ex10_3.htm


    
      

    

    Exhibit
      10.3

    


    


    LEASE

    


    THIS
      LEASE is made on this 1St day
      of May, 2005,
      by and between, Vasona Business Park (hereinafter called
      "Lessor") and Procera Networks (hereinafter called
      "Lessee").

    IN
      CONSIDERATION OF THE MUTUAL PROMISES HEREIN CONTAINED, THE PARTIES AGREE AS
      FOLLOWS:

    


    1.              Premises,
      Lessor leases to Lessee and Lessee leases from Lessor, upon the terms and
      conditions herein set forth, those certain premises ("Premises") situated in
      the
      City of Los Gatos, County of Santa Clara, California, as outlined in Exhibit
      "A"
      attached and described as: approximately 11,772 square feet of that larger
      33,020 square foot building commonly known as 100C Cooper Ct., Los Gatos,
      California. 95032

    2.              Term.
      The term of this Lease shall be for Thirty-seven (37) months commencing on
      June 1, 2005, and ending on June 30, 2008 unless sooner terminated
      pursuant to any provisions hereof.

    3.              Rent.
      Lessee shall pay to Lessor rent for the Premises of Twelve Thousand Nine Hundred
      and Forty-Nine Dollars ($12,949.00) per month in lawful money of the United
      States of America, subject to adjustment or offset, prior notice or demand,
      at
      such place as may be designated from time to time by Lessor as follows:
      $12,949.00 shall be paid upon execution of the Lease, which sum represents
      the
      amount of the second month's rent, A deposit of $15,304.00 as a Security Deposit
      shall be made by Lessee and held by the Lessor pursuant to Paragraph 5 of this
      Lease, and shall also be paid upon execution of the Lease, If Lessee is not
      in
      default of any provisions of this Lease, this sum, without interest thereon,
      shall be applied toward the rent due for the last month of the term of this
      Lease or the extended term, pursuant to any extension of the initial term in
      accordance with the provisions of this Lease. $12,949.00 shall be paid on
July 1, 2005 and in advance of the first (1st) day of each month until
June 30, 2006. $14,126.00 shall be paid on July 1, 2006 and in
      advance of the first day of each month until June 30, 2007. $15,304.00 shall
      be
      paid on July 1, 2007, and in advance of the first day of the each month
      until June 30, 2008.

    Rent
      for
      any period during the term hereof which is for less than one (1) full month
      shall be a pro-rata portion of the monthly rent payment. Lessee acknowledges
      that late payment by Lessee to Lessor of rent or any other payment due Lessor
      will cause Lessor to incur costs not contemplated by this Lease, the exact
      amount of such costs being extremely difficult and impracticable to fix, Such
      costs include, without limitation, processing and accounting charges, and late
      charges that may be imposed on Lessor by the terms of any encumbrances and
      note
      secured by any encumbrance covering the Premises. Therefore, if. any installment
      of rent or other payment due from Lessee is not received by Lessor within five
      (5) days following the date it is due and payable, Lessee shall pay to Lessor
      an
      additional sum of five (5%) percent of the overdue amount as a late charge.
      The
      parties agree that this late charge represents a fair and reasonable estimate
      of
      the costs that Lessor will incur by reason of late payment by Lessee. Acceptance
      of any late charge shall not constitute a waiver of Lessee's default with
      respect to the overdue amount, nor prevent Lessor from exercising any of the
      other rights and remedies available to Lessor.

    
      If
        for
        any reason whatsoever, Lessor cannot deliver possession of the Premises on
        the
        commencement date set forth in Paragraph 2 above, this Lease shall not be
        void
        or voidable, nor shall Lessor be liable to Lessee for any loss or damage
        resulting therefrom; but in such event, Lessee shall not be obligated to
        pay
        rent until possession of the Premises is tendered to Lessee and the commencement
        and termination dates of this Lease shall be revised to conform to the date
        of
        Lessor's delivery of possession. Notwithstanding the foregoing sentence,
Lessor shall permit Lessee to enter and occupy the Premises (Early
        Access) prior to the commencement date of this term, subject to all of the
        provisions of this Lease, except for the obligation to pay rent which
        Lessee shall not be called upon to pay until July 1,  2005. Lessee's
        occupancy of the Premises during the early occupancy period shall in no way
        interfere  with or delay Lessor's clean-up, construction and
        installation of the tenant improvements described in  Paragraph of
        this Lease, and Lessee shall hold Lessor harmless from such delay caused
        by, or due to the  fault of
        Lessee.  Lessee agrees to provide Lessor with insurance required
        in Paragraphs 10A, 10B and 10D prior to occupancy.

      B.
        All
        taxes, insurance premiums, Outside Area Charges, late charges, costs and
        expenses which Lessee is required to pay hereunder, together with all interest
        and penalties that may accrue thereon in the event of Lessee's failure to
        pay
        such amounts, and all reasonable damages, costs and attorney's fees and expenses
        which Lessor may incur by reason of any default of Lessee or failure on Lessee's
        part to comply with the terms of this Lease, shall be deemed to be additional
        rent ("Additional Rent") and, in the event of non-payment by Lessee, Lessor
        shall have all of the rights and remedies with respect thereto as Lessor
        has for
        the non-payment of the monthly installment of rent.

      4.              
        Option to Extend Term.

      A.
        Lessee
        shall have the option to extend the term on all the provisions contained
        in this
        Lease for one (1) three (3) year period ("extending term(s)") at an adjusted
        rental calculated as provided in Subparagraph B below on the condition
        that:

      (1)       Lessee
        has given to Lessor written notice of exercise six (6) months prior to the
        expiration of the initial term or extended term as the case may be.

      (2)       Lessee
        is not in default in the performance of any of the terms and conditions of
        the
        Lease on the date of giving the option Notice, and Lessee is not in default
        on
        the date the extended  term is to commence.

      B.
        Monthly rent for the extended term shall be at ninety-five (95%) of the then
        market rate  for similar buildings in the Los Gatos/Campbell
area.

      C.
        In no
        event shall the monthly rent for any extended term be less than the monthly
        rent
        paid immediately prior in such extended term.

       

    

    
      
        
        

      

      
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    5.              Security
      Deposit. Lessor acknowledges that Lessee has deposited with
      Lessor a Security Deposit in the sum of $15,304.00 to secure the full and
      faithful performance by Lessee of each term, covenant, and condition of this
      Lease. If Lessee shall at any time fail to make any payment or fail to keep
      or
      perform any term, covenant, or condition on its part to be made or performed
      or
      kept under this Lease, Lessor may, but shall not be obligated to and without
      waiving or releasing Lessee from any obligation under this Lease, use, apply,
      or
      retain the whole or any part of said Security Deposit (a) to the extent of
      any
      sum due to Lessor; or (b) to make any required payment on Lessee's behalf;
      or
      (c) to compensate Lessor for any loss, damage, attorneys' fees or expense
      sustained by Lessor due to Lessee's default. In such event, Lessee shall within
      five (5) days of written demand by Lessor, remit to Lessor sufficient funds
      to
      restore the Security Deposit to its original sum. No interest shall accrue
      on
      the Security Deposit. Should Lessee comply with all the terms, covenants and
      conditions of this Lease and at the end of the term of this Lease leave the
      Premises in the condition required by this Lease, then said Security Deposit
      or
      any balance thereof, less any sums owing to Lessor, shall be returned to Lessee
      within fifteen (15) days after the termination of this Lease and vacancy of
      the
      Premises by Lessee. Lessor can maintain the Security Deposit separate and apart
      from Lessor's general funds, or can commingle the Security Deposit with Lessor's
      general and other funds.

    6.              Use
      of the Premises. The Premises shall be used exclusively for
      the purpose of general office, research and development, software development
      and test, light assembly, warehousing, engineering, sales and distribution
      and
      any other related lawful purpose in conformity to municipal zoning
      requirements.

