Quiet Enjoyment


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



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ARTICLE XXII


Recordation


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


ARTICLE XXIII


Subordination


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


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


ARTICLE XXIV


Security Deposit


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



 24
 









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


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


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


ARTICLE XXV


Holding Over


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


ARTICLE XXVI


General


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


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



 25
 









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


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


26.5                           Late Payments and Impounds. Intentionally deleted.


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


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


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


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


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



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


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


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


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


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


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


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


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



 27
 









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


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


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


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


	
  

  	
  Total amount of brokerage
  commission

  	
   

  	
  x

  	
   

  	
  Number of months
  of unexpired lease term

  	
   

  
	
  Number of months of lease
  term

  



 


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


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


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



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


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


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


	
  “LANDLORD”

  	
   

  	
  “TENANT”

  
	
   

  	
   

  	
   

  
	
  Watson Land Company,

  	
   

  	
  Hansen Beverage Company,

  
	
  a California corporation

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Bruce A. Choate

  	
   

  	
  /s/ Rodney C. Sacks

  
	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  President/CEO

  	
   

  	
  Chairman

  
	
  Title

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
  Bruce A. Choate

  	
   

  	
  Rodney C. Sacks

  
	
  Printed Name

  	
   

  	
  Printed Name

  
	
   

  	
   

  	
   

  
	
  10-18-06

  	
   

  	
  10-15-06

  
	
  Date

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Kirk R. Johnson

  	
   

  	
   

  
	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Executive Vice President

  	
   

  	
   

  
	
  Title

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
  Kirk R. Johnson

  	
   

  	
   

  
	
  Printed Name

  	
   

  	
  Printed Name

  
	
   

  	
   

  	
   

  
	
  10-18-06

  	
   

  	
   

  
	
  Date

  	
   

  	
  Date

  



 



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