    Lessee
      shall not use, or permit the Premises, or any part thereof, to be used, for
      any
      purpose or purposes other than the purpose for which the Premises are hereby
      leased; and no use shall be made or permitted to be made of the Premises, nor
      acts done, which will increase the existing rate of insurance upon the building
      in which the Premises are located, or cause a cancellation of any insurance
      policy covering said building, or any part thereof, nor shall Lessee sell,
      or
      permit to be kept, used or sold, in or about the Premises, any article which
      may
      be prohibited by the standard form of fire insurance policies. Lessee shall
      not
      commit, or suffer to be committed, any waste upon the Premises, or any public
      or
      private nuisance, or other act or thing which may disturb the quiet enjoyment
      of
      any other tenant in the building in which the Premises are located; nor, without
      limiting the generality of the foregoing, shall Lessee allow the premises to
      be
      used for any improper, unlawful or objectionable purpose.

    7.              Hazardous
      Materials.

    Lessor
      hereby represents to Lessee that to the best of Lessor's knowledge, there is
      no
      toxic waste, spillage, or other contaminants, including asbestos, present in
      or
      about the Premises or the  building thereon as of the date of
      execution of this Lease. Lessee shall not place any harmful liquids
      in     the drainage system of the Premises or of the
      building of which the Premises forms a part. No waste materials or refuse shall
      be dumped upon or permitted to remain upon any part of the Premises outside
      o
      the building proper except in trash containers placed inside exterior enclosures
      designated for the purpose by Lessor, or inside the building proper where
      designated by Lessor. No materials, supplies, equipment,finished or
      semi-finished products, raw materials or articles of any nature shall be stored
      upon or permitted to remain on any portion of the Premises outside of the
      building.

    
      Should,
        at any time during the term of this Lease, or for a period of five (5) years
        after termination or expiration of this Lease, there be charges or findings
        of
        toxic waste, spillage, or other contaminants found by a governmental agency
        to
        be hazardous and requiring removal or remedial work of the same, and it is
        determined that Lessee is the cause, Lessee hereunder shall hold Lessor harmless
        from all claims, obligations, liabilities and costs, including reasonable
        attorney's fees, for the removal, remedial work, or other action required
        by the
        governmental agency so prescribing said action, or any other agency having
        jurisdiction unless Lessee can demonstrate that such toxic waste, spillage,
        or
        other contaminants did not occur as a result of Lessee's operations while
        occupying the Premises. If, at any time during the term of this Lease, Lessor
        suspects that toxic waste, spillage, or other contaminants may be present
        on the
        Premises, Lessor may order a soils report, or its equivalent, at Lessee's
        expense and if it is determined that Lessee is the cause, Lessee shall pay
        such
        costs within fifteen (15) days from the date of invoice by Lessor. If any
        such
        toxic waste, spillage, or other contaminants are found upon the Premises,
        Lessee
        shall deposit with Lessor, within fifteen (15) days of notice from Lessor
        to
        Lessee to do so, the amount necessary to remove such substances and remedy
        the
        problem, if it is proven that Lessee is responsible for such toxic waste,
        spillage or contaminants.

      Lessee
        shall abide by all laws, ordinances and statutes, as they now exist or may
        hereafter be enacted by legislative bodies having jurisdiction thereof, relating
        to its use and occupancy of the Premises.

      A.              Definitions.
        As used herein, the term "Hazardous Material" shall mean any substance
        or
        material which has been determined by any state, federal or local governmental
        authority to be capable of posing a risk of injury to health, safety or property
        including all of those materials and substances designated as hazardous or
        toxic
        by the Environmental Protection Agency, the California Water Quality Control
        Board, the Department of Labor, the California Department of Industrial
        Relations, the Department of Transportation, the Department of Agriculture,
        the
        Consumer Product Safety Commission, the Department of Health and Human Services,
        the Food and Drug Agency or any other governmental agency now or hereafter
        authorized to regulate materials and substances in the environment. Without
        limiting the generality of the foregoing, the term "Hazardous Material" shall
        include all of those materials and substances defined as "Toxic Materials"
        in
        Section 66680 through 66685 of Title 22 of the California Administrative
        Code,
        Division 4, Chapter 30, as the same shall be amended from time to
        time.

      B.              Use
        Restriction. Lessee shall not cause or permit any Hazardous
        Material to be used, stored, or disposed of in or about the Premises except
        in
        strict accordance with all laws and ordinances governing Hazardous Materials.
        The appearance of any Hazardous Material on or about the Premises which is
        caused or permitted by Lessee shall be deemed an Event of Default. If the
        presence of Hazardous Material on or about the Premises which is caused or
        permitted by Lessee results in contamination of the Premises or any soil
        in or
        about the Premises or groundwater under the Premises, Lessee, at its expense,
        shall promptly take all action necessary to return the Premises to the condition
        existing prior to the appearance of such Hazardous Material and shall perform
        all monitoring, testing, containment clean-up and other actions required
        by any
        applicable governmental agency.

       

    

    
      
        
        

      

      
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    C.              Lessee's
      Indemnity. Lessee shall defend, hold harmless and indemnify
      Lessor and its agents, lenders and employees from or against any and all
      liabilities, obligations, damages, penalties, claims, costs (including
      compliance and clean-up costs), charges, expenses of attorneys, expert
      witnesses, engineers and other consultants which may be imposed upon, incurred
      by or asserted against Lessor or the Premises by reason of any contamination
      of
      the Premises or any soil in or about the Premises or any groundwater under
      the
      Premises caused by Lessee's storage, use or disposal of Hazardous Material
      in or
      about the Premises.

    D.          
         Lessor's Indemnification.
Lessor shall indemnify, defend and hold harmless
      Lessee from and against any
      and all liabilities, obligations, damages, penalties, claims, costs, (including
      compliance and clean-up costs), charges, expenses of attorneys, expert
      witnesses, engineers and other consultants which may be imposed upon, incurred
      by or asserted against Lessee by reason of any contamination of the Premises
      caused by Lessor's storage, use or disposal of Hazardous Material on or about
      the Premises or caused by a release of Hazardous Material by third parties
      which
      release Lessee proves occurred off the Premises.

    E.         
          Representations and
      Warranties. Lessor represents and warrants that Lessor has
      not received nor is aware of any notification from the Department of Health
      Services, California Regional Water Quality Control Board, the U.S.
      Environmental Protection Agency or such other City, County or State authority
      having jurisdiction to require investigation, monitoring or remediation of
      any
      release of Hazardous Material, on, above or beneath the Premises. Lessor further
      represents that in the event that such notice or notices are received by Lessor,
      Lessor shall promptly deliver copies thereof to Lessee.

    F.              Compliance.
      Lessee shall immediately notify Lessor of any inquiry, test, investigation,
      enforcement proceeding by or against Lessee or the Premises concerning Hazardous
      Material used, stored or disposed of by Lessee or alleged to have been used,
      stored or disposed of by Lessee on or about the Premises. Lessor shall have
      the
      right to appoint a consultant to conduct an investigation to determine whether
      Lessee has used, stored or disposed of Hazardous Material on or about the
      Premises. If the consultant determines that Hazardous Materials have been
      stored, used or disposed of by Lessee, Lessee, at its expense, shall comply
      with
      all recommendations of the consultant, including, without limitation, any
      recommended testing, monitoring and clean-up.

    G.             Assignment
      and Subletting. It shall not be unreasonable for Lessor to
      withhold its consent to any proposed assignment or subletting if (i) the
      proposed assignee's or subiessee's anticipated use of the Premises involves
      the
      storage, use or disposal of Hazardous Material; (ii) if the proposed assignee
      or
      sublessee has been required by any prior Lessor, lender or governmental
      authority to "clean­up" Hazardous Material; (iii) if the proposed assignee
      or sublessee is subject to investigation or enforcement order or proceeding
      by
      any governmental authority in connection with the use, disposal or storage
      of a
      Hazardous Material.

    H.             
      Survival. The provisions contained in this
      Paragraph 7 shall survive the expiration or earlier termination of this
      Lease.

    8.              Improvements.
      Lessor will, at its sole expense, make improvements to the Premises as
      specified in Exhibit "B" attached hereto and by this reference made a part
      hereof. Since Lessee needs to  occupy the premise before these
      improvements can be completed, the
      improvements shall be constructed at a
      later date to be mutually agreed upon by Lessee and Lessor (no later than
      October 31, 2005, unless agreed otherwise to in writing. If the improvements
      include a shower, Lessee agrees to pay for all  associated costs.
      Lessor agrees to clean the premise throughout and deliver all mechanical,
      plumbing,  electrical and fire sprinkler systems shall be in good
      working order, condition and repair with all lighting in  proper
      working condition and all broken or soiled ceiling tiles shall be replaced.
      Lessee hereby  acknowledges that exhibit "B" may need to be modified
      to meet the Town of Los Gatos approval for  getting a building permit.
      The existing two men's restrooms do not meet handicap code so they
      definitely  will need reconstructed. This could affect the existing
      cubicles.

       9.            
      Taxes and Assessments.
             A.              
        Lessee shall pay before delinquency any and all taxes, assessments, license
        fees, public charges levied, assessed or imposed upon or against Lessee's
        fixtures, equipment, furnishings, appliances and personal property installed
        or
        located on or within the Premises. Lessee shall cause said fixtures, equipment,
        furnishings, furniture, appliances and personal property to be assessed and
        billed separately from the real property of Lessor. If any of Lessee's said
        personal property shall be assessed with Lessor's real property, Lessee shall
        pay to Lessor the taxes attributable to Lessee within ten (10) days after
        receipt of a written statement from Lessor setting forth the taxes applicable
        to
        Lessee's property.

             
        B.             All
        property taxes or assessments levied or assessed or hereafter levied or
        assessed, by any governmental authority, against the Premises or any portion of
        such taxes or assessments which becomes due or accrued during the term of
        this
        Lease, shall be paid by Lessor. Lessee shall reimburse Lessor for Lessee's
        proportionate share of such taxes or assessments within ten (10) days of
        receipt
        of Lessor's invoice demanding such payment. Lessee's liability hereunder
        shall
        be prorated to reflect the commencement and termination dates of this
        Lease.

      10.           
        Insurance.

      A.              Indemnity.
        Lessee agrees to indemnify and defend Lessor against and hold Lessor
        harmless from any and all demands, claims, causes of action, judgments,
        obligations, liabilities, and all reasonable expenses incurred in investigating
        or resisting the same (including reasonable attorney's fees) on account of,
        or
        arising out of the Lessee's use or occupancy of the Premises. This Lease
        is made
        on the express condition that Lessor shall not be liable for, or suffer loss
        by
        reason of, injury to person or property, from whatever cause, in any way
        connected with the Lessee's use or occupancy of the Premises, specifically
        including, without limitation, any liability for injury to the person or
        property of Lessee, its agents, officers, employees, licensees and
        invitees.

      B.              Liability
        Insurance. Lessee shall, at the Lessee's expense, obtain and
        keep in force during the term of this Lease, a policy of commercial general
        liability insurance insuring Lessor and Lessee, with cross-liability
        endorsements, against any liability arising out of the condition, use or
        occupancy of the Premises and Lessee's use of all areas appurtenant thereto,
        including parking areas. Such insurance shall be in an amount satisfactory
        to
        Lessor of not less than $3,000,000.00 Combined Single Limit for bodily injury
        or
        death and Property Damage per occurrence and annual policy aggregate. The
        insurance shall be with companies approved by Lessor, which approval Lessor
        agrees not to unreasonably withhold. Lessee shall deliver to Lessor prior
        to
        possession, a certificate of insurance evidencing the existence of the policy
        required hereunder, and such certificate shall certify that the policy (1)
        names
        Lessor as an additional insured, (2) shall not be canceled without thirty
        (30)
        days prior written notice to Lessor, (3) insures performance of the indemnity
        set forth in Sub-paragraph (A) above, subject to standard exclusions and
        (4) the
        coverage is primary and any coverage by Lessor is in excess
        thereto.

       

    

    
      
        
        

      

      
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    C.              Property
      Insurance. Lessor shall obtain and keep in force during the
      term of this Lease, a policy or policies of insurance covering loss or damage
      to
      the Premises, in the amount of the full replacement value thereof, providing
      protection against those perils included within the classification covering
      Direct Risk of physical loss with endorsement covering Special Form perils
      insurance, plus a policy of rental income insurance in the amount of 100% of
      the
      twelve (12) months rent (including sums payable as Additional Rent), and, at
      Lessor's option, earthquake insurance and flood insurance. Lessee shall have
      neither interest in nor any right to the proceeds of any insurance procured
      by
      Lessor on the Premises. Lessee shall, within twenty (20) days after receipt
      of
      billing, pay to Lessor as additional rent, the full cost of such insurance
      procured and maintained by Lessor, Lessee acknowledges that such insurance
      procured by Lessor shall contain a deductible which reduces Lessee's cost for
      such insurance and, in the event of loss or damage; Lessee shall be required
      to
      pay to Lessor the amount of such deductible.

    D.              Release
      of Lessor. Lessee acknowledges that the insurance to be
      maintained by Lessor on the Premises pursuant to Sub-paragraph C above will
      not
      insure any of Lessee's property. Accordingly, Lessee, at Lessee's own expense,
      shall maintain in full force and effect on all its fixtures, equipment,
      leasehold improvements and personal property in the Premises, a policy covering
      Direct Risk of physical loss with endorsement covering Special Form perils
      insurance to the extent of at least ninety (90%) percent of their insurable
      value. Lessee hereby releases Lessor, and its partners, officers, agents,
      employees, and servants, from any and all claims, demands, loss, expense or
      injury to the Premises or to the furnishings, fixtures, equipment, inventory
      or
      other personal property of Lessee in, about, or upon the Premises which is
      caused by perils, events or happenings which are covered by insurance required
      by this Lease or which are the subject of insurance carried by Lessee and in
      force at the time of such loss. Lessee shall procure an appropriate clause
      in,
      or an endorsement to, all policies required by this Lease, or any other
      insurance policy maintained by Lessee with respect to the Premises or Lessee's
      occupancy thereof, pursuant to which the insurance company or companies waive
      subrogation or consent to a wavier of a right of recovery against
      Lessor.

    E.             
       Mutual Waiver of Subrogation. Lessee and
      Lessor hereby mutually waive their respective rights for recovery against each
      other for any loss of or damage to the property of either party, where such
      loss
      or damage is insured by any insurance policy required to be maintained by this
      Lease or otherwise in force at the time of such loss or damage. Each party
      shall
      obtain any special endorsements, if required by the insurer, whereby the insurer
      waives its right of recovery against the other party hereto. The provisions
      of
      this Sub-paragraph E shall not apply in those instances in which waiver of
      subrogation would cause either party's insurance coverage to be voided or
      otherwise made uncollectible.

    11.           
      Utilities. Lessee shall pay for its prorate
      share of all water, gas, light, heat, power, electricity and sewer charges
      and all of its telephone, trash pick-up, and other services
      supplied to or consumed on the
      Premises, and all taxes and surcharges thereon. There is only one electric
      meter
      for the entire 33,020 square foot building, and the contract is in the name
      of Lessor. Lessor shall pay for utilities (other than  telephone) to
      the premise and Lessee agrees to reimburse Lessor for its prorata share of
the cost of said  utilities. With respect to the payment of the
      utilities only while a portion of the building is vacant, Lessee's prorata
      share
of the cost of the utilities shall be forty-three and eight tenths
      (43.8%) percent of ninety-five (95%) percent of the amount of the utility
bill and when the entire building is leased, Lessee shall pay thirty-five
      and seven tenths (35.7%) of the total bill. The monthly cost shall be estimated
      at twenty (20) cents per square foot per month and shall be paid monthly along
      with the monthly rent. The actual cost shall be reconciled every six months
      and
      Lessee shall either be billed for any amounts due or receive payment of any
      amount owed within thirty (30) days of reconciliation. Lessor agrees to use
      reasonable  efforts to assure Lessee that other Lessees located within
      the building are not consuming an inordinate  amount of
      electricity or gas and if Lessor determines that other Lessees within the
      building is doing so,  Lessor agrees to adjust the manner of payment
      and the allocated prorata share of the utility expenses on  an
      equitable basis. Lessee shall be provided with copies of all bills of all
      charges. In addition, the cost of any utility services supplied to the Outside
      Area shall be an Outside Area Charge and Lessee shall pay its share of such
      cost
      to Lessor as provided in Paragraph 13 below.

    
      12.          
        Repairs and Maintenance.

      A.             
        Subject to provisions of Paragraph 17, Lessor shall keep and maintain the
        roof
(including the roof structure and membrane), paving, structural elements,
        landscaping, irrigation, the exterior walls of the building in which the
        Premises are located and all common areas in good order and repair. Except
        for the cost of keeping and maintaining the structural elements of the building
        foundations,  exterior walls (excluding painting) and roof structure
        only, which shall be borne solely by Lessor, Lessee shall reimburse Lessor
        for its proportionate share of said expense within ten (10) days of Lessee's
        receipt of Lessor's invoice demanding payment. If, however, any repairs or
        maintenance are required because of an act or omission of Lessee, or its
        agents,
        employees, or authorized representatives, Lessee shall pay to Lessor upon
        demand
        100% of the costs of such repair or maintenance.

      B.             
        Except as expressly provided in Sub-paragraph (A) above, Lessee shall at
        its
        sole cost, keep and maintain the entire Premises and every part thereof,
        including, without limitation, the windows, window frames, plate glass, glazing,
        truck doors, doors, all door hardware, interior of the Premises, interior
        walls
        and partitions, and the electrical, plumbing, heating and air-conditioning
        systems in good and sanitary order, condition and repair.

      Lessee
        shall, at all times during the Lease term, have in effect a service contract
        for
        the maintenance of the heating, ventilating and air-conditioning (HVAC)
        equipment with a HVAC repair and -maintenance contractor approved by Lessor
        which provides for periodic inspection and servicing at least once every
        three
        (3) months during the term hereof and shall provide Lessor with a copy of
        such
        contra and all periodic service reports.

      Should
        Lessee fail to maintain the Premises or make repairs required of Lessee
        hereunder forthwith upon notice from Lessor, Lessor, in addition to all other
        remedies available hereunder or by law, and without waiving any alternative
        remedies, may make the same, and in that event, Lessee shall reimburse Lessor
        as
        additional rent for the reasonable cost of such maintenance or repairs on
        the
        next date upon which rent becomes due.

      Lessee
        hereby expressly waives the provisions of Sub-section 1 of Section 1932,
        and
        Sections 1941 and 1942 of the Civil Code of California and all rights to
        make
        repairs at the expense of Lessor, as provided in Section 1942 of said Civil
        Code.

      13.           
        Outside Area. Subject to the terms and conditions
        of this Lease and such rules and regulations as Lessor may from time to time
        prescribe, Lessee and Lessee's employees, invitees and customers shall, in
        common with other occupants of the parcel on which the Premises are located,
        and
        their respective employees, invitees and customers, and others entitled to
        the
        use thereof, have the non­exclusive right to use the access roads, parking
        areas and facilities provided and designated by Lessor for the general use
        and
        convenience of the occupants of the parcel on which the Premises are located,
        which areas and facilities are referred to herein as "Outside Area". This
        right
        shall terminate upon the termination of this Lease. Lessor reserves the right
        from time to time to make changes in the shape, size, location, amount and
        extent of the Outside Area. Lessor further reserves the right to promulgate
        such
        reasonable rules and regulations relating to the use of the Outside Area,
        and
        any part or parts thereof, as Lessor may deem appropriate for the best interest
        of the occupants of the parcel. The rules and regulations shall be binding
        upon
        Lessee upon delivery of a copy of them to Lessee, and Lessee shall abide
        by them
        and cooperate in their observance. Such rules and regulations may be amended
        by
        Lessor from time to time, with or without advance notice, and all amendments
        shall be effective upon delivery of a copy to Lessee, provided such regulation
        does not interfere with Lessee's quiet enjoyment.

       

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      
        
          Lessee
            shall have the non-exclusive use of 42 parking spaces in the Outside
            Area as
            designated from time to time by Lessor. Lessee shall not at any time
            park or
            permit the parking of Lessee's trucks or other vehicles, or the trucks
            or other
            vehicles of others, adjacent to the loading areas so as to interfere
            in any way
            with the use of such areas, nor shall Lessee at any time park or permit
            the
            parking of Lessee's vehicles or trucks, or the vehicles or trucks of
            Lessee's
            suppliers or others, in any portion of the Outside Area not designated
            by Lessor
            for such use by Lessee. Lessee shall not abandon any inoperative vehicles
            or
            equipment on any portion of the Outside Area.

        

        Lessor
          shall operate, manage, maintain and repair the Outside Area in good order,
          condition and repair. The manner in which the Outside Area shall be maintained
          and the expenditures for such maintenance shall be at the discretion of
          the
          Lessor. The cost of such repair, maintenance, operation and management,
          including without limitation, maintenance and repair of landscaping, irrigation
          systems, paving, sidewalks, fences and lighting, shall be an Outside Area
          Charge
          and Lessee shall pay to Lessor its share of such costs as provided in Paragraph
          14 below.

      

    

        
      14.          Outside
      Area Charges. Lessee shall pay to Lessor, as additional
      rent, upon demand but not more often than once each calendar month, an amount
      equal to thirty-five and seven tenths(35.7%) percent of the fair and
      reasonable Outside Area Charges as defined in this Lease. Lessee acknowledge
      and agrees that the Outside Area Charges shall include an additional five (5%)
      percent of the actual expenditures in order to compensate the Lessor for
      accounting and processing services. The Outside Area Charges shall be documented
      by Lessor.

    15.           Alterations
      and Additions. Except for installations and construction of
      non-structural  improvements and installations costing less than
      $10,000 accumulative in any given year, Lessee shall not make, or suffer to
      be made, any alterations, improvements, or additions in, on or about, or to
      the
      Premises or any part thereof, without the prior written consent of Lessor,
      and
      without a valid building permit issued by the appropriate governmental
      authority. Lessor retains, at his sole option, the right to perform all repairs,
      alterations, improvements or additions in, or about, or to said Premises or
      any
      part thereof. As a condition to giving such consent, Lessor may require that
      Lessee agree to remove any such alterations, improvements or additions at the
      termination of this Lease, and to restore the Premises to their prior condition,
      provided that Lessor informs Lessee that Lessee shall be required to remove
      same at the time  that Lessor grants Lessee the right to make such
      alteration, improvement or addition to the premises. Any alteration,
      addition, or improvement to the Premises, except movable furniture and trade
      fixtures not affixed to the Premises, shall become the property of the Lessor
      upon installation, and shall remain upon and be surrendered with the Premises
      at
      the termination of this Lease. Alterations and additions, which are not to
      be
      deemed as trade fixtures include heating, lighting, electrical systems,
      air-conditioning, partitioning, electrical signs, carpeting or any other
      installation which has become an integral part of the Premises. In the event
      Lessor consents to Lessee's making any alterations, improvements or additions,
      Lessee shall notify Lessor in writing at least fifteen (15) days prior to
      commencing work and Lessee shall be responsible for the timely posting of
      notices of non-responsibility on Lessor's behalf, providing that Lessor shall
      be
      responsible for executing and recording said notices and delivering the same
      to
      Lessee for posting, which shall remain posted until completion of the
      alterations, additions, or improvements. Lessee's failure to notify Lessor
      within the time period provided in the preceding sentence shall be a breach
      of
      this Lease.

    
      
        If,
          during the term hereof, any alteration, change or addition of any sort
          through
          all or any portion of the Premises or of the building of which the Premises
          form
          a part, is required by law, regulation, ordinance or order of any public
          agency,
          Lessee, at its sole cost and expense, shall promptly make the same. Lessee's
          payment shall be determined by multiplying Lessee's prorate share of the
          cost of
          said  improvement by a fraction the numerator of which is the number
          of months remaining on the lease and  the denominator of which is the
          generally accepted useful life of the improvement.

        16.           Acceptance
          of the Premises and Covenant to Surrender. By entry and
          taking possession of Premises to this Lease, Lessee accepts the Premises
          as
          being in good and sanitary order, condition and repair and accepts Premises
          in
          their condition existing as of date of such entry subject to
          Lessor's  responsibility to nevertheless perform all of its
          obligations described in Paragraph 8 and Exhibit B of this  Lease
          within a time mutually agreed to by both Lessee and Lessor.

        Subject
          to Paragraphs 17 and 18, Lessee agrees on the last day of the term hereof,
          or on
          sooner termination of this Lease, to surrender the Premises in substantially
          the same condition as  received (and as modified in accordance with
          the improvements described in Exhibit B) together with all alterations,
          additions and improvements which may have been made in, to or on the Premises
          by
          Lessor or Lessee, unto Lessor in good and sanitary order, condition and
          repair,
          excepting for such wear and tear as would be normal for the period of Lessee's
          occupancy. Lessee, on or before the end of term or sooner termination of
          this
          Lease, shall remove all personal property and trade fixtures from the Premises,
          and all property not so removed shall be deemed to be abandoned by Lessee.
          Lessee further agrees that at the end of the term or sooner termination
          of this
          Lease, Lessee, at its sole expense shall have the carpets steam cleaned,
          the
          walls and columns painted, the floors waxed, any damaged ceiling tiles
          replaced,
          the windows cleaned, the drapes cleaned and any damaged doors
          replaced.

        If
          the
          Premises are not surrendered at the end of the term or sooner termination
          of
          this Lease, Lessee shall indemnify Lessor against loss or liability resulting
          from delay by Lessee in so surrendering the Premises, including, without
          limitation, any claims made by any succeeding tenant founded on such
          delay.

        17.          
          Default. In the event of any default under the
          terms of this Lease by Lessee, or an abandonment of the Premises by the
          Lessee,
          the Lessor has the option of: (1) removing all persons and property from
          the
          Premises and repossessing the Premises, in which case any of the Lessee's
          property which Lessor removes from the Premises may be stored in a public
          warehouse or elsewhere at the cost of, and for the account of Lessor or,
          (2)
          allowing the Lessee to remain in full possession and control of the Premises.
          If
          the Lessor chooses to repossess the Premises, the Lease will automatically
          terminate in accordance with the provisions of California Civil Code Section
          1951.2. In the event of such termination of the Lease, Lessor may recover
          from
          the Lessee: (1) the worth at the time of award of unpaid rent which had
          been
          earned at the time of termination, including interest at the maximum rate
          an
          individual is permitted by law to charge; (2) the worth at the time of
          award of
          the amount by which the unpaid rent which would have been earned after
          termination until the time of award exceeds the amount of such rental loss
          that
          the Lessee proves could have been reasonably avoided, including interest
          at the
          maximum rate an individual is permitted by law to charge; (3) the worth
          at the
          time of award of the amount by which the unpaid rent for the balance of
          the term
          after the time of award exceeds the amount of such rental loss that the
          Lessee
          proves could be reasonably avoided; and (4) any other amount necessary
          to
          compensate the Lessor for all the detriment proximately caused by the Lessee's
          failure to perform his obligations under the Lease or which, in the ordinary
          course of things, would be likely to result therefrom. "The worth at the
          time of
          the award", as used in (1) and (2) of this paragraph is to be computed
          by
          allowing interest at the maximum rate an individual is permitted by law
          to
          charge. "The worth at the time of the award", as referred to in (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
          (1%) percent.

         

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

        
           

        

      

    

    
      If
        Lessor
        chooses not to repossess the Premises, but allows the Lessee to remain in
        full
        possession and control of the Premises, then in accordance with provisions
        of
        California Civil Code Section 1951.4, the Lessor may treat the Lease as being
        in
        full force and effect, and may collect from the Lessee all rents as they
        become
        due through the termination date of the Lease, as specified in the Lea For
        the
        purpose of this paragraph, the following do not constitute a termination
        of
        Lessee's right to possession:

    

    
      	
            	
              a)

            	
              Acts
                of maintenance or preservation, or efforts torelet
                the property.

            


    

    
      	
            	
              b)

            	
              The
                appointment of a receiver on the initiative of theLessor to protect
                his
                interest under this Lease.

            


    

    Lessee
      shall be liable immediately to Lessor for all costs Lessor incurs in reletting
      the Premises, including, without limitation, brokers' commissions, expense
      of
      remodeling the Premises required by the reletting, and like costs. Reletting
      can
      be for a period shorter or longer than the remaining term of this Lease. Lessee
      shall pay to Lessor the rent due under this Lease on the dates the rent is
      due,
      less the rent the Lessor receives from any reletting. No act by Lessor allowed
      by this Section shall terminate this Lease unless Lessor notifies Lessee that
      Lessor elects to terminate this Lease. After Lessee's default, and for as long
      as Lessor does not terminate Lessee's right to possession of the Premises,
      if
      Lessee obtains Lessor's consent, Lessee shall have the right to assign or sublet
      its interest in this Lease, but Lessee shall not be released from liability.
      Lessor's consent to proposed assignment or subletting shall not be unreasonably
      withheld.

    
      If
        Lessor
        elects to relet the Premises as provided in this Paragraph, rent that Lessor
        receives from reletting shall be applied to the payment of

      First,
        any indebtedness from Lessee to Lessor other than rent due  from
        Lessee;

      Second,
        all costs, including for maintenance, reasonably incurred by Lessor in
        reletting;

      Third,
        rent due and unpaid under this Lease. After deducting payment referred to
        in
        this Paragraph, any sum remaining from rent Lessor receives from reletting
        shall
        be applied in payment of future rent as rent becomes due under this Lease.
        If on
        the date rent is due under this Lease, the rent received from reletting is
        less
        than the rent due on that date, Lessee shall pay to Lessor, in addition to
        remaining rent due, all costs, including for maintenance, Lessor incurred
        in
        reletting that remain after applying rent received from the reletting, as
        provided in this paragraph.

       

      Lessor
        at
        any time after Lessee commits a default can cure the default at Lessee's
        cost.
        If Lessor at any time, by reason of Lessee's default, pays any sum or does
        any
        act that requires the payment of any sum, the reasonable sum paid by Lessor
        shall be due immediately from Lessee to Lessor at the time the sum is paid,
        and
        if paid at a later date shall bear interest at the maximum rate an individual
        is
        permitted by law to charge from the date the sum is paid by Lessor until
        Lessor
        is reimbursed by Lessee. The sum, together with interest on it, shall be
        additional rent.

      Rent
        not
        paid within five (5) business days after becoming due shall bear interest
        at the maximum rate an individual is permitted by law to charge from the
        date
        due until paid.

      18.             
         Damage or Destruction.

      (a)            
        Uninsured Minor Casualty. In the event that any
        portion of the Premises are destroyed or damaged by an uninsured peril, Lessor
        or Lessee may, upon written notice to the other, given within thirty (30)
        days
        after the occurrence of such damage or destruction, elect to terminate this
        Lease; provided, however, that either party may, within thirty (30) days
        after
        receipt of such notice, elect to make any required repairs and/or restoration
        at
        such party's sole cost and expense, in which event this Lease shall remain
        in
        full force and effect, and the party having made such election to restore
        or
        repair shall thereafter diligently proceed with such repairs and/or
        restoration.

      (b)             
        Insured Major Casualty. In the event the Premises
        are damaged or destroyed from any insured peril to the extent of thirty-three
        (33%) percent or more of the then replacement cost of the Premises Lessor
        may,
        upon written notice to Lessee, given within thirty (30) days after the
        occurrence of such damage or destruction, elect to terminate this Lease.
        If
        Lessor does not give such notice in writing within such period, Lessor shall
        be
        deemed to have elected to rebuild or restore the Premises, in which event
        Lessor
        shall, at its expense, promptly rebuild or restore the Premises to their
        condition prior to the damage or destruction and Lessee shall pay to Lessor
        upon
        commencement of reconstruction the amount of any deductible from the insurance
        policy.

      (c)             Insured
        Minor Casualty. In the event the Premises are damaged or
        destroyed from any insured peril to the extent of less than thirty-three
        (33%)
        percent of the then replacement cost of the Premises, Lessor shall, at Lessor's
        expense, promptly rebuild or restore the Premises to their condition prior
        to
        the damage or destruction and Lessee shall pay to Lessor upon commencement
        of
        reconstruction the amount of any deductible from the insurance
        policy.

       

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
       

    

    In
      the
      event that, pursuant to the foregoing provisions, Lessor is to rebuild or
      restore the Premises, Lessor shall, within thirty (30) days after the occurrence
      of such damage or destruction, provide Lessee with written notice of the time
      required for such repair or restoration. If such period is longer than two
      hundred seventy (270) days from the issuance of a building permit, Lessee may,
      within thirty (30) days of receipt of Lessor's notice, elect to terminate the
      Lease by giving written notice to Lessor of such election, whereupon the Lease
      shall immediately terminate. The period of time for Lessor to complete the
      repair or restoration shall be extended for delays caused by the fault or
      neglect of Lessee or because of acts of God, acts of stormy weather, inability
      to obtain materials, supplies or fuels, acts of contractors or subcontractors,
      or delay of contractors or subcontractors due to such causes or other
      contingencies beyond the control of Lessor. Lessor's obligation to repair or
      restore the Premises shall not include restoration of Lessee's trade fixtures,
      equipment, merchandise, or any improvements, alterations or additions made
      by
      Lessee to the Premises.

    Unless
      this Lease is terminated pursuant to the foregoing provisions, this Lease shall
      remain in full force and effect; provided, however, that during any period
      of
      repairs or restoration, rent and all other amounts to be paid by Lessee on
      account of the Premises and this Lease shall be abated in proportion to the
      area
      of the Premises rendered not reasonably suitable for the conduct of Lessee's
      business thereon. Lessee hereby expressly waives the provisions of Section
      1932,
      Subdivision 2 and Section 1933, Subdivision 4 of the California Civil
      Code.

    19.          
      Condemnation. If any part of the Premises
      shall be taken for any public or quasi-public us under any statute or by right
      of eminent domain, or private purchase in lieu thereof, and a part thereof
      remains, which is susceptible of occupation and use hereunder, this Lease,
      shall, as to the part so taken, terminate as of the date title shall vest in
      the
      condemner or purchase, and the rent payable hereunder shall be adjusted so
      that
      the Lessee shall be required to pay for the remainder of the term only such
      portion of such rent as the value of the part remaining after such taking bears
      to the value of the entire Premises prior to such taking. Lessor and Lessee
      shall have the option to terminate this Lease in the event that such taking
      causes a reduction in rent payable hereunder by fifty (50%) percent or more.
      If
      all of the Premises or such part thereof be taken so that there does not remain
      a portion susceptible for occupation and use hereunder, as reasonably necessary
      for Lessee's conduct of its business as contemplated in this Lease, this Lease
      shall thereupon terminate. If a part or all of the Premises be taken, all
      compensation awarded upon such taking shall go to the Lessor, and the Lessee
      shall have no claim thereto and the Lessee hereby irrevocably assigns and
      transfers to the Lessor any right to compensation or damages to which the Lessee
      may become entitled during the term hereof by reason of the purchase or
      condemnation of all or a part of the Premises.

    If
      this
      Lease is terminated by either Lessor or Lessee pursuant to this Paragraph 18,
      Lessor shall receive (and Lessee shall assign to Lessor upon demand from Lessor)
      any and all income, rent, award or interest thereon which may be paid or owed
      in
      connection with the exercise of such power of eminent domain or conveyance
      in
      lieu thereof and Lessee shall have no claim against Lessor except that Lessee
      shall have the right to recover its share of any award or consideration for
      (a)
      moving expenses; (b) loss or damage to Lessee's trade fixtures, furnishings,
      equipment and other personal property; and (c) business goodwill.

    20.           Free
      from Liens. Lessee shall (1) pay for all labor and services
      performed and for materials used by or furnished to Lessee, or any contractor
      employed by Lessee with respect to the Premises, and (2) indemnify, defend
      and
      hold Lessor and the Premises harmless and free from any liens, claims, demands,
      encumbrances or judgments created or suffered by reason of any labor or services
      performed for materials used by or furnished to Lessee or any contractor
      employed by Lessee with respect to the Premises and (3) give notice to Lessor
      in
      writing five (5) days prior to employing any laborer or contractor to perform
      services related, or receiving materials for use upon the Premises, and (4)
      shall post, on behalf of Lessor, a notice of non-responsibility in accordance
      with the statutory requirements of California Civil Code Section 3094, or any
      amendment thereof, provided that Lessor shall be responsible for executing
      and
      recording such notices. In the event an improvement bond with a public agency
      in
      connection with the above is required to be posted, Lessee agrees to include
      Lessor as an additional obligee.

    
      21.           Compliance
        with Laws, Subject to the provisions of Paragraph 14 above,
        Lessee shall, at its own cost, comply with and observe all requirements of
        all
        municipal, county, state and federal authority now in force, or which may
        hereafter be in force, pertaining to the use and occupancy of the
        Premises.

      22.        
          Subordination. Lessee agrees that this
        Lease shall, at the option of Lessor, be subjected an subordinated to any
        mortgage, deed of trust, or other instrument of security, which has been
        or
        shall be placed and this subordination is hereby made effective without any
        further act of Lessee or Lessor. The Lessee shall, at any time hereinafter,
        on
        demand, execute any instruments, releases or other documents that may be
        required by any mortgage, mortgagor, or trustor or beneficiary under any
        deed of
        trust or other instrument of security. If Lessee fails to execute and deliver
        any such documents or instruments, Lessee irrevocably constitutes and appoints
        Lessor as Lessee's special attorney-in-fact to execute and deliver any such
        documents or instruments.

      However,
        the provisions of this Paragraph 21 shall not be effective with respect to
        the
        interest of any successor to Lessor unless and until such successor shall
        have
        delivered to Lessee a written non-disturbance agreement for the benefit of
        Lessee, to the effect that this Lease shall not be terminated in the event
        of
        any default under any ground lease or underlying lease or any foreclosure
        or
        sale pursuant to the terms of any mortgage or deed of trust, so long as Lessee
        is not in default (after the expiration of all applicable cure periods) under
        the terms of this Lease, and Lessee agrees to attorn to and become the Lessee
        of
        Lessor's successor. In addition, Lessor shall use its best efforts to obtain
        such a written non-disturbance agreement from all existing lien holders having
        an interest in the Premises. So long as Lessee pays all rentals required
        hereunder and observes and performs all of the covenants, conditions and
        provisions on Lessee's part to be observed and performed hereunder, Lessee
        shall
        have quiet possession of the Premises for the entire Lease term, subject
        to all
        the provisions of this Lease.

      23.           Abandonment.
        Lessee shall not vacate nor abandon the Premises at any time during the
        term. If Lessee shall abandon, vacate or surrender said Premises, or be
        dispossessed by process of law, or otherwise, any personal property belonging
        to
        Lessee and left on the Premises shall be deemed to be abandoned at the option
        of
        Lessor, except such property as may be mortgaged to Lessor; provided, however,
        that Lessee shall not be deemed to have abandoned or vacated the Premises
        so
        long as Lessee continues to pay all rents as and when due and otherwise pursuant
        to terms and conditions of the Lease.

      24.           Assignment
        and Subletting. Lessee's interest in this Lease is not
        assignable by operation of law or otherwise nor shall Lessee have the right
        to
        sublet the Premises, transfer any interest of Lessee's therein or permit
        any use
        of the Premises by another party, without prior written consent of Lessor
        to
        such assignment, subletting or transfer of use, which consent shall not be
        unreasonably conditioned or delayed or withheld.

       

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    If
      Lessee
      is a partnership: a withdrawal or change, voluntary, involuntary or by operation
      of law of any partner(s) owning fifty (50%) percent or more of the partnership,
      or the dissolution of the partnership, shall be deemed a voluntary
      assignment.

    If
      Lessee
      consists of more than one person, a purported assignment, voluntary, involuntary
      or by operation of law, from one person to the other or from a majority of
      persons to the others, shall be deemed a voluntary assignment.

    If
      Lessee
      is a corporation, any dissolution, merger, consolidation, or other
      reorganization of Lessee, or the sale or other transfer of a controlling
      percentage of capital stock of Lessee, or sale of at least fifty-one (51%)
      percent of the value of assets of Lessee, shall be deemed a voluntary
      assignment. The phrase, "controlling percentage" means ownership of and right
      to
      vote, stock possessing at least fifty-one (51 %) percent of the total combined
      voting power of all classes of Lessee's capital stock issued, outstanding,
      and
      entitled to vote for election of directors. This Paragraph shall not apply
      to
      corporation the stock of which is traded through an exchange or over the
      counter.

    Lessor's
      prior consent shall not be required for any assignment, sublease or other
      transfer of Lessee's interest in the Premises or this to any corporation with
      which Lessee may merge or consolidate or become affiliated as a parent,
      subsidiary, holding company or otherwise, or to an entity in which Lessee has
      a
      controlling interest, provided that any such transfer shall not result in
      Lessee's being released or discharged from any liability under this Lease and
      such assignee has equal or greater financial strength. Sublessee or transferee
      shall, prior to taking possession of the Premises, deliver to Lessor written
      notice of the transfer and its terms, covenants, conditions and provisions
      of
      the Lease, including without limitation the provisions regarding the use of
      the
      Premises.

    In
      the
      event of any such subletting or transfer which is consented to, or not consented
      to, by Lessor, a sublessee agrees to pay monies or other consideration whether
      by increased rent or otherwise, in excess of or in addition to those provided
      for herein, then all such excess or additional monies or other consideration
      shall be paid solely to Lessor after first subtracting Lessee's direct cost
      of reasonable  market real estate fees, attorney's fee and tenant
      improvements incurred as a result of said subletting or  transfer, and
      this shall be one of the conditions to obtaining Lessor's
      consent.

    Lessee
      immediately and irrevocably assigns to Lessor, as security for Lessee's
      obligations under this Lease, all rent from any subletting of all or part of
      the
      Premises as permitted by this Lease, and Lessor, as assignee and as
      attorney-in-fact for Lessee, or a receiver for Lessee appointed on Lessor's
      application, may collect such rent and apply it toward Lessee's obligations
      under this Lease; except that until the occurrence of an act of default by
      the
      Lessee, Lessee shall have the right to collect such rent.

    A
      consent
      to or assignment, subletting, occupation or use by another party shall not
      be
      deemed to be a consent to any subsequent assignment, subletting, occupation
      or
      use by another party. Any assignment or subletting without such consent shall
      be
      void and shall at the option of Lessor, terminate this Lease. Lessor's waiver
      or
      consent to any assignment or subletting hereunder shall not relieve Lessee
      from
      any obligation under this Lease unless the consent shall so provide. If Lessee
      requests Lessor to consent to a proposed assignment or subletting, Lessee shall
      pay to Lessor, whether or not consent is ultimately given, Lessor's reasonable
      attorney's fees incurred in conjunction with each such request.

    
       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

    

     

    Notwithstanding
      the forgoing, Lessor consents to Lessee subletting to ALCIS
      Corporation.

    25.           Parking
      Charges. Lessee agrees to pay upon demand, based on its
      percent of occupancy of the entire building, its pro-rata share of any parking
      charge, surcharges, or any other cost hereafter levied or assessed by local,
      state or federal governmental agencies in connection with the use of parking
      facilities serving the Premises including without limitation, parking surcharges
      imposed by or under authority of the Federal Environmental Protection
      Agency.

    26.           Insolvency
      on Bankruptcy. Either (a) the appointment of a receiver to
      take possession of all or substantially all of the assets of Lessee, or (b)
      a
      general assignment by Lessee for the benefit of creditors or (c) any action
      taken or suffered by Lessee under any insolvency or bankruptcy act shall
      constitute a breach of this Lease. Upon the happening of any such event, this
      Lease shall terminate ten (10) days after written notice of termination from
      Lessor to Lessee. This section is to be applied consistent with applicable
      state
      and federal law in effect at the time such event occurs.

    Any
      action referred to above which is suffered involuntarily by Lessee shall not
      constitute an unauthorized assignment or transfer or a breach of this Lease
      by
      Lessee if Lessee shall successfully dismiss any action or proceeding in
      connection therewith within sixty (60) days of the filing thereof. In such
      event, Lessor shall not be entitled to exercise its remedies described in said
      Section until the expiration of such sixty (60)-day period, provided that Lessee
      shall diligently pursue such dismissal.

    27.           Lessor
      Loan or Sale. Lessee agrees promptly following request by
      Lessor to (a) execute and deliver to Lessor any documents including estoppel
      certificates presented to Lessee by Lessor, (i) certifying that this Lease
      is
      unmodified and in full force and effect, or if modified, stating the nature
      of
      such modification and certifying that this Lease, as so modified, is in full
      force and effect and the date to which the rent and other charges are paid
      in
      advance, and (ii) acknowledging that there are not, to Lessee's knowledge,
      any
      uncured defaults on the part of Lessor hereunder, and (iii) evidencing the
      status of the Lease as may be required by either a lender making a loan to
      Lessor, to be secured by deed of trust or mortgage covering the Premises, or
      a
      purchaser of the Premises from Lessor and (b) if requested by any bona fide
      lender of Lessor or purchaser of the Premises, to deliver to Lessor current
      financial statements of Lessee, including a balance sheet and profit and loss
      statement for the current fiscal year and the two (2) immediately prior fiscal
      years, all prepared in accordance with generally accepted accounting principles
      consistently applied. Lessee's failure to deliver an estoppel certificate within
      ten (10) days following such request shall constitute a default under this
      Lease
      and shall be conclusive upon Lessee that this Lease is in full force and effect
      and has not been modified except as may be represented by Lessor. If Lessee
      fails to deliver the estoppel certificate within ten (10) days, Lessee
      irrevocably constitutes and appoints Lessor as its special attorney-in-fact
      to
      execute and deliver the certificate to any third party.

    28.           Surrender
      of Lease. The voluntary or other surrender of this Lease by
      Lessee, or a mutual cancellation thereof, shall not work a merger nor relieve
      Lessee of any of Lessee's obligations under this Lease, and shall, at the option
      of Lessor, terminate all or any existing subleases or subtenancies, or may,
      at
      the option of Lessor, operate as an assignment to him of any or all such
      subleases or subtenancies.

    
      
        29.           Attorneys'
          Fees. If for any reason, any suit be initiated to enforce
          any provisions of this Lease, the prevailing party shall be entitled to
          legal
          costs, expert witness expenses and reasonable attorneys' fees as fixed
          by the
          court.

        30.           Notices.
          All notices to be given to Lessee may be given in writing personally or
          by
          depositing the same in the United States mail, postage prepaid, and addressed
          to
          Lessee at the said Premises. Any notice or document required or permitted
          by
          this Lease to be given Lessor shall be addressed to Lessor at the address
          set
          forth below, or at such other address as it may have theretofore specified
          by
          notice delivered in accordance herewith:

        


        


        LESSOR:         Vasona
          Business Park

        718
          University Avenue, Suite 217

        Los
          Gatos,
          California      95032

        


        LESSEE:           Procera
          Networks

        100C
          Cooper Ct.

        Los
          Gatos,
          California      95032

         

      

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

    

     

    29.           Attorneys'
      Fees. If for any reason, any suit be initiated to enforce
      any provisions of this Lease, the prevailing party shall be entitled to legal
      costs, expert witness expenses and reasonable attorneys' fees as fixed by the
      court.

    30.           Notices.
      All notices to be given to Lessee may be given in writing personally or by
      depositing the same in the United States mail, postage prepaid, and addressed
      to
      Lessee at the said Premises. Any notice or document required or permitted by
      this Lease to be given Lessor shall be addressed to Lessor at the address set
      forth below, or at such other address as it may have theretofore specified
      by
      notice delivered in accordance herewith:

    


    


    LESSOR:         Vasona
      Business Park

    718
      University Avenue, Suite 217

    Los
      Gatos,
      California      95032

    


    LESSEE:           Procera
      Networks

    100C
      Cooper Ct.

    Los
      Gatos,
      California      95032

    
      
         

        31.         
           Transfer of Security. If any security be
          given by Lessee to secure the faithful performance of all or any of the
          covenants of this Lease on the part of Lessee, Lessor may transfer and/or
          deliver the security, as such, to the purchaser of the reversion in the
          event
          that the reversion be sold, and thereupon Lessor shall be discharged from
          any
          further liability in reference thereto, upon the assumption by such transferee
          of Lessor's obligations under this Lease.

        32.           Waiver.
          The waiver by Lessor or Lessee of any breach of any term, covenant
          or
          condition herein contained shall not be deemed to be a waiver of such term,
          covenant or condition or any subsequent breach of the same or any other
          term,
          covenant or condition herein contained. The subsequent acceptance of rent
          hereunder by Lessor shall not be deemed to be a waiver of any preceding
          breach
          by Lessee of any term, covenant or condition of this Lease, other than
          the
          failure of Lessee to pay the particular rental so accepted, regardless
          of
          Lessor's knowledge of such preceding breach at the time of acceptance of
          such
          rent.

        33.           Holding
          Over. Any holding over after the expiration of the term
          or any extension thereof, with the consent of Lessor, shall be construed
          to be a
          tenancy from month-to-month, at a rental of one and one-half times the
          previous
          month's rental rate per month, and shall otherwise be on the terms and
          conditions herein specified, so far as applicable.

        34.        Limitation
          on Lessor's Liability. If Lessor is in default of this
          Lease, and as a consequence essee recovers a money judgment against Lessor,
          the
          judgment shall be satisfied only out of the proceeds of sale received on
          execution of the judgment and levy against the right, title and interest
          of
          Lessor in the Premises, or in the building, other improvements and land
          of which
          the Premises are part, and out of rent or other income from such real property
          receivable by Lessor or out of the consideration received by Lessor from
          the
          sale or other disposition of all or any part of Lessor's right, title and
          interest in the Premises or in the building, other improvement and land
          of which
          the Premises are part. Neither Lessor nor any of the partners comprising
          the
          partnership designated as Lessor shall be personally liable for any
          deficiency.

        35.          
          Stock Warrants: As consideration for entering
          into this lease, Tenant agrees to grant Lessor 25,000 warrants of its company
          stock at a strike price equal to the prevailing market price as of the
          effective
          date of this lease.

        36.        
            Furniture and Equipment. The existing
          cubicles shall be included in the leased premises. The cubicles are for
          Lessees
          use only. The ownership of the cubicles is to remain with Lessor.

        37.       
            Miscellaneous.

        
          	
                   

                	
                  a)

                	
                  Time
                    is of the essence of this Lease, and of each and all of its
                    provisions.

                


        

        
          	
                   

                	
                  b)

                	
                  The
                    term "Building" shall mean the building in which the Premises
                    are
                    situated.

                


        

        
          	
                   

                	
                  c)

                	
                  If
                    the Building is leased to more than one tenant, then each such
                    tenant, its
                    agents, officers, employees and invitees, shall have the non-exclusive
                    right (in conjunction with the use of the part of the building
                    leased to
                    such tenant) to make reasonable use of any driveways, sidewalks
                    and
                    parking areas located on the parcel of land
                    on which the Building is situated, except such parking areas
                    as may from
                    time to time be leased for exclusive use by other
                    tenant(s).

                


        

         

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

    

     

    
      
        	
                 

              	
                d)

              	
                Lessee's
                  such reasonable use of parking areas shall not exceed that percent
                  of the
                  total parking areas which is equal to the ratio which floor space
                  of the
                  Premises bears to floor space of the
                  Building.

              


      

      
        	
                 

              	
                e)

              	
                The
                  term "assign" shall include the
                  "transfer".

              


      

      
        	
                 

              	
                f)

              	
                The
                  invalidity or unenforceability of any provision of this Lease shall
                  not
                  affect the validity or enforceability of the remainder of this
                  Lease.

              


      

      
        	
                 

              	
                g)

              	
                All
                  parties hereto have equally participated in the preparation of
                  this
                  Lease.

              


      

      
        	
                 

              	
                h)

              	
                The
                  headings and titles to the paragraphs of this Lease are not a part
                  of this
                  Lease and shall have no effect upon the construction or interpretation
                  of
                  any part thereof.

              


      

      
        	
                 

              	
                i)

              	
                Lessor
                  has made no representation(s) whatsoever to Lessee (express or
                  implied)
                  except as may be expressly stated in writing, signed by all of
                  the parties
                  hereto or their respective successors in
                  interest.

              


      

      
        	
                 

              	
                j)

              	
                This
                  instrument contains all of the agreements and conditions made between
                  the
                  parties hereto, and may not be modified orally or in any other
                  manner than
                  by agreement in writing, signed by all of the parties hereto or
                  their
                  respective successors in interest.

              


      

      
        	
                 

              	
                k)

              	
                It
                  is understood and agreed that the remedies herein given to Lessor
                  shall be
                  cumulative, and the exercise of any one remedy by Lessor shall
                  not be to
                  the exclusion of any other remedy.

              


      

      
        	
                 

              	
                I)

              	
                The
                  covenants and conditions herein contained shall, subject to the
provisions
                  as to assignment, apply to and bind the heirs, successors, executors,
                  administrators and assigns of all of the parties hereto; and all
                  of the
                  parties hereto shall jointly and severally be liable
                  hereunder.

              


      

      
        	
                 

              	
                m)

              	
                This
                  Lease has been negotiated by the parties hereto and the language
                  hereof
                  shall not be construed for or against either
                  party.

              


      

      
        	
                 

              	
                n)

              	
                All
                  exhibits to which reference is made are deemed incorporated into
                  his
                  Lease, whether or not actually
                  attached.

              


      

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

    

    IN
      WITNESS HEREOF, Lessor and Lessee have executed this
      Lease on the date first above written.

    LESSOR;
      Vasona Business
      Park                                                                   LESSEE:  Procera
      Networks

    


    


    
      	
              BY:

            	
              /s/

            	 	
              BY:

            	
              /s/

            
	 	 	 	 	 
	
              Date:

            	
              May
                4, 2005

            	 	
              Date:

            	
              May
                3, 2005

            
	 	 	 	 	 
	 	 	 	 	 
	
              By:

            	
              /s/

            	 	 	 
	 	 	 	 	 
	
              Date:

            	
              May
                4, 2005

            	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
              By:

            	
               /s/

            	 	 	 


    

    


    Date:
      May
      4, 2005

    
       

       

      12